Putin makes the world poorer.
Spoiler: Putin’s war against Ukraine has led to decreased supplies of several goods which Ukraine and Russia exports. We have already seen price hikes of oil and gas followed by decreased supply and higher prices of wheat, sunflower oil, fertilizers, steel to mention some of the most important goods. The world will be poorer, and the poorest people will be hit hardest by Putin.
The effects are felt directly and indirectly. The direct effects concern those firms and households who use gas and oil for as energy or wheat when baking bread. They are also felt indirectly as goods that are produced with gas, oil, wheat, sunflower, and steel become more expensive. The effects are stronger in countries where imports of the goods are relatively large, account for a large part of final domestic demand and the more elastic demand for those goods are.
The effects are stronger in continents and countries with a relatively large share of poor households. More families will be poor. But the effects will reach further. Increased poverty is associated with less nutrition, shorter life expectance and higher natal mortality numbers. Putin kills people today and in the future. In addition to that, his war will lead to fewer births.
And don't forget! There are no sanctions on russian exports of grain, other agricultural products or fertilizers. putin has chosen, not only to block, destroy and steal Ukrainan exports of grain but also to reduce his own exports.
In a previous post where I showed how globalisation kills poverty, I used this graph, c.f. Figure 1.
Figure 1. World trade and poverty.
Source: World Bank database, https://databank.worldbank.org/home.aspx Note: Poverty headcount ratio at $1.90 a day (2011 PPP) (% of population).
World extreme poverty is increasing because of the thug and murderous dictator Putin’s war against Ukraine. His war will not only lead to increased poverty, but also to increased mal-nutrition, shorter life expectancies and more misery in countries where many people already had fragile conditions.
Putin’s war increases poverty by disrupting current grain shipments, decreasing future harvests in Ukraine and Russian and in the World.
As pointed out by the Economist, the war will lead to decreased supply and higher prices through at least three channels. Firstly, by disrupting the current grain shipments. Russia has closed Ukraine’s ports and stolen Ukrainian boats with thousands of tons of wheat from the occupied port of Berdyansk. Russia has also decided to stop exporting wheat.
Secondly, future harvests in Ukraine and Russia will be lower because of the war. Large parts of the Ukrainian soil can’t be sowed, many farmers are fighting the invaders and Russian soldiers are destroying Ukrainian harvest machines. Russian harvests will also be lower and most of them will be consumed domestically.
Thirdly, world agriculture production will decrease also because of the decreased supply of fertilizer components including natural gas and potash. Belarus and Russia export a lot of potash and Russia accounts for 20% of global output. The decreased Russian supply on world markets will lead to price increases of potash and food all over the world. Mind you, there are no sanctions on belarusian and russian grain, fertilizers or other agricultural products.
The disrupted grain shipments from Ukraine and Russia will affect total supply significantly for at least wheat, sunflower, sunflower oil, barley and maize, c.f. Figure 2.
Figure 2. Ukrainian and Russian shares in global trade 2018-2021.
According to the International Food Policy Research Institute, Russian, and Ukrainian exports account for about 12% of total calories traded in the world. Many countries in North Africa and the Middle East depend even more on these products from Ukraine and Russia. Countries in these regions import over 50% of their cereal needs and a large share of wheat and barley from Ukraine and Russia. Ukraine is an important supplier of maize for several North African markets including Egypt and Libya.
Putin kills poor people in Africa
Concentrating on wheat shows that many African countries import more than 30% of their wheat from Ukraine and Russia, c.f. Figure 3.
Figure 3. African dependence on wheat from Ukraine and Russia.
In these low-income countries, expenditures on food account for large shares in total consumption of as percent of total income. And these shares are expected to increase as result of Putin’s war according to the World Bank, c.f. Figure 4.
Figure 4. Food expenditures as % of total income.
Putin kills poor people everywhere
And in many countries, food accounts for the lion share of basic expenditures in total expenditures. As shown by the FAO, at the relatively low food and and fuel prices of 2017, households in 30 countries spent 60 percent or more of their incomes on these necessities. At the time of writing that report, estimates for 2021 suggested that another 23 countries had joined this group and that the average household expenditure shares in these 53 countries had risen from 62 percent in 2017 to 69 percent in 2021:
“For many consumers, this may mean either lower quantities or qualities of food consumption, or both, and hence more hunger and malnutrition, or less money for other necessities such as health and education. Curtailing such important expenditures could send communities into a vicious cycle of deepening food insecurity and poverty, with potentially irreversible effects.”
The FAO has tried to simulate the effects of Putin’s war and find that
“Globally, if the conflict results in a sudden and prolonged reduction in food exports by Ukraine and the Russian Federation, it could exert additional upward pressure on international food commodity prices to the detriment of economically vulnerable countries, in particular. FAO’s simulations suggest that under such a scenario, the global number of undernourished people could increase by 8 to 13 million people in 2022/23, with the most pronounced increases taking place in Asia-Pacific, followed by sub-Saharan Africa, and the Near East and North Africa.”
Again, there are no sanctions on russian exports of food. None!
Putin kills future generations
The decreased supply of natural gas and fertilizers will affect tomorrow’s harvests. Natural gas is much used in the production of fertilizers. Russia and Belarus are important suppliers of fertilizers and potash, c.f. Figure 5.
Figure 5. Exporters of fertilizers 2020.
Remember! There are no sanctions on belarusian and russian exports of fertilizers. None.
The war leads to higher fertilizer prices which will reduce the future harvests especially in many low-income countries where imports from Belarus and Russia account for significant shares of total imports. Ukrainian imports from those countries account to some 60%.
Putin's war makes lives in low-income countries poorer and shorter
The countries that will suffer most from Putin’s psychopathic war, are low-income countries. In these countries, life expectancy is about 13-15 years shorter than in Europe. The neonatal mortality ratio is about ten times the European average. These differences will increase as will infant mortality rates and maternal mortality rates. Due to the expected increase of mal-nutrition, the children of the next generation will probably be shorter and be less developed in other aspects because of Putin.
Lower growth and more expensive agricultural inputs will put further pressure on governments in low-income countries. Depreciating exchange rates will make debts grow and interest payments higher. As a result, less resources will be available for healthcare, education, infrastructure, sanitation, and other expenditures that would improve lives for people in low-income countries.
In case you forgot,
Putin is a pure thug and a murderous dictator