World, war, economics
Yuliia Yakmets | 29 Aug 2022
We live in a globalized world, so the processes in one country can greatly affect other countries. This is especially evident in the aspect of the economy. One may think: “The war is very far away, it certainly cannot affect my life.” However, as practice shows, this is not quite the case. Russian aggression caused instability not only in the sphere of politics and peace-making, but also disrupted economic stability.
It is vital to note that the global economy has not recovered from the pandemic yet, as the service sector has suffered due to restrictions. That was a strong blow for countries with developed economies. Now we see a new shock that could lead to a recession.
Why is there an economic downturn? In my opinion, there are three main justifications for this.
One reason is a violation of logistics routes, since Ukraine, due to Russian aggression, cannot transport cargo by sea, this type of transportation accounted for the majority of export products, so we can already talk about a possible food crisis. Especially in the countries of Africa, Asia and South America, because that is where the majority of wheat and sunflower exports were directed. It seems that what is the economy here, due to disruptions in logistics, the price of products began to rise, which is felt by all countries, especially by low-income countries.
Another reason, prices for energy resources increased sharply. Brent crude oil was estimated at $118 per barrel in March 2022, up 38% from January levels and up 81% from a year earlier. This means higher oil prices could reduce real incomes and import demand globally, while higher natural gas prices are likely to have a greater impact on Europe.
Also, energy resources are used in factories to produce finished products, so we should expect an even greater increase in price, in particular for metallurgy.
A further reason, the war has caused a massive refugee crisis: more than twelve million Ukrainians have left their country (at the time of writing). This is the largest influx of refugees since World War II. Due to such quantitative forced migration, the load on the social system of the country of immigration increases and may have problems with unemployment inland. Thus, today the world is faced with stagflation, although less than that which occurred between 1973-1974, but could be a major economic shock. This economic process is characterized by a decrease in production, and therefore jobs, and inflation at the same time. This is a lien to contribute to increased uncertainty in the economy, among businesses, households, and financial markets.
In addition in the history of economics, there is a well-known examples, when a crisis in one country affected all over the world. For example, in the crisis of 2008, the economy collapsed in the USA, namely in the financial sphere, which arose as a result of a sharp reduction in savings, inadequate consumption and speculation in the market of risky mortgage securities. The financial crisis quickly spread to all sectors, negatively affecting manufacturing, firms, investors and households. Many countries, especially emerging markets, have been hurt by increasing capital outflows from the economy and falling exports and commodity prices.
Therefore, Russian aggression could potentially trigger a new crisis. Today, almost all countries of the world have already felt the consequences of the war, it is especially dangerous in the context of food supply and energy resources. The world began to decline economically, this is manifested in the increase in prices and stagflation. That is why the war affects all of us and our lives right now.
The blog entry is part of the “Youth Advisory Boards for Peace” project, financed by the European Commission. More info: http://culturalrelations.org/portfolio/youth-advisory-boards-for-peace