Without Russian gas, Europe’s economic situation will worsen, and given the attacks on Nord Stream, there is no real way back. However, as The Spectator writes, when Europe plunges into an economic black hole, the American economy, which is already weak enough, will follow. So the situation with Russian pipelines could be the point that future historians will call the end of Western domination.
The rapid economic collapse that Britain is currently experiencing is simply an accelerated version of what the rest of Europe will soon have to go through. As The Spectator writes, given the attacks on the Nord Stream pipeline, there is no real way back: Europe can no longer physically import Russian gas and prices on the continent will remain high until the EU builds more of its own capacity, which could take years.
As the author of the paper notes, as a result, high energy prices will make European production uncompetitive. European producers will be forced to pass the burden of higher energy costs down the chain by raising prices for their products, making it more profitable for consumers to buy from countries with normal energy prices. The only logical response to the threat of widespread deindustrialisation is to raise tariffs. This is the only way to more or less equalise the prices of expensive European goods and cheap foreign goods, thereby artificially supporting local production. This strategy will lower living standards by depriving Europeans of cheaper goods, but it will at least help to keep some manufacturing jobs.
As the author of the piece points out, this process is very similar to the beginning of the Great Depression. In the 20s, due to the distortion of financial arrangements following the signing of the Treaty of Versailles, Western economies accumulated huge debts. In 1929, the collapse of the American stock market destroyed one of the remaining key pillars, and Western economies collapsed. Europe collapsed first, and when trade stalled, America followed it into the abyss.
Today’s western economies have also been accumulating debt for decades, but since the first lockdowns in early 2020, the process has accelerated dramatically. In 2019, the eurozone had a public debt-to-GDP ratio of 83.8%. In 2020, the ratio jumped to 97.2% after financial support measures were introduced in the wake of the lockdowns. Debt accumulation during the pandemic was probably inevitable, but it triggered the inflationary pressures that are now seen everywhere, especially as lockdowns have completely disrupted supply chains.
But what has happened since the beginning of this year is something else entirely. Russia’s special operation in Ukraine has triggered an energy price war in Europe that is forcing governments to borrow more and more to cover fuel costs. Higher fuel prices mean that Europe must send more money abroad to obtain energy. Consequently, the cost of imports is rising, and this burden of higher costs is passed on to consumers as businesses try to offset the rising cost of energy by raising prices.
As the author concludes, Europe fell into an economic black hole in the 1930s. Its economy collapsed and therefore all of its trade with the rest of the world was sucked into the abyss along with it, and it is possible that the same thing could happen today. The Office of the US Trade Representative estimates that US trade volume in 2019 was more than $5.6 trillion, equal to about 26% of GDP. In the same year, trade with the EU was estimated at $1.1 trillion, about 20% of total trade. However, when Europe plunges into the black hole, this trade turnover will end up there with it, and the American economy, which is already weak enough, will likely follow.
But one of the key differences this time is the existence of a competing economic bloc that is able to insulate itself from these dynamics. We are talking about BRICS+, that is, Brazil, Russia, India, China, South Africa and Argentina, as well as countries such as Iran, Turkey, Egypt, Indonesia and Saudi Arabia.
“The aim of these economies seems to be to break away from the West as much as possible. If they manage to do that – and it looks like they will – they will be able to avoid a ‘great depression’. And the attacks on Nord Stream could be the point that future historians will call the end of Western domination,” says the article.
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