An economic “hurricane” is coming

(CNN) — The worst of the pandemic may be behind us, but an approaching economic “hurricane,” compounded by Russia’s war against Ukraine, means a return to normality is nowhere in sight any time soon.

“The hurricane is out there, coming our way,” said JPMorgan Chase CEO Jamie Dimon on Wednesday, adding a caveat to his dire economic forecast. “We just don’t know if it’s a minor one or Superstorm Sandy. They better get ready.”

For the developed world, the prospect of a severe recession is deeply worrying. In the poorest countries, the growing fear – and the danger already present – ​​is what the World Food Program calls a looming “hunger catastrophe”.

When economies shrink and poverty rates rise, political systems falter. And we are already seeing it in some countries.

As we emerge from the clutches of the pandemic, we are beginning to see how the coronavirus has reshaped the world. That scenario was worrying enough before Russia struck a blow that set the world back.

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The pandemic has affected supply chains, as companies reduced or stopped production. The transportation and logistics were hit, which pushed prices up even higher. Changing ideas about work drove millions of people out of their jobs, many of whom refused to accept jobs they could have held before the crisis, and severely disrupted labor markets. Governments pumped in cash to keep people afloat, fueling inflation that is now forcing central banks to raise interest rates and take other painful steps.

Dimon was talking about the US economy, referring to the impact of the Federal Reserve’s efforts to quell rising inflation. But the economic repercussions of the two crises – the pandemic and the war in Ukraine – are sending shock waves across the planet.

Although some in the United States are quick to blame the current administration for the country’s woes, the fact is that almost all of the symptoms that afflict the US economy also affect much of the world. Gasoline prices are skyrocketing around the worldjust like the food prices. The shortage of personnel has become the nightmare of employers. In Amsterdam, Bruges and many other cities have posted “Help Wanted” signs, and some businesses have cut their hours due to lack of workers. The lack of staff is also causing endless queues at airports across Europe, just as it is contributing to the cancellation of flights in the United States.

gasoline prices they were already going up before Russian President Vladimir Putin launched the invasion of Ukraine. This is because during the pandemic, when gasoline fell below $2 a gallon in the United Statesproducers and refiners reduced production by almost 40%. Some refineries even closed for good. When the economy began to recover, it took them return to previous levels.

Then Russia, one of the main oil producers, invaded Ukraine, and Crude prices soared even higher. Production in the United States has increased, but not enough.

Food prices and hunger were already at crisis levels around the world before the Ukraine war, and the current shortage of fertilizers -also aggravated by the war in Russia – aggravates production problems. A study conducted by Oxfam in July 2021 revealed that the number of people living in famine conditions has multiplied by six compared to the year 2020, and that there are more people dying from malnutrition than from covid-19. The situation has deteriorated since Russian forces turned part of Ukraine’s agricultural land into war zones, and then they blocked key Ukrainian ports such as Odessa and they stole Ukrainian grain, depriving world markets of an important source of staple foods.

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The political impact is already startling. In Colombia, where the pandemic decimated the middle class and plunged million people in povertythe first round of the presidential elections last week produced a result shocking. After decades of electing center or center-right presidents, Colombian voters chose for a second round – on June 19 – a former leftist guerrilla, Senator Gustavo Petro, who promises profound change, and Rodolfo Hernández, a businessman and former mayor, 77, largely unknown, who some describe as a Colombian version of former US President Donald Trump, with views misogynists and a penchant for controversy.

With the majority of Colombians in a situation of food insecurity andl 40% living in poverty, voters chose two anti-establishment figures, which could be the reaction of a population traumatized by economic headwinds and worsening inequality.
When people experience extreme financial pain, they often demand change. And it seems that change is coming. Colombians are on edge.

Similar dramas are taking place around the world. Every country is different, and every situation includes multiple factors. But what is undeniable is that the impact of the coronavirus pandemic is lingering in far more significant ways than our tired debates about whether or not to wear masks or gather at home with friends.

In Sri Lanka, for example, poor decisions made before the pandemic left the country deep in debt. Then the pandemic cut the lifeline represented by tourism. The coup de grâce came with the war in Russia, which pushed prices up even more. The country ran out of money, stopped paying its debtshour cannot afford to buy food or medicine. It is a crisis like no other that the country has experienced. Amid massive protests, Prime Minister I quithis house has been set on fire and calls continue for the resignation of the president.

Widespread economic turmoil is often a factor in political instability. Take the so-called Arab Spring, which rocked the Middle East a decade ago, toppling regimes and sparking civil wars. The rising food prices and unemployment were some of the main triggers. The price increase could once again foment political instability in Middle East.

The pandemic has dealt a huge blow to the world, beyond the millions of lives it has already claimed. And so, just as the world was trying to ease supply chain bottlenecks, stabilize labor markets and restore oil production to pre-pandemic levels, Putin’s war reversed much of the gains.

Of all emergencies, the most urgent is “earthquake crisis of hunger” which, according to the WFP, is already “engulfing the world” and could bring 48.9 million people to the brink of famine. This figure is much higher than the nearly 6.3 million people who have been confirmed to have died of covid-19 so far.

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To prevent such a catastrophe, world powers should consider ways to break the Russian blockade of Ukrainian ports. Putin is trying to weaponize hunger, cynically suggesting that would help alleviate world hunger if the West lifts sanctions against Russia. It is worth remembering that the sanctions were triggered by Russian aggression.

Europe should also work to boost Ukrainian exports by rail, even if that doesn’t make up for sea routes.

Meanwhile, lower income countries need urgent help. Since the war, grain prices have been shot, and financial support for purchases is an obvious answer. The World Food Program’s efforts to provide food for the poor require greater international support.

As we have learned in recent years, a country’s problems do not remain within its borders. Humanitarian reasons alone justify aid to avert famine, but self-interest also comes into play.

Poverty and hunger drive large migrations and produce political instability. And that, in the face of an economic hurricane, could make an already difficult situation even more dangerous.

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