In for the building boom
There is a school of thought which says that countries start wars when they have run out of other means of getting their economies going. Clearly, the next best thing to consumer spending in kick-starting an economy is a large dose of spending on a military which lobs expensive pieces of ordinance at a far-away target.
As surely as night follows day, defence contracts quickly follow to replace all those cruise missiles and other bits of hardware which are currently going up in smoke to the tune of a billion dollars or more per day. And then all of those nice juicy reconstruction contracts.
The advantage of starting a war versus more traditional Keynesian-type government spending is the fact that you have a moral argument for overriding public-sector spending and deficit criteria. Quite how the Bush administration is hoping to reconcile proposed tax cuts to an additional precept of $90 billion to pay for the war is not something which is going to keep Congress awake for the moment, but may well come back to haunt the legislators at some future date.
In the meantime, the New York Stock Exchange continues to demonstrate that the price of stocks has absolutely nothing to do with either reality or the medium to long-term future, but increasingly reacts second by second to sound bites and very limited information on the progress of the conflict in Iraq.
Where does this leave Poland? I am sure that our policy of supporting the American and British efforts in Iraq is guided far more by economic criteria than a moral crusade against evil. One must hope that the US will not forget us when it comes to awarding reconstruction contracts. Our country has a long post-war history of economic involvement in Iraq and the hope must be that the old contacts can be rekindled.
Quite what the country's industry has to offer remains to be seen, and it may be a bit rash hoping that the US will remember its debt of gratitude to us. This is not the time to remind the US of Yalta and the effect the isolationist actions of an ailing and sick American president had on shaping post-war Europe. The record of the award of contracts to date in relation to the Iraqi southern port reconstruction and maintenance, however, does not bode well.
Which brings me back to the auditing profession and the aftermath of Enron (which is what this column is supposed to be about). Well, the US will always do things its own way. While not proposing to discuss the German and French stances on the Iraq war, it is becoming increasingly clear that the American and (partly) British views of how the world should be run do not necessarily coincide with the views of Paris and Berlin. This concerns both global policing and economic regulation. The accounting failures continue to emanate from the US, and the pressure from continental Europe to resist US-led changes to the profession is likely to grow.
How will the US react? I strongly suspect that the media attention on the Iraq war will allow both the regulators and the legislators in the US to quietly forget about Enron. Pressure will be placed on the SEC to ensure that the stock markets can quickly grow following the end of hostilities.
Armaments and reconstruction contracts will clearly stimulate economic activity, and no doubt the value of the dollar will rise as it usually has in times of war. Whether there will be tacit agreement to allow companies to continue misstating profits remains to be seen, but the temptation will be strong. There may well be an opportunity for my profession to take a lead in insisting that best practice is followed even when this has a potentially negative short-term influence on markets.
But then I am a born optimist and only time will tell. And last, I fully support the need to remove an evil dictator, but I do wonder why this could not have been done last time around.
