As the effects of the war in Ukraine spread, we are likely heading towards a global recession a very ugly future. The start of a new cold war against Russia and China in today’s deeply interconnected global economy could be disastrous. The soaring inflation already seen under President Biden could get much worse, and any real solution might be years away. Regardless of what happens in Ukraine, the situation doesn’t look good for the rest of us.
Sanction spree might backfire
Russia is being hit with a barrage of sanctions from the United States and allied countries, and private businesses have raced to join the government in cutting ties.
The damage will undoubtedly be felt in Russia, but the recession will not be catastrophic. Russia has the food, natural resources, and industrial power to survive in isolation. If sanctions didn’t destroy North Korea then they won’t destroy Russia.
Russians endured the economic miseries of communism under the Soviet Union and the extreme poverty and corruption of the 1990s under Boris Yeltsin. Losing Netflix and Apple won’t spark a revolution in a population which credits Vladimir Putin with getting them out of the latter crisis.
More importantly, Putin is nothing if not shrewd and calculating. The Russian president has been preparing his country for a decisive break with the West for years and would not have made his move now if he wasn’t ready.
China is ready and able to step into the void being left by the West. Much of the global south is perfectly willing to trade with Russia.
Russia and China are capable of establishing a parallel global economy fully detached from the United States. Most of the world’s population might fall into their economic sphere.
Recession could drive up food prices
Biden’s ban on Russian energy imports could backfire horribly for the White House. This is something which should have been planned years ago.
As it is, the damage Biden has done to America’s energy sector will make it impossible for domestic producers to immediately step into the vacuum and limit the damage.
The United States doesn’t import much oil from Russia, but it imports enough to increase prices dramatically in the absence of an alternative source ready to be put to use.
Even more frightening is the potential for a surge in food prices, which would ensure that a recession would be felt by everyone in the country. The United States imports much of its fertilizer from Russia; that supply will likely be cut off.
Russia and Ukraine also make up a massive percentage of global wheat exports. Global demand will rise significantly as a result of this crisis, especially for countries which rely on grain shipped from Black Sea ports.
Regardless of how severe the economic damage turns out to be for the United States, Russia’s invasion has probably changed the global economy forever in ways that will take years to be fully appreciated.