It is one thing to impose economic sanctions on Russian rulers and plutocrats, that is, to impose targeted sanctions on Americans and companies that do business with them; as I suggested before, this is preferable to war for virtually everybody. It is another thing, if only a matter of degree, to forbid Americans and their companies from importing energy products or some other broad category of goods or services from any Russian exporter: this is what the Biden administration (see his Executive Order of March 8) and Congress seems to be doing more and more openly (“Biden Bans Imports of Russian Oil, Natural Gas,” Wall Street Journal, March 8, 2022):
The U.S. ban takes effect immediately and applies to new Russian crude-oil imports, certain petroleum products, liquefied natural gas and coal, according to an executive order Mr. Biden signed on Tuesday. … The order also bars new U.S. investment in Russia’s energy industry and blocks Americans from financing foreign companies that invest in the sector.
The governments of other Western countries are doing the same. These moves will directly affect consumers: gasoline and gas prices will likely continue to increase (if the expected bans were not already all priced in), pushing up the price of other forms of energy such as electricity. Ordinary Americans will be hit hard, even discounting a possible recession.
But the sanctions will also affect ordinary Russians, who are not individually worth less than ordinary Americans. At least, this is the moral postulate underlying classical liberalism, Enlightenment ideas, and the implicit values in standard political economy. Ordinary Russians, not only Putin’s plutocrats, produce Russian oil. Ordinary Russian workers are, and will be, victims of our own government after having been victimized by their autocratic one.
The idea that the Russian victims of this double hit just have to rise up against their tyrant looks morally wrong and strategically short-sighted. Sure, any liberal hopes they will rise up, to the extent possible. But would it be acceptable to starve slaves to motivate them to revolt against their master?
There is more. Wide-ranging shotgun sanctions come on top of the liberticidal powers already grabbed from their citizens by American and Western governments, and will contribute to feeding our own Leviathans. President Biden already suggests informal price controls of oil products which, especially if decrees were to follow exhortations, would create actual shortages, that is, waiting lines and eventually political allocation. The Wall Street Journal noted:
Mr. Biden said he wants to do everything he can to insulate Americans from continued oil and gasoline-price increases, but he warned that the crisis in Ukraine could have domestic costs. He urged companies not to impose excessive price increases in response to the ban.
The House speaker will not be outcompeted in the race to the bottom of the interventionist barrel as a remark of her indirectly suggests:
Mrs. Pelosi (D., Calif.) said in a letter to her caucus that the House would … review Russia’s access to the World Trade Organization.
These further sanctions are unwarranted anyway since many Western companies have decided to reduce their business in Russia or with Russian entities, either because they fear violating the first sanctions, or because of their business interests, or because they agree with the general condemnation of Putin’s bullying. Everybody now knows the political risk of engaging in long-term contracts or ventures with businesses subject to the Russian autocrat.
The systemic effect of state interventions that come on top of previous interventions and further shrink the domain of individual liberty is often forgotten; and we cannot count on politicians to remind us. Extraordinary powers assumed during an emergency would be more justifiable, or arguably only justifiable, if the standing powers of our own governments were not already liberticidal. In his book Capitalism and Freedom, whose 60th anniversary we celebrate this year, Milton Friedman wrote (prudently):
We shall always want to enter on the liability side of any proposed government intervention, its neighborhood effect in threatening freedom, and give this effect considerable weight. Just how much weight to give to it, as to other items, depends upon the circumstances. If, for example, existing government intervention is minor, we shall attach a smaller weight to the negative effects of additional government intervention. This is an important reason why many earlier [classical] liberals, like [University of Chicago economist] Henry Simons, writing at a time when government was small by today’s standards, were willing to have government undertake activities that today’s liberals would not accept now that government has become so overgrown.
A politician who believed in individual liberty would heed Friedman’s warning and keep his head cool in emergency situations.
READER COMMENTS
David Seltzer
Mar 9 2022 at 3:00pm
“Mr. Biden said he wants to do everything he can to insulate Americans from continued oil and gasoline-price increases, but he warned that the crisis in Ukraine could have domestic costs. He urged companies not to impose excessive price increases in response to the ban.”
Then why interrupt supply?
From my post on John Cochranes Grumpy Economist:
It seems there is a supply/demand partial solution to Russia’s aggression. I suspect declining oil prices, now highly inelastic, would make Russia less bellicose. The Soviet economy cratered when oil declined from $75 bbl in 1980 to $22 bbl in 1986. By 1989 when the Soviets left Afghanistan, crude oil averaged about $19 bbl. They were bankrupt. According to the WSJ, 7% of our oil imports come from Russia. Why not increase domestic production so as to lower oil equilibrium prices.
Pierre: As an aside, would Americans , ex ante, be willing to pay as much as $10 per gallon at the pump to forestall Putin’s aggression? That price viewed as something of an insurance premium.
Pierre Lemieux
Mar 9 2022 at 9:40pm
David,
On your first point, I suspect that Biden does not understand basic economics (anymore than Trump did), so he feels he can say anything that meets his own interest (his electoral interest) and he even doesn’t even see the contradictions between his statement A and his statement non-A.
On your last point (if I understand it well), many Americans must understand that higher oil prices is the cost of resisting Putin’s aggression, and I suspect that many would agree with paying this cost. (Perhaps $10 a gallon of gasoline is the right figure, assuming that only a small part of the cost has already been priced in.) Many others, however, would want to play free rider if it were possible. But ex ante (as I gather you are saying) if all had been consulted on a general rule that included paying higher prices for something to resist some future, as yet unknown, unjust aggression, perhaps all rational individuals would have agreed à la Buchanan to pay the insurance cost if the adverse event should happen. The worst problem is that the majority of Americans (and even a higher proportion of citizens in other countries) may be like Biden and Trump, understand nothing about basic economics, and offer an opinion anyway. I mention this sort of problem in my review of Buchanan’s Why I, Too, Am Not a Conservative in the issue of Regulation that will be out later this month.
David Seltzer
Mar 10 2022 at 3:08pm
Pierre: Thanks for your trenchant and detailed comment. I hadn’t considered the free rider problem.
Jose Pablo
Mar 10 2022 at 10:33pm
What Russia has done in Ukraine can just not be tolerated.
Invading a sovereign country in a war of conquest. Killing civilians. This should be well in our past, not in our future. The horror of all this is even difficult to imagine: human beigns whose main worry was paying their bills or planning their summer vacation or passing their next test or discussing about philosophy a couple of weeks ago, should now be worried about not getting their family killed or bringing home food for their children or not dying of hypothermia at night.
And Russia has also made a nuclear war a “realistic possibility”. That’s terribly and unnecessarily disturbing.
These doings deserve a severe and unprecedented punishment from the rest of the world. Particularly from the “liberal west”.
And is not Putin who has invaded Ukraine. He is just a pathetic old man. 190,000 Russians have invaded Ukraine. Many more support the invasion from Russia.
Russia should be cut off economically, culturally and in any other realm from the rest of the world. Like totally and forever.
It is not time for subtleties. I don’t want to consume any product even remotely related with Russian soil or Russian individuals. Nothing. Zero. I don’t want to invest in any company that has any, even remote, relation with anything smelling of Russia.
This ignominious war should, at least, serve to make clear to any other tyrant down the road that committing this kind of actions will be punished with total economic destruction of his country. After all this is a more caritative form of destruction that the one they are imposing on Ukraine.
Pierre Lemieux
Mar 13 2022 at 10:34pm
Jose: Like many others, I share your moral indignation, but the end (removing the cause of our moral indignation and the suffering of others) does not justify all means. If instead of saying “Russia,” you said 145,000,000 Russians, it would become clear what the problem is. There are probably 22,500,000 Russians who have always been against Putin, not counting the other Russians who oppose that war and those who have been deprived of the information necessary to make their own opinions. The danger here is to become as collectivist and bad as Putin under the excuse of fighting him. As General Paul Selva said, “We take our values to war.”
Jose Pablo
Mar 14 2022 at 9:49pm
Well, some “ends” certainly justify some “means”. What cannot be justified, I think, is total inaction to avoid breaking any possible set of values. It is war, it’s not nice.
In this case the ends are:
ending the Russian aggression in Ukraine (which includes ending the killing of civilians and the starvation to death of entire populations)
making clear for the times to come that threatening the world with a nuclear war could end up with the economic devastation of the country posing such threat.
The means are:
Isolating Russia economically to the fullest possible extent. Not only expelling them from WTO. Blocking any and all economic activity with Russia … basically sending them back behind the “iron curtain” they were not so long ago.
These ends certainly justify these means.
And you are right, some “innocent” people will bear some consequences. Not only Russians. People all over the world will see some of their economic liberties curtailed.
But a course of action is good or bad only by comparison with the alternative. And the alternative here is waging a conventional war against a nuclear power with a demented tyrant at the helm.
Granted, we don’t know if the “means” will work. But if they do, we would have created a powerful “non killing weapon” that could be used in the future to prevent this kind of barbarisms and threats … definitely worth a try!! Even if this weapon, like all others, by the way, is going to be managed by governments.
And the “innocent victims” of this “economic weapon”, in any case, are less “innocent” and way less “victims” that the ones being killed in Ukraine.
What alternative course of action, that “takes our values” to war, do you propose?
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