Western response to military war may become more and more economical

U.S. President Joe Biden bans trade and investment between Americans and two secession areas in eastern Ukraine recognized by Russia on February 21, 2022 at the White House in Washington, U.S.A. Sign a presidential order to do.

White House | Reuters

Since the mid-20th century, the introduction of thermonuclear weapons has plagued the entire globe with concerns about the potential of World War III.

However, new global risks are emerging. It is the arrival of economic warfare.

It is true that armed conflict remains a threat to world stability, as in the case of Russia’s invasion of Ukraine. Responding to dynamic warfare may become more and more economical.

As the Western world imposes sanctions on Russia, similar sanctions may exist for other malicious actors who are more prone to militarization.

China is closely monitoring the Western response to Russia’s merger attempt and could one day move to Taiwan, bringing multifaceted military challenges to the United States, Britain, EU, India, Japan, South Korea and Australia. There is sex.

The idea that the Allies are trying to fight Russia and China on the streets of Kiev and Taipei may be tempted by some nuclear superpowers to do unthinkable moments, so the facts I can’t think of it above.

In this context, the use of wide and deep economic sanctions that isolate Russia and China from the western world of democracy and capitalism would be a much more likely and damaging response.

Old enemies resurfaced

Such a scenario has not been possible since the fall of the Berlin Wall and the opening of China at the end of the 20th century, but now it is possible that old enemies and enemies have resurfaced in diplomacy.

This geopolitical disparity has reappeared in the same way that the world economy has become deglobalized. Until recently, globalization was seen as a stabilizing force that harmonizes international economic interests while reducing the risk of a catastrophic World War.

Sadly, the ghosts of the past are probably revived, suggesting that the “end of history” was a conceptual composition that was unfounded in reality.

In addition, the pandemic has revealed an unequal trade-off between supply chain efficiency and security.

As countries are trying to rebuild not only their critical infrastructure but also their major domestic industries, the scenarios of vulnerable economic warfare are endlessly plausible in the current situation.

Impact on the world economy

This will affect the global economy and financial markets.

The world market has been shaken by the invasion of Ukraine.

Russia’s stock market has already fallen sharply since its peak in October, amid the soaring oil prices it depends on, but has fallen by more than 30% this week.

This is before the full power of Western sanctions has been enforced.

Given Beijing’s action on Taiwan, it’s not hard to imagine a series of similar disciplinary sanctions aimed at Beijing head-on. This is still heavily dependent on targeting the Chinese Communist Party’s elite, national billionaires, wealthy generals and, more importantly, sustaining economic growth that has already slowed. It also includes separating China from the market.

When that time comes, it will not replace the risk of athletic war and is certainly not region-based.

But globally, economic warfare can undermine growth and stability. This is especially true if it contains cyber attacks that could ruin a critical system. These range from the most basic transfer of funds to the purification of water to global electrification to the most enhanced and critical infrastructure.

The United States is not ready for this kind of retaliatory response, just as Russia and China are ready to be isolated from the rest of the world.

This may not be the war that our generation has always feared, but it is the next war that this generation will face and can have lasting and serious consequences.

– Ron Insana is a CNBC contributor and senior advisor to Schroders.