There are also uncertainties associated with Europe's stability pact. Will it survive, and will it be good for Europe if it does?
Finally, there are the uncertainties associated with Japan -- will it at long last fix its banking system, and if it does, how negative will be the short-term impact?
Some suggest that the US may be going to war to maintain steady oil supplies, or to advance its oil interests. Few can doubt the influence that oil interests have on Bush -- witness the administration's energy policy, with its emphasis on expanding oil production rather than conservation. But even from the perspective of oil interests, war against Iraq is a risky venture. Not only is the impact on price, and therefore on oil company prices, highly uncertain, but other oil producers, including Russian and European interests, will not easily be ignored.
Indeed, should the US go to war, no one can predict the effect on oil supplies. A peaceful, democratic Iraqi regime could be established. Desperate for funds for reconstruction, that new regime could sell large amounts of oil, lowering global oil prices. Domestic US oil producers, as well as those in allied countries, such as Mexico and Russia, would be devastated, though users of oil around the world would benefit enormously. Or the turmoil throughout the Muslim world could lead to disruptions of oil supplies, with high prices the result. This will please oil producers in other parts of the world, but will have enormously adverse consequences for the global economy, akin to those resulting from the oil price hikes in 1973. Whichever way one looks at it, the economic effects of war with Iraq will not be good. Markets loathe uncertainty and volatility. War, and anticipation of war, bring both. We should be prepared for them.
Joseph Stiglitz is professor of economics and finance at Columbia University and the winner of the 2001 Nobel Prize in Economics.
Copyright: Project Syndicate
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