The wages of war: profits

Dan Rodricks

January 23, 1991|By Dan Rodricks

"How'd we do today, Ted?"

"Oh, just dandy! The market went crazy."

"How did you do?"

"Just great, just great."

"What're you going to do with all that money?"

"I dunno. I'll find a way to spend it."

-- Conversation overheard in Baltimore, Jan. 17, 1991

After the long lull in the stock market, investors went to battle stations at the sound of war. It was a day that left some of them crowing like fighter pilots returning from successful sorties. The day after the "liberation of Kuwait" began, blue chip stocks and issues in the broader market scored impressive gains, the biggest since the 1987 crash. Volume was the eighth-highest in history. Trading exploded in a buying binge. Investors, caught up in the euphoria born in the one-sided success of the early air-attack missions, were hoping the war would quickly resolve the Persian Gulf conflict without the long, seering economic pain that many had feared.

And in the boys' clubs from Tokyo to New York, they were patting themselves on the backs for a banner day. It's an old note, simplistic and bromidic: War is good for business. Someone said that one day when the world was young, and we haven't been the same since. It's not entirely true -- unless you're a defense contractor, or unless the war happens to be short and tidy. Short wars are good for nice pops on the charts. The long, tedious ones are thought to sap national economies -- especially economies that are practically prostrate at Zero Hour.

But, no matter how vulgar the locker-room crowing, let's accept the facts of life in America. The president's decision to bomb Iraq, combined with early reports that American fighters were destroying Saddam Hussein's war machine, created an irresistible stampede. Wall Street traders shopped til they dropped. Then the brokerage brats went off to happy hour to high-five the day while the troops crept up to the Kuwaiti border.

Vulgar but true. Wall Street was looking for a break from the tension that infected trading since Aug. 2. Desert Storm did it.

Now, of course, we're already hearing about "vindication" for those high-tech weapons systems which the generals are anxious to display in action. They work! They knock on doors and blow up buildings! They deliver a cruise missile in Saddam Hussein's hometown from a frigate in the gulf! They slip bombs down airshafts! They knock Scuds out of the Arabian nights!

We're hurling $500 million worth of missiles, shells and other ammunition at the Iraqi forces each day. One cruise missile goes for $1.3 million -- and we launched 100 of those the first night of the attack! Phoenix missiles come off the wings of jet fighters at close to $800,000 a shot. One shell from a tank goes for $2,000. I culled these numbers from the various experts who take the TV networks, shelf by shelf, through the military's tool shed, attaching a price to each gadget as they go. (Don't you love it when these network military experts explain how the weapons work? They're like the Helpful Hardware guys of war.)

Assuming that we'll have to replace all the tools we use in this war, defense companies will get a boost from investors. (The big winner so far is Raytheon and other companies responsible for the Patriot missile-defense system.)

I guess this is what you call war profiteering. But it's the conventional kind. A country like ours can't be running low on ammunition. Now that we are the world's constable, the so-called "peace dividend" from the Cold War will probably be spent restocking on Tomahawks.

It all follows. It all figures.

If you want genuine vulgarity, you've got to turn to the news from Mobil. Here's a particularly oily kind of war profiteering. The corporation posted a 46 percent increase in earnings in the fourth-quarter of 1990.

"The improvement in the fourth quarter reflects higher crude oil and natural gas prices," Mobil chairman Allen Murray said.

I'll say it was an "improvement," Al.

In the last three months of 1990, Mobil earned $651 million. That's about $200 million more than it earned in the same period last year. Sweet, sweet, sweet.

Saddam Hussein invades Kuwait. The United States confronts him. With war looming, Mobil and the other oil companies raise prices at the gas pump. You've got to love the oil companies. You can always count on them. Especially in times of crisis.

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