Journalist lays out 3 ways in which the economic campaign against Russia could have a global impact

Journalist lays out 3 ways in which the economic campaign against Russia could have a global impact
Economy

The economic sanctions that the Biden Administration and its European NATO allies have brought about in response to President Vladimir Putin’s decision to invade Ukraine are hitting Russia’s economy hard, causing the ruble’s value to plummet to less than one U.S. cent. In a global economy, the rapid collapse of Russia’s economy is bound to have repercussions way beyond Ukraine and Russia — and journalist Derek Thompson examines three possibilities in a think piece/listicle published by The Atlantic on March 10.

“In a matter of days, the United States, Europe, and others have excommunicated Russia from the world stage, isolating the 11th-largest economy financially, commercially, and culturally,” Thompson observes. “The U.S. and Europe have frozen foreign assets held by Russia’s central bank, hurting its ability to stabilize its currency. Private companies — including Apple, Netflix, Adidas, and BP — have cut off the Russian market, and the U.S. has moved to ban Russian oil imports.”

Thompson continues, “Sports leagues, film festivals, and other cultural institutions have banished Russian competitors. McDonald’s is closing its Russian franchises. Many of these measures are unprecedented for a country of Russia’s stature. Collectively, they amount to a radical worldwide experiment in moral retribution. If Vladimir Putin sought to expand the Russian empire by hard power, he has achieved the very opposite: the diminishment of Russia through an unprecedented display of global soft power.”

Some of the “immediate consequences” of Russia’s economic pain, Thompson notes, were easy to predict — for example, Nasdaq going into “bear territory” and the fact that the ruble “crashed by 50%.” But these things, he stresses, are “just the beginning.” And Thompson goes on to list and describe “three ways that Russia’s economic blackout could change the world.”

They are: (1) “The green-energy revolution goes into warp speed,” (2) “a new Chinese empire,” and (3) “a global food fight.”

Some far-right Republicans in the U.S. have been saying that the Ukraine crisis makes an argument against green energy and in favor of fossil fuels — in other words, the old GOP/Tea Party “drill, baby, drill” mantra of the 2000s and 2010s. But Thompson argues that countries will ramp up their green energy programs.

Thompson predicts, “Over time, the boycott of Russian energy could raise the price of thermal energy enough that it compels countries to deploy significantly more wind and solar projects. For years, anti-growth fears, anti-nuclear sentiment, and vague NIMBYism have stood in the way of green-energy construction…. Rising energy prices will change consumer preferences, nudging more consumers away from gas-powered cars.”

Thompson goes on to say that being ostracized economically by so many countries could make Russia more dependent on China.

“It looks like China could become the counterpart of last resort for Russia,” Thompson argues. “This would make Russia something like a giant North Korea. Since 2010, that rogue nation has relied on China for roughly 90% of its total trade. One plausible scenario, then, is that Putin’s failed attempt to expand the Russian empire grows the Chinese empire, as Russia clings to China to avoid economic ruin.”

Thompson notes that a lot of food is exported from Russia and Ukraine, and the fact that they now at war, he writes, could lead to a “global food fight.”

“Ukraine and Russia feed the world,” Thompson notes. “They account for about 30% of global wheat exports, along with 20% of global corn and 80% of global sunflower-oil exports.… And now, they’re at war…. The past few weeks have already demonstrated the force of social cascades — where what began as a financial sanction against Russia has become a worldwide boycott of it. Imagine a social cascade powered not only by moral righteousness, but also, by hunger.”

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