August 23, 2022 - 10:23am
It has now been six months since Russia invaded Ukraine. Yesterday Citi released a report arguing that inflation in the UK would hit an eye-watering 18.6% next year — their projections for energy prices showed average monthly bills rising from around £80 a month in 2021 to around £480 a month in 2023.
Annual wage growth is chugging along at just over 6%, so if Citi are correct Britain could be facing down the largest collapse in living standards in decades. The war has been a disaster for the Western economies. And while most people have managed to muddle through so far, a very dark and cold winter looms. How did we get here?
When the war started, the West was full of confidence. Our leaders assured us that the sanctions we were going to impose on Russia would collapse their economy. During a speech in Warsaw in March 2022 President Biden claimed that while Russia was currently ranked the 11th largest economy in the world, after the sanctions it “will not even rank in the top twenty”. Backing out the numbers from this statement it appears that the White House expected the Russian GDP to collapse by at least 55%.
How has this prediction worked out? Not very well. In July the IMF ran actual projections on Russian GDP growth and found that it would fall by around 6% this year. The White House was off in its assessment by a factor of around ten. That is not a simple botched forecast — that implies the White House was occupying an alternative reality.
Yet even the recession in Russia doesn’t tell the whole story. Russia is becoming enormously rich off the sanctions. The sanctions — and recent counter-sanctions in the form of the Russians withholding gas from Europe — are generating enormously high energy prices. These high prices translate to higher revenues for energy exporters like Russia. In July 2022, Russia’s trade account was generating a surplus of $166.6bn — that is more than three times higher than it was a year previously. The Russians are raking it in.
Meanwhile, as noted previously, Western economies are being badly damaged by high energy costs and energy shortages. These do not simply harm consumers; they result in massive disruptions in the industrial sector. Just today it was reported that the European metals industry is falling to pieces, with an aluminium smelter in Slovakia shutting down, and a zinc factory in the Netherlands following suit. These are key components for other sectors of European industry, such as automotive, construction and infrastructure.
This is not to even mention the enormous global realignment that is taking place in the wake of the invasion. The BRICs economic alliance looks set to expand enormously, with sixteen new potential applicants rumoured to want to join. Notably these include core oil producer and (former?) Western ally Saudi Arabia. New payments systems are rapidly rolling out to replace the Western-centric SWIFT system, with Russia and India testing out a new bilateral payments system that eliminates the need for a “one payments system that rules them all” SWIFT model.
Why did Western sanctions hurt the West and make Russia more powerful? Because we have overestimated our economic and diplomatic power. Western leaders are acting like we are living in 1995. In 2022, however, the BRICs economies are far more prominent, and the diplomatic power of Russia and China often exceeds our own.
If our leaders do not step back and re-evaluate our place in the world, they risk collapsing our economies completely and dissipating the remaining power we have on the global stage. The stakes could not be higher.
Philip Pilkington is a macroeconomist and investment professional, and the author of The Reformation in Economics
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SubscribeWest and it’s media seem to be unable to shake off the Hollywood theme . The bad guy is always Russia & some elaborate exotic collaborators but the finger of blame is never pointing at itself. America especially is so quick to draw that blame finger. But do look at the mirror , perhaps the west is not faultless? The series of events that resulted in the war may not have been that obvious to a casual observer . Similarly the sanctions were akin to shooting yourself in the foot after the horse has bolted. Senseless and poorly thought out. The world was already put into crisis by the thoughtless lockdowns. Now the very people that were “saved” will feeling the cold cold of this winter .
Yes , one can’t do nothing when crisis hits ( be it covid or war) but surely taking less of a knee jerk & disastrous action would have a better result? We are in a world where the demand for instant result is being met by reactionary solutions. So when the dominoes begin to fall why are we surprised?
karma…the law of causes and consequences…reaping what you sow…etc…
I love the mixed metaphor or a horseless rider with a bullet in his foot. Fits the situation perfectly!
And no mention of printing trillions of dollars, which is always the primer in the inflation pump. Putin is being secretly cheered by the Western elites, who are wiping their brows in relief.
So just rollover when the next dictator invades? Looking forward to kneeling to our Chinese masters?
i might just be stupid- but not sure why it wouldn’t have been better for the West to slap punitive taxes (say 500%) on Russian energy imports. The global price would still have gone up – but not so much, and importers would have every incentive to source from elsewhere. Crucially Putin would not be raking it in via the EU’s euro-to-rouble Swiss conversion system that they are using currently
The author is very perceptive and his analysis is absolutely spot on. Let’s hope the West doesn’t collapse completely on itself. That being said, when all is said and done, I suspect that the US will no longer be the global power and leader of the free world that it once was.
While the Russian invasion of Ukraine is certainly not justifiable, there is no question that the US and the West helped nudge this along by continually pushing eastward with NATO expansion, something that was totally unnecessary. Never a good idea to prod the bear, as eventually the bear will strike back, even in irrational ways. In the immediate lead up to the war, Blinken, the US secretary of state said categorically that he was not prepared to exclude Ukrainian membership of NATO and that if the Ukrainians wanted to jojn they were free to do so. (Of course when Russia wanted to join NATO following the collapse of the Soviet Union, they were categorically rejected).
Now, at least in my view, it would be perfectly reasonable for the West to go to the wall for a fully Western country, but not for Ukraine. Prior to the war, Ukraine was rated as one of the most corrupt countries in the world. So why exactly are we defending one bad actor over another bad actor.
I suspect much has to do with the military-industrial complex in the US raking in the dollars through armament deliveries to Ukraine, all paid for by the US taxpayer.
Agreed but not 100%.
Imagine Mexico with it’s sizable US population (yes, it has) on the East coast: and it’s premier to be Pro-US. But a large faction of Mexican are anti-US and so they cosy up to Russia (in case the US attacks it*). For good measure it ousts it pro-US premier in a coup, with Russia’s help and installs a Pro-Russian premier.
Bouyed up by all this Mexico now decides to discriminate against its US population who in turn reject the coup and the illegal premier: and seek US support to defend itself and even declares UDI to break from Mexico.
Now the US is very concerned about all this and so, naturally, supports the pro US population with arms etc.
Incensed the Mexicans bomb the crap out of the US populated East coast in a near genocide!
The US is very unhappy about this but given Mexico is a sovereign state it puts up with it for 8 years watching their ex-countrymen being blown to bits!
After 8 years the US has had enough and invades Mexico to protect it’s own.
*After all thats how it acquired Texas, New Mexico and California!
So was Russia justified in invading Ukraine? Think again and see if you change your views? Let me know…
You’re despicable. It seems you condemn American imperialism but not Russian imperialism. I wonder what your thoughts are on Russian war crimes in Ukraine. Can you give me an honest response that doesn’t engage in whataboutery?
.
Wasn’t I basically saying the same thing in a slightly more delicate manner so as not to offend the sensibilities of readers such as Samuel Turner and Billy Bob.
So of course I agree with you. The problem to some extent though is that the West is living in a post-modern world where the sort of thing that Russia did with regard to Ukraine is just unthinkable, just as Lincoln’s actions in 1860 to preserve the Union would be considered unthinkable in the US and the West in general in 2022.
So tell me, what do you think should have been done. Should the west have simply allowed Ukraine to fall, letting an aggressive, expansionist Russia march right up to its borders? I very much doubt those old Soviet republics would be too keen on that idea, and it would strike me as incredibly dangerous having Putins regime knocking on the door of NATO countries
If the west wouldn’t have interfered in Ukraine in the first place, and had Blinken categorically stated that Ukraine would never be a member of NATO, this war would never have occurred. As for your comment about Russia at NATO’s doorstep don’t you see how hypocritical it is. So it’s fine to have NATO on Russia’s doorstep threatening Russia, but the other way round is bad. But Russias (as opposed to the Soviet Union) never threatened NATO or the EU. So what exactly are you talking about.
But Russian interference in Ukraines affairs is fine is it? Poisoning Yushchenko was perfectly reasonable I’m sure! Ukrainians ousting a pro Russian leader and electing a pro western one isn’t the west interfering in my eyes.
I also don’t buy the theory this has anything to do with NATO, as even Russias reasons for invading their neighbour seems to change weekly. It’s no different to when they attacked and carved off areas of Georgia, they’ve done it simply because they believed they could get away with it.
Finally your point regarding NATOs expansion, all those countries have joined voluntarily, and Russias behaviour in Ukraine has shown they were right to do so. Sovereign countries choosing to join a voluntary defensive alliance is completely different to a hostile power edging up to your border through aggressive violent invasions of neighbouring countries.
If Putin was in charge of a poor African country rather than Russia the actions of his army would now see him up in The Hague on war crimes
You have this idea that Russia should decide what other countries alliances should be.
NATO is on Russia borders because former Soviet Block states joined it as soon as they could based on their experience of Russian genocidal Imperialism.
Please tell us why Finland and Sweden joined NATO?
According to your moronic view of the world it has nothing to do with Russia invasion of Ukraine.
No one is threatening Russia militarily.
What Putin can not stand is example of other countries on Russia borders having successful democracies with rising living standards.
It might give Russian slaves bad ideas.
Disgusting, utterly anti-democratic, and stupid.
Following your logic UK should invade Ireland.
You speak English, so you are English?
..not to mention the hypocrisy of it all given its own flagrantly illegal invasions of sovereign nations. Is that not relevant? Why not? Because they are brown skinned and non-Christian?
You are still at it with your idiotic claims of Russia being member of NATO.
Russia never met any conditions, never mind the basic fact that NATO was created to stop Russian genocidal Imperialism as being displayed now in Ukraine.
Your moronic claims about Eastern expansion of NATO is another Russian propaganda lie.
Former Soviet Block countries were desperate to join NATO based on their experience of Russian subjugation (East Germany 1953, Hungary 1956, Czechoslovakia 1968, Poland 1981).
Please tell us, were they wrong?
If so, can you tell us why Finland and Sweden joined NATO?
Main question is:
why should anyone in the West, i mean people like you, wish Russia victory in Ukraine?
You have to be a moron not to see that Russia victory there is similar to Munich dismemberment of Czechoslovakia.
Remind us, did it end well?
“we have met the enemy and it is us”
..or maybe “he is one of ours”? The 99% have done nothing to merit this except elect an idiot, belligerent government and support a hawkish military at home and in GHQ (the US). They should protest! Oh wait: that’s illegal now!
This is so obvious to destroy the West to cause ‘The Great Reset’
Biden and his ilk in all the West are out to destroy the West, and all the golbal economic system so it can be rebuilt in the Great Reset, a 1984 of Neo-Feudalism where the Corporations run and own all things, everywhere, and the people own none and are ruled by Tech more pervasive than can be dreamed of.
The same reason the Pandemic was done.
This all is not by chance.
conspiracy theory par excellence.
The analysis and comments are missing a crucial point. You cannot lump “The West” together in this case. This is not an economic disaster for the West, it is an economic catastrophe for Europe and the US is relatively well insulated as a net energy exporter, in fact they may well profit from the inflated price of LNG (liquid natural gas) exports they’re shipping to Europe.
This is not mainly about the west overestimating it’s economic & diplomatic strength (although this is part of it), it’s principally about a collective European failure to understand that energy is the lifeblood of an economy and therefore our own security being strongly tied to some level of energy independence.
Great post.
All the people like the author of the article just keep saying “surrender to Russia and all will be well”.
But the same people are moronic lefties who got us here.
Remember great leader of EU Merkel?
She forced our dependence on Russian energy and supported by idiots like Boris Johnson and Biden was instrumental in net zero idiocy.
Obviously MSM like bbc have nothing to say about how come “Church of Holly Green Bollocks” can not save us now?
Surely wind and solar are plentiful and cheap?
Great post.
All the people like the author of the article just keep saying “surrender to Russia and all will be well”.
But the same people are moronic lefties who got us here.
Remember great leader of EU Merkel?
She forced our dependence on Russian energy and supported by idiots like Boris Johnson and Biden was instrumental in net zero idiocy.
Obviously MSM like bbc have nothing to say about how come “Church of Holly Green Boll***cs” can not save us now?
Surely wind and solar are plentiful and cheap?
Does the Davos sect actually care if they “collapse our economies”? Do they even see the rest of us as participating in “the economy”? Remember “you’ll own nothing, and you’ll be happy.” Well I own a whole lot less than I did 3 years ago. Can someone please tell me when the happiness starts?
Certainly our leaders on both sides of the pond appear utterly heedless of the damage their policies create (eg: global warming targets, massive immigration, inflation) for the vast majority of their own citizens.
It increasingly looks like a carefully cultivated Russian energy play that they have been nurturing for years, greatly assisted by environmental policies that have created large energy supply vulnerabilities.
A fear is that the coming economic woes may push hawks and neocons to press for more direct engagement against Russia to try to ‘liberate’ those energy supplies for Western use.
Good luck “directly engaging” with Russia.
It ain’t Afghanistan or Syria.
… oh I dunno: didn’t Napoleon and Hitler give ’em a damn good thrashing? Can’t remember how it ended though can you?
Since it is just one day past another anniversary of Ribentrop Molotov pact, what about discussing how appeasement worked in 1938/1939?
Nazi Germany and Russia starting ww2 by invading Poland together.
Reply to Liam O’Mahony
Since it is just one day past another anniversary of Ribentrop Molotov pact, what about discussing how appeasement worked in 1938/1939?
N**i Germany and Russia starting ww2 by invading Poland together.
I had to repost.
As usual typing N**i makes your post “awaiting approval” but posting Communism is fine.
I am really annoyed with Unherd (unless you are Communist) and I will not be renewing my subscription.
I’ve thought the same.. surely the smart guys in govt, MI5 and the Pentagon would also have had the wit to see that coming? Obviously the Germans thought “mutual dependence” was the best approach to take showing how unsmart they are? Maybe Putin is super smart right enough: and history shows the Russians are invincible at the long game? Napoleon and Hitler learned that the hard way. Don’t the aforementioned Western govts and their hawks study history? Instead they think (as Napoleon and Hitler thought) “Russia is taking a beating! They must be weak? Let’s get ’em!
Oops, here comes the bear!!
This article has shown that governments should be cautious with a proper analysis of the situation, including the end game, before taking such a momentous decisions.
There is no doubt that we need the war to end for our welfare and national stability. In fact, I am sure a majority of the public want the UN to start peace negotiations.
Unfortunately America is not on board as can be seen from the News today. I believe that this is because it encouraged Ukraine to refuse neutrality and it does not want to lose face yet again – at least that is my view! It sees military power as the means to retain dominance in the world. However that dominance was starting to wane before the conflict. Europe was regarding Russia as a friendly neighbour (through trade, sport and culture) and recent Alliances between countries in the Far East was giving China additional kudos in that part of the world.
I often wonder how much support Zelensky has in Ukraine now, when its economy and infrastructure are continuing to be destroyed.
Well, people like you are directly responsible for ww2 and tens of millions of deaths.
You believe that appeasing genocidal dictator (Hitler then and now Putin) will save your skin?
But it didn’t work in 1939, so tell us why it would work now?
The war was engineered by Western plutocrats and military industrial complex, forcing Putin into corner, whilst Western press completely miopic, now we all pay for the sole beneficiaries: oil, armaments and international capitalists of all varieties.
What corner is that that Putin was forced into? The last time I looked Putin is sitting in one of the vastest “corners”in the globe.
What you mean is that the US gave support to the Ukrainian people to chose a Western leaning government. Zelinski has been voted in democratically. If Putin wanted more influence he could have supplied aid just as the West supplies aid around the world in the hope of having some positive influence.
Don’t try to pretend Putin was forced to do anything by the West. He deliberately chose to invade and seize part of Ukraine just as Adolph chose to invade Czechoslovakia on the pretence of protecting the Sudeten Germans. He is simply a Slave nationalist.
Juxtapose Mexico (with its sizable US population on its East coast) for Ukraine: and the US for Russia as per my reply to Johan Strauss and you’ll see exactly how Putin and Russia were very much backed into a (political, not geographical) corner. While he may well be a Slave Nationalist he is not simple nor is the situation simple! He is very very smart and the situation is very very nuanced.
A plague on all their houses I say! One is as bad as the other in my opinion but the fact remains: you cannot kick a powerful nation and hope to get away with it!
After next winter and a closer study of the history of Ukraine since 2000 let us know if your views change at all: please..
There is no moral equivalence between Russia and Ukraine. To suggest so is victim-blaming plain and simple. Russia attacked Ukraine, violating its national sovereignty. Ukraine did nothing to harm Russia. Surely cozying up to the West does not justify a full invasion resulting in tens of thousands of needless deaths.
May I suggest that perhaps you read a little bit of the history of Ukraine and Russia and just how closely intertwined they are. In essence the current situation does not represent a war between two separate nation states, but rather a civil war. Had the US not sponsored the 2014 Maidan revolution/coup and installed a corrupt western puppet, succeeded by an equally corrupt Zelensky, and had the US/NATO not continually pushed eastward, this entire episode could have been avoided entirely.
Almost every time the US interferes in other countries’ politics, disaster and misery follow. Not always, of course, but a good deal of the time.
Just repeating Russian propaganda lies doesn’t make it true.
You are nothing more than a scumbug.
Ukraine voted over 90% for independence in 1991 referendum.
Even Donbass voted over 80% for independence from Russia and Crimea 54%.
There was nothing to avoid, you just need to read Putins speeches.
He denies Ukraine right to exist, it has nothing to do with NATO “expansion” as you call it.
Do you deny rights of countries like Baltic States and Poland etc to join NATO?
Please explain why Finland and Sweden joined NATO?
Answer is clear:
To be safe from disgusting Russian Imperialism.
Just repeating Russian propaganda lies doesn’t make it true.
You are nothing more than a scu**ag
Ukraine voted over 90% for independence in 1991 referendum.
Even Donbass voted over 80% for independence from Russia and Crimea 54%.
There was nothing to avoid, you just need to read Putins speeches.
He denies Ukraine right to exist, it has nothing to do with NATO “expansion” as you call it.
Do you deny rights of countries like Baltic States and Poland etc to join NATO?
Please explain why Finland and Sweden joined NATO?
Answer is clear:
To be safe from disgusting Russian Imperialism.
According to what I have read, Zelensky was, indeed, democratically elected, but on a platform of bringing peace between the Ukraine and Russia. Yet, when he stated, upon winning the presidency, that he would do all in his power to achieve that end, the non-corrupt fascists threatened to string him up, and, when there was no help forthcoming from the U.S. and NATO to combat this threat, his tune quickly changed. And now, with the billions of dollars and weapons from the U.S., with more to come, and resources from NATO, Zelensky seems inclined to carry on.
Sadly, true..
So what are you proposing? The west roll back sanctions and Russia turn on the taps? Russia would demand all military assistance be halted to Ukraine as well as the reversal of Sweden’s and Finland’s acceptance into NATO.
Mr. Pilkington–what is your strategic vision with regards to the West and the BRICS? Do you recommend Europe continue its energy transformation or rely still more on Russian natural gas? What if Russia never turns the taps back on because as you point out they “are raking it in”?
I am hard pressed to see answers in your work. Any in-depth analysis of Chinese trade surpluses and the sacrifices required to become a reserve currency would raise immediate questions if the BRICS could ever establish an alternative to SWIFT. China has struggled since the Recession to rebalance its demand with unsuccessful results. They now run a larger debt-to-GDP ratio than the US and face a far more serious demographic cliff. Chinese youth unemployment is near 20% whereas the US hums along at 8.5%.
Russia has lost thousands of talented citizens abroad in the wake of the war and they can no longer export the defense systems to former clients like India and Turkey. Their military is clearly a farce and they have horrific demographics.
As for Brazil and South Africa, these nations struggle to tap the inherent dynamism of their populations. Brazil is a tragic case as it is blessed with resources that rival the US, but its GDP-per-capita peaked at $13k in 2011 before falling to $8k on the eve of the pandemic (where it was in 2008). They have suffered a lost decade and real declines in standards of living that mirror the Great Depression. South Africa peaked as well in 2011 around $8k before falling to $6.6k in 2019. Youth unemployment is above 60% and the national rate runs around 35%. They suffer chronic black outs to deal with poor electric infrastructure and have just suffered an embarrassing run of scandals at the hands of Zuma and the Gupta brothers.
Finally, we have India. Of all the countries, India has the greatest fundamentals. They have a young population, a longer history of democratic norms, a culture of innovation and exquisite achievement, and plenty of natural resources. They also run a youth unemployment of 23.3%, entered a recession in 2019, and face existential threats related to climate change (the entire subcontinent could see wet bulb temperatures unsafe for human activity).
So what threats do the BRICS pose? Argentina is a perennial debt trap and China has cut its foreign lending every year since 2016. Sri Lanka plunged into crisis and Pakistan is quite close. China’s closest neighbors are all cozying up to the US with the exception of Cambodia. I suppose we will see.
Thank you. Some sanity amongst the delusional Western self-hating nonsense on here.
I am writing this from Slovakia. Yesterday I was in Poland. Front line states to Ukraine. Tell these guys this war is about money and not freedom and security. No one in Eastern Europe wants Russia as a neighbour. No one trusts them. For very good reasons.
Does this author only have one subject matter to write on? I swear I’ve read the exact same thing now with the exact same viewpoints multiple times simply worded in a slightly different way
He sure don’t like sanctions on Russia no sirree.
Москва payroll
..and how are you enjoying the price of gas and the shortage of grain and oils etc yourself?
If you are stupid enough to kill your energy sources and make yourself dependent on the grace and favour of national level mafioso thugs (Russia, China, Saudi etc), then why would you expect them to play nice with you?
Countries leaving themselves at the whim of a hostile dictator for their energy needs was some of the most stupid, short sighted policy imaginable. However if they don’t transition now something else will simply crop up in the future and they’d be back to square one anyway. Rip off the plaster, endure a bad winter and be done with it.
Yep agree. Although likely it would be half a decade of pain not just a year.
Yes, I mostly like Bob posts but he might be optimistic and you might be realistic.
I hope he is right and that you are wrong, obviously
Agreed it probably would take longer than my post implied, mine was based more on the sentiment than the actual timeframes, so apologies
Bis repetita placent!
This is completely unfair. The author has written multiple articles about China as well. Although to be fair to you, you could substitute Russia with China in any of them, and they would all read identically.
..if at first you don’t succeed (coz de beggars won’t listen) then I guess it’s try, try again. After all so many believe the Western mainstream narrative no matter how unlikely it is and that’s because it has been hammered home, again and again: unchanged, unnuanced, false and exaggerated? Repetition works…
Just because you repeat something often enough it doesn’t make it true. To imply the conflict in Ukraine is only harming the west is nonsense. Yes the energy prices are causing trouble, but to imply Russia is coming out if this unscathed is simply rubbish
And the sky is falling…again.
The one thing we all agree on! We’ll never agree on what caused it, or what we might have done to prevent it, but something deep down inside of all of us seems to be sensing the rapidly descending sky.
..coz de gas is risin’
“Western leaders are acting like we are living in 1995.”
Spot On!
Jeez Liam I hope the Internet Research Agency pays overtime
Fearmongering, defeatism, and conspiracy theorizing on full display both above and below. The woke crowd have nothing on you lot.
Cue the Putin defenders, useful idiots all.
I know. There’s quite a nest of them here. A worrying folk.
.were you banging pots and cheering on Thursday nights for the NHS?
Noise. Irrelevant to his point. Try posting something relevant.
Sounds about right to me… all based on a juvenile invincibility syndrome.. make America great again and the good ol’ British empire don’t ye know.. time to wake up and smell the cold coffee and stale toast!