Consequences of U.S. vs North Korea war would be devastating, experts say, with U.S. debt levels likely to skyrocket.
The world holds its breath amidst the worst tensions between the U.S. and North Korea, as Pyongyang reveals plans to attack the U.S. overseas territory of Guam within “two weeks.”
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As thousands of North Korean people took to the streets of Pyongyang to support their leader Kim Jong Un’s plans to attack America’s remote Pacific Island in mid-August, experts start calculating the consequences of a seemingly imminent war between the two nuclear enemies.
Although many argue that the likelihood of U.S. vs North Korea war is still pretty low at this point, there has been no precedent of analysts and academics seriously discussing the consequences of a conventional or nuclear war between Washington and Pyongyang.
With North Korea responding to U.S. President Donald Trump’s “fire and fury” threats saying it would strike Guam, which has a key Air Force base, and later detailing plans how it would attack the remote Pacific island, the two nuclear states have never been in such proximity to war.
Amid boiling tensions, Trump’s advisor has warned Pyongyang that “going to war with America is suicide.”
Loss of Life, Significant Economic Decline: Consequences of US vs North Korea War
Experts at Capital Economics argue that any conflict would cause a global economic decline and global supply chain disruptions across the world. This could be a domino effect, as an economic decline in a country that is being at war could ripple through the global economy and severely affect other nations’ economies.
In their research paper, Capital Economics experts Gareth Leather and Krystal Tan have detailed the “significant economic consequences” of a full-scale military conflict on the Korean peninsula. Given that the U.S. – the world’s largest economy that accounts for 22% of nominal world GDP – is in the center of the seemingly imminent war, the economic consequences could be unthinkable if North Korea makes good on its promises to strike Guam, which is sitting a little more than 3,000 km from it.
The two experts argue that any war on the Korean peninsula involving North Korea would have an impact on global supply chains, global inflation and economic growth. The “most important impact,” however, would be “a massive loss of life,” Mr. Leather and Mrs. Tan argue.
With U.K. Labour leader Jeremy Corbyn estimating that a U.S. vs North Korea war could kill “millions” in both North and South Korea, which would likely get involved in a military confrontation between its biggest ally and biggest enemy, as well as in neighboring countries. Guam, which has a population of 162,000, would most likely suffer the most disastrous losses if Pyongyang delivers its promise to strike the remote island first.
War with North Korea Could Cost Trillions of Dollars
The impact of a U.S. vs North Korea war on the U.S. economy would also be “significant,” the two economic experts argue. “At its peak in 1952, the U.S. government was spending the equivalent of 4.2% of its GDP fighting the Korean War.” In the 2017 equivalent of U.S. GDP, that would account for nearly $780 billion.
The two experts also reminded that the total cost of the Gulf War in 2003 was estimated at a whopping $1 trillion. America’s economic struggles in the wake of war on the Korean peninsula would most likely serve as a domino effect that would severely affect the global economy and global supply chains.
If a U.S. vs North Korea war would spill blood for a prolonged period of time, U.S. federal debt would likely go up. Given America’s already high federal debt at 75% of GDP, this could have a negative long-term effect.
Global Economy to Plummet in Case of War on the Korean Peninsula
Many argue that since North Korea is incapable of reaching the mainland U.S. with a nuclear weapon, the U.S. economy would not be in harm’s way if Trump were to go to war against Pyongyang on the Korean peninsula. Despite the quite large distance between the U.S. and North Korea (nearly 6,500 miles), North is still capable of reaching the mainland U.S. with the rocket it publically unveiled last month.
While the development of the highly dangerous rocket for the U.S. was met with a new round of sanctions from the United Nations and a furious response from the Pentagon, defense experts speculate that the rogue state could be just a few steps away from developing a missile that could carry a nuclear weapon.
Meaning: the U.S. economy – and consequently, the global economy – could still suffer immense damage from a conflict on the Korean peninsula.
Any military conflict has a negative – ranging from small to big – impact on the economy of the participator, as the experience of past wars clearly shows. The two Capital Economics experts estimate that the ongoing war in Syria has resulted in a whopping 60% decline in the country’s GDP. But the Korean War in the 1950s has so far been the “most devastating military conflict since World War II,” Mr. Leather and Mrs. Tan argue, as the conflict not only claimed the lives of more than 1.2 million South Koreans, but also led to South’s over 80% fall in the GDP.
Global Supply Chain Disruptions and Costly Reconstruction
Since the U.S. represents 22% of nominal global GDP and 17% of gross world product, the impact of a U.S. vs North Korea war on the global economy would be unthinkable. This means setbacks in the U.S. economy would strip away a considerable amount of global GDP, while indirect effects on the global GDP could be even more devastating.
Given that the U.S. is a trading partner of most of the countries in the world – its total trade amounted to $4.92 trillion in 2016 – and given that America is a vital supplier of goods, setbacks in the U.S. economy as a result of a military conflict on the Korean peninsula would disrupt global supply chains.
Not to mention that reconstruction after a U.S. vs North Korea war would not come cheap, as it would require America to rebuild infrastructure, roads, ports, bridges as well as fix electricity and water supplies. Even if the mainland U.S. remains intact and Pyongyang fails to make good on its long-time promises to ‘bomb America’, the U.S. would still most likely be paying for the reconstruction in South Korea, which is expected to become a key battlefield in any confrontation involving North Korea.
The Capital Economics experts remind that Washington spent around $170 billion on reconstruction after the prolonged wars in Afghanistan and Iraq.
North Korea’s Sizeable Army Could Prolong Military Conflict
Although the Pentagon has previously estimated that a war on the Korean peninsula would not be long in duration – suggesting that the consequences and economic impact would be relatively small – the formidable size of North Korea’s army, which has been growing at a rapid pace for years, could make it last longer than expected.
North Korea has nearly 1,000,000 active soldiers, more than 1,000 aircraft, 5,000 tanks and 76 submarines. Not to mention that its army has 5.8 million paramilitary personnel, the largest paramilitary organization in the world. According to retired U.S. Army general Mark Hertling’s estimations in his interview with CNN, it could take the U.S. “a couple of weeks of airstrikes” to take out North’s thousands of conventional artillery.
The Capital Economics experts argue that history could repeat itself. In 2003, the Iraq War had been predicted by the Pentagon to last only several weeks, but instead it took the U.S. military more than eight years to leave the war-torn nation. That also translated into a much higher total cost of the Iraq War. Originally, experts predicted it would be only $60 billion, but in reality it was nearly $1 trillion, according to data by the Congressional Budget Office.
Panic Grips Global Markets
Fears of a U.S. vs North Korea war sparked panic in global stock markets this week, with equities slipping across the world as tensions between Washington and Pyongyang are running high. On Thursday, The Dow Jones industrial average dropped about 150 points, while the S&P 500 fell 1.1 percent and Nasdaq plummeted by more than 100 points.
Apple, Amazon and Netflix have been trading lower since tensions intensified earlier this week. Global stock markets are expected to continue dropping sharply with every threat made by Trump or North Korea.
