THE ECONOMIC TIMES

Analysing The Political Economy


Prepare For The War Economy

Last week, the ONS stated that 4 in 10 households were struggling to pay for their energy bills – or that they were trading fuel for food. Cold or hunger. Either way, this is an awful prospect for well over the 11 million of the 28 million households in Britain.

Soon, well over one million people are expected to be plunged into poverty – a large percentage of them will be children.

It’s a terrible reality, really grim. But here is another – the whole situation is not only going to get worse, it’s going to get much worse.

The cost-of-living crisis is about inflation. It kicked off because of the effects the global pandemic has had on raw materials and supply chains – making stuff more expensive, not just to make but to shift. But everything is made much worse by Vladimir Putin’s madness.

Putin is likely to double down more than he is to buckle under the diplomatic efforts of the international order.  As a direct result – we are entering a period of prolonged price instability.

What Putin wants is winter. A hard winter. For Europe, this coming winter is the stuff of nightmares for politicians. The cost-of-living crisis will spike again dragging millions more families into the heat-or-eat dilemma. The response won’t be a few shouty people waving some homemade placards – it’ll be riots in capitals all over Western economies.

Stagflation is coming at the same time because of it all. That means both recession and inflation. Unemployment with price rises is a deadly combination for political stability.

Putin’s hand is being strengthened as the weeks roll into months. Predictions from both the American and British military brass agree that the Russia/Ukraine conflict will last many months. Only yesterday, Putin’s forces are reportedly looking like they are about to threaten Moldova on Ukraine’s western flank – another entry point from the Black Sea.

The leaders of Western economies have stood together – so far. But will their focus on homegrown tensions or foreign ones dominate when the winter is upon us?

Western resolve to beat Putin’s ambition to break Europe will be severely challenged before the year is out if longer-term planning is not agreed upon now. Not least, being truthful with the people of Europe is essential, to let them know what to expect.

The reality facing politicians across the West is stark. The Western way of life is being threatened not just by Russia, but by China, and large swathes of Africa, the Middle East and Asia as the geopolitical pack is forced into taking sides in a global reshuffle.

There are two wars going on. The first is in Ukraine where billions in cash and military hardware are being funnelled into physical warfare strategies to stop Putin’s rampage. Then there is economic warfare – being used to strangle Russia. Neither are seemingly the deciding factor – yet.

As this conflict continues, which it will, the cost-of-living crisis is only going to get worse. The financial pressures for half of Britain’s population will become even more serious than it is now.

But now, there is another reality. Stopping Putin is the only option if Western values and democracies are to be protected. The other option does not bear thinking about.

To all intents and purposes, Putin beckons a much wider conflict to test the resolve of this geopolitical reshuffle. Everyone loses if they don’t take sides, so take sides they must. And as they do, Putin’s thuggery will expand.

The consequences of Putin’s actions has already reached every one of us – be it in the weekly shop, topping up the car, our heating costs and more. Savings are already falling fast – debt is rising faster than at any time on record.

Ukraine, known as the breadbasket of Europe is now a wasteland. The largest steelworks in the world has been bombed to dust. Ukrainian blood is being spilt in our name.

Putin is countering Western sanctions by using vital energy supplies as a weapon. Being cold and hungry is the wider outcome of conflict and war. And this prospect is coming to Europe.

As recession bites, and it will, jobs will be lost, corporate profits will decline and along with it, the governments’ ability to raise vital tax revenues to defend the most vulnerable will come under strain – pushing up the national debt. The cost of servicing that debt will increase. The pressure of the war economy will become ever more painful – that is until Putin is beaten back. And even if he is – who will replace him with what?

At the time of writing, cost-of-living protests across continental Europe have already started in places like Berlin, Paris and Rome. There were some 250 protests across towns and cities in Italy, more in France and even in Russia itself. Sri Lanka and Turkey joined in too.

The reality of our world is staring at us. Putin and the climate crisis demand the same action. The path of least resistance – appeasing Putin for fear of a violent escalation and buying fossil fuels from him – is far more dangerous than doing the other thing.

If we had not allowed right-wing forces to trash experts’ warnings of the impending climate crisis years ago, perhaps we would not be in this position. But we are.

This is a war economy – a different one than we have known before, but a war economy it is. It can’t be left to the petty whims of Boris Johnson and the acolytes of his tragic comedy of errors. It’s clear Chancellor Rishi Sunak has no idea what to do in this type of economic environment – he’s a banker more worried about his wife’s tax status than the future of our country. Foreign Secretary Liz Truss is preparing herself for a leadership contest by spending taxpayers’ cash on photoshoots. The Home Secretary is now fighting legal battles against the deportation of migrants in small boats. Britain needs grown-ups in the room, not political lightweights in such dire circumstances. The country needs to be told what we are really facing in a few months’ time – and get prepared for it.

 

 

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