The Economic Consequences Of The Iran-Iraq War On The Belligerents

The Iran-Iraq War which started from 22 September 1980 to 20 August 1988 lasted for almost 8 years, which was one of the most devastating wars since the World War II in terms of it’s sacle of destruction and impact on the economy, bringing about a fatal consequence to the economies of the belligerent powers. As for the breakout of the war, both of the them consumed a large amount of wealth, reducing the investment in the development plans of their own, the opportunity cost it caused couldn’t be underestimated more than the direct economic damage.This article is divided into three chapters to discuss the economic consequences of the war. The first chapter is about Iran and the second is about Iraq, both of them are discussed from the following parts:oil sector, industry, agriculture, manpower resources and the living standards of people, militarization, direct economic consumption and the opportunity costs. At last, it concludes the total economic loss and devastating consequences contributed to by the war, and the spillover effect of the economic consequences of the war.In general, the Iran-Iraq War contributed to some common consequences for both sides, which can be elaborated in the following several aspects:1、Loss of wealth 。 There has been a massive loss of both human and non-human capital, leading to a large reduction in productivity and loss of foreign-exchange earnings.2、Sacrifice of potential output, owing to the transfer of the labor force from a peace-time economy to a military and war-related economy, therefore, resources are not allocated to their most efficient uses or to their most efficient locations, thus resulting in increased costs and reductions in the efficiency.3、A brain-drain and outgoing of human capital leading to a smaller skilled and semi-skilled labor force, besides, a reduction in the quality of human capital resulting from and unprecedented call-up to military service of students in schools, high schools and universities and the flight of the academics and professional classes to Western countries.4、A rise in domestic inflation, arising from more expensive imports, an increase in black-market trading, and an increase in commercial activities (importing and its distribution) at the expense of domestic production.5、Crippling of the agricultural sector, leading to massive shortfalls in production, thus resulting in a serious state of dependency on the outside world for food supplies.6、A huge rise in military expenditure, leading to an increased defense burden.7、The outbreak of the long-time war brought about the failure of governments to implement the economic development plans, for example, the failure to diversity exports and thus the tendency to become increasingly more dependent on the oil sector to provide the much needed foreign-exchange earnings.However, the economic consequences they suffered are not all the same:1、In terms of the destruction of infrastructure, Iran was more serious than Iraq; 2、As for the loss of human capital, Iranian people subjected a great sacrifice than Iraq, however, the contradiction between population and need for soldiers compelled Iraq to bring in larges of foreign workers to make up for the requirement of labor, which influenced the balance of international payment; 3、In the aspect of domestic industrial production, although Iran depended heavily on the non-military imports, the domestic small sized handicraft were thriving because of the wartime needs. On the other hand, Iraq’s industry was free from the influence of war in the early stage for the policy of "butter and guns" made by Saddam, but with the running off of the foreign exchange, Iraq relied more and more on the non-military imports, especially consumer goods.4、 Iran’s agriculture was relatively the best one of all economic sectors, with food production steadily increasing, in spite of this, the food still couldn’t meet the demand of growing population just like Iraq, whose agriculture sector was deteriorating continuously, Iraq was more and more reliable on food imports.5、As far as the opportunity cost, Iran lost the golden chance to correct the problems in the process of developments, while Iraq was interrupted by the war when it was in the time of rapid economic developments, causing a huge waste of wealth.