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Wednesday, April 21, 1999 Published at 12:47 GMT 13:47 UK

Business: The Economy

The cost of conflict

US Army paratroopers add to the multi-million dollar bill of war

By BBC Economics Correspondent Ed Crooks

The true cost of any war is obviously reckoned, not in money, but in lives lost or ruined.

Kosovo: Special Report
And no one who has seen the terrible pictures from Kosovo or Macedonia could have any doubt that that is the grim truth of this latest conflict.

BBC News' Rory Cellan-Jones adds up the figures
But military power has always needed the support of economic and industrial power behind it and on today's high-tech battlefield, that is more true than ever.

High price of high-tech

Waging the modern kind of computerised, laser-guided war is a very expensive business. Of course, missiles and bombs have been paid for already, and only cost more when they are replaced.

[ image: Kosovan refugees: The human cost is immense too]
Kosovan refugees: The human cost is immense too
Fuel for the aircraft and the cost of the army would have to be paid anyway, even if they were only training, not in action.

But still, the additional cost of deploying British forces has been estimated at 2m a day. And Britain is contributing only about a twentieth of the total NATO effort.

NATO's commitment is rising, too. The force deployed is building up to three times the size of the initial number of aircraft and ships involved.

If NATO were to send ground forces into Kosovo, then the cost would rise sharply, and Britain's share of the burden would probably be proportionately much higher too.

[ image:  ]
But though these figures may sound enormous, it is important to keep them in perspective. The Falklands war, for example, cost the equivalent in today's money of about 2.5bn. That is just 1% of total government spending.

The Chancellor of the Exchequer Gordon Brown has, despite all his talk about prudence, put rather less aside for emergencies than his predecessors.

The emergency reserve and the margin for error in this year's spending plans add up to just over 2bn.

Picking up the tab

But even so, the costs of the war should not mean higher taxes. Wars are, we all hope, relatively rare events: it should be perfectly acceptable for the government to borrow a bit more to cover the cost of fighting.

[ image:  ]
But in the long run, the real cost of the war will not be fighting it, but the reconstruction afterwards. A cruise missile costing 835,000 could do a hundred million pounds worth of damage to a factory or refinery.

The damage done to homes and other property in Kosovo by the Serbs has already been estimated at 2bn.

The West will almost certainly have to pick up the bill once the war is over. If the Kosovar refugees are to return to their homes, they have to have homes to go back to.

Any peace settlement may well also have to include making good the damage done by NATO - just as the Allies used the Marshall Plan to rebuild Europe after World War II.

If Slobodan Milosevic is deposed, aid from the West would probably be offered to reconstruct the Yugoslavian economy and cement any peace deal.

The cost of knocking Yugoslavia down may be substantial. The cost of building it back up again will probably be much higher.

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