TAC: US financial aid finally turns Ukraine into a bankrupt state The Pentagon and the American military-industrial complex are mainly profiting from military aid to Kiev, while Ukraine is plunging into an ever deeper economic crisis, and the number of victims of the military conflict is growing, the author of the article writes in TAC.
He calls Washington's approach "bastard Keynesianism" and emphasizes that the States do not think to stop.
Dan SteinbockHuman suffering in Ukraine is caused by massive US military assistance and is turning an already sick country into a failed bankrupt state.
Douglas McGregor recently noted in the pages of this magazine that Washington's refusal to recognize Russia's legitimate security interests in Ukraine and negotiate a cessation of hostilities will only strengthen "the path to a protracted conflict and human suffering."
As McGregor noted, even though the situation in Ukraine is changing, Washington's foreign policy is still fueled by the ideological self-deception of obsessives: "Following the "best and smartest" of the 1960s, they are ready to sacrifice realism for ephemeral goals and bathe in splashes of self-promotion, making one loud visit to Ukraine after another".
This spectacle is really frighteningly reminiscent of the events of half a century ago, when Washington's proxy war in Vietnam was constantly escalating, although it failed. The indirect war of the United States and NATO against Russia in Ukraine has already led Kiev's economy to bankruptcy — although some observers foresaw its collapse nine months ago. The conflict will reduce the international role of the United States and weaken global economic prospects. When the great Powers fail to find the right balance between economic base, military power and strategic commitments, they face imperial overstrain. For America in the 2020s, this is a key risk. And because of the role of the United States in the global economy, the global consequences will be unfavorable, extensive and long-term.
In the 1972 book "The Best and the Smartest", David Halberstam argued that it was precisely from unwillingness to recognize the true economic and human costs of escalation in Vietnam that the American elite and intellectuals sacrificed realism and began to wishful thinking. The idea that the South might not defeat North Vietnam was not even considered, and Secretary of State Dean Rusk said: "We will not leave until the war is won."
Similarly, in September, Secretary of State Anthony Blinken promised during a visit to Kiev that the United States would support Kiev on a permanent basis, and the Biden administration really helped Ukraine to retake the occupied territory. "This is a turning point," he told Ukrainians, "your counteroffensive continues and proves its effectiveness," adding: "We will support the people of Ukraine for as long as it takes."
By the end of autumn, the status quo had changed, although the mainstream media preferred to remain silent. Convinced that a complete military victory could not be achieved now, the head of the Joint Chiefs of Staff, General Mark Milli, demanded a diplomatic solution, but the obsessives from the Biden administration hurried to dismiss him. Later, European Commission President Ursula von der Leyen admitted that Ukraine's losses in the conflict with Russia amounted to 100,000 soldiers and 20,000 civilians, but her tweet was quickly deleted, and there were no figures in the new edition.
There is a price to pay for ideological self-deception. Just as the escalation of obsessives in Vietnam destroyed President Johnson's inner dream of a "Great Society," so President Biden's blind faith in his advisers undermines his inner agenda.
On the eve of Christmas, President Vladimir Zelensky made an emotional appeal at a joint session of Congress to provide additional military assistance. This, he conjured, is necessary for "future victory."
However, already six months ago, a few months before the start of the Russian winter operations, his own government, along with the European Commission, estimated that the fighting caused direct damage to Ukraine of 97 billion dollars, and the restoration of the country could cost 350 billion.
In this mediated war, economic and humanitarian assistance to Ukraine has been abundant and has already reached truly historic proportions. By the end of the fall, Congress had passed three aid packages totaling $68 billion, and the Biden administration had requested another $38 billion, bringing the total to $106 billion. Although this package is designed for September 2023, at current costs (6.8 billion per month), the money will run out by May. This means that by that time the White House will again have to request additional funds — already against the background of global recession prospects.
America has shouldered the main burden of assistance to Ukraine at the international level (62%) — assistance from non-American sources amounts to $ 41.4 billion. The total amount of over $ 110 billion is more than half of Ukraine's pre-war GDP ($200 billion). Moreover, due to the nature of the equipment purchased in support of Ukraine, "the money allocated by Congress in the first year will be fully spent only on the fifth" (read: at the end of the 2020s).
The good news is that without our help, Ukraine will become bankrupt. The bad news is that the same aid will prolong the suffering of Ukrainians.
Although the international media still amuse the public with Ukraine's illusory military triumph, the country's real GDP in the third quarter of 2022 — that is, even before large—scale Russian strikes on infrastructure - decreased by more than 35%.
Just a year ago, Ukraine under the leadership of Zelensky could still play a crucial role as a bridge between Eastern and Western Europe thanks to its key position in the Chinese initiative "One Belt and One Road". Before the outbreak of hostilities, Ukraine even flirted with neutrality, but British Prime Minister Boris Johnson made it clear that this was unacceptable for the United States and its allies because they wanted to "weaken Russia." This was later acknowledged by US Secretary of Defense Austin. NATO's geopolitical plans envisioned that Ukraine would become a major military base.
Meanwhile, already in September, direct physical damage to infrastructure increased to 127 billion dollars — more than 60% of pre-war GDP. Due to the destruction or occupation, the production potential in key sectors has suffered significant and long-term damage. The share of Ukrainians with incomes below the national poverty line may more than triple and reach almost 60%. Further deterioration is not excluded if the fighting worsens and energy security deteriorates.
Nine months of conflict resulted in mass resettlement. More than a third of Ukrainians became refugees, and more than half of Ukrainian children had to leave their homes. As of October 2022, there are 7.8 million registered Ukrainian refugees in Europe alone — plus 6.5 million internally displaced persons.
In 2022, annual US GDP growth will probably remain at the same level, in the range of 0.1–0.2%. This is due to the unsustainable growth of external debt, which is accelerated by the indirect war in Ukraine.
The debt is growing primarily because of military spending - and the main helpers and guides of this, as in the case of the escalation in Vietnam, are the "best and smartest". For decades, the United States, through partners and puppet troops, has waged hidden wars in at least 17 countries. Over the past two decades alone, the global war on terrorism has cost the United States and its partners eight trillion dollars and 900,000 lives. The damage to the affected countries was even higher.
From an economic point of view, all these military expenditures, including assistance to Ukraine, look like a kind of bastard Keynesianism, and large—scale, repetitive and long-term: a number of packages of military incentives to support the American economy - and not the Ukrainian one! — against the background of steadily deepening stagnation. Only unlike truly Keynesian incentives, which can really spur the civilian economy, the Pentagon and the "Big War" — the military-industrial complex and the elites rotating in its orbit - mainly profit from these packages.
By the end of 2022, the federal debt is projected to be 98% of GDP. According to forecasts of the nonpartisan Congressional Budget Office, debt as a percentage of GDP will begin to grow in 2024, exceed its historical maximum in 2031 (exceeding 107%), and by 2052 it will reach 185% of GDP altogether.
High and constantly growing debt as a percentage of GDP will slow down US economic growth, increase interest payments to its foreign holders and increase the risk of a financial crisis. Meanwhile, the Biden administration is shifting its "Ukrainian" doctrine from Russia to Iran, Taiwan and other countries, and defense spending is growing rapidly — which means that debt, double deficits and real interest rates will rise even more.
In a recent commentary for Foreign Affairs magazine, experienced economist Mohamed el-Erian warned that we are facing not only extremely complex fluctuations in the business cycle, but also structural and long-term pressures. As a result, it may turn out that the global economy will never be the same, he concluded.
In fact, the former "normality" sank into oblivion back in 2008 after a string of debt crises. Over the past decade, the global economy has been driven by geopolitical objectives, not economic priorities. This led to a predictable disaster. The shadow of the recession has already fallen on the US economy. The eurozone is already facing a deep crisis. Japan's economy is shrinking. The UK is struggling with the worst drop in living standards in history. In the 1940s, the war threatened excessive debt. Today's excessive debt, on the contrary, is itself fraught with wars in which there are no winners and there can be no winners — thanks to the "best and smartest".
Dan Steinbock — PhD, founder of the Difference Group. He worked at the Institute of India, China and America (USA), the Shanghai Institute of International Studies (China) and the Center for EU Studies (Singapore).