Economics on the chessboard — Sheh aur Maat

Manasi Phadke | Updated on: Aug 04, 2022
Economists are also deeply influenced by the chess drama

Economists are also deeply influenced by the chess drama | Photo Credit: Nuthawut Somsuk

The current economic crisis looks like a chess game

It’s chess time in India, and how! You switch on the TV and they are showing you the checkered chessboard look given to the Napier bridge. A R Rahman appears in your FB feed on a chessboard crooning ‘ Vanakkam, welcome to Chennai’! Newspapers contain manic analysis on the many moves that they think Carlsen must be contemplating, which ummm, in all probability, the man must not be contemplating. Think about it – had he been so predictable, would he be Carlsen? Insta is gramming about the new Chess Dance video, showcasing folk and classical dance forms on the chess board. Just a year ago, had you said ‘two-and-a-half’, any kid on the street would have completed the phrase by saying ‘men’. Now, the kid might just say ‘knight’.

Economists are also deeply influenced by the chess drama. After all, the current economic crisis looks exactly like a chess game with an aggressive Russian opening! Putin’s invasion of Ukraine is like sending the king’s pawn forward 2 places (1.e4). Sending pawn to E4 is an endeavour to attack and control the centre, which is often the objective in opening the game. ‘Best by test’ is how GrandMaster (GM) Bobby Fischer used to describe the move. Putin’s move may have been driven by a deep-seated political desire to restrict the sphere of influence of the NATO, but its economic fallouts have put the situation firmly within the ambit of economics. Or should one say gambit?

First-mover advantage

Perhaps Putin believes the traditional view that the player making the first move in chess (playing the whites) has an inherent first-mover advantage. After all, the statistics suggests that whites tend to win 52–56 per cent of the times. However, GMs have been increasingly challenging the first mover advantage. Hungarian GM András Adorján wrote the famous book ‘Black is Ok’ in 1988, following it up with the sequels ‘Black is still Ok!’, ‘Black is OK forever!’ and ‘Black is Back!’ recently. The message is loud and clear in the first book, and gets still louder and clearer and almost shrill in the sequels – there is no need for the second player to get unnecessarily worried. Interestingly, one of the most famous matches that Adorjan won was in the Chess Olympiad of 1978, the only Olympiad in which the Russians did not win a gold! Perhaps Zelensky has been reading up on Adorjan, and is creating a Ukrainian defence through unbalanced positions rather than by simply reacting so as to equalize.

On its part, the West has reacted to Putin’s move by introducing a counter-threat, answering expansionism with sanctions. Russia has defaulted on its international debt payments for the first time since 1998, since the US won’t permit it to pay its debt using the funds kept in US banks. Russian central bank assets stand frozen, and Russian banks have been removed from SWIFT, the international financial messaging system. This has had the impact of delaying payments to Russia for its oil and gas exports. Quite the Zwischenzug. That’s a chess move in which a threat is countered by an even more devastating threat, forcing the opponent to beat a retreat on the original threat and focus on repairing the damage that the counter-threat might entail. Financial sanctions are being fortified by targeting Russian exports of oil and gas. US is banning all of oil and gas imports from Russia. EU will phase out its dependence on Russian energy products by end- 2022. A pawn storm on the cornered king.

Unintended consequences

In the meanwhile, as in many chess games, whilst the players execute their immediate strategies, unintended consequences abound on the board. The conflict has strained inflation levels across the globe, and no one remains unscathed. The Fed, on its own chessboard vis-à-vis Rest of World (ROW), has decided to go ahead with the destruction sacrifice. This entails sacrificing a crucial piece on the board in order to gain control over the squares where it potentially ruled. The piece being sacrificed is growth, and this is being done by assuming control over inflation by hiking interest rates. It looks like interest rates are the new pawns, only allowed to move forward. As the Fed keeps hiking interest rates, the Foreign Portfolio knights, bishops and rooks are moving backwards to the home ranks. ROW is left with only one strategy — mirror the Fed. As interest rates increase across the globe, there’s a check on growth — pun intended.

But this is probably where economics differs from chess. In chess, the objective of the player is to push the opponent into a checkmate. In economics, especially where growth is concerned, you have to think how not to check, mate.

The writer is a brave economist trying to laugh against the odds

Published on August 03, 2022
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