751: War & Money

The fever pitch of war has a way of obscuring something very fundamental: war is bad. Completely and utterly bad. Stalwart heroes and just causes cannot alter this reality. Right now the people of Ukraine are heroes to the world, and that heroism is deserved. But it does nothing to diminish the ugliness of war.

I was in eighth grade when U.S. forces invaded Iraq, and I remember the giddiness which accompanied that invasion. The tales of Ukrainian heroes which are bandied about today remind me of those days, when we believed that American forces could do no wrong. It’s not the same situation by a long shot, and I fully hope that the Ukrainians can defend their homes. But that does not mean that the rest of the world is free from guilt in the actions which have been taken in the hell of war.

In particular, I am deeply concerned about the destruction of Russian currency which has occurred due to a coordinated attack from western banking and financial forces.

Here are a few things I think we should keep in mind when lauding such an action.

1. This is a weaponized financial attack, and we should be very wary of the weaponization of financial institutions. Just a couple weeks ago the Canadian government weaponized their financial institutions against peaceful protestors who were demonstrating against government policy. I do not expect weaponized finance to merely remain a tool of war against an aggressive state. It will be used, and in fact already has been used, against non-violent citizens and is a grave threat to civil liberties.
2. Currency debasement will always hurt the poor people disproportionately worse than it hurts the wealthy. There are complicated reasons for this, one of which is that wealthy people have diversified assets which maintain their value even when the currency loses value. While the oligarchs will likely weather the storm many innocent Russians will not.
3. A financial attack against the people of Russia is likely to create an intense populist backlash which will fuel more war and aggression. Hitler came to power on the back of the populist uprising which occurred when western allies debased the German currency after World War I. I have heard that many Russians are currently opposed to this war. History would suggest that if western powers continue to attack the finances of ordinary Russians that may change.
4. A financial attack on the Russian people is not a serious strategy to counter military aggression. A more serious, and targeted, plan would be to cut Russia out of the oil market. Oil revenues accounted for 36% of the country’s total budget last year, but actions directed against the Russian banking system have been specifically designed to allow oil exports to continue. Much of Russia’s oil revenue goes directly to the state, so freezing the oil markets would be a much more direct attack on the means of continuing the war. 

The actions regarding Russian banking and currency are the equivalent of financial carpet bombing. un-targeted, but dangerous and destructive to wide swaths of the innocent civilian population. I say these things not to denigrate the brave people of Ukraine, who fully deserve our admiration and respect, but out of a concern that in the fog of war it is all too easy to not fully evaluate the actions which we ourselves are taking. I hope that we can be fully aware of the horror of war, and not get carried into rash actions by the excitement of the moment.

And remember, it could always get worse. Just imagine, for example, that the two greatest nuclear superpowers in the world found themselves on opposite sides of a land war in the middle of Europe. How bad would that be?