31 May 2022
Dear Richard and Montserrat,
1943 Britain rationed clothes with a Ministry of Information newsreel ‘Make Do and Mend’ urged repair and reimagining, with ‘Dig for Victory’ and other newsreels encouraged frugality for those on the ‘Home Front’. Today, families look to Social Media for cost savings and managing shortages as we face another war.
On the Northern Front, Siberia burns unabated with the army away; drought and tinder box conditions burn twice last year’s acreage with further permafrost melt. On the Southern Front, record-breaking temperatures and water problems span India, the Middle East, and Africa to further erode sustainability.
On the Eastern Front, China’s Covid policy locks down cities, with Shanghai, a key global manufacturing and container port hub, only recently released, but stressed global supply chains remain.
On the European Front Putin’s attempted razing of Ukraine threatens critical foods (Russia & Ukraine supply 33% of global wheat), with the IMF warning of millions on the brink of starvation. Limited supplies from Europe’s breadbasket, is “a declaration of war on global food security” and likely to see millions migrate mirroring the coming climate migration.
Combined, these Fronts bring growth shocks, severe shortages and stagflation; a herald of what climate change portends. Countries ration food exports and supermarkets' foodstuffs while manufacturers replace ingredients. The combined shock will cause some countries to default.
However, they also bring significant opportunities as a Europe decoupled from Russian petrol and gas will speed the adoption of hydrogen, micro-nuclear and enhanced wind and solar just as BP has announced peak oil. A wartime cost-of-living crisis, inflation, shortages and lower growth will push a huge economic and political reset. New models will emerge and remarkably, but at a terrible blood price, Ukraine’s cohesive democracy could be pivotal.
Now geopolitical; “the west” aligns key global countries with Europe’s sanctions and support for Ukraine. Previously unimagined, NATO is aligned to support aspiration, lifestyle choice and free markets to wage an anti-colonial war against Russia’s crumbling oil-fed kleptocratic state control where running water remains a luxury for many. Sen. John McCain saw “Russia as a gas station masquerading as a country." Not an inspirational model.
UK’s WWII debt and restoration cost of its bombed cities and industry were eased by The Marshall Plan but required crippling taxation and decades to rebuild. Fast-forward to a distinctly probable Ukrainian victory where seized Russian reserves could rebuild Ukraine without major cost to Europe; a significant worldwide boost as a rebuild cost points to $1 trillion. A reset of Ukraine’s burgeoning 40 million consumers with 5G enabling new tech, life sciences, 3D printed housing, Agri-tech and localised energy systems to become a transformative global stimulus. En masse, a ‘Model T’ moment!
With stark shocks in price and supply, much needs to be reimagined, and a ‘dig in’ attitude adopted from which ingenuity will abound. There will also be global tax shocks so be prepared.
All the Best,
Alistdair