There is No Free Lunch in Kiev

We have all heard, “There is no such thing as a free lunch”. As economists, we believe every exchange requires the reallocation of resources, even in the case of theft. But how much does war cost?

The Russian invasion of Ukraine has been raging for almost a month. No one will deny the reality of the destruction, with images from Ukraine blasted across the world. While the world watches, the Ukrainians are mounting a heroic effort. But such losses are not isolated to the battlefront alone in a global economy. The refugee crisis is flooding neighboring countries, putting pressure on their social networks and the associated budgets to service these refugees. There are costs associated with military ordinances, hiring soldiers, moving men and materials into the battlefield, separate from the costs of moving people from the war-torn areas. War is not cheap.

But these are but the short-term costs. Replacing damaged buildings, transportation, and public goods, would take years, and in some places, historical buildings, icons, recorded history, and works of art may be lost forever. (And based on the reports from Syria and Georgia, the Russians are ineffective nation builders.) There will be other costs, especially regarding the people who fled, who suffered from the death of loved ones, or simply the destruction of their way of life. (And living in Louisiana, where people take years to recover from a hurricane, I can only imagine how long it takes to recover from a war.)
Some of the other costs will be the payment for ramped-up military spending. We will see a continued militarized Europe over the next twenty years. The world will also struggle with energy independence, which may push for more internally generated fuels from alternative sources. But in all cases, these investments will take away from other public goods.
While military and humanitarian aid flows to Ukraine, the western response has been to impose sanctions. Despite reported shortages in Russia, I will bear some costs associated with “defending Ukraine”, as I pay more for other goods. But I am lucky when compared to those in developing countries as the threat of food scarcity remains an issue.
But despite the degree of challenge, we can instantaneously follow the war through podcasts, Twitter, and other social platforms. In many ways, the material streaming from Ukraine and concerns over Russian-supported “Big Lie” propaganda made this conflict, at least here in my immediate circle, more engaging. If the Vietnam War was called the “living-room war”, the Ukrainian invasion may become the “app war”.
The Russian Invasion of Ukraine highlights not only the role of interconnected economic networks but also socially connected networks. There are costs spread out across all of these networks, even as the discussion on limiting information, “fake news”, etc., remains a reality.

So, while Russian bear attempts to “consume” Ukraine, we will all pay a portion of President Putin’s enormous lunch tab, both today and into the future.