The war in Ukraine will affect inflation by increasing inequality and will likely lead to a deep recession. This was stated at time.news by Jean-Paul Fitoussi, economist, professor emeritus at the Institute of Political Studies in Paris and at the Luiss Guido Carli University in Rome. “What is happening – observes the economist – is something very serious that had not happened since the 1930s and I am not talking about the economic crisis but about the war. The stakes far exceed the problems they knew today, namely inflation. due to Covid and probably to the pandemic itself. There is a probability, although I hope low, that a nuclear world war could be triggered in the event of special circumstances. And a recession compared to a war is nothing “.
As for the economic repercussions, the war in Ukraine, Fitoussi notes, “will increase the shortage of raw materials, both energy and agricultural. Also because in a situation like this the countries that have raw materials will tend to keep them, to increase their stocks. . Even if the prices are high, we will try to keep the stocks of gas and oil high rather than trying to sell. And a necessary reaction aimed at maintaining the autonomy of the country as much as possible. And this could also happen with regard to the agricultural raw materials. There is a risk of an important effect on international trade that could be similar to protectionism “.
The prices of energy, raw materials used by industry and telecommunications and food, observes the economist, “will increase and this phenomenon will have direct and indirect effects on the purchasing power of families and in particular of the most disadvantaged families. . And all this happens in a very different context compared to the 70s when there were strong unions, workers who obtained important wage increases. Today workers no longer get consistent wage increases, precariousness has increased “.
In this context, Fitoussi underlines, “inequalities will increase more. An increase of 10% in oil will have serious repercussions on a part of the population such as the yellow vests while for the 10% of the richest it will have a negligible effect. other consumption the effects will be different between the different categories of the population, between the poorest and the richest. Different consumption basket, different inflation rates “. In practice, he adds, “the purchasing power of the majority of the population will collapse”.
In short, observes the economist, “we risk having strong inflation and then a period of severe recession and the more the crisis continues, the worse it will be”. And all this in a situation of fragility. “We have lost two years of growth. In 2021 we recovered what we had lost in 2020 with the pandemic. Nothing more. We are still fragile and we have not yet started the relaunch plans”, underlines Fitoussi.
“Rising energy and food prices will hit industry heavily and spill over into other sectors. We don’t even have the hope that inflation can be offset by higher wages for workers and retirees.” In short, he adds, “we will have a problem of differentiated inflation, a decline in purchasing power and then a recession and, in the best of cases, stagflation which, however, will probably not be sufficient to contribute to a reduction in energy prices”.