Another Crisis

A neighbor nation is being invaded. What is happening, and what will the consequence be? Exactly two years after the coronavirus took the world by surprise, another enigma must be decrypted under intense emotions. Think. Hard. Fast.

From a cold, microeconomic perspective, the immediate focus is on lost revenues, rising input costs (energy, raw materials, food), impaired assets, and financial leverage. At the macroeconomic level, a consensus is quickly emerging: inflation, GDP growth slowdown, stagflation. The economic outlook is portrayed as a somber inevitability. War has a cost, and the West is at war.

There is more to say. First, Russia’s attack adds a geopolitical twist to the burning of fossil fuel in Europe and beyond. Reliance on Russia, the largest oil & gas exporter in the world, is unsustainable, independently from climate change considerations. Unsurprisingly, the S&P Global Clean Energy Index has outperformed the broader market by 13% since last week’s invasion.

Second, the increase in the price of essential commodities, including energy and food, will trigger social stress, calling for government intervention to support those affected by rising poverty levels. A European ‘recovery funds’ may be eventually considered, mirroring the measures taken during the pandemic.

Third, basic governance principles are reinforced through the unequivocal condemnation of unacceptable rule-breaking behavior by Russia. The magnitude of the international response signals a global shift in values. Democracies have found a new, unifying raison d’être. The cathartic reaction of certain countries, including Germany and Switzerland, is historic.

Building on the COVID impact, the Ukrainian crisis will further turbocharge the concept of global sustainability: renewable energy, energy efficiency, social equality, and purpose. And it is adding a core theme that had become underappreciated by many: democratic security through military defense.

Moreover, I would argue that the response to the Ukrainian invasion was shaped by sensibilities born during COVID. Without the health crisis and the trends it accelerated, the West’s reaction would not have been as decisive, including in the corporate world where ‘capitalistic diplomacyis unraveling.

One could have only wished, perhaps naively, to have reached the same enlightened place without incurring so much anger, pain, and sorrow.

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