The war in Ukraine, global inflation and disrupted supply chains lead to discussions about many a bleak future scenario. The exciting question, however, is what needs to happen so that more disaster does not occur. Six food for thought.
The US Federal Reserve Chairman does. The Council of Wise Men in Germany does. And so did former Goldman Sachs boss Lloyd Blankfein over the weekend. Everyone is warning of the coming recession, which, according to Blankfein, is “very very likely”.
The reasons for the collective gloom are obvious: the European war, global inflation and the partially still disrupted supply chains in the wake of the corona pandemic.
More apocalypses could easily be added, from the tangible effects of climate catastrophe to the looming hunger riot in Africa. But the exciting and therefore intellectually demanding question is how this perfect storm can be prevented? What must happen so that the disaster does not happen?
Mankind is not rushing towards self-destruction on the track bed that has broken into the earth’s interior, as in Friedrich Dürrenmatt’s dystopian story “The Tunnel”. There, indeed, there was no escape: “She’ll keep on racing,” said the twenty-four-year-old, pointing to the speedometer.
“One hundred and fifty. Has the machine ever driven a hundred and fifty?” “One hundred and five at the most,” replied the conductor. “Exactly,” the young man stated. “Just. The speed increases. Now the knife reads one hundred and fifty eight. We fall.”
So here are six food for thought to avoid free fall and to do what is rarely done in contemporary politics, which is to think in the best-case scenario:
1. Inflation has its roots in an overly pruned money supply. The increase in the cost of money – that is, the metered increase in interest rates – must therefore also begin immediately in Europe. A return to restrictive monetary policy, now that the effects of the miraculous increase in money are being felt by everyone, may not defeat inflation overnight, but it can have a dampening effect.
2. The parties to collective bargaining, i.e. employers and trade unions, can make a noticeable contribution to calming things down on the price front in the coming months. Long-term collective agreements and one-off payments for the lower collective bargaining groups can be used to prevent the wage-price spiral from getting underway.
3. The sanctions regime of the NATO states against Moscow endangers global food security. The war between Russia and Ukraine is further disrupting already disrupted food flows. Russia was the world’s largest exporter of wheat in 2021, with a total of around 33 million tons. The West would have to change its mind here – from the relentless fight against Putin to the fight against hunger. The people of Africa and the global economy would thank those involved.
4. It would also be better for the world economy and world peace if NATO did not expand into Sweden, Finland and Ukraine and thus into its eastern and northern European flanks, but instead sought to discuss a new security architecture in Europe with Turkish moderation . Erdoğan – who in any case refuses to accept the Western sanctions regime – has offered his mediation services. Olaf Scholz is also keeping the conversation going with Putin, which brings him harsh criticism at home and could be useful in precisely this situation.
5. Instead of bowing down to the Emir of Qatar to replace fossil fuels from Russia with fossil fuels from the Middle East, the state should now redouble its efforts to decarbonize the economy. New funding programs and a Marshall Plan to reduce bureaucracy in Germany and Europe would counteract the recessionary tendencies.
6. The threat of competition between the USA and China, which leads to the politicization of trade relations and is bound to unsettle an export nation like Germany, could be replaced by a new free trade agreement. The simultaneity of the Ukraine war, NATO enlargement and the deliberate initiation of a conflict with China harbors a risk of explosion that could be mitigated on the Western-Chinese front to mutual benefit.
Conclusion: There are reasons for the current despondency of the central bank governors and heads of government, but not good ones. With the spontaneous words of the 1970s, one would like to call out to the frightened of all countries: Prosperity is possible, Mr. Neighbour. Even the Bremen Town Musicians were smarter than the current generation of politicians. Their motto: We will find something better than death everywhere.
Gabor Steingart is one of the best-known journalists in the country. He publishes the newsletter The Pioneer Briefing. The podcast of the same name is Germany’s leading daily podcast for politics and business. Since May 2020, Steingart has been working with his editorial staff on the ship “The Pioneer One”. Before founding Media Pioneer, Steingart was, among other things, CEO of the Handelsblatt Media Group. You can subscribe to his free newsletter here.
