"We will provoke the collapse of the Russian economy", says France
"We will provoke the collapse of the Russian economy," French Finance Minister Bruno Le Maire told a local news channel on Tuesday.
Economists get highly nervous when French politicians talk of provoking a collapse of an adversary's economy. We get reminded of the Treaty of Versailles & Paris Peace Conference in the aftermath of World War 1, when French politicians agreed with its Allies to punish Germany by imposing massive financial penalties.
Sure, the Treaty of Versailles was signed at the conclusion of WW 1, whereas the sanctions on Russia are aimed at trying to change its behavior at the start of this war .. but all the same. Looking back, Versailles became regarded as a catastrophe. John Maynard Keynes, who many regard as the founder of macroeconomics, disagreed with the Treaty and explained why in his book, "The Consequences of the Peace". Whilst Germany formally surrendered to the Allies in a railway carriage in the Compiegne Forest in 1918, it wasn't long afterward that the French surrendered to the Germans in that very same railway carriage in 1940.
Our hearts bleed for the Ukrainians. It's the home of some of my ancestors. But many economists around the World must be trembling about the rhetoric of provoking the "collapse" of Russia's economy. As for NZ, our politicians are also talking the sanctions talk, without, it seems, much reflecting on that similar meeting of minds of Allies which instigated Germany's economic collapse post-1919, a misjudgment that still haunts the world.
As Bob Dillon once put it, "When you ain't got nothing, you got nothing to lose".