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A report published last weekend by the obscure financial analyst group, Citrini Research, on the future impact of AI apparently caused a stock market sell-off in software companies. Citrini was little known until its “Global Intelligence Crisis” report suddenly amassed over 22 million views on X alone. The basic message was that, within a very few years ahead, AI ‘agents’ will quickly replace human labour in all sectors of the economy. This would lead to a massive rise in unemployment, followed by a collapse in consumption and a financial crisis in so-called ‘private credit’ and mortgages, thus triggering a recession.
The Citrini authors say that they were not making ‘predictions’ but just setting out a ‘scenario’ that could happen as early June 2028: forecasting a stock market price crash of 38%; an unemployment rate above 10% and a credit and mortgage market meltdown. And all because AI was so successful that AI agents usurped human labour, especially in software and other hi-tech development currently done by skilled tech workers.
How did Citrini justify this doom scenario for the economy, the stock market and millions of mainly skilled workers that so convinced US investors (at least for a day or so)? The main argument was that AI agents developed by the tech giants would be so productive and so effective that companies would make huge profits by replacing costly human labour. But then, said Citrini, millions would have no wages, so they could no longer spend as before, and a consumpton-led slump would be inevitable.
The 2028 scenario was described. “The owners of compute saw their wealth explode as labor costs vanished. Meanwhile, real wage growth collapsed. Despite the administration’s repeated boasts of record productivity, white-collar workers lost jobs to machines and were forced into lower-paying roles.”… The velocity of money flatlined. The human-centric consumer economy, 70% of GDP at the time, withered.” There would be no escape from this doom because there were no countervailing factors to stop it – “no natural brake”. Loss of incomes would lead to mortgage defaults, not by workers with low incomes, but this time by those hi-tech workers who were paid high wages until AI agents took over.
The Citrini scenario dismissed the conventional view of crises as ‘creative destruction’, namely that “technological innovation destroys jobs and then creates even more”. Not this time. Yes, “AI has created new jobs. Prompt engineers. AI safety researchers. Infrastructure technicians. Humans are still in the loop, coordinating at the highest level or directing for taste. For every new role AI created, though, it rendered dozens obsolete. The new roles paid a fraction of what the old ones did.” So the ensuing slump would not correct the crisis because it was not a traditional cyclical recession but a permanently structural one.
That’s because “AI got better and cheaper. Companies laid off workers, then used the savings to buy more AI capability, which let them lay off more workers. Displaced workers spent less. Companies that sell things to consumers sold fewer of them, weakened, and invested more in AI to protect margins. AI got better and cheaper. A feedback loop with no natural brake.” Human intelligence will no longer be needed, because “machine intelligence is now a competent and rapidly improving substitute for human intelligence across a growing range of tasks”.
What are we to make of this doom scenario? Apparently, many investors in the US tech market swallowed it – at least for a day. But they came to their senses when they were reassured by mainstream economists and others that Citrini was laying out a scenario in just two years that was never going to happen. As shown in previous posts,technological innovations take some time to pervade an economy and make a step change in productivity and its impact on the labour force.
The OECD reckons it could take up to 20 years before AI becomes a ‘general purpose technology’ and that assumes that AI models and agents have become experienced and at least as error-free as humans. And a new report argues that it took 100 years to move from Michael Faraday’s and Joseph Henry’s generation of the electric current in the 1830s to electricity boosting productivity growth and transforming the economy. ChatGPT only appeared on the scene five years ago.
Yes, an AI agent-driven economy is emerging.Consumer AI agents are already beginning to book travel and complete small purchases autonomously for shoppers. Soon they’ll handle more of the end-to-end buying journey in complex purchases: negotiating prices and terms, coordinating delivery and returns and transacting with other agents at machine speed. The global AI agents market, valued at $5.4 billion in 2024, is projected to reach $236 billion by 2034.
For businesses, this means a growing share of businesses won’t have humans at all. They’ll be agents acting on behalf of individuals, interacting with other agents representing sellers, logistics providers and payment processors. A majority of the commercial supply chain could eventually be agent-to-agent.
Or so the story goes – it may not be that simple. There is still a lot wrong with the ability of these agents to talk to each other and provide a reliable service that matches skilled and experienced human labour. Moreover, AI agents are digital, they do not make physical goods, which we still need. To do that, agents will have to combine with robots and that can only be at exorbitant cost of investment. And this is the real scenario for a future recession. Many mainstream commentators on the Citrini paper reckoned that it was ‘pure Marx’ because it posed a consumer collapse without recovery ie. the end of capitalism. But a consumer-led slump and collapse is not Marx’s theory of crises – although most mainstream (and many leftist) economists think it is.
Marx rejected the ‘underconsumption’ theory of crises on many occasions. Marx’s theory was based not on underconsumption, but on overinvestment or accumulation. Capitalist resort to technologies and machines to cut production costs and raise profitablity by shedding labour. But in Marxist theory, only human labour can create value in production, so a contradiction emerges between trying to increase the productivity of labour by doing away with much of it and trying sustain higher profitability. Falling profitability over time leads to falling profits and then an investment ‘strike’ by capitalists. That is the ‘natural brake’ that Citrini claims does not exist with AI. Capitalists stop investing, then lay off workers and it is then that workers cannot sustain consumption. Mainstream critics of Citrini are right in saying that if AI increases productivity so much, it will lead to falling prices so that consumer purchasing power will remain. But they ignore the real doom scenario: rising productivity means less growth in value and eventually falling profitability.
Historically, there is another side to the impact of technology. Technological change has been the main driver of employment growth throughout history. Around 60 per cent of workers in the US today are employed in occupations that did not exist in 1940. In the 1840s, Friedrich Engels argued that mechanisation shed jobs, but it also created new jobs in new sectors. The historian Robert Allen characterised that period as ‘Engels pause’ when the industrial revolution took output forward in leaps and bounds, but wages and employment did not. Real wages only began to rise during the long boom of the 1850s.
In the 1850s, Marx clarified these two sides of ‘creative destruction’: “As soon as machinery has set free a part of the workers employed in a given branch of industry, the reserve men are also diverted into new channels of employment and become absorbed in other branches; meanwhile the original victims, during the period of transition, for the most part starve and perish.” (Grundrisse). So eventually, new technologies may take an economy forward, but only after a time and at the expense of labour (and not forever).
Mainstream economists suggest that labour could be protected by a tax on AI agents and capital and/or government handouts to the unemployed – these are the usual remedies offered for the Citrini calamity. But that would not be effective if profitability is eventually squeezed. Instead, what is required is the collective ownership of AI technology and its private owners so that any gains in productivity would be used for social needs (reduced hours and increased public goods and services).
There were three reasons why stock market investors panicked on reading the Citrini scenario, despite the holes in its arguments. Investors were already worried about a possible AI bubble bursting if the huge investment in AI models did not deliver sufficient returns. Investors could also see that existing software development companies with human labour are under threat from AI agents; and they also worried that any bursting bubble could spread to the unregulated private credit lenders and cause a systemic crisis. But investors have been reassured by the counter-arguments to the Citrini doom scenario and, for the moment, it is back to business as usual.
“We’ve…taken down one of the most sinister cartel kingpins of all,” Donald Trump said in his celebration of the national security state last night.
“In January,” he went on to say, “elite American warriors carried out one of the most complex, spectacular feats of military competence and power in world history.”
There’s little question that the national security state can produce “spectacular feats.” And Trump loves it. No other part of the government can do anything close. Trump has been seduced, pure and simple, by the one thing that works (as he sees it).
“Foreign leaders,” Trump crowed last night, “called me and they said, ‘Very impressive, very impressive,’” in responding to the kidnapping of Nicolas Maduro in Venezuela.
From the killing of Bin Laden in 2011 to the present, the US (and Israel) have conducted more and more regular decapitation strikes, a method of warfare that is nothing like the many failed attempts to take down Saddam Hussein. Aided by ubiquitous surveillance, tippy-Top Secret techniques, and artificial intelligence, individuals can now be found and tracked in real time.
Contrary to Hollywood depictions, it’s not just one guy at an all-seeing computer telling the door kickers where to go. In actuality, there are thousands of supporting actors and unsung participants—spies, cyber warriors, planners, targeters, analysts, pilots, drone operators, watch officers, and on and on—who back up the Delta Force or SEAL Team 6 commandos on the ground.
Just like Amazon same-day shipping, decapitation strikes can now produce instant results thanks to a sprawling infrastructure and logistical system that has been painstakingly constructed over the past two decades. From the perspective of the customer (whether that’s Trump or Obama), the promise of success and perfection has become so alluring, the option is just too convenient to pass up. It seems almost frictionless, with little thought going into anything beyond the takedown. Just push a button and you get results.
The capability to do this is not static. Strikes like those on Maduro and El Mencho are more and more feasible today because of the wealth of data that was never available before, as quickly, or as precisely targeted: data produced by phones and computers, the digital exhaust of social media, the emanations of cars and the vast Internet of Things gadgets, such as Ring cameras. That data is processed in ways that are faster and faster and with greater and greater precision. The objective is real-time geolocation.
What Trump celebrated in the State of the Union—and what no one has really named—is this practice that I call lethal doxxing: the acquisition of someone’s most sensitive personal information revealing their up-to-the-moment location, followed by the lethal part. It’s doxxing at nation-state scale, with a kill chain attached.
Lethal doxxing (n.): The practice of using cutting-edge state surveillance techniques to discern a target’s real-time location to capture or kill them. See: El Mencho, Nicolas Maduro, Qasem Soleimani
And as with Internet doxxing, the information age has made this easier than at any point in human history. Maybe that’s why ICE is so paranoid about it, treating doxxing as a life-or-death threat to their officers.
The killing of Mexican cartel leader “El Mencho” is just the latest indication of a quiet shift toward lethal doxxing as a routine instrument of diplomacy, statecraft, warfare, or even just revenge. That shift, scarcely discussed at all in the mainstream, has taken place for reasons that make it likely to outlive the Trump administration.
Put simply, “hard targets” have become relatively easy ones. The body count is growing rapidly, adding to experience and confidence on the part of the secret special operators of the US and Israeli militaries. Here are just some of the big ones:
Osama bin Laden, May 2011.
Anwar al-Awlaki, September 2011.
Joaquín “El Chapo” Guzmán, January 2016.
Abu Bakr al-Baghdadi, October 2019.
Qasem Soleimani, January 2020.
Ayman al-Zawahiri, July 2022.
Ismail Haniyeh, July 2024
Hassan Nasrallah, September 2024.
Yahya Sinwar, October 2024.
Ahmed al-Rahawi (Houthi Prime Minister), August 2025.
Nicolas Maduro, January 2026.
Welcome to the golden age of lethal doxxing.
US adversaries, presumably benefiting from the same advancements, seem interested in the same practice. Following the Maduro operation, there have been reports that the Chinese military has been probing leadership elements in Taiwan for its own targeting purposes.
Lethal doxxing is attractive in part because it generates a lot of headlines and heroic reporting with the appearance that something important has happened.
And yet Joseph Humire, now Trump’s own Acting Assistant Secretary of Defense, discussed the limitations of decapitation strikes in testimony before Congress last year:
“Prominent academics, such as Dr. Guadalupe Correa-Cabrera from George Mason University, have argued that major Mexican cartels have abandoned the kingpin model a long time ago in favor of a CAS structure that functions as a transnational enterprise. She argues this is a result of Mexican President Felipe Calderon’s ‘decapitation’ strategy against the cartels, which resulted in the fragmentation of their structures and the expansion into several countries throughout the Western Hemisphere, including the United States.”
In the case of al Qaeda, this was always the fear, that the War on Terror was a game of ‘whack-a-mole’ (though to be fair, its most famous leader was never replaced by anyone near as effective). And yet, though corporate al Qaeda in Afghanistan was defeated, it still survives and it spawned the half dozen organizations, including ISIS, that are still very much alive.
I could link to any number of scholarly studies arguing for and against decapitation strikes, but what’s the point? In any of the string of examples we have, ask yourself: what, beyond the theater, has been achieved for the long-term?
From the Western Hemisphere to Iran, we are to believe that all of those Purple Hearts and Medals of Honor represent more than the honor and bravery of the individuals in uniform. And yet, after all is done, nothing changes. The drug war, and the military efforts to bring stability to Mexico and Central America, are literally endless. We’ve been warring with Iran my entire life. The terrorist “threat” never goes away. Russia is on the move. And on and on.
Now we face the “possibility” of a decapitation strike in Iran, some version of modern-day regime change played out in a bin Laden-like killing or a Maduro-like capture. The media coverage (especially from Israel) certainly implies some kind of major showdown is coming, as I wrote about yesterday.
This and other operations like it happen not because they influence American public opinion, especially in the confidence they place in the military over virtually all other institutions.
Data from Gallup’s 2025 “Confidence in Institutions” poll
And then there’s the Purple Hearts and Medals of Honor that Presidents love. Remember how Obama was treated like he practically flew the helicopters and landed on the ground in the death of Osama bin Laden, for his “bravery” in making the decision to approve the operation? Remember the photo of him and Hillary sitting with all of the generals watching television?
Now look at Trump. His approval rating saw an unusual jump in response to the Maduro operation. “Americans like what they deem to be successful foreign policy operations,” CNN’s data guru Harry Enten said of the bump.
It doesn’t have to be this way. Like Amazon, the same-day shipping that is lethal doxxing is built on the billions (now a trillion) taken from our pockets, billions that are not being used to build an equally impressive infrastructure in hospitals or schools or public transportation.
I know that that sounds like some bleeding heart making the old guns versus butter argument, but really, how do we ever hope to have something else be great unless we begin to question the crisp efficiency of our lethal doxxing machine?
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Epstein had no degree, no credentials, no public business wins, yet he controlled a billionaire's fortune, owned a private island, and had access to presidents. His resume doesn't explain his wealth.
So what does?
The answer is in the people who built him.
Epstein didn't climb his way to power. He was handed it—by a sequence of people who gave him access, training, and protection at every stage.
Want the all the names and the receipts? (LINK IN THE COMMENTS)
Here's the timeline the media won't walk you through.
𝟏𝟗𝟕𝟒: 𝐓𝐞𝐚𝐜𝐡𝐢𝐧𝐠 𝐖𝐢𝐭𝐡𝐨𝐮𝐭 𝐚 𝐃𝐞𝐠𝐫𝐞𝐞
Epstein lands a job teaching math and physics at the Dalton School, one of New York's most elite private schools. There's just one problem: he doesn't have a college degree.
Elite schools don't do this. Ever.
But Donald Barr does. Barr was a former OSS officer during World War II (the precursor to the CIA) and father of future Attorney General William Barr. He's also the author of a science fiction novel about oligarchs running a society built on sexual slavery.
Epstein now has direct access to the children of Manhattan's wealthiest families.
𝟏𝟗𝟕𝟔: 𝐖𝐚𝐥𝐥 𝐒𝐭𝐫𝐞𝐞𝐭 𝐖𝐢𝐭𝐡 𝐍𝐨 𝐄𝐱𝐩𝐞𝐫𝐢𝐞𝐧𝐜𝐞
Two years later, Epstein gets hired at Bear Stearns, one of Wall Street's most prestigious firms. He's introduced through a parent at Dalton, but it's CEO Alan "Ace" Greenberg who personally brings him on.
No finance background. No degree. No traditional path.
Within four years, Epstein becomes a limited partner, a position that normally takes decades of proven results to reach.
He's learning how the ultra-wealthy hide money. Tax shelters. Offshore accounts. Asset protection strategies most people will never hear about.
𝟏𝟗𝟖𝟏: 𝐅𝐨𝐫𝐜𝐞𝐝 𝐎𝐮𝐭 𝐁𝐮𝐭 𝐍𝐞𝐯𝐞𝐫 𝐂𝐡𝐚𝐫𝐠𝐞𝐝
In 1981, there's an SEC investigation into insider trading connected to the Seagram Company and the Bronfman family. Bear Stearns forces Epstein out over what they call "minor infractions."
But here's what's strange: despite the investigation, Epstein faces no charges. No legal consequences. No public scandal.
He just walks away.
Now he understands how the ultra-wealthy move money invisibly, and he knows he can get away with it.
𝐓𝐡𝐞 𝐁𝐨𝐮𝐧𝐭𝐲 𝐇𝐮𝐧𝐭𝐞𝐫 𝐘𝐞𝐚𝐫𝐬
After Wall Street, Epstein reinvents himself. He tells people he recovers stolen assets for governments and oligarchs. He carries a concealed weapon. He travels on a British passport.
During this time, he's mentored by Sir Douglas Leese, a British defense contractor and arms dealer. Leese teaches him the mechanics of international arms deals and black market finance.
Epstein now knows how to operate outside traditional banking systems entirely.
Leese introduces Epstein to Steven Hoffenberg, who hires him as a consultant for Towers Financial. Together, they pull off one of the largest Ponzi schemes in U.S. history, over $450 million stolen from investors.
Hoffenberg goes to prison for 20 years.
Epstein? Not even questioned.
Hoffenberg later testifies that Epstein was the architect of the entire fraud. Federal prosecutors never follow up.
Epstein now has proof he's protected.
𝟏𝟗𝟖𝟕: 𝐓𝐡𝐞 𝐁𝐢𝐥𝐥𝐢𝐨𝐧𝐚𝐢𝐫𝐞 𝐖𝐡𝐨 𝐆𝐚𝐯𝐞 𝐇𝐢𝐦 𝐄𝐯𝐞𝐫𝐲𝐭𝐡𝐢𝐧𝐠
That same year, Epstein meets Leslie Wexner, founder of The Limited and Victoria's Secret. Through an insurance executive, they're introduced.
What happens next doesn't make sense by any normal standard.
Wexner is worth billions. He has access to the top financial advisors in the world. Yet he gives Epstein, who has no verifiable credentials and no formal education, total control of his fortune through a sweeping power of attorney.
Then Wexner transfers his $56 million Manhattan townhouse to Epstein. For $0.
That house becomes the center of operations. Epstein wires it with hidden cameras. He uses Victoria's Secret as a recruiting pipeline, promising young women modeling contracts.
Epstein now has the infrastructure and the bait.
𝐋𝐚𝐭𝐞 𝟏𝟗𝟖𝟎𝐬: 𝐓𝐡𝐞 𝐌𝐚𝐱𝐰𝐞𝐥𝐥 𝐂𝐨𝐧𝐧𝐞𝐜𝐭𝐢𝐨𝐧
Epstein gets introduced to Robert Maxwell, British media mogul and arms dealer. Former Israeli intelligence officer Ari Ben-Menashe later claims Maxwell brought Epstein into a network of operatives during this period.
In 1991, Maxwell dies under suspicious circumstances. He falls off his yacht. His body is found floating in the Atlantic.
His daughter, Ghislaine Maxwell, steps in to take his place.
𝟏𝟗𝟗𝟏: 𝐆𝐡𝐢𝐬𝐥𝐚𝐢𝐧𝐞 𝐁𝐫𝐢𝐧𝐠𝐬 𝐭𝐡𝐞 𝐍𝐞𝐭𝐰𝐨𝐫𝐤
Ghislaine becomes Epstein's partner. She has her father's contact list—royalty, politicians, scientists, billionaires. She knows how to move in those circles without raising suspicion.
But she does more than provide social cover.
She professionalizes the entire recruitment operation. She scouts at art schools, auction houses, high-society events. She trains victims to normalize what's happening to them. She makes the whole system run smoother.
Epstein now has legitimacy and operational control.
𝐓𝐡𝐞 𝟏𝟗𝟗𝟎𝐬: 𝐁𝐮𝐢𝐥𝐝𝐢𝐧𝐠 𝐭𝐡𝐞 𝐁𝐥𝐚𝐜𝐤𝐦𝐚𝐢𝐥 𝐅𝐢𝐥𝐞𝐬
Through the 90s, Epstein wires his properties with surveillance equipment. Hidden cameras. Audio recording devices. His Manhattan townhouse. His Palm Beach estate. His New Mexico ranch.
The goal wasn't just abuse. It was leverage.
He starts hosting powerful people. He records them. He builds files.
𝟏𝟗𝟗𝟑-𝟏𝟗𝟗𝟓: 𝐖𝐡𝐢𝐭𝐞 𝐇𝐨𝐮𝐬𝐞 𝐀𝐜𝐜𝐞𝐬𝐬
Between 1993 and 1995, Epstein visits the Clinton White House 17 times. Most of his meetings are with Mark Middleton, a staffer who was later tied to illegal campaign fundraising.
Epstein often brings women with him to these visits.
Nobody stops him. Nobody questions it.
𝐓𝐡𝐞 𝟐𝟎𝟎𝟎𝐬: 𝐂𝐨𝐥𝐥𝐞𝐜𝐭𝐢𝐧𝐠 𝐭𝐡𝐞 𝐅𝐮𝐭𝐮𝐫𝐞
In the 2000s, Epstein shifts his focus. He's not just collecting politicians anymore.
He starts courting the biggest names in tech and science. Bill Gates. Nathan Myhrvold. Sergey Brin.
He donates millions to MIT and Harvard. He positions himself as a philanthropist and intellectual. He hosts salons where Nobel laureates discuss ideas.
He's now collecting the people building the future
𝐓𝐡𝐞 𝟐𝟎𝟎𝟖 𝐏𝐥𝐞𝐚 𝐃𝐞𝐚𝐥 𝐓𝐡𝐚𝐭 𝐁𝐫𝐨𝐤𝐞 𝐄𝐯𝐞𝐫𝐲 𝐑𝐮𝐥𝐞
By 2008, federal prosecutors have a 53-page indictment ready. They have evidence of crimes against 36 girls. The case is solid.
Then it gets killed.
Instead, U.S. Attorney Alex Acosta offers Epstein a plea deal that lets him plead guilty to two state prostitution charges. Epstein serves 13 months in a county jail, with work release. He leaves for 12 hours a day, six days a week.
The deal also grants immunity to any unnamed co-conspirators.
Years later, Acosta tells the Trump transition team that he was told Epstein "belonged to intelligence" and to "leave it alone."
𝐖𝐡𝐚𝐭 𝐃𝐨𝐞𝐬𝐧'𝐭 𝐀𝐝𝐝 𝐔𝐩
Epstein had no degree. No credentials. No public business wins.
Yet he controlled a billionaire's fortune. He owned a private island. He had a fleet of planes. He had access to presidents, prime ministers, and tech moguls.
His claimed net worth was over $500 million, but financial investigators couldn't trace where it came from. His only known client was Wexner. No public investment wins. No business holdings that matched his wealth.
The money moved through offshore accounts and shell companies. The source was never clear.
𝐓𝐡𝐞 𝐑𝐞𝐚𝐥 𝐏𝐚𝐭𝐭𝐞𝐫𝐧
Look at what actually happened:
He was hired without credentials, by someone connected to intelligence work.
He was promoted without experience, by a Wall Street CEO.
He escaped prosecution, twice.
He was funded by a billionaire who gave him a house and total financial control.
He was introduced to powerful networks by people who operated above the law.
And at every point where he should have been stopped, he wasn't.
Someone kept clearing the path.
The question isn't just who visited the island.
The question is: who made sure he could build it in the first place?
Shoutout to Whitney Web and her extensive research to piece this all together.
Today marks the end of the fourth year of the Ukraine-Russia war. After four years, Russia’s invasion of Ukraine has caused staggering damage to Ukraine’s people and economy. There are wildly varying estimates of those killed or wounded in the war, as well as civilian casualties. On the Ukraine and Western side, it is claimed that over 1m Russians have died, but less than 100,000 Ukrainians. The Russians claim the opposite ratio, with around 300,00 Ukrainians killed or wounded in 2025 alone. The latest estimate of Mediazona, a Ukraine based agency, is in between; with Russia at 160k killed and slightly more Ukrainians.
Whatever the truth, the war has been a humanitarian crisis for Ukraine, especially during this winter with energy and heating power systems in the major cities mostly destroyed by Russian missiles. In four years of war, millions have fled abroad and many more millions have been displaced from their homes within Ukraine. Ukraine’s population has fallen by 37% since the collapse of the Soviet Union and by 20% since the start of the war. Real GDP is down 37% since 1991 and down 21% since the start of the war.
The physical and mental damage to those staying in Ukraine has been immense. Learning losses by Ukrainian children are a particular worry. Studies show that a war during a person’s first five years of life is associated with about a 10% decline in mental health scores when they are in their 60s and 70s. So it’s not just war casualties and the economy that’s the problem, but also the long-term damage to those Ukrainians staying.
Despite the war, there has been some economic recovery in Ukraine in the last couple of years – at least in GDP terms. Ukraine’s ports on the Black Sea are still functioning and trade is flowing west along the Danube, but to a lesser extent by train. Meanwhile, agriculture has staged a modest recovery. Even so, manufacturing of iron and steel still remains at a fraction of its prewar level; down from 1.5m tonnes a month before the war to just 0.6m a month. Industrial production in Ukraine decreased 3.5% yoy at the end of 2025.
Ukraine increasingly lacks able-bodied people to produce or to go to war. Independent analyses reveal a volatile yet consistently elevated unemployment rate, peaking at 22.8% in late 2025. Over 80% of these are women, as the men have mainly been drafted into the armed forces. And half of all young people (under 35 years) not yet drafted are not working. There is a massive shortage of skilled people, who have mostly left the country. So desperate is the government for men to join the army that it has resorted to ‘press gangs’ that roam the streets day and night to snatch people to force them to the front line.
Ukraine is still totally dependent on support from the West. It needs at least $40bn a year in order to sustain government services, support its population and maintain production. On top of that, it needs another $40bn a year to support the armed forces. Since the beginning of Russia’s full-scale invasion, over half of the state budget has been spent on defence, or 26% of GDP. It has been relying on the EU for civil funding, while relying on the US for all its military funding – a straight ‘division of labour’. But since the Trump administration took office in 2025, the US has drastically reduced its direct military aid and instead urged the Europeans to take up the baton, both for civil and military funding.
In 2025, European aid increased notably, with military aid allocation rising by 67% and financial and humanitarian aid by 59%. The share of total civil aid from the EU rose to 90% from around 50% at the start of the war. But because of the withdrawal of the US, military aid in 2025 was still down 13% overall and civil funding fell 5%, in real terms.
Europe’s military aid depends on just a few countries in Western Europe, primarily Germany and the UK, which accounted for around two-thirds of Western Europe’s military aid between 2022 and 2025. The EU is now stuck on trying to find funds for Ukraine this year. Its plan to use frozen Russian FX assets fell apart because the holders of those assets, Euroclear in Belgium, feared heavy losses in international courts. A new EU plan to provide around $100bn through sovereign bond issuance is still in abeyance.
The IMF and World Bank have offered monetary assistance but, in this case, Ukraine has to show it has ‘sustainability’, ie it is able at some point to pay back any loans. So if bilateral loans from the US and EU countries (and it is mainly loans, not outright aid) do not materialise, then the IMF cannot extend its lending programme. A new loan instalment of about $8bn is about to be announced by the IMF for 2026.
All this brings us back to what will happen to Ukraine’s economy, if and when the war with Russia comes to an end. The very latest estimate from the World Bank puts reconstruction costs at $588bn over the next ten years for Ukraine to recover and rebuild – assuming the war ends this year. That’s three times its current GDP. However, even that may well be an underestimate. Ukraine itself estimates that $1trn will be needed, with nearly $400 billion for energy-sector rehabilitation, $300 billion for housing and urban infrastructure, $200 billion for transport corridors and logistics, and $100 billion for social services and public institutions. This total is equivalent to six years of Ukraine’s previous annual GDP. That’s about 2.0% of EU GDP per year or 1.5% of G7 GDP for five years. Even if reconstruction goes well and assuming that all the resources of pre-war Ukraine are restored (eastern Ukraine’s industry and minerals are now in the hands of Russia), then the economy (GDP) would still be 15% below its pre-war level. If not, recovery will be even longer.
The EU Commission has announced a European Flagship Fund, supposedly a joint ‘equity vehicle’ backed by the EU, Italy, Germany, France, Poland and the European Investment Bank to mobilize large-scale public and private investments for Ukraine’s post-war reconstruction. In effect, this would mean the takeover of Ukraine’s economy and resources by Western investors. As it is, much of what is left of Ukraine’s resources (those not annexed by Russia) has already been sold off to Western companies. Overall, 28% of Ukraine’s arable land is now owned by a mixture of Ukrainian oligarchs, European and North American corporations, as well as the sovereign wealth fund of Saudi Arabia. Nestle has invested $46 million in a new facility in western Volyn region while German drugs-to-pesticides giant Bayer plans to invest 60 million euros in corn seed production in central Zhytomyr region. MHP, Ukraine’s biggest poultry company, is owned by a former adviser to Ukrainian president Poroshenko. MHP has received more than one-fifth of all the lending from the European Bank for Reconstruction and Development (EBRD) in the past few years. MHP employs 28,000 people and controls about 360,000 hectares of land in Ukraine — an area bigger than EU member, Luxembourg.
The Ukrainian government is committed to a ‘free market’ solution for the post-war economy that would include further rounds of labour-market deregulation below even EU minimum labour standards i.e sweat shop conditions; and cuts in corporate and income taxes to the bone; along with full privatisation of remaining state assets. However, the pressures of a war economy have forced the government to put these policies on the back burner for now, with military demands dominating.
The aim of the Ukraine government, the EU, the US government, the multilateral agencies and the American financial institutions now in charge of raising funds and allocating them for reconstruction is to restore the Ukrainian economy as a form of special economic zone, with public money to cover any potential losses for private capital. Ukraine will be made free of trade unions, any severe business tax regimes and regulations and any other major obstacles to profitable investments by Western capital in alliance with former Ukrainian oligarchs.
Russia: the war economy What about Russia? For a while, Russia’s invasion of Ukraine in early 2022 to take over the four Russian-speaking provinces in the Donbass in eastern Ukraine ironically gave a boost to the economy. Russia managed to steer through Western sanctions, while investing nearly a third of its budget in defence spending. Despite being cut off from energy markets in Europe, it was able to diversify to China and India, in part by using a ‘shadow’ fleet of tankers (ie uninsured by the West) to skirt the price cap that Western countries had hoped would reduce the country’s war chest. China now takes 45% of all Russian oil exports and Russia has become China’s top oil supplier.
Chinese imports into Russia have jumped more than 60% since the start of the war and rose 26% in 2025, as China has supplied Russia with a steady stream of goods including cars and electronic devices, filling the gap of lost Western goods imports.
However, the war has intensified an acute labour shortage inside Russia. Like Ukraine, Russia is now desperately short of people – if for different reasons. Even before the war, Russia’s workforce was shrinking due to natural demographic causes. Then at the start of the war in 2022, about three-quarters of a million Russian and foreign workers, the middle class in IT, finance, and management, left the country. Meanwhile, the Russian army has to recruit between 10,000 and 30,000 every month, sucking up the labour force from domestic production. To boost the armed forces, Russia has recruited convicts and others on contracts. The initial boost to the economy and wages from huge defence spending has begun to wane. And global oil prices have fallen well below the break-even level for Russian oil revenues.
Russia’s oil and gas income, representing up to 50% of state revenues, is down 27% year-on-year. Inflation is around 8%, down from double-digit highs, but the Russian central bank is still keeping interest rates at 16%, making it impossible for households and businesses to borrow to invest or buy large ticket items. War spending is now over 7% of annual GDP. Despite increased taxation, the sharply rising budget deficit to pay for the war is draining Russia’s sovereign wealth fund and forcing the monetary authorities to consider monetising the deficits.
However, Russia still has large foreign exchange reserves and a low public debt ratio to GDP. Even if export revenues slump, the largely state-owned banking system is sitting on piles of cash that could be used and banks could also be directed to buy government bonds, as they were at the end of 2024. If all else fails, the central bank could buy government bonds, thus monetising the debt, although that would lead to a sharp depreciation of the ruble. and so drive up inflation.
Russia’s economy has entered 2026 weaker than it was a year before, with growth declining and oil prices well below budgeted projections.
Services and manufacturing activity indexes (PMIs) have dropped sharply and are now in contractionary territory. Full year real GDP growth estimates have been revised down to less than 1% for 2025. The Economic Forecasting Institute of the Russian Academy of Sciences projects growth of 0.7% in 2025 and 1.4% in 2026, accelerating to about 2% in 2027. The International Monetary Fund forecasts growth of 0.6% in 2025 and 1.0% in 2026.
In effect, the Russian economy, like many others in the OECD, is in “stagflation” (where price inflation stays high, but output stagnates). Russia’s ‘military Keynesianism’ is no longer delivering, as before. As a result, any opposition to the war is being ruthlessly suppressed. The most famous antiwar dissident is the Marxist Boris Kagarlitsky, arrested in July 2023 and now serving five years in a prison colony. But there are others. In November 2025, members of a small Marxist study circle in the city of Ufa were sentenced to 24 years, accused of “terrorism” and “conspiracy to overthrow the government” for reading works of Marx.
However, despite these pressures on the Russian economy and increasing austerity for the Russian people, there will be no financial collapse as many Western commentators claim. This wishful thinking has been on the agenda of many ‘experts’ in the West for all of the four years of war. But the Russian economy has survived and has every prospect of being sufficiently strong to continue the war through 2026 and beyond. Unlike Ukraine, more borrowing is possible because Russia has a relatively low stock of debt and taxes can be raised again. The central bank can print money and the government can continue to nationalise businesses to strengthen the war economy.
It will be a different matter if and when the war ends. War production is basically unproductive for capital accumulation over the long run. Russia’s economy will revert to civilian capital accumulation when the war ends. Then Russia’s productive sectors will be exposed. A post-war slump is very likely. The Russian economy remains fundamentally natural resource-linked. It relies on extraction rather than manufacturing. Russia remains technologically backward and dependent on high-tech imports. Russia is not a substantial player in any of the cutting-edge technologies, from artificial intelligence to biotechnology. It has yet to produce technologies fit for a competitive export market beyond arms and nuclear energy, with the former already sanctioned and the latter on the brink of being so.
The demographic trough, the declining quality of university education, severed ties with international schools and a brain drain exacerbate these problems. The technological gap will likely widen, with Russia increasingly relying on Chinese imports and reverse engineering (copying). Russia’s potential real GDP growth is probably no more than 1.5% a year as growth is restricted by an ageing and shrinking population and low investment and productivity rates. The underlying message is that Russia will remain feeble economically for the rest of this decade.
What about peace?
In my view, there is little prospect of any peace deal in the foreseeable future. When taking office this time last year, President Trump declared that he would settle the war in Ukraine within a week. Now in 2026, interminable negotiations continue with no sign of any deal. The current Ukraine leadership is opposing any deal that means the loss of any territory (including Crimea) and any veto on future membership of NATO. European leaders have declared that they will back Ukraine and continue to finance the war and provide military support. The Russians refuse to make any concessions on their long stated position that the Donbass and Crimea are now part of Russia, that Russian-speakers within Ukraine are to be protected from repression and discrimination, that Ukraine must renounce joining NATO and its armed forces must be reduced to defensive levels only. In turn, the Europeans threaten to send troops on the ground to Ukraine to back a supposed ‘ceasefire’.
This is an impasse in the style of the Korean war of the 1950s (which officially is still not ended!). The war looks likely to be settled on the front, rather than by diplomacy. So it will continue with more thousands of soldiers as casualties, deprivations for Ukrainians and worsening living standards for most Russians.
The war has not only destroyed Ukraine; it has seriously weakened the European economy, as the costs of production have rocketed with the loss of cheap energy imports from Russia. For example, the UK now has the highest electricity and energy costs in the world (with Germany not far behind)!A recent survey by the British employers federation (CBI) found that the UK has industrial prices nearly two-thirds above the median of International Energy Agency (IEA) countries and the highest among G7 members. UK electricity prices are around double the EU median. The average UK business currently faces electricity costs that are around 70% higher than pre-crisis, while their gas costs are over 60% higher. Four in ten firms have also indicated they plan to scale back investment as a consequence.
But it seems that the European leaders want to continue the war even if Trump eventually pulls out. They claim that if Ukraine is supported for a while longer, Russian losses will be too great, the Russian economy will collapse and Putin will have to sue for peace, and then possibly be ousted. The Russians think the opposite; that Ukraine is on its knees and cannot hold out much longer.
The Europeans reckon Russia is weak and near defeat – yet at the same time will invade Europe once it has defeated Ukraine – a contradictory analysis indeed. But this argument is justifying a massive doubling of defence spending towards 5% of the GDPs of the major European economies within the next ten years, so they can ‘defend’ themselves from the impending Russian invasion. This is ludicrously justified on the grounds that spending on ‘defence’ “is the greatest public benefit of all” according to Bronwen Maddox (promoting the view of the British security services). She concluded that: “the UK may have to borrow more to pay for the defence spending it so urgently needs. In the next year and beyond, politicians will have to brace themselves to reclaim money through cuts to sickness benefits, pensions and healthcare…In the end, politicians will have to persuade voters to surrender some of their benefits to pay for defence.”
This will mean a huge diversion of investment away from badly needed public services and benefits and technological investment and instead into unproductive and destructive arms production. That puts a huge uncertainty about Europe’s future as a leading economic entity through the rest of this decade and beyond.
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