Despite significant Ukrainian gains in September, neither side currently appears powerful enough to win the conflict outright. As a line of contact stabilises and parts of eastern Ukraine remain under Russian occupation, is a military stalemate likely? And what might be the economic consequences of the absence of a negotiated agreement?

How has the conflict progressed and is a military stalemate likely?

Russia launched its so-called ‘special military operation’ in Ukraine in February 2022. But Russia’s military involvement in Ukraine dates back to 2014 when it supported separatists in the eastern regions of Donbas and Luhansk, and the southern peninsula of Crimea. Russia annexed the latter after an illegal referendum in the same year.

The conflict in eastern Ukraine was fought between separatists backed by Russia and Ukrainian forces that were, at first, an amalgam of informal militias and the Ukrainian army. Over time, this became an increasingly centralised and effective military force.

The conflict simmered at low intensity, with a relatively stable line of contact stretching from north of the city of Luhansk to east of the city of Mariupol. Despite sporadic episodes of heavy fighting, movement of people and goods across the contact line resumed, although this was heavily controlled through a small number of border crossings.

Russia’s role in the conflict was initially debatable, but the origin of the ‘little green men’ became well known, and in 2015, Russian president Vladimir Putin admitted to their presence. Military support often guised as humanitarian aid and the direct involvement of military personnel ensured high levels of control over the separatist armed groups and region by Russia.

Russia began amassing troops near the Ukrainian borders with Russia and Belarus around March 2021. Claiming to want to protect ethnic Russians from genocide, Vladimir Putin launched a full-scale invasion of Ukraine on 24 February 2022. This included bombing across the entire Ukrainian territory and an attempt to take the capital city, Kyiv.

Despite predictions of imminent defeat for the Ukrainian army, the Russian army ultimately failed to achieve their primary military objectives. This was due to a combination of staunch Ukrainian resistance and poor logistics.

In late March, the Russian defence ministry refocused its military power on eastern Ukraine, aiming to create a land bridge between Crimea and the separatist regions. Russia employed brutal and often indiscriminate military tactics to take the strategic cities of Kherson in March, Mariupol in mid-May and Severodonetsk in late May.

Russia didn’t succeed in achieving its initial goals, and while significant tracts of land in eastern and southern Ukraine came under occupation by Russian forces, Ukrainian forces are increasingly pushing the Russian army back.

Indeed, in recent weeks, Ukrainian forces have forced Russian troops to retreat, especially in the north-eastern region of Kharkiv, where the Ukrainian government claims to have liberated over 3,000 square kilometres. In response to this military setback, Putin ordered the mobilisation of army reservists to support the ailing campaign.

But despite a successful Ukrainian counter-offensive, there are early signs of a military stalemate. Neither side appears strong enough to win the conflict outright.

What are the prospects for a negotiated settlement?

The international community will play an important role in how Russia’s war in Ukraine ends. The invasion was largely condemned, although there were some notable absences, such as China, North Korea, Iran and Syria.

Western states have responded in two ways. First, the West imposed debilitating sanctions that targeted the Russian economy. Sanctions are inflicting large costs on people in Russia, but their effectiveness in making the Russian elite abandon their foreign policy goals in Ukraine is not clear.

Generally, economic sanctions can inflict costs on target states, but many question whether they are the most effective foreign policy tool for forcing states to change their course of action. Writing over two decades ago, Robert Pape argued that: ‘Pervasive nationalism often makes states and societies willing to endure considerable punishment rather than abandon what are seen as the interests of the nation.’ Iran has since become testament to this claim.

While it is difficult to assess public opinion in Russia, early polls suggested that its citizens supported the invasion, and polls show high approval rates for Russian leadership. As winter approaches, Russia is flexing its own economic muscles by halting important energy supplies to Europe. While unprecedented in scale and scope, it is not obvious whether economic sanctions will stop Russia’s aggression in Ukraine or force the country to the negotiating table.

Second, the West has supplied military equipment to support Ukraine in its fight against Russia. In an unprecedented move, the European Union sent military assistance to support the Ukrainian armed forces. At the same time, the UK and the United States have provided effective weaponry aimed at providing Ukraine with the tools to overcome Russia’s important military advantages.

While surveys indicate that the Western public overwhelmingly supports their states’ response to the Russian invasion, a small but growing group are raising concerns over warmongering. For example, in the UK, the former leader of the opposition Labour Party, Jeremy Corbyn, urged Western countries to stop arming Ukraine because it will ‘prolong and exaggerate’ the war.

There is a large body of relevant research on the role of external states in civil wars and, specifically, the mixed track record of interventions in ending hostilities. Interventions affect the capabilities of opposing sides in a conflict and, ultimately, conflict duration.

Existing theories tend to focus on a balance of power between government and rebel forces, which is often measured in troop numbers, military capabilities and resources. External support may shorten wars if it is provided to one side, but not both. Certain forms of support – mainly money and weapons – cause greater uncertainty over fighting capability, which causes sides to continue fighting rather than settle the dispute.

Although there is variation in the role of external states and conflict duration, a consensus has emerged that conflicts tend to be harder to resolve when external states intervene, especially if the two sides achieve some form of military parity. With increasingly effective military support reaching Ukrainian troops on the frontline, it is unlikely that the conflict will end soon.

There is a larger trend for conflicts not to end in victory or an agreement. Researchers have argued that a norm emerged in the 1990s that led the United States to accept high costs to achieve negotiated settlements despite having the ability to help proxies achieve outright military victories. Due to a logic of appropriateness, Western policy-makers came to think that wars should end a certain way, namely through compromise based on democratic principles.

These experts also note that an emerging goal of stabilisation marked conflicts in Iraq and Afghanistan. Indeed, conflict termination data from the Uppsala Conflict Data Program (UCDP) show that conflicts are increasingly likely to end in low-intensity activity – that is, conflict continues but does not amount to more than 25 battle-related deaths per year. Combined, most research points to a military stalemate and, ultimately, a low-intensity or frozen conflict.

What might a frozen conflict look like?

It is difficult to predict how Russia’s war in Ukraine will develop. A settlement that sees Russia retreating to the pre-conflict line of contact is hard to imagine. Neither Russia nor Ukraine is prepared to agree to a negotiated settlement that ultimately amounts to failure to achieve their aims.

And yet a United Nations-backed deal negotiated by Turkey to allow the export of grain from Ukraine provides ‘a beacon of hope’ that Russia and Ukraine may cooperate, at least in economic matters that benefit both sides.

Taking both the unlikelihood of a negotiated settlement to the war and emerging cooperation in trade, a possible future scenario is a protracted conflict with a volatile line of contact. In time, occupied lands in eastern Ukraine may be annexed by Russia through unrecognised referenda or a de facto state may emerge from an increasingly cold conflict.

De facto states are not recognised by most states and thus do not have access to the legal rights afforded to states. As there is no international legal protection for their existence, they are often at risk of being forcibly re-integrated into their ‘parent’ state – in this case, Ukraine – and rely heavily on their external patron for protection – in this case, Russia.

There is a rich body of research on de facto states with a regional focus on the post-Soviet space. Places like Transnistria, Nagorno-Karabakh, Abkhazia and South Ossetia were part of the Soviet Union. But de facto states also exist elsewhere in the world, for example Taiwan, Somaliland and Rojava.

Researchers focus on how these state-like entities emerge and how long they last until they are either re-incorporated into their parent state – as was the case when Russia invaded Chechnya in 1999 – or they are recognised by the international community – as was the case with South Sudan in 2011. Scholars therefore often focus on the dynamics of recognition and non-recognition, or on processes aimed at settling the conflict between the de facto state and its parent.

What will be the economic consequences of a frozen conflict?

The economic consequences of the war are dwarfed by the current human suffering and loss of life. Yet the economic impacts of war on Ukraine and beyond are immense. In the short term, Ukrainian economic output is currently a fraction of its pre-war levels.

Ukraine and Russia are the biggest producers in agriculture and food globally. Described collectively as the breadbasket of the world, restricted economic activity within Ukraine and its limited ability to export raw goods, particularly food, have led to soaring food costs.

This is directly linked to inflation in Europe, but crucially, record goods prices have triggered a global crisis that is driving millions into poverty and hunger, especially in low- and lower-middle income countries. Despite recent shipments of grain, the Russian blockade of Ukrainian ports and sanctions against Russia mean that food prices are likely to increase further.

The long-term economic costs of the war are equally alarming. People directly affected by violence are maimed, killed and displaced. Children miss out on crucial years of education and training. Combined with the loss of property and infrastructure – such as roads, bridges and equipment – all of this will significantly reduce future economic activity of people and areas most affected by the war.

The destruction of human and physical capital has reduced Ukraine’s macroeconomic performance, and a frozen conflict will prolong the economic costs of this war. While post-conflict states often experience a rapid economic rebound, a frozen conflict is unlikely to follow such a path.

As the conflict cools and a de facto state emerges in contested parts of Ukraine, a semblance of order will return for civilians in their everyday lives. But economic activity in de facto states is often restricted because they are not internationally recognised.

There may be informal trade into the de facto state over the line of contact. This dynamic was clear in Northern Ireland during the conflict known as the ‘Troubles’ and the civil war in Colombia – two wars heavily marked by cross-border smuggling and narco-trade.

But exports from government and Russia controlled areas are unlikely to resume to pre-war levels. In the absence of concessions by Russia to allow Ukrainian exports, sanctions that limit Russian agricultural exports will remain while Ukraine’s most industrial lands are ravaged by war.

Exports from occupied lands in the east and south will be limited to Russia and its allies, both of which will not be able to trade on international markets due to economic sanctions. Ultimately, a frozen conflict will ensure that the global economic crisis persists.

It is thus no surprise that Ukraine launched a counter-offensive in late August and September. It aims to signal the ability to regain Russian occupied lands to external supporters whose resolve will weaken if Ukraine cannot show that they can prevent a frozen war with such high economic costs.

Where can I find out more?

• The puzzle of peace – towards inclusive development in fragile contexts: United Nations University-WIDER Development Conference.
• The institutional legacies of violent conflict: United Nations University-WIDER project.
• The economic consequences of the war: articles and video from CEPR.
• The economic consequences of the Ukraine war: ebook by Luis Garicano, Dominic Rohner and Beatrice Weder di Mauro.
• The war in Ukraine: civilian vulnerability, resilience, and resistance: article by Patricia Justino.
• Ukraine has become a bloody stalemate – we need a settlement to end the fighting: Democracy Now interview with Anatol Lieven.

Who are experts on this question?

• Kristin Bakke (University College London)
• Anastasia Shesterinina (University of Sheffield )
• Dominic Rohner (University of Lausanne)
• Patricia Justino (UNU-WIDER)

Authors: Patricia Justino, UNU-WIDER and Kit Rickard, UNU-WIDER

The post What would be the economic consequences of a military stalemate in Ukraine? appeared first on Economics Observatory.

The United Nations (UN) process to tackle climate change recognises finance as one of its three pillars and includes the only agreed international treaty on providing finance to developing countries. The legally binding Paris Agreement of 2015 reinforced this commitment. So, are rich countries doing enough; and what would ‘enough’ be?

Developed countries are expecting to meet a collective goal of mobilising $100 billion per year in climate finance in 2023, three years after they made this commitment.

While that amount is substantial, the design of the target means that much of the money has been rebadged or diverted from other development objectives such as economic development and poverty reduction. Policy officials at the UN and within individual countries are beginning work, mandated by the Paris Agreement, to agree a post-2025 climate finance goal from a floor of $100 billion per year.

While economic analysis of the externalities of climate change – effects not experienced by the company or country causing them – could justify a much larger figure, if the design of the target doesn’t improve, that money may not make a difference to those dealing with the worst effects.

Despite the importance of combating climate change, high quality economic research on it is still lacking. In 2019, a study assessed nine of the top economic journals and identified just 57 papers on climate change out of a total of around 77,000 (Oswald and Stern, 2019).

The authors suggest that this may reflect a bias towards ‘conventional’ topics among editors and authors. It may also reflect the absence of reliable data – but the result is relatively thin research on arguably the most important issue of our time.

What are the costs of climate change and adaptation?

It is well understood that emissions of greenhouse gases such as carbon dioxide are trapping the sun’s heat, raising temperatures and affecting weather patterns. Each tonne of carbon dioxide, wherever it is emitted, is damaging to the environment and has associated costs.

Various reports have estimated these costs, although doing so relies on taking a view on how badly the planet and the economy will be damaged if and when emissions peak.

If climate change ultimately destroys much of the planet, the cost of each tonne of carbon will be extremely high, relative to one where the goals of the Paris Agreement – which commits to limiting temperature increases well below 2°C – are achieved. One authoritative summary, led by the US government puts the cost at $40 per tonne in 2020.

We have used that figure to look at historical emissions and their cost. Even if we discount the externality cost historically, and don’t count emissions at all before 1979 – when awareness grew and the first world climate conference was held – the costs are very significant.

They are estimated at $34 trillion globally, or $15 trillion for OECD countries – around 28% of their national income (Robinson et al, 2021). Paying off just the OECD’s historical liability would cost $190 billion per year to 2100.

The costs of climate change could also be estimated by aggregating government or business costs of mitigating emissions and adapting to the effects of climate change. The true costs would be those relative to a scenario or ‘counterfactual’ without climate change.

But this is a difficult calculation. Even for, say, flood defences, it requires attributing some share of the cost to changed climate; and there is no automatic reason for governments or businesses to do so.

But under the Paris Agreement, every country must produce a nationally determined contribution (NDC), which estimates emissions pathways and includes financing costs in many cases. As these develop over time, they may give a fuller picture of national costs.

These estimates of costs are different from the climate finance target. The latter is a negotiated outcome as part of an agreement to reduce emissions, not an attempt to set finance to match the costs of climate. But clearly any ‘liability’ for climate damage is relevant to that negotiation.

The COP process has a separate track on ‘loss and damage’ (article 8 of the Paris Agreement), which is where discussions of compensation take place. But these have made little progress as industrialised countries have been unwilling to agree to liability – although Scotland made the first financial contribution of £2 million under this article at COP26 in Glasgow in late 2021.

The $100 billion climate finance and other development finance targets

In practice, the $100 billion per year target, originally agreed in 2009 at the 15^th COP and reaffirmed by the Paris Agreement, is currently the only active mechanism for redistribution.

The other well-known international agreement on development finance is the 60-year-old UN agreement to provide 0.7% of gross national income (GNI) in official development assistance.

This long-standing target is accepted in principle by many high-income countries (but not by the United States or Switzerland), although in practice few have met it consistently. Across the 29 rich countries that comprise the OECD’s Development Assistance Committee, development assistance has typically amounted to 0.32% of GNI or $161.2 billion in 2020.

These efforts overlap with the COP climate finance target – nearly a quarter of official development assistance is now badged as climate finance (and counts towards the $100 billion target).

Climate finance was originally intended to be additional to existing development finance efforts. The first UN meeting of the conference on climate change (UNFCCC) in 1992 called for ‘new and additional’ resources. This language has appeared consistently in COP agreements, including the 2009 Copenhagen Accord, which set the $100 billion per year goal, and the Paris Agreement that reaffirmed it.

In practice, rich countries have shifted resources from aid programmes or rebadged activities to make progress on the climate goal. By 2019, the OECD suggests that climate finance grew to $78.9 billion but that was within an increase of all development finance of just $43.6 billion.

This suggests that only around half of climate finance was additional in absolute terms. Relative to national income, the picture is even worse: high-income countries’ contributions have remained unchanged as a share.

This failure to commit additional funds is particularly obvious in the case of the UK. The country is the current COP president and aims to double its climate finance to total £2 billion annually until 2026.

Despite this commitment, the UK has reduced its wider aid budget by £4.5 billion per year. During 2021, nearly all of the UK’s aid partners saw their support fall by a third or more, while the UK claimed to be increasing its support for climate.

The climate finance target was not defined clearly – it lacked a measure, baseline or any attempt to assess additionality. It also counts loans as equivalent to grants.

This has led to major disagreements in the past. Ahead of the Paris negotiations, India’s government famously suggested that credibly new and additional climate finance actually disbursed (rather than just ‘committed’) was more like $2.2 billion in 2014, far below the OECD’s claim of $62 billion for the same year.

Not only has this meant fewer resources to tackle climate change, but the lack of definition and progress has also undermined trust in the Paris Agreement. Without trust, countries do not have the incentives to make major adjustments to their policies or emissions.

Where next on climate finance?

At COP26 in Glasgow, developed countries set out a ‘delivery plan’ that would ensure the $100 billion target will be met three years late, from 2023 onwards. Although this is no guarantee of additional resources, for which there are acute needs in low-income countries to deal with the health and economic fallout from Covid-19, a food price crisis exacerbated by Russia’s invasion of Ukraine and record levels of humanitarian demand mainly due to the conflicts in Syria, Ukraine and Yemen.

The Paris Agreement commits to a new climate finance target from a floor of $100 billion per year from 2025 ‘taking into account the needs and priorities of developing countries’. Officials are starting work on the design of that target now.

This work will be crucial both in financing development, but also ensuring trust between nations as they look to transform their economies in the coming decades. Industrialised nations will need to recognise their responsibility for the damage caused by emissions and be prepared to provide financial support to those most vulnerable to deal with their effects on the climate.

Where can I find out more?

• The UN Framework Convention on Climate Change gives an introduction to climate finance and describes the agreements on its provision.
• An analysis of which high-income countries are providing climate finance by the World Resources Institute.
• Ministers from Canada and Germany published a Delivery Plan in autumn 2021, demonstrating how and when developed countries will meet the $100 billion goal by 2023.

Who are experts on this question?

• Joe Thwaites, World Resources Institute
• Clare Shakya, International Institute for Environment and Development
• J. Timmons Roberts, Ittleson Professor of Environmental Studies and Sociology at Brown University
• Nicholas Stern, London School of Economics

Author: Ian Mitchell

Photo by Kongdigital from iStock

The post How much climate finance should rich nations provide? appeared first on Economics Observatory.

The war in Ukraine, as well as sanctions against Russia, have resulted in a massive decline in the supply of major staple foods. This has led to a rise in food prices globally.

Which countries are bearing the brunt of the crisis?

Many developing and emerging market countries rely on food imported from Ukraine and Russia – known as ‘the breadbasket of Europe’ – to augment local food production. For example, the top three importers of Russian wheat in 2018 were Turkey, Vietnam and Indonesia. Similarly Indonesia, the Philippines and Morocco imported the largest share of Ukrainian wheat that year. Instability caused by the war will therefore negatively affect the food supply in these importing nations.

Food shortages precipitated by the war are hurting food prices everywhere, with the hardest hit being developing economies where the world’s poorest live. The United Nations’ Food and Agriculture Organization (FAO) reports that the global Food Price Index (FPI) averaged 159.3 points in March 2022, up 17.9 points (12.6%) from February. This is the highest level since its inception in 1990. The latest increase reflects new all-time highs for vegetable oils (248.6 points) and cereals (170.1 points), highlighting the direct negative effect of the conflict.

Focusing on country-level statistics, the largest leap in food price inflation between February and March 2022 has been in developing/emerging regions such as sub-Saharan Africa. Several of these countries have experienced higher food price inflation than the global average (12.6%) over this period. For example, Lebanon (396%), Zimbabwe (75%) and Turkey (70%) experienced the highest rate of food price inflation between February and March (see Figure 1).

Figure 1: Developing and emerging market economies with the highest food price inflation change between February and March 2022

Source: FAO Food Price Monitoring and Analysis, 2022

Households in these countries devote a greater proportion of their total expenditure to the provision of food (see Figure 2). Specifically, the World Bank estimates that poor households in sub-Saharan Africa spend approximately 75% of their income on food. This compares with 10.8% for the average UK household in 2019/20.

Consequently, rising food prices reduce the real incomes of households, pushing more people into the food poverty trap – a situation where more individuals and households are unable to afford adequate and nutritious diet.

Figure 2: Share of income spent on food, by selected country

Source: Economic Research Service (ERS), United States Department of Agriculture

Sanctions on Russian oil companies and the planned bans on Russian energy exports have triggered further increases in energy prices in the international market. While the European Union (EU) is the largest collective buyer of Russian oil – buying 42% of Russia’s oil output in 2021 – the constituent countries have managed to diversify their economic base and begin importing more oil from elsewhere.

In contrast, many developing/emerging markets run a ‘monocultural economy’ –meaning they are highly reliant on single basic resources such as oil. For example, while oil accounts for 40% of Nigerian GDP, 70% of its budget revenues, and 95% of foreign exchange earnings, Nigeria remains the only member of the Organization of the Petroleum Exporting Countries (OPEC) that imports 95% of refined petrol for domestic use.

Consequently, movements in the international oil market affect local fuel prices in these markets. Eventually, the burden of higher costs of production, storage and transport is passed on to the consumers in the form of higher food prices.

Going back to Figure 1, countries with the highest rate of food price inflation are also often conflict-prone economies. Before the war broke out in Ukraine, some developing/emerging markets were already experiencing higher food bills due to internal conflicts or climate-related challenges.

For example, in 2016 the United Nations (UN) reported that Boko Haram bombings in Northern Nigeria disrupted trade routes between Chad and Nigeria, interrupting the supply of basic goods and causing local price hikes. It is likely that the war in Ukraine has worsened existing food price crises in some developing economies.

What next for food security around the world?

More research is needed to disentangle the extent to which current food price inflation can be attributed to internal crises in developing economies or the war in Ukraine. But we do know that the effects of both situations on food prices reinforce one another.

Situations where food becomes increasingly expensive or insufficient can incite further civil conflicts. This was seen during the Arab spring in the early 2010s – an event that emerged partly in reaction to high cereal prices. These anti-government protests in the Middle East followed international food price inflation, bad weather conditions and shrinking farmlands, together with high unemployment and dissatisfaction with the corrupt political classes.

A decade later, a similar set of factors could combine and cause both political turbulence and a further escalation of prices. The combination of fragile institutions, political instability and non-diversified economic structures are central factors that amplify the effects of the Russian invasion of Ukraine on food prices in emerging economies. Where these challenges are not addressed, it may be that food prices in these economies do not revert to the pre-crisis era, even if the war in Ukraine were to end.

Where can I find out more?

• The World Bank blog gives an insight into amplifying effect of the conflict in Ukraine on food crisis in Africa.
• The United Nations Brief provides an in-depth discourse on the impact of war in Ukraine on global food systems.
• The International Monetary Fund blog details how the war in Ukraine is affecting different sectors in several parts of the world.

Who are experts on this question?

• Lotanna Emediegwu
• Sascha O. Becker
• David Ubilava
• Alfons Weersink

Author: Lotanna Emediegwu

Photo by AndrijTer from iStock

The post How is the war in Ukraine affecting global food prices? appeared first on Economics Observatory.

The response has been an outpouring of support from the West. In the UK, 100,000 people signed up to host a Ukrainian refugee family on the first day that the ‘Homes for Ukraine’ scheme opened. An emergency appeal by the Disasters Emergency Committee (DEC) received more than £150 million during the first week, making it DEC’s second largest fundraising appeal in more than 50 years.

Some critics have accused the West of double standards in the response to the Ukrainian crisis – for caring more about a humanitarian disaster unfolding on their doorstep than about similar tragedies further afield.

A senior CBS News correspondent has been particularly berated for his comments that: ‘This isn’t a place, with all due respect, like Iraq or Afghanistan that has seen conflict raging for decades. This is a relatively civilised, relatively European – I have to choose those words carefully, too – city where you wouldn’t expect that, or hope that it’s going to happen.’

A contrast has also been noted with a DEC emergency appeal launched for Afghanistan in December 2021, which collected £30 million, less than a quarter of the amount given to the Ukrainian appeal.

But do people really care more about crises closer to home?

Analysing the responses to more than five decades of DEC appeals, there is in fact, little evidence that UK donors are more generous when it comes to close European neighbours. Across the whole period, there have been 73 DEC appeals, of which six (including Ukraine) have been in response to disasters in European countries – the previous ones being floods in Romania (1970), earthquakes in Turkey (1990) and the former Yugoslavia (1969), and conflict in the former Yugoslavia (1994) and Kosovo (1999).

Looking at average total donations by geographical area (see Figure 1), the amounts donated were, if anything, lower for European appeals compared with those in Asia, Africa and Central America.

This mirrors findings from economic experiments that explore the role of race in generosity in the context of Hurricane Katrina in 2005. In these experiments, donors were primed with information about the race of victims, but this information did not affect how much they gave.

In other words, on average, white donors gave as much to black people as to other white people. But people did give less when they were primed to think that the victims were from a less economically disadvantaged area. This may explain the higher amounts given to Africa and Asia in DEC appeals.

Although there was no variation by victims’ race on average, there was variation according to the participants’ subjective identification with racial groups. This was measured by the question ‘How close do you feel to your ethnic or racial group?’

Where white donors identified more with their racial group, they gave less to black victims, while white donors who did not identify with their racial group gave more to black victims. (Similarly, black donors who identified more with their racial group gave less to white victims.) The role of group identity in pro-social behaviour is more complex than a simple ‘them and us’.

Figure 1: Analysis of donations to 72 DEC appeals, 1968 to 2021

Source: Disasters Emergency Committee
Note: Real donations in 2021 prices (GDP deflator)

What explains responses to disaster appeals?

There is a perception that people give more in response to natural disasters than to man-made disasters. This is not the case for DEC appeals. Since 1968, roughly two-thirds of the appeals have been in response to natural disasters.

The average amounts given are not significantly different between man-made disasters and natural disasters – £26.8 million for man-made emergencies (such as war and violent conflict) and £39.2 million for natural disasters (£28.6 million excluding the 2004 tsunami in the Indian Ocean). The current response to the invasion of Ukraine also confirms that people give generously when it comes to man-made disasters.

The amount of money donated is closely related to the scale of the disaster, as measured by the number of people who are killed and the number affected in other ways. Standardised information on the scale of natural disasters is available from the Emergency Disaster Database (EM-DAT) provided by the Centre for Research on the Epidemiology of Disasters (CRED).

Controlling for natural disaster type (floods, earthquakes, storms, etc.) and geographical area, a 10% increase in the number of people killed and in the number of people affected both increase the amount donated by 3-4%.

Another key factor driving donation responses is media coverage. While this is closely correlated with the scale of disasters, research has isolated the effect of media coverage by exploiting the presence of competing news events, particularly sporting events. The results show that television coverage of natural disasters has an effect on the provision of aid.

The exact mechanism is not clear, but media coverage is likely to provide information on the scale of the need, to make the need more salient in people’s minds, to create identifiable victims by showing images of real people who are suffering, and to reduce the social distance between donor and potential recipients.

Media coverage is an important factor in explaining the very large response to the DEC appeal in the aftermath of the 2004 tsunami. The response to that natural disaster remains the biggest fundraising appeal, with more than £500 million donated (in real terms). Dramatic pictures of devastation were broadcast around the world during the Christmas holidays, a time when people typically watch a lot of television and when there may be few competing news stories.

Similarly, the almost constant coverage of the war in Ukraine is likely to be an important factor driving the large donation response.

Lift or shift?

When large amounts of money are donated in response to a single fundraising appeal, there is a concern that this will reduce donations to other causes. But there is no evidence that this is the case.

Focusing on responses to six DEC appeals between 2009 and 2015, analysis of detailed donation data from the Charities Aid Foundation (CAF) accounts found that donations to other charities increased during the time of an appeal. Although these other donations subsequently reduce, there is overall zero effect on other donations.

The contemporaneous increase may be the result of transaction costs – ‘if I am giving to one charity, I might as well make my other regular donations at the same time’. But this may also be a salience effect: the DEC appeal makes people more aware of the need to give to those in need.

Taken together with the positive response to the DEC appeal itself, the most important takeaway for the charity sector is that the response to the current humanitarian crisis in Ukraine is likely to generate new giving rather than taking donations away from other charities.

Where can I find out more?

• Disaster Emergency Committee (DEC).
• Charities Aid Foundation (CAF).
• Emergency Disaster Database (EM-DAT) at the Centre for Research on the Epidemiology of Disasters.

Who are experts on this question?

• Sarah Smith
• Kim Scharf
• Susan Pinkney, CAF

Author: Sarah Smith

Photo by shironosov from iStock 1

The post Charitable donations: do we care more about our close neighbours? appeared first on Economics Observatory.

In the aftermath of the atrocities uncovered this week in the city of Bucha, Ukraine, Western governments have intensified their sanctions on Russian individuals and goods. Shifting European energy supply away from Siberian oil and gas is key to cutting off the Kremlin’s sources of foreign exchange. It may also bring a potential ‘double dividend’ if it leads to increased use of renewable energy sources, such as nuclear power.

In an article for the Economics Observatory this week, Raj Patel (associate director of policy at Understanding Society) explains that while supply-side energy policies are favoured politically even without war, emissions reductions on the demand side will also have an important role to play if the UK is to reach its net-zero emissions targets. Around 20% of greenhouse gas emissions can be directly attributed to households – and research evidence suggests that households could be indirectly responsible for as much as 80% (for example, through emissions in the supply chain for food and clothing).

The Understanding Society survey of a representative sample of UK households is a useful tool for revealing potential changes in behaviour that could benefit the planet. Pessimistically, the data show that households make the easiest but least effective efforts when trying to be greener – turning off lights and saving water – rather than more significant life changes, such as walking to work or taking fewer flights. But on the brighter side, the data also indicate that increasing active travel is feasible for many commuters.

To appreciate how the UK can make the transition to a low-carbon economy, as well as the distributional consequences of doing so, Raj highlights the need for granular, linked datasets. The impact of the transition on households will vary based on emissions levels. For example, people living in homes that are inefficient in their use of energy and families that have multiple petrol cars will be more affected.

But our working lives are important too – delivery drivers who have to change to electric vehicles may suffer short-term disruptions, but technological change that causes their jobs to be replaced by drones, for example, would be much more significant.

More broadly, the effects of production on the environment remain absent from GDP figures. In a data piece for the Observatory on Wednesday, Elias Wilson (University of Bristol) analysed the updated quarterly national accounts for the end of 2021. GDP growth was revised upwards by 0.3 percentage points for the period from October to December, indicating annual GDP for 2021 of 7.4%. This is the largest annual increase since the Second World War, and it means that GDP is now only 0.1% lower than before the pandemic began.

Elias argues that this is largely a mechanical rebound from the devastating recession caused by Covid-19 in 2020. Indeed, output excluding government spending (such as the generous Covid-19 support measures) has not recovered so much, remaining nearly 3% below the its level in the fourth quarter of 2019. Exports of goods and services are also depressed in comparison with other G7 countries, with Brexit frictions potentially looming over trade.

This could be a cautionary tale for a potential second Scottish independence referendum. In a new piece for the Observatory series on constitutional change in Scotland, Brad MacKay (University of St Andrews) looks at how business leaders assess these risks and opportunities.

Evidence on how firms react to regulatory uncertainty is mixed, but many seem to adopt a ‘wait and see’ approach to further investment. Research on the specific effect of political independence is limited, but what little data there are suggest that large businesses tend to oppose constitutional change (for example, Medina and Molins, 2014). Brad notes that firm size is also likely to be a proxy for factors such as ownership structure, which may be the true driving force behind this effect.

Brad’s earlier research finds that 90% of executives reported uncertainty around the 2014 independence debate (MacKay, 2013). Digging deeper, concerns about risk overshadowed potential opportunities, particularly for large, UK-facing and publicly traded companies with Scottish headquarters. On the other hand, private companies, which are typically free of pressures from external shareholders, generally exhibited a greater willingness to absorb downside risks.

The 10% of leaders who emphasised opportunities over risks were largely from medium-sized businesses trading mostly within Scotland or globally, rather than with the rest of the UK. This suggests that the structure of a business and its key market locations explain risk appetite more accurately than generic classifications – a result also found in pre-Brexit business surveys.

The heightened uncertainty in the UK since 2016 is unlikely to change the opinions of Scottish executives if another independence vote does go ahead. With 60% of Scottish exports going to the rest of the UK, it will remain Scotland’s largest export market even if membership of the European Union were possible post-independence. But while the recent experience of Brexit would make any constitutional change less of a surprise than it might have been before, it does not necessarily mean that it would be any less painful.

Observatory news

• Royal Economic Society conference. Next week (11-13 April) is the 2022 RES 2022 Annual Conference, featuring a presidential address by Tim Besley (one of our lead editors), as well as plenary lectures by Stefanie Stantcheva (Harvard), and Nicholas Bloom (Stanford). Diane Coyle (another of our lead editors) is also speaking with former RES president Partha Dasgupta, lead author of the independent government review of the economics of biodiversity.
• Scottish Economic Society conference. Later this month (25-27 April), the birthplace of economics hosts the annual gathering of economists in Scotland, including some policy roundtables in Edinburgh and Glasgow with the Observatory. No doubt there will discussion of some of the issues raised in our continuing series on the economics of Scottish independence, curated by Graeme Roy (University of Glasgow), another of our lead editors, and Stuart McIntyre (University of Strathclyde).
• ESCoE conference. Next month (25-27 May), the Economic Statistics Centre of Excellence (ESCoE) will hold its annual conference, organised in partnership with the UK Office for National Statistics (ONS) at the University of Strathclyde. The Observatory will be running a data masterclass introducing best practice in data visualisation and a 'code along' to create an interactive chart (including using the ONS API). We're also contributing to a panel on effective communication of data and statistics.

Author: Ben Pimley

Picture by Daniil Dubov on iStock

The post Conflict, climate and constitutions appeared first on Economics Observatory.

What has been the impact of Covid-19 on sales, employment and investment?

The spread of Covid-19 and measures to contain it led to a large fall in sales. Looking back, between April and June 2020 (Q2) businesses estimated that their sales were around 30% lower than they otherwise would have been (see Figure 1). Crucially, this was when the UK was in its first country-wide lockdown.

Sales have recovered gradually since then. But there have been further, smaller dips, including in the first quarter of 2021, when the country was again subject to restrictions introduced to contain the Delta variant, and again more recently, as a consequence of the Omicron wave.

The estimated impact of Covid-19 on sales worsened from -4% in 2021Q3 to -6% in 2021Q4 and -7% in 2022Q1.This is likely to be related to the effects of the Omicron variant. But this was a somewhat small change relative to the effects on sales seen earlier in the crisis.

The pandemic has not affected all firms and industries equally. Industries that rely on personal interactions or travel, such as airlines or hotels, have been hit hardest. Indeed, the estimated falls in sales in the early part of the pandemic were largest in accommodation and food and recreational services. These industries continue to be among the most affected in the latest data (Anayi et al, 2021).

Looking ahead, respondents to the February 2022 DMP survey expect the effects of Covid-19 on sales to continue to ease during 2022. The group expect sales growth to go from -7% in 2022Q1 to -4% in 2022Q2 and move up to approximately 0% by 2022Q3. Beyond this, they expect the impact to rise to around 1% over the medium term (2023 and beyond).

This represents only a slightly slower recovery compared with firms’ pre-Omicron expectations. This is most likely to be the case as the new variant was revealed to be milder than originally expected, requiring less stringent containment measures.

By the second half of next year, UK businesses expect Covid-19 to be having little effect on their sales, on average. But within these figures, around 15% of firms expect sales to be higher than they would have been otherwise, with 20% predicting sales will be lower.

There was also a large fall in employment during the pandemic. Employment is estimated to have fallen more slowly than sales, with the impact of Covid-19 estimated to have peaked at -9% in 2020Q3. Falls in employment were smaller than those in sales, in large part due to government support programmes, such as the Coronavirus Job Retention Scheme (CJRS) which at its peak protected almost nine million jobs.

The proportion of employees on furlough gradually declined after February 2021, and the CJRS officially ended in September 2021 (see Figure 2). In the February 2022 DMP survey, the impact of Covid-19 on employment in 2022Q1 was estimated to be -4%, marginally worse than in 2021Q4 (see Figure 1). The effect was expected to ease to -2% in 2022Q2, and -1% by 2022Q3.

Lastly, Covid-19 has also led to a large fall in investment. This fell initially by more than sales in the early part of the pandemic and remained weaker until the end of 2021. But it appears to have been less affected by the Omicron variant compared with sales. In 2022Q1, the impact of Covid-19 on investment was estimated to be -6%, compared with -7% for sales.

The effects on investment are also expected to wane over the coming quarters, and at a slightly faster pace than for both sales and employment. In the February 2022 DMP survey, the impact of the pandemic on investment was expected to ease from -6% in 2022Q1 to -1% in 2022Q2 and be approximately zero in 2022Q3 (see Figure 1).

Investment was expected to be around 1% higher compared with what it would have been without Covid-19 over the medium term (beyond 2023). The pandemic is also expected to lead to long-term structural changes in the economy that will affect the types of investments firms make. For example, firms are expected to invest less in land and buildings but more in information technologies and software in future years (Anayi et al, 2021).

Figure 1: Expected impact of Covid-19 on sales, employment and investment

Source: DMP

Note: (a) The results are based on the questions: ‘Relative to what would otherwise have happened, what is your best estimate for the impact of the spread of Covid on the sales/employment/capital expenditure of your business in each of the following periods?’. Data for 2020 Q2 are from the July 2020 DMP survey, data for 2020 Q3 are from the October 2020 DMP survey, data for 2020 Q4 are from the January DMP survey, data for 2021 Q1 are from the April 2021 DMP survey, data for 2021 Q2 are from the July 2021 survey, data for 2021 Q3 are from the October 2021 DMP survey, and data from 2021 Q4 are from the January 2022 DMP survey. Data for 2022 Q1, 2022 Q2, 2022 Q3, and 2023+ are from the February 2022 DMP survey. Data shown for 2020 Q1 are percentage changes in aggregate ONS data for private sector output and private sector employment between December 2019 and March 2020.

What about working arrangements?

Working from home became much more common during the pandemic (see Figure 2). In 2019, DMP respondents estimated that around 7% of the hours that their employees worked were done so from home (Anayi et al, 2021).

In April 2020, just under two-thirds (61%) of employees were actively working (that is, excluding those on furlough, those who were employed but had zero hours, and those unable to work). More than a third (36%) of employees were working from home (see Figure 2).

During most of 2021, the proportion of employees working from home gradually declined with more people returning to business premises. But government guidance to work from home where possible in response to the spread of the Omicron variant increased the proportion of employees working from home from 25% in November 2021 to 30% in December 2021 and January 2022.

By February 2022, as this guidance was removed, the numbers had returned to November 2021 levels. By this stage, around 24% of people were working from home, 4% were unable to work and 72% were working on business premises. This indicates that a larger proportion of the workforce is currently working from home than was the case before the pandemic.

Looking ahead, firms’ responses to the DMP also suggest a gradual return to business premises is anticipated. Nevertheless, working from home is predicted to remain significantly above pre-pandemic levels over the medium term, with around 17% of hours to be worked from home in 2023 and beyond. That is around two and a half times more than before the pandemic.

Figure 2: Percentage of employees working on business premises, working from home and unable to work

Source: DMP

Note: (a) The results are based on the question ‘Approximately what percentage of your employees do you expect to fall into the following categories in each of the following periods?’. Respondents could assign their employees to the following categories: (i) Still employed but not required to work any hours (eg. ‘on furlough’), (ii) Unable to work (eg. due to sickness, self-isolation, childcare etc), (iii) Continuing to work on business premises, and (iv) Continuing to work from home. Firms are asked to include only employees of UK-based businesses and not from any overseas part of the group, and to treat employees working some hours as continuing to work if they have been partially furloughed. Where employees spend some time working on businesses premises and some time working from home, firms are asked to answer based on the approximate proportion of hours worked from each location. Not all bars sum exactly to 100 exactly due to rounding.

How has business uncertainty evolved over the past two years?

As well as a large fall in sales, there was a sharp increase in uncertainty as the scale of the pandemic became clear during early 2020. Measures of uncertainty can be constructed using year-ahead expectations data in the DMP (since the survey asks about the distribution of expectations, not just for point estimates).

Figure 3 shows a big increase in uncertainty about both future sales and employment in the spring of 2020. Sales uncertainty remained high throughout 2020 but has since declined. Even in February 2022, it remains above pre-pandemic levels.

Employment uncertainty declined more quickly and is now only marginally above its 2019 average. Meanwhile, uncertainty about future inflation initially rose by less than sales and employment uncertainty. But it has been on an upward trend over the last year and is currently the highest of all three measures in relation to their 2019 averages.

Figure 3: Sales, employment and inflation uncertainty

Source: DMP

Note: : (a) The sales uncertainty index is constructed using the standard deviation of expected firm-level sales growth a year ahead. The employment uncertainty index is constructed using the standard deviation of expected firm-level employment growth over the next 12 months. The inflation uncertainty index is constructed using the standard deviations of expected firm-level price growth over the next 12 months. All three indices are normalised to their respective average values during 2019. A three-month moving average is then constructed to create the final series.

What about inflation?

During the first year of the pandemic, there was a modest fall in economy-wide price inflation reported in the DMP. This was similar to what was seen in aggregate consumer price index (CPI) inflation.

During 2021, inflation picked up sharply. DMP respondents reported that inflation in the prices that they charge has been increasing in recent months, reaching 5.4% on average in the three months to February 2022 (see Figure 4). This is up from 4.9% in the three months to November 2021.

These figures refer to prices charged by businesses across the whole economy, including businesses that sell to other businesses (rather than just by those businesses that sell directly to consumers). Price growth was particularly elevated in the manufacturing, wholesale and retail sectors, as well as in accommodation and food industries.

The rise in inflation is likely to reflect a number of factors, including the recovery in demand, supply and labour shortages, and higher energy prices.

As well as increases in reported inflation, expected year-ahead price inflation has also been increasing over the last year. It reached 4.8% in the three months to February 2022, up from 4.2% in the three months to November 2021 (see Figure 4).

This implies that businesses believe that inflation is likely to remain high over the next year, although the expectations have fallen back a little from current levels. But as described above, uncertainty around these expectations for inflation is currently higher than normal.

It should also be noted that the latest data were collected up to the middle of February 2022 and so will not take account of how businesses expect prices to be affected by the war in Ukraine.

Figure 4: Realised and expected annual price inflation

Source: DMP

Note: (a) Realised price growth results are based on the question ‘Looking back, from 12 months ago to now, what was the approximate % change in the average price you charge, considering all products and services?’. Expected price growth results are based on the question: ‘Looking ahead, from now to 12 months from now, what approximate % change in your average price would you expect in each of the following scenarios: lowest, low, middle, high and highest?’ and respondents were asked to assign a probability to each scenario.

How have supply and labour shortages affected UK businesses?

As reported in November 2021, there continues to be a strong positive relationship between both recruitment difficulties and non-labour disruptions (such as supply chain delays and shortages of raw materials) on the one hand, and realised and expected output price growth on the other. The emergence of these shortages is another important feature of the post-pandemic recovery challenge.

In February 2022, businesses estimated that around 13% of their non-labour costs had been disrupted on average, a gradual decline relative to previous months (see Figure 5, panel A). These disruptions are widespread, with around two-thirds of businesses reporting some disruption in February. Manufacturing and accommodation and food industries were most acutely affected, with over 20% of their non-labour costs disrupted.

Over the past few months, businesses have also been asked about the level of difficulty in recruiting new employees. The results suggest that recruitment difficulties continue to be pervasive among businesses in the DMP. Over half (59%) of firms report finding it ‘much harder’ to recruit new employees compared with normal times. This figure is broadly in line with the levels seen since October 2021 (see Figure 5, panel B).

Businesses in the transport and storage, wholesale and retail, and information and communications industries report the highest levels of recruitment difficulties.

Figure 5: Percentage of non-labour inputs disrupted (panel A) and percentage of businesses currently finding it much harder than normal to recruit (panel B)

Panel A

Panel B

Source: DMP

Note: (a) Results on availability of non-labour inputs are based on the question ‘Over the past month, has the availability of the non-labour inputs that your business uses been disrupted?’. Respondents provided a percentage impact figure. (b) Results on recruitment difficulties are based on the question ‘Are you finding it easier or harder than normal to recruit new employees at the moment?’. Respondents could select from one of the following options: (i) Much easier, (ii) A little easier, (iii) About normal, (iv) A little harder, (v) Much harder, (vi) Not applicable – not recruiting at the moment.

Conclusions

Covid-19 has had a significant impact on UK firms, affecting almost every aspect of everyday business. This article analyses the main developments over the past two years using data from the monthly Decision Maker Panel survey.

The sharp drops in sales, employment and investment experienced in 2020 have now waned. Nevertheless, risks remain, mainly around higher price growth, elevated uncertainty and persistent supply disruptions.

In addition, structural changes are also expected across UK firms, with working from home remaining much more common than before the pandemic.

Where can I find out more?

• The Decision Maker Panel website.
• This article from the Bank of England summarises and analyses some of the key findings from the latest DMP survey data.

Who are experts on this question?

• Lena Anayi
• Nicholas Bloom
• Paul Mizen
• Gregory Thwaites

Authors: Paul Mizen, Philip Bunn, Ivan Yotzov, Lena Anayi, Nicholas Bloom and Gregory Thwaites

Picture by Nito100 on iStock

The post Two years on, how has the pandemic affected businesses in the UK? appeared first on Economics Observatory.

War always results in deaths, destruction and forced displacement. As of 20 March 2022, 977 verified civilian deaths have been recorded, with 1,459 reportedly injured (UN Office of the High Commissioner for Human Rights, OHCHR, 2022). More than three million Ukrainians (about 4.5% of its population) have fled to safety in other countries (OHCHR, 2022). It is difficult to verify these numbers, and many commentators fear the toll could be far higher. Nevertheless, this substantial shock to the local population is likely to have an adverse effect on the country’s capacity to produce and export food products.

In response, severe economic sanctions have been levied on Russia in a bid to end the war. Potential Russian responses to the sanctions could also have a negative effect on global food supplies.

How is the war affecting food production?

Russia and Ukraine – together sometimes called the ‘breadbasket of Europe’ – are top producers and exporters of several important grains (such as wheat and maize) and vegetable oils (see Table 1).

Table 1: Ranking of world production of major food crops (2020)

Source: World Integrated Trade Solution, WITS (2022)

Figure 1: Share of total world exports for major food-related commodities (2020)

Source: WITS (2022)

Ukraine is the world’s largest producer of sunflower oil and, combined with Russia, it is responsible for more than half of global exports of sunflower oil (Figure 1). The region is also responsible for over a third (36%) of wheat exports (making it the world’s largest exporter of wheat).

Nearly every continent depends on them for either sunflower oil or wheat. In 2018, the European Union (EU) and other European countries were among the top importers of Russian and Ukrainian sunflower oil, with Southeast Asia and the Middle East the largest importers of the region’s wheat (Figure 2).

Instability in the region is therefore likely to affect food supply in the importing countries, many of which are currently food-insufficient – a situation where there is not enough food to eat.

Figure 2: Importers of Russian and Ukrainian sunflower oil and wheat (2018)

Source: WITS (2022)

The Russian invasion has resulted in the suspension of commercial operations in Ukraine’s ports, hampering the country’s ability to export its products. A halt in agricultural exports is bad for Ukraine as agriculture is a major source of its export revenue – 45% in 2020, amounting to $22.2 billion (International Trade Administration, ITA, 2022).

At the time of writing, there are still a few weeks left before the spring planting season in Ukraine. But with intense fighting continuing, and farms either shut down or occupied by Russian soldiers, future food output is very likely to be jeopardised. Former Ukrainian agriculture minister Roman Leshchenko has said that the country’s spring crop sowing area could be less than half what it was in 2021 (Reuters, 2022).

Farmers may be incentivised to ‘eat their seed’. Many other producers have fled the war to neighbouring countries for their own safety. Whether the displaced population will restore balance in global food supply by going into farming in their host nations is questionable, certainly in the short term. Others that remain in the country are presumably fighting or supporting the war effort.

The Irish government has launched a €12 million crop growing scheme to boost planting of barley, wheat and oats to help make up the drop in production in Ukraine. But many farmers have said that the incentive payments are too small to ‘counter the surging cost of fertiliser and fuel’ (Financial Times, 2022).

In addition to the effects on the population, and therefore workforce, the destruction of farms and storage facilities, and the transformation of tractors into armoured vehicles, are all contributing to a reduction in food production (Bloomberg, 2020). In times of war, farmers also reduce the time they spend on the farm for security reasons (for example, in response to an imposed curfew).

Reduction of food production in Ukraine translates into low or no exports. Ukrainians may start hoarding food for survival, or even seek to profiteer from the situation.

Russia could also retaliate in response to the severe economic sanctions placed on it, by restricting food supplies (as in 2010, when Putin placed a ban on exports of grain following a severe drought that hit the country).

Overall, the war affects food supply everywhere – in the conflict zones as a result of a fall in food production, and the rest of the world due to a drop in the export of major staple food commodities.

How is the war affecting the prices of food, fuel and fertiliser?

Scarcity of food has led to rising prices within the conflict zone and elsewhere in the world. Both local and global markets are stressed because food demand is high while supply has been restricted (and is becoming increasingly expensive). Rising food prices mean rising food insecurity.

Food prices have been rising since January. The Food and Agriculture Organization (FAO) of the United Nations reports that the food price index is 24.1% higher than it was a year ago, and similar trends have been experienced across the world (FAO, 2022). In the UK, for example, food price inflation hit 4.3% in February 2022, the highest in about a decade (Office for National Statistics, ONS, 2022).

In Ukraine, household income has fallen while poverty is rising. This is due to deaths of household heads (such as parents), job losses following destruction of infrastructure and businesses, and reduced economic activities. Forced migration to countries still grappling with post-pandemic recovery has also contributed to the crisis. Loss of income makes it more difficult for Ukrainians to access food, especially against the backdrop of rising prices.

In other parts of the world, rising food prices reduce the real incomes of households, pushing more people into the food poverty trap. This effect is graver in developing regions, where a larger part of people’s disposal income is spent on food. For example, a further rise in food prices would be more severe for an average household in Nigeria, which spends 56.4% of its income on food, compared with an average household in the UK, whose share of food expenditure is only 8.2% of their income (see Figure 3).

Figure 3: Share of income spent on food

Panel A – highest share

Panel B – lowest share

Source: ERS, United States Department of Agriculture (2015)

Russia is the third largest petroleum and liquid fuels producer in the world, after the United States and Saudi Arabia. It is the second largest exporter of crude oil after Saudi Arabia (see Table 1 and Figure 1). Russia is also a major fertiliser producer and exporter.

Sanctions on Russian oil companies and the planned ban on Russian oil have triggered an increase in fuel prices in the international market. The price of Brent crude for delivery on 21 March 2022 stood at $122 per barrel – the highest since 2015. Although oil-exporting nations like Saudi Arabia and Qatar will benefit from this price rise, oil-importing nations will feel the brunt as import bills are set to rise.

Figure 4: Daily Brent front-month futures contract price (2014-2022)

Source: Energy Information Administration (2022)

Note: The blue line illustrates the $100 per barrel mark

The movements fuel and food prices are closely linked (Karel and Krištoufek, 2019; Debdatta and Mitra, 2017). Even countries that are self-sufficient in grain production, such as the UK (which produces 90% of wheat consumed locally), could be affected by the knock-on effect of rising fertiliser and fuel prices. Eventually, the burden of a higher cost of food production, storage and transport is passed on to the consumers through higher food prices.

Will the conflict change what people eat?

Falling food supply coupled with rising food prices and with reduced real incomes will make it difficult for people to enjoy a nutritious diet in many countries. There may be a shift in consumption patterns towards cheaper food substitutes, such as cassava. Besides other global factors, such as rising fuel and fertiliser prices, an increase in demand for these substitutes could also see their prices rise, depending on the degree of substitutability.

Whether such a shift will be temporary or permanent depends on a host of factors such as expectations about the duration of the war or the possibility of a global food price contagion. For example, households might decide to continue consuming wheat, despite the price rise if they expect that the conflict will end soon and the price of wheat will revert to its pre-war level.

Could the food crisis generate further conflict?

As a conflict intensifies, food can become even more scarce. This means the few remaining food stocks become increasingly expensive or insufficient (especially if rationed by the government). Either way, food becomes difficult to access.

This situation, where many hands are pursuing very scarce and expensive food resources, could incite civil conflict – as witnessed during the Arab spring, an event partly a reaction to high cereal prices. In the besieged Ukrainian city of Mariupol, reports have emerged of people attacking one another in desperation for food (Business Insider, 2022).

This ‘fight-food-fight’ narrative has been established in many economic studies, and implies that conflicts can arise as a result of struggles over limited resources such as land, food or people (Collier and Hoeffler, 2005; Harari and Ferrara, 2018). This vicious conflict cycle continues unless there is an external intervention in form of financial and food aid, or if the conflict in question comes to an end (which is the most effective).

What we do not know

War is costly. Beyond the present destruction and devastation, the process of reconciliation, rehabilitation and reconstruction post-war is very expensive.

Figure 4: Global growth projections (October 2021)

Source: International Monetary Fund (2021)

Whether the economic crisis is due to war, the changing climate or Covid-19, the consequences for global food supply are similar – low supply and high prices. But unlike with the pandemic, where most economies around the world bounced back quickly as projected by the IMF (Figure 4), we do not know how long it will take for food supplies to recover to their pre-conflict state. It will depend on several factors: the extent of the devastation, the effectiveness of foreign interventions and aid, and how quickly Ukrainian farmers can be trained and deployed to farms.

The long-term impact of low food imports is not yet clear. In the past, it has been suggested that low imports can make reliant nations look inward and strive towards greater food self-sufficiency (The Guardian, 2020). But whatever happens in the long run, what we know is that in the short term, local food production will not be able to compensate for lower imports, worsening food scarcity and insecurity as a result.

What way forward?

Global food supply has been affected directly and indirectly. It has been hit directly by shortages in food production, import restrictions, higher food bills and falling incomes – and indirectly by fuel and fertiliser price inflation. Acute hunger may motivate farmers to eat what they were previously planning to cultivate, which could reduce the next season’s planting capacity. Even where local farmers in developing countries seem to benefit from rising international food prices, such gains are eroded by falling real incomes.

There is an urgent need for an aggressive external intervention to avert a food crisis. Information sharing among countries about their food status, as well as keeping borders open for agricultural exports, as proposed by the G7 agriculture ministers, are important responses to the brewing food crisis.

Beyond providing ammunition and other supplies for Ukraine’s war effort, and financial aid for the ailing populace, it may make sense to send in farmers to help to revamp the agricultural sector in Ukraine, once the fighting subsides. But when it will be safe to do so remains highly uncertain.

Where can I find out more?

• The International Food Policy Research Institute blog gives an insight into the economic impacts of the Russian invasion on global food systems.
• The IMF blog details how the war in Ukraine is affecting different sectors in several parts of the world.
• A series of podcasts from The Economist discuss the several channels through which the war in Ukraine will affect global food supply.

Who are experts on this question?

• Sascha O. Becker
• Lotanna Emediegwu
• Erkal Ersoy
• Wandile Sihlobo
• David Ubilava
• Alfons Weersink

Author: Lotanna Emediegwu

Picture by ErgBob on iStock

The post How is the war in Ukraine affecting global food security? appeared first on Economics Observatory.

Hopes of 2022 being a better year for humanity than the previous two have been horrifically dashed by Russia’s invasion of Ukraine. While the natural catastrophe of the pandemic was devastating for the lives and livelihoods of millions, it was an experience to which the world was responding collectively – and we could all contribute, even if it was just by staying at home. It’s difficult not to feel helpless faced with the man-made disaster of war.

So what can we do? One possibility is giving to charities that support victims: indeed, an appeal by the Disasters Emergency Committee (DEC) has already received donations of more than £200 million. As Sarah Smith (University of Bristol), one of our lead editors, points out on the Economics Observatory this week, that already makes it DEC’s second largest fundraising initiative in more than 50 years.

Sarah notes that while some critics have accused European donors of caring more about a humanitarian crisis unfolding on their doorstep than about similar tragedies further afield, evidence suggests that this is not the case. Rather, it is the scale of a disaster, together with media coverage, that most influence the response to an emergency appeal: DEC’s biggest ever fundraiser followed the tsunami in the Indian Ocean in 2004.

Another way to help is to welcome refugees from Ukraine. And as Sascha Becker (Monash University and University of Warwick) explains in another recent Observatory piece, we shouldn’t just be looking to provide shelter and safety to the millions of forced migrants: we also need to offer access to education. Evidence from history, notably the millions of Polish people expelled from their homes during the Second World War, demonstrates the lifelong benefits of investment in human capital, particularly of refugee children, at the earliest opportunity.

A third potential contribution to the war effort is to make the case for an embargo against Russian oil and gas. Here at the Observatory, in our first piece on Ukraine, Erkal Ersoy and Chris Aitken (both Heriot-Watt University) explored the options for diversifying Europe's energy supply away from Russia, concluding that while the continent could realistically meet its energy requirements without Russia in the medium to long term, it is unlikely in the immediate future.

Nevertheless, a number of economists have been active in the campaign for action now. These include researcher turned politician Luis Garicano; former rector of the New Economic School in Moscow Sergei Guriev; Ben Moll (London School of Economics) and colleagues, whose analysis of the impact of stopping energy imports from Russia on Germany’s economy suggests it would be severe but manageable; and a poll of economic experts, several of whom indicated that while a total ban on Russian energy risks recession in Western Europe, it is a price worth paying.

Other notable contributions from economists to discussions of the economic consequences of the war, include a report by the National Institute of Economic and Social Research (NIESR), whose director Jagjit Chadha, another of our lead editors, provided evidence to inform a House of Commons Treasury Committee report on economic sanctions on Russia; a debate hosted by VoxEU, featuring analysis by Luis, Sergei, Ben and many other experts; and the Kyiv School of Economics (KSE) led by Tymofiy Mylovanov, which together with Ukrainian businesses and state-owned companies, has launched a humanitarian aid campaign for Ukraine.

Spring season

While it is hard to think about anything other than what’s unfolding in Eastern Europe, let me mention some events in April and May that are likely to interest Observatory readers. Spring is generally a busy time of year for meetings in economic research and policy-making – and no fewer than six upcoming conferences are worth exploring.

Economic History Society 2022 annual conference (#EHS2022), Cambridge, 1-3 April

First up, the annual gathering of the UK’s economic historians features several researchers who’ve written for us on key questions: what can looking back at the past teach us about dealing with pandemics, recessions and related crises? And can it help us think through how best to ‘build back better’, notably in the aftermath of war?

John Turner, another of our lead editors, is managing editor of the Society’s journal, the Economic History Review. He has also contributed to the Observatory this week in a piece asking where Russia’s post-communism economic reforms went wrong. John notes that since the early 1990s, both Russia and China have reformed their economies – but the paths taken have been very different. In Russia, the speed of privatisation, alongside inadequate laws and institutions, led to economic collapse and ultimately the rise of Vladimir Putin.

#EconomicPolicy, Paris, 7-8 April

The Centre for Economic Policy Research (CEPR) will be holding the half-yearly meeting of the journal Economic Policy in a hybrid format – online and in Paris at the French finance ministry, Direction Générale du Trésor.

The standout session is an online public debate on the potential effects of school closures during the pandemic on children’s futures, featuring new evidence from Germany and the United States presented by Nicola Fuchs-Schündeln (Goethe University Frankfurt). On the panel will be Monica Costa-Dias (University of Bristol and the Institute for Fiscal Studies, IFS) and Andreas Schleicher (director for education and skills at the OECD), and the discussion will be moderated by Andrew Jack, global education editor at the Financial Times.

Royal Economic Society 2022 annual conference (#RES2022), online, 11-13 April

The UK’s annual gathering for economists features a presidential address by Tim Besley, another lead editor, and contributor of Observatory pieces on a national infrastructure bank for the UK and how an independent Scotland might build fiscal capacity.

Further RES conference highlights include plenary lectures by Stefanie Stantcheva (Harvard), who has written for us about policy actions on inequality, and Nicholas Bloom (Stanford), who has contributed to several Observatory pieces on the impact of the pandemic on firms and industries, and its effects on future working arrangements; plus former RES president Partha Dasgupta, lead author of the independent government review of the economics of biodiversity, in conversation with Diane Coyle, another of our lead editors.

Scottish Economic Society 2022 annual conference (#SES2022), Glasgow, 25-27 April

Towards the end of the month, the birthplace of economics hosts the annual gathering of economists in Scotland, including some policy roundtables in Edinburgh and Glasgow with the Observatory. No doubt there will discussion of some of the issues raised in our continuing series on the economics of Scottish independence, curated by Graeme Roy (University of Glasgow), another of our lead editors, and Stuart McIntyre (University of Strathclyde).

The role of economics and economists in public policy and public debate, Chicago, 28-29 April

This conference, which will examine how economists engage with different groups of people outside academia, is hosted by the Initiative on Global Markets (IGM) at the University of Chicago. I am co-organising it with Chicago Booth economists, Anil Kashyap, who is also a member of the Bank of England’s Financial Policy Committee, and Christian Leuz, who has written for us on mandatory corporate reporting on sustainability.

Topics will include how economists influence public policy and public opinion, teaching approaches, evidence-based policy-making, the debate over the causes and consequences of inequality, and an analysis of responses in the IGM expert panels – the last an issue that has been discussed recently on the Observatory by Sarah Smith in a piece on women’s voices in economics.

ESCoE conference on economic measurement 2022, Glasgow, 25-27 May

The Economic Statistics Centre of Excellence (ESCoE) will hold its annual conference, organised in partnership with the UK Office for National Statistics (ONS) at the University of Strathclyde. The Observatory will be running a data masterclass introducing best practice in data visualisation and a 'code along' to create an interactive chart (including using the ONS API). We're also contributing to a panel on effective communication of data and statistics.

 Other news

The Society of Professional Economists is inviting entries for this year's Rybczynski Prize. This prestigious award is given to the best piece of writing on an issue of importance to economists, and offers individuals the opportunity to increase their profile among professional colleagues. The Society is particularly keen to receive entries from women.

The big economic news story in the UK this week has been the government’s spring statement. Many of the economic experts and organisations that work with us at the Observatory are key contributors to the in-depth independent evaluation of economic policy announcements like this, and their implications for families, firms, public finances and the economic recovery.

As ever, the IFS provided detailed pre- and post-match analysis. So too did NIESR, the Resolution Foundation (which focuses on living standards of low and middle-income households) and, with a Scottish perspective, the Fraser of Allander Institute at the University of Strathclyde.

And finally, next week on the Observatory, we’ll be launching a series of pieces on what we’ve learned about the impact of the pandemic two years on from the first lockdown in March 2020. These will include a look at what’s happened to businesses in the UK as a result of restrictions and recession, and an overview of the past, present and future effects of Covid-19 on public health.

Author: Romesh Vaitilingam, Editor-in-Chief

Picture by Drazen Zigic on iStock

The post War stories appeared first on Economics Observatory.

The UK was at the forefront of helping those fleeing from Nazi Germany. It also has a moral obligation to help those fleeing the atrocities of Putin’s army today. Some countries – for example, Poland, Moldova and Romania – have given amazing welcomes to Ukrainians. It is estimated that over 1.7 million Ukrainian refugees have fled to Poland alone.

The initial response of the UK government has been slow and extremely bureaucratic, but the UK now has to do more to help refugees of all ages. The recently launched ‘Homes for Ukraine’ scheme, which offers £350 a week to households to house refugees, is a step in the right direction.

Refugee experience and needs

The United Nations’ refugee agency (UNHCR) estimates that around 70 million people are forcefully displaced around the world. The war in Ukraine is adding several million more refugees to this number.

While the humanitarian rationale for helping refugees is obvious, it is also important to understand the needs of refugees beyond their mere survival, shelter and food. Refugees are not just yet another group of immigrants. They did not have months or even years to plan a move across international borders, as economic migrants might have.

Instead, the trauma of forced displacement comes with a series of additional experiences and needs (Becker and Ferrara, 2019):

• First, refugees have undergone and still undergo physical or psychological pain to an extent not experienced by voluntary migrants.
• Second, refugees have lost their assets as a result of destruction or because they had to leave their home – often quickly – without much hope of returning.
• Third, refugees often end up in sub-optimal locations; their first concern is to ‘get out’ and their choices over where to go are often limited. Just think of the UK’s focus on giving visas to those Ukrainians who have family connections in the UK. How about those without family connections who, for whatever reason, want to make the UK their new home?
• Fourth, refugees often have no control over whether their new location is temporary or permanent, which makes planning one’s future harder. In the case of Ukraine, many may wish to return but will be unable to do so until it is safe – and it is unclear when that will be.

In these circumstances, one important aspect is education. This is because refugees who have lost all their physical belongings and have been uprooted from their homeland may wish to invest in the one (portable) asset that no one can take away from them: education (Becker et al, 2020).

This applies to both adults and children. Adult Ukrainians are likely to want to learn the language of their new home country, as well as investing in developing vocational skills that will allow them to make the most of their new environment.

One group that deserves particular attention is refugee children. Around the world, the educational needs of refugee children are often overlooked as politicians in host countries focus on giving refugees food and shelter.

The UNHCR estimates that among the 20.7 million refugees under their immediate care, many in less developed areas of the world, and 7.9 million are refugee children of school age (UNHCR, 2022). Their access to education is limited, with almost half of them unable to attend school at all.

Even in Europe, immediate and full access to education for refugee children is by no means a given. In Germany, which welcomed more than one million Syrian refugees after Angela Merkel’s famous ‘We can do it!’ (‘Wir schaffen das!’), state governments struggled to provide access to education for all refugee children. Some waited for nearly a year to go to school (Deutschlandfunk, 2019).

What does history teach us about the importance of full and immediate access to education for refugee children?

During and after the Second World War, millions of Europeans were displaced and forcefully resettled hundreds if not thousands of kilometres from their homes as a result of massive border changes. In the aftermath of the war, over two million Poles were expelled from their homes when Polish frontiers were moved westward. Figure 1 illustrates Poland’s redrawn borders.

Figure 1: Map of Poland during the Second World War

Source: Becker et al, 2020

Poland’s Eastern territories (Kresy) became part of the Union of Soviet Socialist Republics (USSR), concretely the Ukrainian, Belarussian and Lithuanian Soviet Socialist Republics – the same part of the world that is now again at the centre of a massive war.

At the same time, former German areas (the Western Territories) became Polish. Before the Second World War, the Western Territories had been home to about eight million Germans, who were forced to resettle after the war, leaving land and capital stock behind. In the east, Poles were forced to leave Kresy and the vast majority resettled in the now sparsely populated (formerly German) Western Territories.

Can the experience of being uprooted by force encourage people to invest in portable assets such as education? Economic researchers have long entertained the idea that being uprooted by force or expropriated increases the subjective value of investing in portable assets, in particular in education (for example, Brenner and Kiefer, 1981).

This notion is also popular outside academic spheres. In his bestselling autobiographical novel A Tale of Love and Darkness, Amos Oz gives a testimony of how a history of forced migration has made Jewish families put a lot of emphasis on education as the ‘only thing that no one can ever take away from your children, even if, Heaven forbid, there’s another war, another revolution, more discriminatory laws’.

The Polish experience of forced migration after the Second World War shows strong evidence for the ‘uprootedness hypothesis’. Polish people with a family history of forced migration as a result of the war are significantly more educated today than any comparison group.

This result suggests a shift in preferences toward investment in human capital rather than physical capital, and it implies that the benefits of providing schooling for forced migrants and their children may be even greater – and more persistent – than previously thought.

What is the lesson for the UK today? Above and beyond the moral imperative to help all refugees fleeing from an evil war, it is of paramount importance to give refugees immediate and unhindered access to schooling.

Every week that refugees spend in temporary shelters may lead to hesitancy by education authorities to provide places at school until there is more clarity about the long-term living arrangements and address. But every week is a week lost.

If a history of mass displacement in Europe carries any lessons for today (see Becker, 2022), refugees, and by extension their children, will be keen to make the most of a traumatic experience. Access to education can be a silver lining of forced migration, allowing refugee children to invest in a brighter future.

Where can I find out more?

• A silver lining of forced migration: Investment in education – VoxEU article examining historical data to show the effects of education among Polish refugees during the Second World War.
• International Policy Talks: Consequences of refugee immigration – video discussion with Henrik Andersson, Sascha Becker, Annika Sunden and Tessa Bold.
• Forced displacement in history: Some recent research – survey by Sascha Becker in the Australian Economic History Review.

Who are experts on this question?

• Sascha O. Becker
• Andreas Ferrara
• Irena Grosfeld
• Pauline Grosjean
• Nico Voigtländer
• Ekaterina Zhuravskaya

Author: Sascha O. Becker

Photo by Nzpn on iStock

The post What lessons from history for our response to Ukrainian refugees? appeared first on Economics Observatory.

Yesterday, the world woke up to the news of war in Europe, with Vladimir Putin announcing a ‘special military operation’ in Ukraine’s Donbas region, just before 6am Moscow time. Although tensions have been mounting steadily over the past few weeks, confirmation of the invasion is nonetheless shocking.

Listening to BBC Radio 4’s Today programme early on Thursday morning, one of the stories broadcast from Kyiv was a report on panic buying. Already, people living in the capital were flocking to supermarkets, fuel stations, and – most disturbingly – firearms shops. Global or geopolitical events do have severe economic implications for people on the ground. In Ukraine, food, petrol and ammunition have never been in higher demand.

But the economic consequences of the Russian invasion go far beyond the shopfronts of Kyiv, Donetsk and Luhansk. Earlier this week, a range of international sanctions were levied against the Kremlin, including Germany announcing the suspension of the Nord Stream 2. The undersea pipeline – which was due to run gas from Vyborg in Northwest Russia to Lubmin just north of Berlin – offered a literal and symbolic connection between Russia and the West: a means for trade and energy supply, a channel of cooperation. But this economic tie has, at least for now, been severed.

The macroeconomy has been affected too. As the first missiles struck during the early hours of Thursday morning, the Russian rouble tumbled and oil prices spiked, climbing to over $100 per barrel for the first time since 2014. Simultaneously, global stock markets fell.

Eastern Europe has experienced extreme economic turmoil because of geopolitical shifts before. As recently as the early 1990s, hyperinflation in Yugoslavia reached 313,000,000%, which meant that prices were doubling every 34 hours. Economic instability was closely associated with the country’s disintegration – and the series of wars that followed brought widespread and long-lasting suffering for an entire generation of people. As similar events unfold in Ukraine, we sincerely hope the personal and economic costs are not too great.

At a time when international law is once again being broken, several articles posted on the Economics Observatory website this week stress the importance of rules in the face of big policy challenges. They argue that decision-makers should be guided by frameworks informed by sound economic thinking. Climate change, Covid-19 and Scottish independence are all issues that require expert guidance, and the right rules at the right time will be critical to navigating these uncertain waters.

Tightening business regulation

On Tuesday, we posted a piece by Michelle Kilfoyle on the likely effects of mandatory corporate reporting on sustainability. She argues that making firms become more transparent in their reporting has the potential to deliver social, environmental and financial rewards. But mandatory reporting is not a panacea. Rather, its success rests on carefully considered standards and the credible (and costly) enforcement of these rules.

According to data collected by accountancy giant KPMG, in 2020, 96% of the world’s largest 250 companies and 80% of large firms worldwide reported on their sustainability performance. Yet far more still needs to be done if we are to combat climate change. It is one thing to make businesses declare their environmental and social impacts, but another challenge to ensure that they then curb their harmful behaviour.

Michelle highlights that a key factor in achieving this is promoting competition. With more public information available on what other businesses are doing in the name of sustainability, compulsory corporate social responsibility reporting could foster competition between firms, as well as helping them to learn from one another.

There is already evidence that this works. In 2010, the United States made emissions reporting mandatory for thousands of factories. In response, these facilities reduced their greenhouse emissions by 7.9%. While the rules did not directly control company behaviour, the increase in transparency put pressure on polluters to clean up their operations for fear of falling behind their peers.

In strictness and in health

Perhaps the most high-profile rules over the last two years have been the Covid-19 restrictions. Since March 2020, people across the UK have lived under varying degrees of regulation. From stay-at-home orders to social distancing, not since the Second World War has everyday life been so closely bound by policy.

Protecting health has come at a cost. The measures introduced to curb the spread of the virus have had substantial negative effects of the economy – effects that are still being felt today. On Wednesday, Stuart McIntyre (University of Strathclyde) explored the latest regional GDP data from the Office for National Statistics (ONS), which cover economic activity across the UK up to the end of the second quarter of 2021.

These data highlight how different parts of the country are still experiencing a range of challenges, even as the worst of the pandemic appears to be behind us.

Figure 1: Q2 2021 levels of activity relative to 2019, by region and industry (100 = back at 2019 levels of activity)

Source: Office for National Statistics (ONS)

Figure 1 shows the change in economic activity in each region and nation relative to 2019. The data show that activity associated with hotels, restaurants and cafes was still only around 60% of its 2019 level in the second quarter of 2021. At the same time, in most other parts of the country, similar activity was closer to 80% of its 2019 level. Just as rules and restrictions have varied across the UK at different stages, so have the effects.

What the data show most clearly is that the rules introduced to protect public health have left the UK economy with a number of scars. While not all the regional and sectoral struggles can be attributed directly to lockdown measures, the latest GDP data provide a striking picture of the pandemic’s long-run consequences.

Winds of change

On Thursday, we published an article by Andrew Cumbers (University of Glasgow), Sheila Dow (University of Stirling/University of Victoria, Canada) and Robert McMaster (University of Glasgow) examining the political economy perspectives of Scotland’s future. The authors argue that while the economics of Scottish independence are important, they must be viewed as just one part of a process that will change the whole country. The economic concerns surrounding Scotland’s future should stand alongside concerns with social and moral priorities.

The referendums on Scottish independence in 2014 and on Brexit in 2016 presented problems for mainstream economics. The mistake, they said, was to assume that institutional relationships were fixed. The whole point of any possible constitutional change is that institutional relationships also change. In terms of the Union, the contents of the rulebook have been cast into doubt.

What now?

The concluding section of Thursday’s article helps bring us back to where we started. Andrew, Sheila and Robert argue that the economic debate concerning independence needs to be viewed as part of a process that will change institutions, governance, power relations and behaviour. Each of these changes, in turn, will have substantial economic consequences.

Many of the profound political and social changes of recent history have often happened against the consensus of economic thinking at the time. While the threat of further Russian aggression has been looming since 2014, the arrival of war in Europe is deeply unsettling. For many people the economic ties between Russia and the West should have been too strong, market forces too potent and stability too profitable. But this consensus view appears to have come undone. How the war will go on to affect people’s personal, political and economic security around the world remains to be seen.

Author: Charlie Meyrick

Picture by mrakor on iStock

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