This week marks the 50th anniversary of a short-lived war that few but those living in the Middle East still recall. The Yom Kippur War, initiated on the Jewish Yom Kippur holiday, redefined global economics and politics. 

I agree with Natalie that history too often revolves around wars and conquest. Certainly the invasion of Ukraine is redefining the history of Europe today and may well continue to do so for decades, depending on its resolution (or not). Natalie was a student of the history of science, and I have written a number of books on the history of finance and economics. Science and the market economy may well have had more profound effects on modern society than any war. But, alas, the Yom Kippur War, as brief as it was, had a powerful influence on the balance of economic power worldwide. 

We are all familiar with the tensions that began even before Israel was granted a homeland following World War II. These tensions still exist today, and have been aggravated even this week. From a short historical perspective, persecuted Jews required a homeland to keep them safe following the travesties of World War II, but Palestinians lost their homeland in return. We all hope a solution can be found that permits healthy coexistence. We've been waiting for that one for almost eighty years. 

The "balance" in the Middle East is a contrived one. It is not a natural equilibrium that occurs as each side simultaneously pursues their rights to life, liberty, and happiness, and recognizes those rights for others. Instead, it is maintained from the pointy end of the modern day equivalents of spears. It is an unsustainable and vexing contrived equilibrium maintained through the loss of lives. 

The Yom Kippur War of 1973 was a concerted response by Israel's neighbors to recapture areas seized by Israel in the Six Day War half a dozen years earlier. The 1973 battle put Israel on its heels as its neighbors caught it by surprise. The United States supported Israel, and the USSR supported Syria, Egypt, and Saudi Arabia. The Cold War heated up in this period half a century ago. 

Following the war, a cartel of mostly non-aligned oil producing states, called the Organization of Petroleum Exporting Countries (OPEC) and led by Saudi Arabia, the oil superpower at the time, made a decision to retaliate against the U.S. by embargoing its oil destined to the U.S. 

While the U.S. is pumping more petroleum now than any other country, it was not then. OPEC had been relatively ineffective in increasing oil prices substantially until it discovered its collective clout following the embargo. Oil prices rose dramatically, and these costs were passed on by energy users in the United States until every sector of the economy felt the pinch. 

Soon, these cost increases were passed on as higher prices. U.S. energy costs rose by about $400 billion to over $1 trillion (in 2020 dollars) in just a few years. Much of these dollars were the result of higher oil prices that quickly increased the fortunes of OPEC countries, mostly at the expense of the U.S. 

Before the OPEC embargo, the U.S. enjoyed abundant cheap imported energy. Following the embargo, the U.S. was forced to divert a significant part of its Gross Domestic Product to energy purchases. This meant that Americans necessarily became poorer and Middle Eastern sheiks significantly wealthier. Such a runup in prices at a time when the U.S. was not at war was unprecedented. Without the discipline of a war effort, and with a far higher proportion of the nation organized in unions then, households demanded a commensurate increase in wages to compensate for their higher prices. 

We have in the past differentiated the wage-push inflation then, and precisely what the Federal Reserve fears now, with the current demand-pull inflation resulting from excessive government fiscal injections today. What is of note, though, is how the OPEC decision in 1974 changed the economic landscape.

This supply-side cost-push inflation induced a wage-push inflation by the end of the decade, and a major recession. The U.S. dollar weakened significantly, and Detroit cars designed for thirty cent per gallon gas were obsolete as cars with the names Honda, Datsun, and Toyota dominated the market for the next couple of decades. Detroit is a mere shadow of its former self, and the U.S. economy is still trying to transition from a fossil fuel- and manufacturing-based economy to a more sustainable and productive one. 

The real loss for the U.S. was its status as the sole economic superpower. When I was a child, "Made in Japan" was a symbol of lower quality. Now nations aspire to Japanese quality. The stock market crash of 1987 was caused in part by Japan's refusal to continue to fuel U.S. federal deficits that emerged in the 1970s. The perennial deficits since then now make the U.S. vulnerable to China. In another 40 years, India will even overtake Japan to be one of three nations competing for economic superpower status on par with the U.S. and the European Union. 

We now live in a world that is no longer characterized by U.S. economic dominance. Now, the U.S. is but one of five nations that each compete economically, and are coordinated by alliances that did not even exist fifty years ago, or by no alliances at all. Some of these nations have the express goal of knocking the U.S. off its perch as the world's largest economy. By the measure of purchasing power parity, China has already attained economic supremacy. 

Until the 1970s, the soft economic power wielded by the U.S. was sufficient to afford it an outsized power in the United Nations and an expectation it would be the kingmaker in settling disputes worldwide, such as in the Middle East. That power has now been dissipated. The U.S. in some conflicts is now an equal power, along with the E.U., for instance. In other areas of conflict or shifting alliances, the U.S. is on its back foot or is less visible. Following the Yom Kippur War, the world is more a collection of nations of equals, which leaves little soft power to prevent disputes. 

In this less hierarchical and perhaps more chaotic world order, no nation is capable of ordering a stop to the belligerence of other nations. As a result, we see disputes in Ukraine, in Azerbaijan, Sudan, Syria, and between China and India, and China and Taiwan. At least the First World harbored the hope fifty years ago that economic power could replace military power. The fall of the Berlin Wall even extended this notion to the Second World as the USSR was no longer a military or economic superpower. 

The consequences of failed economic power include a new emphasis on military power, a fear of loss of sovereignty or an aspiration to create sovereignty at the expense of weaker nations, and a rise of dictatorships and populism that convinces people that only might makes right. 

The traditional soft economic power, and the promise of the United Nations, now appear feckless. And, the capacities of even the biggest economies are now insufficient to "encourage" others to get along through trade restrictions and sanctions. With economic power on the descendancy and with nations increasingly aspiring to build the empires of bygone times, it may well be hard to contain the enchantment of the use of military power, repression, and genocide. 

Nations now increasingly revert to hunger games, with little sympathy to those displaced by military or economic aggression. When peoples feel threatened, compassion is often the first casualty. As our lack of sustainability increasingly threatens our economic security, these hunger games may worsen. We will need a huge reversal of economic and military tides for us all to recognize we will succeed collectively or fail in conflict and isolation.

Another image from 1973 was the Blue Marble photo from Apollo 17 that put us all in perspective. The heightened awareness of Earth’s fragility and our lack of sustainability began then but is even more existential today. These are issues I document in my new book, Understanding Sustainability Principles and ESG Policies. I recall a world so much simpler when I was a child. Mind you, even then we should have expected that twenty-five cent per gallon gasoline was unsustainable. We have learned much but have not adjusted well since then.

It's also been 50 years since Elton John released Yellow Brick Road. His words then remain a metaphor for today:

So goodbye yellow brick road
Where the dogs of society howl
You can't plant me in your penthouse
I'm going back to my plough