Winter is coming

How is the epidemic economy different from the war economy? Or, rather, from the influence of the war in the neighborhood?

From the point of view of economic policy, the difference is not great and certainly not systemic, to put it that way.

In both cases, there is a negative impact on the supply side of goods and services. What needs to be adjusted for work and consumption. And finally, in both cases it is a temporary disorder until, in the case of an epidemic, a cure is found or immunity is acquired, and in the case of war, until a truce or peace.

In both cases, it is necessary to preserve production capabilities and the level of consumption. In general, this means that it is necessary to reduce the activities that suffer the impact of an epidemic or war in order to preserve the activities on which the quality of life depends the most. These are not the same activities during an epidemic and in wartime, which of course is not insignificant, but the problem is basically the same, at least for economic authorities.

It is understandable, of course, that the goal is to lose as little as possible on production in both cases. So there is a lot of talk about how the winter will be cold because energy sources will be saved, and production that depends, for example, on natural gas, will have to be reduced. And in fact, production will have to be abandoned in some places in order to heat households and institutions.

In the pandemic, it was necessary to face the same choice because some activities had to be reduced or even prohibited due to concern for health and life. Economic recovery was very fast when the pressure of the epidemic subsided and even inflation accelerated because demand was, understandably, higher when life returned to normal.

The same could be the case now if mistakes are not made. Some activities should be reduced in order, for example, to avoid winter being colder because it is necessary to save on heating. Just as it was necessary to reduce certain activities so that the epidemic would not spread and so that there would not be many more patients than the health system is capable of treating.

The difference between an epidemic and a war next door that disrupts normal trade is that an epidemic is a natural occurrence, while war is a matter of choice. Therefore, the authorities can be criticized not only for the possibly wrong public health policy, but also for the attitude towards the war, which, it can be considered, does not concern the neighbors or partners of the warring parties. One can, for example, take the position that, quite neutrally, one will trade with warring parties and be neutral in general in order to avoid winter freezing or reduce production in order to avoid freezing. Admittedly, even in a pandemic, it is possible to take the position that it makes no sense to worry about the number of sick and dead in order not to reduce production and consumption.

I will put this misconception aside. The difference between a political response to a pandemic and a war is that war is completely avoidable. So the war is conditioned by political decisions, while the epidemic is not. But if we are talking about countries that are not at war but are suffering the consequences of the war that others are waging, then there is no big difference between the policy of adapting to the changed circumstances in international trade and in trade during the epidemic.

For now, it is still being considered whether it is possible to preserve the activity and to transfer the costs increased by inflation to households. But this is quite unrealistic. Because it is unlikely that the war will end by winter. And even if it did, perhaps an unnecessary loss of production would be avoided, but the trade relations that existed before the war would not be restored.

Even when the winter passes and the war ends, relations between Europe, which imports gas, and Russia, which exports it, will not be restored. The risk of Russian political decisions will increase and trade routes will change. Much like the epidemic has changed the attitude towards working from home. Each subsequent winter will bring a lower risk of freezing, reduced production and increased insecurity. Of course, until the next crisis.

(novimagazin.rs)