Ukraine, Sanctions, Raising Inflation

This is Richard Wolff wanting to respond about this Ukraine crisis many of you have asked, and I want to talk to you about, particularly, the economic dimensions of it. Of course, we are all worried. Wars in Europe have been devastating over the last century. 40-50 million people dead, untold numbers hurt, economies destroyed, histories upended. Extraordinary, and so, of course, we’re all worried, and we should be. Accidents can happen, nuclear powers are involved, political considerations are making leaders desperate. All of it. A heady stew, very dangerous. But I also want to take a hard look at what is actually going on, and to do that I need to make some comparisons. Let me start with the following.

Over the last 20-25 years the United States has claiming national security concerns. Worried about its security. The United States has invaded two countries, many, many, many thousands of miles away. Afghanistan and Iraq. I won’t mention other incursions elsewhere but those were done on urgent national security grounds, or so our leaders told us. Invasions of countries with whom we were not at war, invasions of countries that pose no credible threat to the United States, countries that weren’t in any official way clearly connected to anything that happened in the United States on 9-11, most of the people involved there came from an allied country, the Saudi Arabian country.

Okay. Russia now claims its national security is threatened by the expansion of NATO, an alliance that has always been directed against Russia. They are threatened by a country they border on. The Ukraine. And they’ve taken steps including recognizing two former provinces of the Ukraine as needed by their national security. Russian national security, American national security. Illegal international intervention by both. Far away in one case, right up close by another. What implications you want to draw from this, I leave to you. But forgetting it is not a reasonable way to approach this situation. Second consideration. Going back to the 1990s, and one could go further, but just starting with the 1990s, the United States has slapped sanctions against the Russians, the Chinese, the Iranians and a whole host of other countries, companies and so on. There were stated purposes in those sanctions, as there are today. Did those sanctions work? Basically, the evidence suggests not at all. In 2014, when Russia took the Crimean peninsula, and there were tremendous sanctions against them. Did they work? Did the Crimean peninsula revert back to the condition before Mr. Putin and the Russians went in? No. Did the Iranians fundamentally change their government, their society, their religion, their attitude towards a whole host of issues, including Israel, as a result of the sanctions. There not much evidence of that at all. Mr. Trump’s sanctions against Huawei corporation or China with his tariffs and his trade wars, did that change China’s basic policy, did it hurt China the way Mr. Trump boasted over and over again? There’s no shred of evidence to that effect. Chinese economy last year did better than ever in its growth and its exports. Remarkable. Did they stop doing what they’ve done in the past? No. Did they change their attitude towards Hong Kong? No. Did they change their attitude towards Taiwan? No. The problem is that sanctions never worked well, and over the last 30 years the victims of sanctions have become experts more than they were ever before in getting around them, climbing underneath or over them pretending and all the rest. So, sanctions aren’t going to do much. Mr. Putin must have known, given the history that sanctions would be applied. Even before the West had told him that it would do that. And he did it anyway. Clearly, they are not the deterrent. It may be a good couple of days on television looking and sounding tough, but it doesn’t do the job.

But now, let me turn to what the effects of all earths are going to be. Above all this regime of sanctions. Russia is one of the most important producers and exporters of oil and gas in the world. The price of oil and gas has been shooting up in the anticipation of problems at the Ukraine, and now they’re shooting up even more. You know what that will do? It will worsen and lengthen the inflation already shaking the U.S. capitalist system to its foundations. An inflation doubly destructive, because it comes after the last two years when we had simultaneously an economic crash of immense proportions and the worst public health disaster in American history at the same time. An inflation now is as people are feeling it, an unbelievable extra burden. And it’s going to be worsened by this program of sanctions and I say, that even though we don’t yet know as I’m doing this what the response will be, let me remind everyone in response to the sanctions in the past, the Russians, the Chinese and so on have levied their own sanctions and those will have an effect. And the Russians are getting good as the Chinese are in figuring out how to make those hurt. We’re going to have quite a situation in this country. The American people are going to have to ask themselves

is it worth it? Do we really want another blow to our standard of living? Another hurdle? We don’t have the resources to overcome in those rising prices, is that worth it, to argue over two provinces of a country called the Ukraine that most Americans would have trouble finding on the map if asked to do so? Well, I don’t want to belabor the point, but my guess is that’s not going to be a popular political or economic stance. Not at all.

Let me close by telling you what, in my judgment, will be the biggest inflationary impact of all of this. The whole world is full of businessmen and women, employers, who have been chomping at the bit wanting to raise their prices. The reasons are obvious. They want more profits. Which is the major reason prices are raised most of the time. Indeed, if you study business, you’ll know that the name of the game in business is to make a profit. And the bigger your profit, the better off you are and the better businessman or woman you’ve shown the world you can be. So, yeah, of course, they raise prices to make more money. But, of course, that runs a risk. Your customer won’t be happy to be required to pay more. And if the thought is he’s only paying more your customer so you can make more profits, especially, if you’ve just had a year or two of decent profits. That’s not good. You know, what you need, you need to be able to raise your prices and have an excuse, so, it doesn’t look like you’re doing it to make more profits. That’s why folks who raise prices and you know it’s only employers that do that. Nobody else raises prices. That tiny minority, one percent of our people if that, raises the price that the rest of us pay. They always need to blame somebody else. Blame the workers, blame the government playing the taxes, blame, blame. But it’s often as thin as I just made it look like, but this trouble in Ukraine, oh, wonderful! What a godsend that is every businessman or woman around the world jacking up their prices can now point to the turmoil in the war and the fear of war and the turmoil of the sanctions and all of that point to that and excuse the jacking up of prices. That’s why the inflation is going to be the first global casualty of the events in the Ukraine. I will, of course, have more to say as the specifics of this particular conflict arise and become known. Thank you for your attention and above all for your partnership. Those of us, who believe that the world can do better than capitalism, need all the help we can get to take the problems of capitalism and understand them, and share the understanding with others.