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Politics of Sanctions

Boris Mikhailov, Case History #308, 1997

BEYOND THE WAR/
essay

Politics of Sanctions

Philip Manow on the Geo-Economics of Geo-Politics.

Boris Mikhailov (born in Kharkov in 1938) is one of the most prominent chroniclers of (post)-Soviet life. His 400-work series “Case History” from the late 1990s is a testament to the socio-political turmoil in corroding Eastern Ukraine, showing outcasts, homeless people, poverty, nudity, sexuality, emptiness, despair, and resignation. These images bring to light a bitter reality that has long been concealed and now, tragically, comes back to the fore.



Philip Manow on the Geo-Economics of Geo-Politics.

If, as has been pointed out, the Russian invasion of Ukraine represents a 'Putin shock' for the West, then what is shocking about what happened is that the war appears to have fundamentally violated the frame of reference within which politics has so far primarily been understood in the West. Consequently, a prominent reading of events simply assumes that Putin, whom we have come to know as a power politician who does not shy away from violence, who is always cool and calculating, has somehow gone mad overnight, and that, in this highly personality-driven system no one dares to speak truth to power, (parrhesia, παρῥησία), so that his personal delusion, with all its catastrophic consequences for the world, is now unleashed, uncontrolled and uncriticized. The West's primary response, namely that of economic sanctions - embargoes - reveals the specific hegemonic frame of reference of political reason the war seems to be violating from its point of view, namely that of economic development that promises prosperity within a liberal social model - in which of course, an international free trade system is also integral as a guarantee of growth and prosperity - and to which there is no warlike and autocratic path, quite the contrary, from which Putin will rule out war for the foreseeable future.

Russia is a country that produces nothing that the world could use, that can only export gas and violence.

But behind such an interpretation implicitly lies a modernization-theoretical perspective which questions why Putin's Russia chose poverty, destruction and the autocratic path in the choice between development and underdevelopment, prosperity and poverty, productivity and destruction, liberalism and autocracy, rather than following the Western path of development. Exactly this modernization-theoretical perspective could be subject to error. Since 1990, the assumption that one can largely freely choose between different development paths has turned out to be illusory for Russia. After thirty years, the balance is clear: “Russia's gross domestic product is lower than that of Italy, its per capita product lower than that of Poland. The Russian economy is weak and uninnovative, the population growth catastrophic...” It is a country that produces nothing that the world could use (apart from one weapon system or another) – that can only export gas and violence. The fact that Russia is blocked from joining the club of industrialized countries, a path China has been pursuing since 1990, has systematic and one might say structural reasons - which is why a book like The Myth of Economic Development, in which as early as 1974 the Brazilian economist Celseo Furtado tried to explain Latin America’s persistent and enigmatic “underdevelopment” (and which has just now, in 2020, been translated into English for the first time), suddenly has extraordinary relevance for understanding the situation.

The Brazilian and Russian economic models are similar in many ways: hardly any manufacturing industry of their own.

What Furtado described for the Brazil of the 1970s is fatally reminiscent of today's Russia: that as a supplier of raw materials and food it has integrated itself into a global division of labor and has thus committed itself to an extensive economy that only allows growth in an ever-increasing exploitation of nature and man, has thus entered a structural trap of raw material exports and consumer goods imports, an economic system without any substantial advances in productivity, in which the realized profit is not reinvested but 'distributed' and then ostentatiously consumed (yachts, private jets, London apartments for the oligarchs, and trickle-down imitations of this consumption pattern by the upper middle class, which remains small in number), accompanied by blatant social inequality and the capture of politics by large economic and always “personalized” interests.
In the international division of labor, one remains constantly excluded from the group of “advanced capitalist democracies” (Iversen/Soskice), to which one positions oneself in a complementary way: as their “gas station” with – as far as wheat or soy is concerned – a medium-sized bistro area as additive. The Brazilian and Russian models are similar in many ways: hardly any manufacturing industry of their own, if - then on the simplest technological level - mainly to supply the population with basic consumer goods, but without significant export shares. Finally, they also share an authoritarian presidentialism, which in the Latin American case had not turned to the outside world in a military-aggressive manner because after 1823 the Monroe Doctrine has subordinated everything intergovernmental to the interests of the regional hegemon, while Russia itself is the regional hegemon - which, due to its progressive weakening, is only able to act internally and externally through brutality.

What applies to many ex-communist countries did not apply to Russia: that communism, its strong statehood, its advanced education, would have prepared the country for capitalism.

There are many reasons why development in Russia took this direction: in Russia in the 1990s, at a time of brutal and disorderly transformation, the path of the rapid financial exploitation of resources was taken. At the same time, as world trade opened up, China, crowned by its accession to the WTO in 2001, was on an unprecedented path of development. Since then, Russia has been confronted with the typical problems of the “resource curse,” as a lack of incentive to invest in long-term modernization of the economy coupled with the politics of handouts and cronyism. In Russia, unlike in the former Eastern Bloc countries, but also unlike in China, the implosion of power and the vacuum left by the CP left room for criminal predatory capitalism, the economic collapse (between 1987 and 1995 a reduction in GDP of almost 40 %!) was dramatic (Milanovic 2022a), and the state functions that would have been indispensable for the modernization course that brought countries like Taiwan, South Korea, but now also Vietnam and China, to the technological standards of the West, also collapsed.
Such a modernization path requires a strong, autonomous, rule-oriented state bureaucracy, massive public investments, the long-term delay in gratification in the form of reduced consumption, technology imports that have been prevented by countless Western embargo measures (Milanovic 2022b), and so on. None of this existed in Russia in the 1990s and early 2000s – if you disregard the enforced consumption waiver, which was and is only due to shortage management and not to the modernization strategy. The comparatively late integration into a world economy whose division of labor had already reflected advantages in specialization that had developed over many years, suggested the "path of least resistance of comparative advantages:" (Furtado p. 13) resource exploitation and military bullying. Thus, what applies to many ex-communist countries did not apply to Russia: that communism, its strong statehood and its advanced education and research system, would have prepared the country quite well for capitalism (cf. Milanovic 2019, chapter 3).

If a Western-integrated Ukraine can take on the role of Western Europe's primary energy supplier, then that jeopardizes the entire business basis of Putin's rule.

But that also means that if economic pressure comes head to head with military aggression today, then that is not evidence of a submissive, naïve West that is hopelessly lagging behind militarily – on the contrary, it is evidence of the inferiority of the Russian development model, which thus follows a completely different geopolitical logic. This must be seen in the following context:

  • the increasingly West-oriented Ukraine's control of Russian gas pipelines to Europe (particularly when bypass attempts such as Nordstream2 are under constant embargo threat),
  • in connection with the discovery of large gas deposits off Crimea, for which Ukraine had not granted licenses to Gazprom or Lukoil, but to Shell and Exxon,
  • in the context of the fact that the enormous shale oil reservoirs in Donbass and western Ukraine near the second troubled region, Transnistria, can be exploited with fracking technology since around 2010,
  • as well as the political unrest in “allied” states such as Belarus and, most recently, Kazakhstan,
  • and last but not least must also be connected with the fact that in 2019 the first Russian pipeline, which does not lead west but east, to China, was put into operation (Thompson 2022: 79), in connection with the conclusion of a 30-year supply contract between the two countries.

If a Western-integrated Ukraine can itself take on the role of Western Europe's primary energy supplier, a Ukraine that also has the power to dictate the Russian petrostate's access to that market, then that jeopardizes the entire business basis of Putin's rule and the Russian economic model overall and it becomes understandable which economic and thus also directly related political war aims are being pursued here.

And if the Ukraine war is closely intertwined with questions of energy supply, and ultimately also with questions about the geopolitical consequences of a de-carbonization of global capitalism, then both Russia and Brazil each point in their central roles in the question of whether climate change can be mastered to the fact that it is probably too simplistic to explain “capitalism” as a problem for the survival of mankind, but that one should pay more attention to the changing relationship between industrialized and resource-based states. This suggests mixed results, because on the one hand underdevelopment can only ever be based on the expansion of extensive farming - but on the other hand it is clear who - if anyone - will be able to act in the coming crises: the West plus an Asia that is approaching the Western development model.

Philip Manow is Professor of Political Science at the University of Bremen and a fellow in the programme “The Future of Democracy” at THE NEW INSTITUTE.


Bibliography:

Furtado, Celseo (2020 (1974)), The Myth of Economic Development (Cambridge (UK): Polity Press).

Hediger, Vincenz (2022), 'Nur Gewalt im Angebot. Russland ist der große Verlierer der Globalisierung: Statt in Technologie investiert die Elite in Luxuskonsum', Frankfurter Allgemeine Zeitung, Montag, 7. März 2022, p. 11.

Milanovic, Branko (2019), Capitalism, alone. The Future of the System that rules the World (Cambridge, Mass.: The Belknap of Havard University Press).

Milanovic, Branko (2022a), 'Russia’s economic prospects: the short-run', in Branko Milanovic (ed.), Globalinequality.

Milanovic, Branko (2022b), 'Long term: Difficulties of import substitution and delocalization ', in Branko Milanovic (ed.), Globalinequality.

Thompson, Helen (2022), Disorder. Hard Times in the 21st Century (Oxford: Oxford University Press).

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