October 3, 2022

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Leading countries / China and the United States, the duty to build peace

While we were all waiting for the end of the plague, the war began. Even if the two events add their negative consequences to the global economy in different ways and characteristics, we must admit that within three months, the world we live in has moved from a climate of optimism to an anticipation of a crisis that is getting worse every day. The great collapse of the economy, the collapse approaching tragedy, naturally worries both countries at war, including Russia which, this year, will see a 10% drop in GDP compared to the past it was already experiencing. Serious problems. A setback continued and intensified as a result of the sanctions as well, despite the large influx of financial resources that still reach the Russian government from the export of gas and other raw materials. True, in fact, these exports continue to decline in quantity, but their income remains impressive as a result of the general and unprecedented increase in prices.

And it is still the consequences of the war that hit the European economy with particular violence. From the positive post-pandemic growth scenario, which has continued for the whole of the past year, we are now entering into a period of great stagnation that affects, albeit with nuances, all the four major states of the Union, even if it affects in particular Germany and Italy, which depend the most on Russian gas supplies. It is also for this reason that inflation, which was already alarmingly growing in the eurozone, reached 7.5%. It is such a high level that even if easing in energy prices is unlikely, inflation will persist for a long time, forcing the European Central Bank to take restrictive measures that will certainly not allow the start of recovery after the possible mitigation of the effects of Covid. . And the effects of the war on the Chinese economy are much less, but it is witnessing a decrease in its growth rate to less than 4%, and also due to the closure of all economic activities due to the return of Covid in some major cities.

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Although the Chinese government has decided on a plan for massive interventions in public works, the persistence of the epidemic and the increasing obstacles to international trade make the path more difficult, while the direct consequences of the war are of little significance. Despite the increase in recent years, trade with the Russian ally does not actually amount to 10% of the trade that China still maintains with Europe and the United States. In this strange world there is also a large country that, despite its dominance of world politics, does not seem to suffer significant economic consequences, neither from Covid nor from war. The United States, which has achieved extraordinarily high growth rates for such a prosperous country, is itself causing the present problems, having over time created an overheating economy, in which demand systematically exceeds production capacity. For the entire past year, they wanted to delude themselves that this phenomenon was temporary. As a result, the US inflation rate was 6.9% in March. Inflation did not arise mainly from energy prices, as in Europe, but crucially, from rising food prices and rising wages.

Of course, this belated recognition by the Federal Reserve of the inflationary phenomenon now imposes monetary tightening and an increase in prices, which, if not guided by a wise and prudent hand, can lead to the harmful coexistence of inflation and stagflation (stagflation), a fatal phenomenon that extends to other regions From the world. For the time being I have confined myself to noting the disparate consequences of Covid and war on the world’s dominant economies, albeit in a succinct way, but unfortunately it must be admitted that, as the old Polish proverb goes, ‘all this so that people walk barefoot on thorns’. And it is precisely in the Third World that the already dire consequences of plague and war have led to an increase in hunger caused by the collapse of imports of grain and fertilizers from Russia and Ukraine.

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In this case, these brief reflections on the world economic situation are not intended to predict future decisions (or should be) to regulate the global economy. I will confine myself only to drawing a brief overview and a simple conclusion from it. The consideration is that no international conference has been held (and is not planned) to bring the major leaders of the world’s major economies around a table, with the task of tackling these problems and trying to at least mitigate the damage done to poor nations.

In conclusion, I must simply point out that China and the United States are the only two superpowers capable of ending this dramatic war, but they are also the countries least suffering from the economic consequences of this conflict. All this certainly makes their task more difficult, but it cannot absolve them from exercising their necessary duty to build peace. Leadership is only maintained through the exercise of responsibility.

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