Twenty years, three oil shocks, three global recessions: The Persian Gulf War that began last week may have been about borders. It may have been about civility. But deep down, its purpose is to take away the "oil weapon" from the nations that have exercised it since 1971.
Though not officially stated in such terms, the idea involves eliminating the government that has reached for the weapon most recently and intimidating the others. But President Bush had little to say the night war broke out in describing his war aims regarding the slow growth and the cycles of boom and bust that have plagued the international order since the Organization of Petroleum Exporting Countries gained control of prices.
Instead, the president repeatedly stressed the brutality of the Iraqi invasion of Kuwait. Only obliquely did he refer to the stakes that could ultimately make the war worthwhile.
"While the world waited, while Saddam stalled, more damage was being done to the fragile economies of the Third World, the emerging democracies of Eastern Europe, to the entire world, including to our own economy," the president said. That brief mention notwithstanding, when the history books are written, the period of instability that began with the "oil embargo" of 1973 is likely to form the core of the story of the gulf war.
How might this war help the world economy free itself from the periodic stranglehold on oil that has been exercised by the oil-rich nations? It helps to go back to one of the basic economic stories of the last 20 years. Few technical issues are more susceptible to argument than the provision and distribution of energy in the world economy. But the broad outlines of a story acceptable to most experts was related by energy economist M. A. Adelman of the Massachusetts Institute of Technology in congressional testimony last autumn.
For most of a century after its discovery in 1859, Adelman said, oil's world price was held well above the cost of finding new reserves by the multinational oil companies. Then, in the years after World War II, oil's inflation-adjusted price fell by 80 percent. It hit bottom in 1970. It was then that the cartel of sovereign governments known as OPEC discovered it could exercise control of the price of oil through a combination of output cuts, threats and the shrewd manufacture of crises.
There is reason to believe, Adelman said, that the OPEC nations were abetted in their early efforts by the Nixon administration, which was anxious at the time to arm the nations of the Middle East -- Iran in particular -- against the Soviet Union.
Slowly at first, then in a series of sharp increases, the cartel of nations raised the price of oil 15-fold, adjusted for inflation, between 1970 and 1971, to markups far beyond those ever contemplated by the companies that had administered the oil market. The result of this governmental gouging was, as Adelman said, worldwide suffering on a grand scale. Among the consequences he noted:
Industrial nations tumbled into steep recessions twice, in 1974 and 1981. The latter slowdown in Europe turned into a six-year depression. The lost output cost the world hundreds of billions of dollars. Declining productivity growth translated into stagnant living standards that strained normally confident societies.
Less-developed countries devastated their forests for fuel. They ran up staggering debts in a vain attempt to outrun the oil shocks -- debts whose ultimate uncollectability shut down new lending for worthy purposes and ultimately threatened the banking system of the West.
Arab nations invested huge portions of their oil revenues in armaments. Petrodollars financed the eight-year Iraq-Iran war, for example, with 1 million dead and 3 million casualties and refugees.
The third oil shock, which began last summer, was no different from the earlier two, Adelman argued. Last June, oil was selling for about $13 a barrel and the market verged on the brink of a further steep decline. Two months later, when Iraq invaded Kuwait, prices skyrocketed toward $40 a barrel. Overripe after eight years of debt-financed expansion, the United States paused momentarily on the brink, then tumbled into recession. Sales fell, unemployment rose sharply, the budget deficit soared, the banking system threatened to collapse.
Although Federal Reserve Board Chairman Alan Greenspan has said that he thought the recession just might have bottomed out, much depends on the price of oil -- and so on the outcome of the war.
Just how, then, might a successful gulf war stabilize the price of oil? And at what level? With no one in the Bush administration talking much about war aims other than "the liberation of Kuwait," it is difficult to say.
But the very unanimity with which the United Nations reached its votes, and with which 28 nations assembled their military mission in the gulf suggests the extent to which a stable world economic order is desired. Predictable oil prices would form a significant part of such a world -- and precisely those nations threatened by Saddam Hussein's August invasion, Kuwait and Saudi Arabia, are thought to be most deeply committed to a policy of stable prices.
It's not gas-guzzling cars and fast boats that are the issue. Nations are free to tax the use of energy as heavily as they see. Indeed, they can confidently be expected to do so if an environmental crisis looms. Rather, it is the freedom from sudden and disruptive shocks arising from cartel shenanigans that is desired by Bush and the leaders of the 27 nations that joined him.
On the morning after the war began, oil prices plummeted a long way toward what the markets figure might be their long-term price of $15 or less, and the possibility arose that the war might be more or less self-financing, through stronger-than-expected economic growth. So why, then, did Bush have so little to say about the economic basis of the war? Well, for one thing, the state of economic understanding of the processes of growth and development is hardly such that he could firmly base moral claims of life and death upon it. It is much better to base your policy on the promise that it will stop the torture of children than on your hope that it will enhance industrial and agricultural productivity.
Moreover, the gulf war offers no quick fix for slow global growth. Even if the war goes well for the coalition, much remains to be done to stitch together the new world order of which the president spoke.
Then, too, questions having to do with energy consumption are highly charged emotionally. For many people, economic growth means the greenhouse effect and nothing more.
Finally, it can hardly be said that all of America's problems -- nor those of any of the other industrial nations -- stem from gyrations of the price of oil, important as that strut of the story has been.
But barring a disaster, the likelihood is that the institutional arrangements of the post-Cold War world are being laid in the ashes of the war against Iraq. Not since the end of World War II has there been so much to gain from a possible victory.
David Warsh is a columnist for the Boston Globe.