When we think of small businesses, we think of the local businesses we know and love. One thing we never take into consideration is the world economy, how it affects national and local economies, and how it can affect your small local business.
When looking at the conflict between Russia and the Ukraine, most people think that it will not or cannot affect their small business, but that is not the case at all. How does a conflict on the other side of the world affect business in the United States? Normally, Russia and the Ukraine wouldn’t matter on the surface. Taking a closer look into the dynamics on the world stage will become self-explanatory.
China is now one of the wealthiest countries in the world. China is Communist on a social level, but economically, they participate on the world stage utilizing capitalism like the majority of countries around the world. China is the real reason why the Russia/Ukraine conflict will affect the world economy. It could even be worse in the end for Europe and the United States for several reasons.
The reasons are, shifting economic importance on the world stage, shifting economic growth to Russia/China alliance regions, and economic downturn in the western world as a result. What does shifting economic importance mean on the world stage? It means that world commerce, driven by the world bank, shifts in importance away from the west to the east. Russia and China are allies. When Russia is involved in a conflict, China is also involved to an extent behind the scenes.
The United States and Europe support the Ukraine in the current ongoing conflict. Countries that support Russia include old U.S.S.R. countries along with Cuba and China. Pakistan and Iran also support Russia in the conflict. Looking closely at the situation, we can see clearly the lines of division, not only in politics, but also in economics. This type of conflict can create a lasting economic shift that will affect all businesses in the United States and Europe. The worst-case scenario could even lead to a world-wide conflict that would solidify the shift.
In 2021, The growth of the economy in the United States was 5.1%. Due to the shifting world-wide economies due to conflict, the United States is predicted to grow by only 3.7% in 2022. We can already see the economic downturn for the western world due to alliances and conflicts. How does this affect small local businesses?
Small local businesses depend solely on the amount of money available to spend by their customers. When customers have less to spend, small businesses are directly affected. The reason that customers have less money to spend has to do with the increase of inflation. This inflation is caused by the shifting economies on the world stage. The Ukraine/Russia conflict could be considered symbolic of the world division and the shift from the west to the east. This shift stifles economic growth in the west, as seen by the growth prediction for the United States for 2022.
As the conflict continues, economic growth predictions for western countries like the United States and Europe will continue to fall. Powerhouse China will only take advantage of this shift by becoming the world’s strongest economy. This shift towards China will only strengthen countries like Russia due to their strong alliance. The strength of the east could cause more than just an economic downturn for the United States. The eradication of the Petro dollar becomes more of a possibility than ever before.
The Petro dollar is used in all trade world-wide. It is what gives the United States dollar worth and power. Without the Petro dollar, the United States economy and the economy of western countries will suffer greatly, more than anyone could imagine. The type of conflict happening today could push China to demand more trade in the Yen than in Petro dollars. This has been happening since the 1990’s but never got a real footing. Unfortunately for the United States, this demand for alternate exchange currencies over the Petro dollar will have credence. The world bank can only work with the shift, and the Petro dollar will lose its power.
Small businesses will be affected if a loss in the power of the Petro dollar occurs. This shift may be inevitable. The west should begin planning ahead for this scenario to lessen the blow on western economies. Small business can only do so much locally as they do not have the power to change the economy. In the end, small businesses will be the first to fold. Every small business should pay attention to the local economy, the national economy, and above all the world economy. Plan for customers spending less. This will help your small business survive the big shift on the horizon.