Alexey Grivach: With soaring energy prices, the specter of stagflation haunts the world
The surge in energy prices, which began last year and has been reinforced by Russia’s military action in Ukraine and the “collective West’s” sanctions war against Moscow, has brought the world back to the 1970s.
That was a time when stagflation raged – first in Britain and then in other countries across the globe.
“As we look at global GDP… it’s hard right now to see how we avoid a recession,” World Bank President David Malpass told an event organised by the US Chamber of Commerce in late May. “The idea of energy prices doubling is enough to trigger a recession by itself.”
The week before, on the sidelines of the G7 finance ministers’ meeting, US Treasury Secretary Janet Yellen acknowledged that “higher food and energy prices are having stagflationary effects, namely, depressing output and spending and raising inflation all around the world.”
Stagflation is a contradiction from the point of view of classical economic theory, combining a sharp rise in prices and a slowdown in GDP growth. The term is attributed to Ian McLeod, a British Conservative politician who was never an economist but rather a poet, an avid bridge-player, a fine orator and who served as Health Secretary under Winston Churchill, Labour Secretary under Anthony Eden and Secretary of State for the Colonies under Harold Macmillan.