Stagflation: Between Threat and Power and What to Understand


Until now, global conditions are still in the phase of economic recovery from the effects of covid 19. Even in the country of origin of the outbreak, the country is still struggling against the outbreak.  Not finished with the epidemic, in early 2022 the world was again shocked by the Russian invasion of Ukraine, although at first the reason for the invasion was not a complex problem, but until now, the war that has been going on for four months has become a new focus problem in the world that has caused many problems.  dangerous risks in terms of human security, whether real or not.  The pandemic and the Russia-Ukraine war are just two of the big problems facing global governments today, we don’t count the minor border wars, the Jewish Israeli invasion of Palestine, new epidemics that have the potential to threaten human life, climate and energy issues.  Why the epidemic and the Russo-Ukrainian war are counted as big problems and challenges today is because the outbreak and the Russo-Ukrainian War threaten the flow of distribution of logistics goods as well as energy.  If this is studied further, it could be because the countries that are the main players at this time are countries that have great power.  The involvement of the big powers will become a magnet for other countries, the impact will also be felt by many countries and also the state actors involved.  The biggest impact globally today is that epidemics and wars have threatened global economic stability.  At least, there are about 10 countries in the world that have experienced inflation and are threatened with recession in the second quarter of 2022.

Understanding Recession, Crisis, Inflation, and Depression

 Several major countries in the world are currently experiencing high inflation rates, and are even experiencing a period of recession.  Before discussing inflation and stagflation further, it is necessary to recall some terms in the threat of the economic environment.  There are at least four terms that economists use to describe economic threats, namely:


 A recession is a time when a country’s economic growth declines for two consecutive quarters.  Recession is usually marked by a decrease in people’s purchasing power and an increase in unemployment.  The difference between a recession and a crisis is that the impact of a recession is more evenly distributed across all sectors of the economy.  The things that cause a recession, for example, are economic shocks due to the pandemic, excessive debt, and inefficient investment.  In addition, uncontrolled deflation can also be the cause of a recession.  Deflation itself means that prices fall from time to time which causes wages to contract and continues to suppress prices.  This makes shopping activities stop.


 Crisis is a situation where several economic indicators drastically decrease in a country.  This is caused by fragile economic fundamentals, as can be seen from the stalled economic growth. Signs of an economic crisis are usually seen in the decline in government spending capacity, low purchasing power of the people, and rising prices of basic commodities.

 The difference between a recession and a crisis is its impact, namely a recession can be bigger and wider in a longer time span than a crisis.


 Inflation is a condition where the price of goods and services increases continuously within a certain period of time.  Inflation is caused by an increase in the circulation of money in society, increased production costs and an imbalance between supply and demand.  The impact of inflation can make people’s purchasing power decrease.  If purchasing power decreases within a certain period of time, it will automatically cause economic growth to decline which can lead to a recession.  The existence of inflation can also potentially be the cause of a crisis, even a recession.

 Economic depression

 Meanwhile, what is most feared to happen if the recession does not end is the economic depression.  An economic depression can also be referred to as an extreme recession that lasts up to two years in a row.  That is, if there is an economic depression, it means that economic problems cannot be resolved.  This brings with it a worsening impact, such as higher unemployment rates and has a global impact.

 The inflationary tsunami swept across countries in the United States, Europe and other countries.  At least 60% of countries have an annual inflation rate above 5%.  In developing countries, inflation can be above 7%.  According to data from Trading Economics in April 2022, there were at least 10 countries with the highest inflation with Venezuela in the first place with high inflation reaching 222%, followed by Zimbabwe, which was 96.40% and then Turkey which almost reached 70% in April.  then.  Uncertain economic growth causes recessions and crises.  Global consensus is now for world economic growth to average just 3.3% this year, down from the 4.1% expected last January, before the war broke out.  Global inflation is forecast at 6.2%, or 2.25% higher than last January’s forecast.  The IMF lowered its forecast for this year’s 143 countries that account for 86% of global gross domestic product (GDP).

The Threat of Global Stagflation 2022

 The fact that many countries in the world must take into account today is higher inflation and slower economic growth.  Now the world is faced with a new condition of global economic threat, namely “Stagflation” which is already in sight.  Stagflation is the rate at which inflation exceeds expectations, while forecasts for growth are rapidly declining.  In another description, stagflation is described as a characteristic in which the price of goods continues to be high while income does not increase.  Stagflation reflects a time when no matter how hard you try to make money, the money you collect is not sufficient to meet the exchange rate for goods, meanwhile there is no economic value business that can be done because of the scarcity of materials, which will further lead to an increase in the number of unemployed.  Stagflation is also defined as a condition of unemployment accompanied by inflation.  Stagflation presents a difficult choice for policy makers, which is the right way, tactics, and timing.  Until now, the price of basic needs in the market has continued to increase, while the exchange rate is still weak, while jobs are increasingly difficult, salaries and wages have not increased, while basic needs continue to skyrocket.

Will Inflation and the Threat of Stagflation Shift Current Power?

 Economic strength is one part of the soft power of a country, although it cannot be denied that it is currently very difficult to avoid a real war (military).  Both types of power (soft and hard) are very transparent and easy to feel, even information spreads around the world so fast.  The situation where the dominance of these two powers at the same time characterizes the current pattern of global state order.  We see that for years America has held the top position for world power, after the end of World War 2 there was a polar shift of power to America, where America led and also controlled the global culture, education, economy, and even weapons, so there was no  other choice but to follow America or not have any place in this world.  However, now things are starting to change.  A weak US dollar and a strengthening Russian ruble reflect the characteristics of power in the current soft form.  As it turned out, the sanctions imposed on Russia did not make the country worse off, Russia’s economic policies that increased gas and oil prices and required purchases using the ruble forced the sanctioning countries to rethink imposing sanctions on Russia, because Russia is the largest energy exporting country.  Coal and natural gas are essential for the survival of life, especially in the deadly winter.  A long-running war between Russia and Ukraine will be able to put the world at the worst economic risk that has never been imagined.  Not only countries that are at war, the impact of the current shift is also being felt by other countries, like it or not, state actors must be smart in taking partisan decisions with all the risks they bear, it is very difficult to be neutral for developing countries, if they are pro-  one of them will accept the risk, but if he is neutral he will be accused of being a traitor by both parties.  However, withdrawing completely is impossible, because countries that are not involved in war need energy supplies from the warring countries, be it energy or food, so there is no such thing as an eternal enemy or an eternal friend, there is only eternal interests.  .  What needs to be done is not to become too dependent on other people, at the state level, it is time to reduce dependence on goods and energy from outside, create new breakthroughs, minimize exports.  At the individual level, what needs to be done is to reduce consumptive behavior and get used to simple patterns and lifestyles and reduce dependence on the government and certain parties.

Uswah Alaydrus
Uswah Alaydrus
Uswah Alaydrus (孙美琳) from Indonesia. She received a Master of Law in International Relations from the School of International and Public Affairs, Jilin University, China. She is member of Tsunami Disaster Mitigation Researcher Center (TDMRC) and independent analyst emphasis on Environmental In International Relations Issues. She is also founder of Uswah Home Education Centre for Kids.


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