Worldwide economic disruption could lead to famine and pestilence. We're going to need a bigger ballroom
Such is the case with Trump’s claim that he didn’t know Iran might attack its
neighbors and close the Strait of Hormuz in response to his joint attack with
Israel. Trump insisted that none of the experts thought this possible when in
effect just about every expert thought it was both possible and likely.
Given Trump’s ignorance and propensity to lie, it is not
easy to know whether Trump actually went to war totally unaware of the most
likely consequences, or instead went to war anyhow, deciding that he didn’t
care about the damage it would cause. Whatever the real story, the consequences
are enormous and sure to get worse as the Strait remains closed longer.
The most immediate and obvious consequence is the higher
price for oil and
natural gas. People in the United States see
this at the gas station every time they fill their tank. Paying a dollar or so
more for a gallon of gas is an annoyance for everyone. It is very bad news for
low- and moderate-income households, especially those who need a car for work.
But this is just the beginning of the story. Diesel prices are up by close to $2.00 a gallon. Diesel fuel prices have risen by far more than regular gas because there is more limited refining capacity. This means when some refiners lose access to their supply of oil, their production cannot be easily replaced. Also, there is less ability for users to cut back their demand.
With gas, most people have some ability to cut back the number of trips they take, or to carpool or take public transportation. Most diesel fuel has commercial uses like trucking. There is not much ability to cut back unless fewer goods are transported.
The higher price for diesel fuel will be a big hit to
independent truckers and trucking companies, who will end up with lower income
as a result. And in most cases, they will look to pass on much of the higher
fuel cost to their customers, who will eventually pass it on as higher prices
to consumers.
There is a similar story with other commercial
transportation. Many travelers are already seeing this in higher airplane
prices and fewer flights.
But whatever the costs in the United States, they are far
higher elsewhere. Jet fuel is in more limited supply in Europe, since they
import a large share of what they use. East Asia is also being hard hit by
higher gas and fuel prices, since countries like Japan and South Korea import
most of their fossil
fuels, and most of it comes from the Middle East.
But the worst story is in the developing world, especially
Sub-Saharan Africa.
Tens of millions of people in the countries of the region were already living
at the edge. Higher prices for oil could mean many can no longer afford
kerosene for cooking. And the cost of transporting food and other necessities
could be too high for the countries to bear.
And fossil fuels are only part of the problem. Close to 30
percent of the world’s fertilizer supply passes through the Strait of Hormuz. As a
result of the blockage, fertilizer prices have also soared since the start of
the war. Already, 70 percent of farmers in the United States report cutting back fertilizer usage due to price
increases. That number will increase if the closure persists and prices go
still higher.
But as bad as the story is here, it is much worse in the
developing world, where farmers will be much less capable of coping with higher
fertilizer prices. Many may be forced to do without fertilizer altogether,
causing crop yields to plummet. This could put millions of struggling farmers
out of business.
And the result of lower crop yields in both developing
countries and the United States will be higher food prices for the world. This
will cause an increase in hunger and malnutrition for tens of millions of
people.
The point here is that it is entirely possible, perhaps
likely, that millions of people will die because of a totally foreseeable
consequence of Donald Trump’s war that he claims he never even considered. I
guess this is consistent with Secretary of Defense Pete Hegseth’s pursuit of
“lethality.”
Dean Baker is the co-founder and the senior economist of the Center for Economic and Policy Research (CEPR). He is the author of several books, including "Getting Back to Full Employment: A Better bargain for Working People," "The End of Loser Liberalism: Making Markets Progressive," "The United States Since 1980," "Social Security: The Phony Crisis" (with Mark Weisbrot), and "The Conservative Nanny State: How the Wealthy Use the Government to Stay Rich and Get Richer." He also has a blog, "Beat the Press," where he discusses the media's coverage of economic issues.
