Spoiler: Putin’s war against Ukraine has led to decreased supplies of several goods which Ukraine and Russia exports. We have already seen price hikes of oil and gas followed by decreased supply and higher prices of wheat, sunflower oil, fertilizers, steel to mention some of the most important goods. The world will be poorer, and the poorest people will be hit hardest by Putin.
The effects are felt directly and indirectly. The direct effects concern those firms and households who use gas and oil for as energy or wheat when baking bread. They are also felt indirectly as goods that are produced with gas, oil, wheat, sunflower, and steel become more expensive. The effects are stronger in countries where imports of the goods are relatively large, account for a large part of final domestic demand and the more elastic demand for those goods are.
The effects are stronger in continents and countries with a relatively large share of poor households. More families will be poor. But the effects will reach further. Increased poverty is associated with less nutrition, shorter life expectance and higher natal mortality numbers. Putin kills people today and in the future. In addition to that, his war will lead to fewer births.
And don’t forget! There are no sanctions on russian exports of grain, other agricultural products or fertilizers. putin has chosen, not only to block, destroy and steal Ukrainan exports of grain but also to reduce his own exports.
Spoiler: A lot of people cried wolf at the outbreak of the Corona crisis. Media reports of shortages of medical goods led to demands for increased production inside the EU of such goods. These demands came at the same time as some countries closed their borders and prevented exports of medical goods to other countries.
But these demands have been proven wrong. Most medical goods were produced within the EU, and trade with medical goods increased dramatically during the crisis eliminating the shortages. This and earlier experience from trading with the rest of the world show that decreased globalisation and specialisation will give us fewer resources and make us less resilient when future pandemics occur.
The export restrictions were counterproductive. The correct policies for combatting pandemics are trade-facilitating. Lowering tariffs and reducing the number of Non-Tariff Trade Barriers are obvious policies. In fact, decision makers across the world have realised this and have now introduced trade-facilitating measures for covid-19 goods that cover more trade than the trade-restrictive measures that were initially introduced. The correct policies within the EU is of course to make sure that the functioning of the Single Market is not harmed by trigger-happy politicians.
A few days ago I posted this where I showed that Globalisation kills poverty. In this post I will show that globalisation saves the lives of children. As countries increasingly become integrated in the world economy by opening up their economies, national incomes rise.
Increasing incomes allow people to invest more in the health of their children. And higher incomes create resources that can be used to improve people’s health. More and better roads can be built so people can visit clinics, doctors, and hospitals easier and faster. The new roads also allow for better access to also goods and services such as pharmaceuticals and vaccines. And more clinics closer to people can be built and be supplies with better educated nurses and doctors than before. And the higher incomes make it possible to supply more people with electricity and water.
Following the corona outbreak, some countries closed their borders and banned exports of medical supplies. Populistic politicians want their countries to become more “self-sufficient”. According to them, that would also decrease our exposure to viruses like Covid-19. But arguing that more self-sufficiency, aka protectionism, would kill two birds with one stone is terribly wrong.
The arguing is wrong because less trade would make us poorer and leave us with fewer resources to combat viruses. Producing our own ventilators, medicines, vaccines, all the protective equipment we need, would be more expensive than buying from countries that now produce them more efficiently. Some of these products, e.g. ventilators, consist of many parts which now are produced in many different countries all over the world. If we were to produce them ourselves, we would need to set up plants to also produce those parts and extract the raw material which is used in the production processes.