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Economics lessons from the Ukraine war: expectations matter

Kyiv’s counter-offensive, inflation and the Wizard of Oz

There are few things more heartening than the comeuppance of a brute, especially when that comeuppance liberates thousands of people from the brute’s ability to terrorise them. But Ukraine’s exhilarating advance on the battlefield in the past week or so carries lessons beyond the satisfaction of good’s victory over evil.

I remember well conversations in the first days after President Vladimir Putin’s attack about whether to arm Ukraine’s government. A common view was that because the country was bound to be overrun by Russia’s army in a matter of days, sending arms would only make things worse by encouraging a permanent but permanently doomed guerrilla effort: “a new Afghanistan on our doorsteps” as some put it. In these conversations I insisted that even those who expected Ukraine to lose at least owed them a chance at defending their country. Fortunately, the Ukrainians’ bravery and fighting prowess stopped the assault on Kyiv fast and spectacularly enough to rally more western support. That support made this month’s counter-offensive possible.

Expectations about what will happen play a deep role in what actually does happen. Ukraine’s stout defence in the battle for Kyiv, by confounding expectations of a quick defeat, made the political winds shift in the west. This month’s counter-offensive, by confounding western expectations of a dragged-out positional war, has shifted them again. Already, as my colleague Henry Foy reports, the view is taking hold that better and faster weapons delivery could hasten rather than delay an end to the war, and a better end at that. Western countries are now said to be discussing providing Kyiv with fighter aircraft, a move that was previously rejected as too likely to provoke Putin.

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