Economic Penalties for Putin’s Aggression Threaten To Impoverish the World

Casualties were inevitable the moment Vladimir Putin sent Russia’s army across the border into Ukraine. But after the initial tally in lost and shattered lives, destroyed homes, and depleted wealth, we’re likely to discover that we’ve also lost a world of expanded trade that pulled billions of people out of poverty by removing barriers to free exchange. The walls were already rising because of pandemic restrictions and politicians’ thirst for greater control, but the war in Ukraine has accelerated a process that threatens human freedom and prosperity.

Economic sanctions and the retreat of Western businesses in response to the invasion of Ukraine have left Russia largely isolated. But they’ve also made clear that the integration of the global economy in recent decades wasn’t inevitable and is vulnerable to political decision-making.

“The damage sanctions are doing to the Russian economy and the substantial costs to central Europe if Russia cuts off its access to natural gas and oil in response may make governments pursue self-reliance and disentangle themselves from economic connections,” warns economist Adam S. Posen in Foreign Affairs. He supports sanctioning Russia on ethical and national security grounds but predicts far-reaching consequences. That governments around the globe are likely to take lessons from the sanctions against Russia was emphasized by Putin himself.

“Now everybody knows that any assets could be basically stolen,” the Russian dictator seethed in a March 16 speech in response to the seizure of foreign reserves held overseas. He predicted that countries would respond by converting foreign reserves into physical stores of wealth, such as food, land, and gold that aren’t vulnerable to international action. There’s enormous irony in a national leader who violated rules against rolling tanks into neighboring countries caught off-guard by the confiscation of funds entrusted to other nations, but Putin wasn’t alone in predicting strong reactions. Predictably, some even see opportunity in encouraging disengagement with global systems.- READ MORE