AFTER Adolf Hitler invaded Poland in September 1939, England and France declared war on Germany. After the invasion of Poland, there was the eight-month “phony war” that ended when Germany invaded France and the Low Countries in May 1940. From Wikipedia: “The Phony War was an eight-month period at the outset of World War II, lasting from September 1939 to May 1940, during which there were virtually no Allied military land operations on the Western Front... Although the Western Allies did not conduct major military actions during the Phony War, they did implement economic warfare, particularly a naval blockade of Germany, shut down German surface raiders and formulated elaborate plans for large-scale operations designed to cripple the German war effort. These plans included opening an Anglo-French front in the Balkans, invading Norway to seize control of Germany’s main source of iron ore and imposing an embargo against the Soviet Union, which was Germany’s primary oil supplier.”
With Iran and the United States having ostensibly a ceasefire, I think we have a phony peace. There are no open military attacks, but there are blockades and blockades of blockades, threats, counterthreats, claims and debunking of the claims (which sounds like disinformation), and the effects of war minus the fighting rather than peace. And what are the dismal consequences for us and those like us? Nothing good.
Here are excerpts from an email from The New York Times called “The World,” which is sent daily to subscribers on April 21 outlining and explaining how the biggest effect of this war outside the Middle East has been in Asia. (Also see their article on April 22 about hoarding in Asia).
“The war, by keeping oil, gas and vital byproducts like fertilizer from Asia, has added pressure to these vulnerabilities. As a result, three pillars of stability in the region — transportation, manufacturing and upward mobility — are confronting powerful shock waves at once. If commercial traffic through the Middle East remains strangled for even a few more weeks, experts told me, shortages could push several countries into unrest and recession... Within hours of the first strikes on Feb. 28, trucks, ships and planes stopped operating in Asia, a region defined by near-constant motion. Air travel, in particular, veered toward chaos. In March, there were more than 92,000 flights canceled worldwide, with the largest number in eliminated flights linked to the Asia-Pacific. Jet fuel has nearly doubled in price, and some airlines have slashed routes indefinitely... Many of Asia’s most successful export industries require enormous amounts of energy and other inputs from the Middle East. Seven weeks in, stockpiles are running out, revealing new vulnerabilities. Copper and nickel production, for example, rely on high heat from natural gas and sulfur, a fossil fuel by-product. Both are in short supply. Several Indonesian nickel processors have reduced their output... Polyester and nylon are also derived from petroleum. In Gazipur and Ashulia, the sewing hubs of Bangladesh, where clothes are made for Walmart, Zara and Uniqlo, there have been severe disruptions to production and shipment schedules... Prices have soared for helium, a gas by-product used for semiconductors. On Thursday, Taiwan Semiconductor Manufacturing Co., the world’s largest producer of high-end chips, said it had enough helium on hand to avoid a near-term impact. But a prolonged shortage could force chipmakers to seek supplies from other locations, like Russia, or force production cuts that would affect everything from electronics to cars.
“Last week, a new UN report estimated that 8.8 million people in Asia and the Pacific are at risk of falling into poverty because of the war, depending on how long hostilities last. Most of those, about five million, would be in Iran. But in a region where most employment is informal, without a robust safety net, the conflict’s effects are starting to compound. In interviews, farmers in Vietnam, laborers in India, innkeepers in Sri Lanka, drivers in the Philippines, and executives in Hong Kong and Singapore all sounded more worried than many of the region’s politicians, who are seeking to project a stoic calm that often understates the scramble occurring offscreen.”
I was asked in an interview, “What is the silver lining?” and I said none. Something like this was never going to be good for us but what the Economic Pontius Pilates who don’t believe in government planning and industrial policy and lazily defaulting to the private sector and market forces have done is make us even more exposed than we had to be. It is like insurance. Yes, you pay for it even when you don’t need it, but what happens if you don’t have it when something catastrophic happens to your house or self? You may be ruined.
Same with effective industrial policy, planning and preparation. It is during difficult times and crises when you need it most to avoid catastrophe and reduce pain. Done right or even well and responsive enough, it deepens economic development during normal times. Not bothering with that complex but necessary path is not the foundation for economic freedom, but the foundation for economic servitude and the destitution that results with our dismal level of vulnerability to a crisis and underperformance in usual times. We can’t avoid being victims of a crisis not of our doing, but we are to blame for not being better prepared and enhancing vulnerability which our 45-year fatwa against industrial policy and long-term planning has resulted in. To quote Dolly Parton (!) — “We cannot direct the wind, but we can adjust the sails.” Unless you are an Economic Pontius Pilate then the motto is “Bahala na si Batman.”
The author is an independent director of the state-run Maharlika Investment Corp.