Crispin Hull | Russian invasion of Ukraine and rising inflation fail to account for human behaviour

They have a common theme - the failure of intelligence agencies and economists to take account of some fairly constant human behaviour.

When Russia invaded, the United States offered President Volodymyr Zelenskyy and his family safe passage to the US.

US intelligence agencies had merely added up the number of weapons, soldiers and industrial capacity of the combatants and concluded that it would be a Russian walkover.

They failed to take into account the human factor. "We are not going to let these bastards wipe us, our culture, and our language off the map."

History tells us that bombing civilian targets increases morale and resistance. It does not reduce it. The human condition was the same in Kyiv in 2022 as it was in London in 1940.

History tells us that successful armies are ready, willing and able. Russian soldiers are none of these.

The military strategists also failed to predict that other fairly constant human factor: ingenuity in the face of adversity. Ukrainian civilians and soldiers alike have adapted, invented and applied new technologies and tactics in a way that is impossible for a monolithic, top-down structure like the Russian army.

History was not learned. The US invasion of Iraq and "Mission Accomplished" also marked the failure of US intelligence to see the importance of the human factor. People do not like foreign invasions, however initially welcomed they are for overturning a local dictator. And huge military machines are not enough to overcome that factor. Same in Afghanistan and Vietnam.

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And what of Putin? Like all autocrats, he won't delegate, won't listen, and has an unshakable belief in his own invincibility. Like all autocrats he consolidated power by manipulating a sense of grievance that their nation is being humiliated and threatened by external forces. Like all autocrats he retains power by instilling terror.

Putin's underlings nodded in terror their "agreement" to the invasion, just as Hitler's underlings nodded in terror their agreement to his megalomanic plan to invade the Soviet Union.

Putin emerged from Russian humiliation after the Soviet Union's loss in the Cold War, just as Hitler emerged from German humiliation after the loss of World War I and the imposition of the Treaty of Versailles.

And the lesson here?

Xi Jinping has emerged in China with all the characteristics of an autocrat. He is imposing erratic and dangerous policies that will weaken the Chinese economy and reduce Chinese living standards.

The US should not be fearful of "the rise of China" but of its decline. A declining, humiliated China ruled by an autocrat is dangerous indeed. The US should not gloat at the decline lest a humiliated China lashes out.

And now to inflation.

Remember all the economists predicting that COVID would cause 15 per cent unemployment so that interest rates would remain low almost forever?

They failed to understand the human factor of greed. People running corporations put profit first. If there are shortages, they take advantage by putting prices up.

Central banks hate inflation. Their mathematical equations say it must be fought by rising interest rates to prevent a wage-price spiral.

But how can there be a wage-price spiral if workers have no power to demand higher wages? The economists at central banks, unlike the psychologists whose research has discredited the economists' belief that humans act rationally in their own self-interest, now imagine that in response to higher interest rates people will slowly tighten their belts and gradually spend less. And that will lower demand so corporations will lower their prices and inflation will fall.

Fantasy. Humans don't foresee catastrophes and act accordingly. They ignore it until it is upon them and often too late. Witness climate change. As a Hemingway character said in reply to a question as to how he went bankrupt: "Gradually, then suddenly".

People's spending habits will stay much the same. They will run up debt. Bankruptcy and forced house sales will follow.

Meanwhile, the greed and profit motive of people running corporations will keep prices high.

These are not meant to be predictions of endless recession and war, but rather a plea for policymakers to take account of how humans tick.

So rather than predict what might happen in 2023, it might be better to set out a wish list of things to hope for.

First, that Ukrainian ingenuity and determination drive the Russian military out and drive Putin out of power into the International Criminal Court.

Second, that the interest-rate pause in January enables central banks to come to their senses and not drive us all into recession with further rises.

Third, that the US stops its total reliance on military power and stops its hypocritical hyperbole about the rules-based order while refusing to sign or ratify 46 international treaties, among them ones on the Law of the Sea and the International Criminal Court. The import of the former it wants China to apply with respect to the South China Sea and the import of the latter it wants applied against Putin.

The US is also stymieing the work of the World Trade Organisation by vetoing the appointment of trade-dispute appeal judges, thus undermining the very rules-based order it lauds. Most of the 46 treaties are on human rights, disarmament and trade.

Fourth, that Xi oversteps and is thrown out before he does any more damage at home or abroad.

Lastly, at home, that the Australian people endorse the Voice with or without Liberal or National support.

Best for 2023 to all.