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The cost of living and the cost of principles

  • 15 August 2022
McDonald's is the secret to world peace — or so the economist and New York Times columnist Thomas Friedman famously wrote back in 1999. Friedman’s theory of peace was based on the observation — correct at the time — that no two nations with McDonald's have ever been at war with one another (that is, not since each got their first McDonald's). He was largely correct. It seemed that buying and selling things was humankind's surest path to peace.

At least we all thought it was, until 8:59am on 24 February, 2022, when Russian forces began a full scale invasion of Ukraine. What has followed — apart from the war itself — has been the most globally significant and wide-ranging set of political and economic sanctions ever  carried out against a nation.  

The founding textbook of economics, Adam Smith’s 18th-century work The Wealth of Nations, heralded the march of free markets as modern society’s most powerful invisible force. Money became the metric of success. As Madonna told us in the 80s, somewhat more pithily, we are living in a material world. But Russia's invasion of Ukraine and the Western response to it has revealed something else: there is more to human motivation than we sometimes give ourselves credit for.

Despite a post-pandemic bull-run, both the national and international economy are now stalling. Interest rates are going up. Markets are going down. Inflation seems unstoppable. While many factors are to blame for the rising cost of living, a catalysing force continues to be our response to the war in Ukraine.

'Our cost of living is (at least partly) an outworking of the cost of our principles.'

Sanctions have sought (effectively) to punish Russia, but they have also hit global trade-flows, supply chains, business confidence, and the prices on a shopping-list of consumer staples including petrol, wheat, metals, energy, and of course that new luxury item, the iceberg lettuce. As people and as ‘a people’, Australia’s stand (along with other nations) against Russia’s invasion has not been free of charge. Our cost of living is (at least partly) an outworking of the cost of our principles.

When Adam Smith wrote The Wealth of Nations, he also wrote a largely forgotten essay called ‘The Theory of Moral Sentiments’. In it he makes the point that free markets — though  beneficial — require moral frameworks to ensure human flourishing.

A couple of centuries of capitalism and multiple industrial revolutions later, it’s still true