The New Cold War
America, China, and the Echoes of History
As Ukrainians celebrate the 25th anniversary of their independence this year, they would do well to remember that the next 25 years will be far more important—and difficult—than the last.
Ukraine declared independence on August 24, 1991, in exceptionally favorable geopolitical circumstances: the Soviet empire was disintegrating; its Russian successor state was democratically inclined and militarily weak; the United States, the world’s sole superpower, was determined to promote democracy around the world; NATO had proved its mettle and was soon to expand; and Europe was brimming with the self-confidence that would culminate in the formation of the European Union.
Under such benign conditions, Ukraine could neglect fundamental systemic reform and simply get by, as it did for many of its 25 years.
This period of fair weather has ended, and the approaching storm clouds will require Ukraine to cope with far more challenging, as well as existentially threatening, conditions. In order to survive, Ukraine will need to do more than muddle along. It must pursue, with unwavering resolve, a clearly defined set of priorities.
Consider the changes that have taken place in Ukraine’s geopolitical environment.
President Vladimir Putin is actively pursuing hegemony in Russia’s “near abroad.” Hoping to reestablish a militarily dominant Russia in central Eurasia, Putin has expended an enormous amount of resources in upgrading Russia’s armed forces and weapons arsenal; engaged in relentless saber rattling and occasional land grabbing; routinely violated international norms and the postwar European security order; vastly strengthened Russia’s internal security apparatus; dismantled the country’s democratic institutions; and constructed a despotic, hypernationalist regime centered on his cult of personality. In the process, Putin has managed, by means of bluster and propaganda, to persuade most Russians, and many Westerners, that he is acting in their interests.
At the same time, Putin’s Russia is a brittle regime that is in the throes of advanced decay. It is hyper-centralized, corrupt, inimical to introducing systemic reform, and incapable of changing itself. Although Putin himself is wildly popular, the ossified regime he leads is not, as his decision to form a powerful National Guard and the dismal turnout in the recent Duma elections suggest. A regime that is so dependent on the erratic judgment of an increasingly aging leader is inherently prone to strategic errors that, sooner or later, could embroil it in destabilizing misadventures at home and abroad. Putin’s invasion of Ukraine in 2014, for instance, not only alienated Kiev but also the near abroad and the West. Meanwhile, it brought Russia nothing that it did not already have, such as de facto control of Ukraine’s pro-Russian Crimea and the Donbas.
The failing Russian state is increasingly fragmented between its center in Moscow and the periphery, elites and non-elites, and Russians and non-Russians. Its unreformed economy is in secular decline, while its pell-mell effort to modernize its armed forces and take strategic initiative has revived NATO, terrified Russia’s formerly pro-Russian neighbors, and put off much of the world. The longer Putin stays in power, the greater the likelihood that Russia will collapse, with untold consequences—from civil war to mass refugees—for its neighbors.
The United States’ superpower status remains unquestioned, but its willingness to engage with the world declined significantly in the aftermath of the Afghanistan, Iraq, and Syria debacles. Making things worse, Republican presidential nominee Donald Trump’s inflammatory and knee-jerk rhetoric will likely infect U.S. discourse with greater isolationist tendencies regardless of who wins the presidency this November.
NATO, which had lost its sense of mission after the end of the Cold War, has been revitalized by Putin’s aggression in Ukraine, but the alliance’s military capabilities are woefully inadequate to meet the growing Russian threat. As Western policymakers know, were Putin to test NATO by invading Estonia, the alliance would be hard-pressed to defend it. It would take years for NATO to meet such a challenge.
Finally, the European Union is beset with troubles, from Brexit to the continued flow of refugees to the rise of an antidemocratic and pro-Putin right in France, the Netherlands, and, most alarming, Germany. As Europeans turn inward and as the possibility of pro-Russian political forces coming to power grows, the EU’s capacity to sustain a united front against Putin will decline.
Regardless of how these trends play out, chances are that some combination of them will characterize Ukraine’s geopolitical neighborhood for the next five to ten years. The worst-case scenario for Ukraine would be a United States distracted by its internal troubles and external failures, a weak Europe, and either a strong, aggressive Russia or a disintegrating one. The best case would be a strong, engaged West, which would make whatever transpires in Russia less threatening. Unfortunately, that seems less likely than the worst case.
Given these uncertainties, Ukraine’s policymakers need a strong set of principles to guide them.
First, Kiev must make its own survival as an independent, democratic state its overriding strategic priority. All other concerns should be subordinate. That means, above all, shifting policy attention from Crimea and the occupied Donbas to state and nation building in free Ukraine. This need not mean recognizing Russia’s annexation, but Kiev should live with the temporary loss of these regions, or their quasi-reintegration on confederal terms, in order to focus on the difficult but long overdue restructuring that is needed to make Ukraine’s Westernization irreversible and its vulnerabilities to Russian aggression minimal.
Second, Ukraine must understand that it alone is responsible for its survival. Although Europe and the United States should recognize that Putin’s Russia has become an existential threat, no Western country is currently ready to abandon its hopes of rapprochement and fight Russia on Ukraine’s behalf. That may change, especially if Putin strikes again, but probably not in the foreseeable future.
Third, Ukraine’s survival rests on four interconnected pillars: a strong military, a strong economy, a strong democracy, and a patriotic population. One cannot stand without the others. Only a strong military can deter further Russian predations and thereby offer the conditions for economic and democratic institutions to develop and thrive. A growing economy is a precondition for a strong military, a vital democracy, and a patriotic population; an open, democratic society ensures a dynamic economy and a supportive population; and popular support is necessary for a strong military and a strong democracy.
Among these, however, Ukraine must make economic growth its immediate priority. Its army and democracy are strong enough for the time being, and popular patriotism is at a high as well. But these three pillars will weaken if Ukraine’s economy fails to grow at near-double-digit rates. Ukraine currently spends five percent of its GDP on its armed forces, an enormous strain on a poor country. Democracy requires a growing middle class—as a counterweight to powerful political and economic elites, as a guarantor of private property, and as a repository of liberal values. But, at present, the middle class is declining in Ukraine. And patriotism is hard to sustain under punishing economic conditions. A strong economy will also enable Ukraine to pursue a more confident foreign policy and imbue its current government with greater legitimacy.
Fourth, although Ukraine should do everything possible to eradicate corruption, the key to generating rapid and sustainable economic growth is small and medium-sized entrepreneurship. Ukraine has vast reserves of impressive human capital that could, if permitted by the right combination of economic incentives, produce as much growth as its highly developed information technology sector. Unless that human capital is put to productive use, Ukraine’s economy will always languish. As nineteenth-century Europe and the United States, and today’s Brazil, China, and India, demonstrate, if human capital is mobilized, corrupt economies can and do grow at very high rates. Even corrupt Ukraine enjoyed seven to eight percent growth rates and significant inflows of foreign capital in the recent past. Foreign direct investment in Ukraine dried up over the last two years not because of some sudden spike of corruption but because of the war with Russia.
Ukraine has adopted an impressive raft of economic reforms since the Euromaidan Revolution of 2014, and the result is that two years of significant negative growth have translated into one to two percent growth in 2016. But it needs to do more. Among other things, Kiev must sell its state-owned enterprises, privatize its land, cut the government apparatus while raising salaries, radically simplify procedures for establishing businesses, and find some form of modus vivendi with the oligarchs and their overseas accounts. If these and other measures—such as preventing outright seizures of property by oligarchs, state officials, and organized crime—are adopted, and the war in the east remains in a stalemate, foreign investors will return and, together with Ukrainian entrepreneurs, significantly expand the economy.
For its first 25 years as an independent nation, Ukraine survived mostly because no one threatened its existence. That has changed for good, and Ukraine must learn to live with a permanent Russian threat and the likelihood of growing Western indifference. Above all, Ukraine must become an Eastern European economic tiger. If it does not, it may not live to see its 50th anniversary as a sovereign state.