“It’s the instinct of the people of this country,” bellowed Boris Johnson at a recent Tory party conference in Blackpool, “like the people of Ukraine, to choose freedom. When the British people voted for Brexit…it’s because they wanted to be free.”
His inconsiderate, preposterous comparison drew anger from all political climes, including many of his party faithful. To compare the Ukrainians, who are fighting for survival in their home country, bombed to smithereens by invaders, with the moody lifestyle choice of Middle England was not only obnoxious but absurdly wrong: the Ukrainians are after all braving destruction because they wanted to take part in the European project, not because they wanted to desert it in search of an empire.
The psychology of Brexit, if anything, has parallels with Putin’s dream of resurrecting imperial Russia: his contempt for minorities, his delusion of greatness, his repudiation of 21st-century values.
I do of course not wish to compare the thoughtless clownery of ‘Basil Fawlty’ Boris with the murderous thuggery of Vladimir ‘Stalin’ Putin. But let’s not forget how much disregard there is for the rule of law and constitutional procedures in Boris Johnson’s political world, how much loathing for opinionated curators, critical media, independent parliamentarians and civil servants. The BBC, as the world’s pre-eminent news purveyor, has to fear for its survival.
Brexit has demonstrated the precedence of emotions over economic rationality. Many European amenities are oozing away. There are fewer wines to choose from. Large-sized sea bass from France does not make it over the channel anymore. Groceries are not so fresh nowadays and last hardly more than a day in the fridge. European cheeses, bread and pasta became rarer and restaurants have to do without chefs from the continent. In the grand scheme of things, nothing to get agitated about. Yet life has become a bit greyer in the UK as a consequence.
Such was the result of Britain’s uncoupling from the European customs union, in all its aspects: Goods and people could not move freely anymore. Small businesses on both sides of the new border were struggling with paper protocols - from health and safety certificates to norm compliance, from re-export limitations to VAT handling.
Many have given up. We can check this on Amazon Marketplace: “Not delivered to the UK”. Workers in labour-intensive sectors – fruit and vegetable pickers, nurses, builders and truck drivers - went missing, augmenting unnecessary deficits.
This not only showed in shops and the hospitality industry. Brits had difficulties to fill up their cars last year because there were not enough road tankers around to stock up gas stations in the UK. This picture of deteriorating affluence, which began with Brexit, intensified in the aftermath of the pandemic, and not only in Britain.
When the pandemic subsided and we all started to consume with gusto again, supply struggled to keep up with our abruptly resurging demand. Deficits started to crop up everywhere, from transport to spares, with labour quickly to become a deficit good too. The resulting, relentless price rises, experienced since the beginning of last year, began to corrode our joyous consumption of stuff and entertainment. For the first time in generations, inflation became a serious worry, exacerbating inequality.
Less well-off households and many developing countries started to feel the pinch, with food and energy poverty threatening the living standards of millions of people. Our thirst for a return to free consumption and travel became ever more expensive. As a result, we were forced to restrain our abandon and to consume more selectively.
For the first time in generations inflation became a serious worry exacerbating inequality- Andreas Weitzer
First Brexit and then, much more dramatically, the reopening of the economy in the aftermath of the pandemic have demonstrated the cost of insufficient supply, the inflationary effects of disrupted transport and production. Inflation, tamed by decades of outsourcing and cheap labour in South East Asia, came roaring back.
Rapidly rising fuel and gas prices inflated the cost of food, heating and housing, infecting in its wake pretty much everything we can buy for money. The prices of even the most ordinary things went up, like stainless steel nails, which rose 40 per cent in a year.
And then Putin invaded Ukraine, hell-bent to destroy it. This unexpected act of military adventurism was answered by Western sanctions of unheard-of severity. Exacerbated by Ukraine’s destruction and Russia’s embargo responses, these will create supply deficits not experienced since WWII. The effects are already severe: Russia and Ukraine are both key exporters of metals, crops and basic raw materials for the production of microchips.
Twenty-five per cent of the world’s wheat comes from Ukraine and Russia. Fifty per cent of the world’s sunflower oil comes from the Ukraine. Ninety per cent of the world’s neon is exported by Russia – an essential ingredient for integrated circuits. The list goes on: fertilisers, platinum, nickel, copper, titanium, palladium, maize, rapeseed oil. It’s not just Russian gas which goes missing.
In the coming months, we will learn how the absence of Russian raw materials and energy will creep into the most unexpected corners of the economy. Fertilisers not shipped from Russia and Belarus, for instance, cannot be by easily compensated for by Norway’s Yara, globally the biggest producer of nitrates. They need natural gas to do so, which became prohibitively expensive even before the Ukraine war. As a result, farming everywhere will suffer, no matter how high food prices may soar.
Transport costs, which have already increased tenfold since the pandemic, will further rise. The trans-Siberian rail connection is now out of reach. Numerous containers are stranded in Russia. Russian vessels are idling. Seventeen per cent of the world’s sailors are either Russian or Ukrainian, hence difficult to deploy.
Post-pandemic price rises have been countered with monetary tightening, fiscal interventions (VAT reductions, windfall taxes, transfer payments) and the imposition of price caps. The shortages we are facing now make all these measures ineffective.
If there’s not enough food or fuel around, it will not multiply all of a sudden with the help of subsidies or regulated prices, or just by making credit dearer. Sky-high commodity prices are already lowering the financial ceiling for commodity traders, who are running out of credit lines irrespective of interest rate levels. This too is limiting trade volumes beyond sanctions already broadened by voluntary acts.
Since February 24, the day Putin invaded Ukraine, my neighbours in Lija began to hoard flour, pasta, vegetable oils and gas bottles, thereby involuntarily contributing to empty shelves and soaring prices. This is not a Maltese phenomenon. It happens right now all over Europe. People anticipate worse to come, and rightly so.
The commodity deficits now imminent will be large and disruptive enough for us to expect government-mandated rationing. Those of us old enough to remember the OPEC oil embargo in the 1970s will recall how we were told by our governments to leave our cars at home, to save electricity, to stop heating and air-conditioning.
Deglobalisation – the retreat from a wealth-bestowing, global division of labour – began with Brexit and Trump’s “America first”. It intensified during the COVID-induced lockdowns. The war with Putin has made it irreversible.
What we can expect now are not price caps but consumption caps. Germany and Austria have started to ration natural gas. We will soon have to make do with further curbs, substitutes and more limited choices. But we will endure these deprivations with a light heart when we see the lives of millions of Ukrainians shattered.