The United States is currently pulling its armed forces out of Afghanistan. Unsurprisingly, the European nations are following close behind, having neither the resources nor the resolve to remain and fight once their American colleagues have departed. The chaos at Kabul airport portends what might happen next across the entire country, as the American-backed Afghani government disintegrates, and the Taliban and its associates move in to fill the power vacuum. In a speech given in early July, President Biden argued that “… after twenty years … a trillion dollars spent …” it was the right time for American troops to come home. In this text I am not going to take a view about whether his decision to bring the war to an end now is sensible, nor whether the decision by one of his predecessors to start the war in the first place was justified, rather I want to reflect on the price-tag associated with the endeavour.
The Watson Institute for International and Public Affairs, at Brown University, has provided some analysis of the costs of the “War on Terror”, launched back in 2001 in response to the terrorist attacks on New York and Washington. In a paper published in November 2019, which takes account of budget forecasts for the fiscal year 2020, they estimate the full costs of the various wars to be just over $5.4 trillion dollars. Add in their estimate for medical and disability costs for veterans (a liability that has been incurred already, but not yet budgeted for) and the total rises to just over $6.4 trillion dollars. This bill includes not just the costs of the war in Afghanistan, but also the war in Iraq, as well as spending on homeland security, and probably the costs of running the Guantanamo Bay Detention Centre too. It is an impressively large sum of money: $6,400,000,000,000.
The Bolivian city of Potosí lies 4,000 metres above sea level and is one of the highest cities in the world. In 1545, not many years after the so-called Spanish conquest of the region – achieved by the spread of deadly European viruses rather than superior European virtues – silver was discovered here, on the slopes of the Cerro Rico, an ochre-coloured mountain in the Andes range. The Habsburg rulers of Spain were keen to add to their existing supplies of precious metal, which they shipped from the Americas to Europe to fund the expansion of their Empire. By 1610, Potosí’s population was estimated to have grown to more than 160,000 people, larger than London at the time.
Some of these were free labourers, but many were effectively slave labour, working in appalling conditions, and many others lived on the margins of survival given the difficulty of maintaining food supplies to such large numbers in such a remote location. The historian J H Elliot observed: The human suffering caused by the creation of this monstrous mining complex in the heart of the Andes is incalculable. Thousands upon thousands of miners lost their lives, either as the result of accidents in terrifyingly dangerous working conditions or from exposure to mercury vapor, lead, zinc, and other toxins showered down on the city by the Red Mountain that loomed above it. Their wives and children, too, died by the thousands from disease, malnutrition, and forcible removal from their homes.
By some estimates, the silver mine at Potosí produced 60% of all the silver mined globally in the second half of the sixteenth century and is probably the richest silver mine in human history. To what end was all this wealth extracted from the Andean highlands? Mostly to fund wars between the Spanish and the French, in which thousands of Europeans were killed or maimed in order to determine the ruling elite in Milan, Naples, or Navarre; or wars between the Spanish and the Germans, in which thousands of Europeans were killed or maimed in order to determine the content of the liturgy in the local churches. The function to which all this wealth was devoted was the waging of endless wars in order to promote the glory of empire.
Between the decline of the Habsburg Empire and the rise of the American Empire, we must not forget the British Empire, on which, at least for a time, the sun never set. The British were adept at combining their naval power with their first-mover advantage in industrially mass-produced goods, to establish a trading emporium across the world. Cheap British goods were exported to colonial markets, in return for agricultural commodities and rents, which funded the extravagant taste in interior design of several generations of haut bourgeoise society. The reason why the City of London (where I once earned my living) is the world’s premiere global financial marketplace is that the management of traditional instruments of trade finance, in which it excelled thanks to the pre-eminence of British factories and gunboats, were over time transformed into the prototypes of modern investment finance. The beneficiaries of the twentieth century’s equivalents of the “silver rush” had no need to climb up the Cerro Rico, when ambling down Cornhill and Cheapside sufficed.
What did the British do with all the wealth they had acquired by selling their manufactures all around the world? Some was privatised and used to fund country houses, private schools, and collections of art and antiquities. Some was requisitioned by the state, through the tax system, to fund the navy and, in due course, to fight the first global war in 1914. Stalemate in the trenches across northern France was eventually resolved, in 1918, by the ability of the British to maintain a semblance of economic activity, thanks to Atlantic supply routes, while Germany faced collapse. Twenty-seven years later, when the second global war reached its conclusion, Britain was bankrupt and, along with Germany, wholly reliant on the United States to finance its recovery.
Just as the British failed to learn from the Spanish, so too the Americans have failed to learn from the British. No matter how much wealth you accrue from your position of global dominance, there will always be more than enough wars to spend all of it, and then some. According to the OECD, the value of public debt in the United States as a proportion of annual GDP has risen from 75% to 160%, over the period from 2001 to 2020. The war on terror has been terrible expensive. Etymologically, the word hegemon means “the leading or paramount power”; but in truth, the word describes the nation whose population is foolishly willing to continue picking up the tab from foreign battlefields, irrespective of the price paid. Kings and Presidents might tell you that Empire equates to glory, but I tell you – with the benefit of my understanding of double-entry book-keeping – that Empire equates to debt.
Long before the Spanish reached the Americas the Norse did. They travelled as far as Greenland, for sure, and probably reached Newfoundland, but it is unlikely that they trekked all the way down to Bolivia. More recently, the Norwegians have become wealthy by exploiting the oil and gas reserves discovered in their own territorial waters (an unfortunate oxymoronic designation). The global consequences of the burning of several billion cubic metres of oil from the North Sea are now becoming increasingly obvious, as average temperatures around the globe rise, and extreme weather events become more common. Amidst the growing number of wildfires and floods, the Norwegian government has accumulated a significant sum in revenue from its oil exports, and as I write the value of the Government Pension Fund Global stands at around $1.35 trillion. Not nearly enough to fight a twenty-year war on terror, for sure, but by most people’s standards, a respectably large pot of cash.
In the late 1960s, huge oil deposits were discovered close to Ekofisk. In subsequent years, further exploration led to the discovery of several more large oilfields in Norwegian and British waters. Production costs were high but became more affordable when the price of oil rose sharply in the mid-1970s, courtesy of OPEC production embargoes, and then again in the late 1970s, when production was disrupted in Iran following the Revolution. Both Norway and Britain became oil exporters, generating significant cash inflows for their respective economies. Knowing that the oil would one day run out, the Norwegians stated their determination to ensure that we use this money responsibly, think long-term and so safeguard the future of the Norwegian economy. Revenues from oil were passed to the GPFG, which has purchased a large portfolio of international assets, including equities, bonds, and property. Each year the fund passes some of its income to the government, financing around 20% of Norwegian public spending, but the fund continues to grow in size, allowing the country’s citizens to benefit from its oil revenues for many years into the future, long after oil has stopped being drilled. (By contrast, the British spent all their North Sea income immediately, not having a political culture that would be able or willing to think long-term and use money responsibly).
I do not know why the Norwegians have been able to manage their windfall wealth better than any other nation that has experienced similar good fortune. I suspect lack of imperial ambition is part of the answer. Unlike the Habsburgs, the British, and the Americans, they exhibit no urgent desire to rule as much of the world as they can and no propensity to spend all their wealth trying to achieve this goal. Instead, they seem content to own 1.5% of the global equity markets, plus some prime real estate in major cities across the world. Perhaps they are happy enough knowing that over a millennium ago, the Vikings built a successful trading empire through their fearsome navy of longboats. Perhaps they are smart enough to understand that in the modern world, power is better exercised through the control of financial assets than the deployment of armed forces. Perhaps they are wise enough to understand that spending riches on welfare rather than warfare is the better choice.
Ja, vi elsker dette landet. Yes, we love this country.