The Pandemic Depression
The Global Economy Will Never Be the Same
Until recently, most Europeans believed that their post–Cold War security order held universal appeal and could be a model for the rest of the world. This conviction was hardly surprising, since Europe has often played a central role in global affairs. For much of the last three centuries, European order was world order—a product of the interests, ambitions, and rivalries of the continent’s empires. And even during the Cold War, when the new superpowers stood on opposite sides of the continent, the central struggle was between two European ideologies, democratic capitalism and communism, and over control of the European lands in between.
Still, it was not until 1989 that a distinctly European model of international conduct emerged, one that represented a radical departure from the assumptions and practices that still held elsewhere. In June 1989, communist authoritarians in China crushed that country’s nascent pro-democracy movement; that same year, communist authoritarians in Europe gave way without a fight as the Berlin Wall fell. For Europe’s leading intellectuals, this moment signified more than the conclusion of the Cold War; it marked the beginning of a new kind of peace. “What came to an end in 1989,” the British diplomat Robert Cooper wrote some years later, “was not just the Cold War or even, in a formal sense, the Second World War” but “the political systems of three centuries: the balance of power and the imperial urge.”
Indeed, the Cold War ended without a peace treaty or a parade—it seemed at the time a victory for both sides—and Europe’s new system washed its hands of old notions of sovereignty. Continental leaders were not interested in creating new states, as they had been after World War I. Nor did they move people around to secure existing ones, as they had done following World War II. Instead, they sought to change the nature of borders themselves, encouraging the free flow of capital, people, goods, and ideas. Political maps fell out of fashion; economic graphs took their place. Diplomats in Brussels came to see economic interdependence, international legal institutions, and mutual interference in one another’s domestic politics as their primary source of security. And later, in the wake of U.S. failures in Afghanistan and Iraq, military force lost its luster.
Europeans were aware that this order was distinctive but also believed that it could expand well beyond the European Union—to Turkey, to Russia, and to the postcommunist countries of eastern Europe. They expected that their model would spread naturally, whether through the enlargement of NATO, the extension of EU ties to states on the union’s periphery, or the ascent of global institutions that enshrined European norms, such as the International Criminal Court and the World Trade Organization. So long as citizens could choose freely, the thinking went, governments would eventually embrace the European way.
Russia shattered that assumption last year when it invaded Crimea. In the face of Moscow’s determination to preserve its influence in the post-Soviet space through the use of force, the EU’s soft power proved to be very soft indeed. Turkey, along with three of the world’s largest democracies—Brazil, India, and Indonesia—refused to join the EU and the United States in placing sanctions on Russia. China preferred to see Russia’s annexation of Crimea as a natural adjustment of borders rather than a challenge to international order. Brussels and Washington, meanwhile, did level significant sanctions. But these measures have done little to dissuade Moscow from holding its line.
The Ukraine crisis has forced Europeans to face up to the fact that their political model is not attractive to everyone—and certainly not to everyone in their own neighborhood. Their shock recalls that felt by Japanese technology executives at the end of the last decade, when they realized that although they manufactured the world’s most advanced cell phones, they could not sell them abroad. Consumers elsewhere simply weren’t ready, since Japanese devices relied on advanced technologies, such as third-generation e-commerce platforms, that were not widely used in other countries. Japanese cell phones, in other words, were too perfect to succeed.
Some dubbed this phenomenon Japan’s “Galápagos syndrome,” referring to Charles Darwin’s observation that animals living in the remote Galápagos Islands, with their unique flora and fauna, had developed special characteristics not replicable elsewhere. Much the same could be said of Europe’s order today, which evolved in an ecosystem shielded from the wider world’s rougher realities—and has consequently become too advanced and too particular for others to follow.
As the Ukraine crisis drags on, Europeans must abandon their dreams of transforming foreign habitats and focus instead on protecting their own increasingly endangered one. The task won’t be easy. It will require a de-escalation of tensions with Moscow and calculated compromises, such as accepting Russia’s own regional integration efforts as legitimate. Acknowledging that the European order has limits, however, is far preferable to seeing it weaken—or to seeing another authoritarian power take advantage of the impasse.
Although the immediate effect of the Ukraine crisis was to bring Europe and the United States closer together, the process of formulating a response has exposed deep divisions between them. There are persistent questions, for example, about U.S. guarantees of European security, despite repeated assurances from U.S. President Barack Obama. Were Russia to support rebel forces in a NATO member—Latvia, say—how would Washington respond? There are also doubts about Washington’s attention span. At the 2015 Munich Security Conference, a senior German official complained to us that the United States is unreliable: “Because the stakes are so low for [the Americans], we never know where Washington will end up. It could escalate the sanctions and arm Ukraine now. But in a few years, it could reset the relationship to secure Russia’s cooperation on an unconnected issue, such as Islamic State.”
Underlying this uncertainty is a sense among Europeans that their security is no longer central to U.S. strategy, as it was during the Cold War. Europe, after all, is only one of many theaters in which Washington has interests, and it is probably not the most important one. U.S. officials, for their part, increasingly fear that European countries will gradually lose their military capabilities and political will, abandoning their alliance with the United States in order to pacify the bully next door. Americans were especially shocked, for example, to see that even in the wake of Russia’s invasion of Crimea, many European governments—including those of Germany and the United Kingdom—still chose to make further cuts to their military budgets. And a 2014 WIN/Gallup International survey only reinforced U.S. doubts about European publics; just 29 percent of French citizens polled, 27 percent of British citizens, and 18 percent of German citizens said that they were willing to fight for their country. (Sixty-eight percent of Italians said they would outright refuse.) As then U.S. Secretary of Defense Robert Gates put it in 2010, “The demilitarization of Europe—where large swaths of the general public and political class are averse to military force and the risks that go with it—has gone from a blessing in the 20th century to an impediment to achieving real security and lasting peace in the 21st.”
Western governments fundamentally misread Russia. They mistook Moscow’s failure to block the post–Cold War order as support for it, assumed that Russia’s integration into the world economy would invest the country in the status quo, and failed to see that although few Russians longed for a return to Soviet communism, most were nostalgic for superpower status.
Such attitudes reflect an even deeper philosophical split over two competing narratives about the end of the Cold War. For most Americans, it was the military and economic superiority of the West that made victory inevitable and the 1980s arms race that pushed the Soviet system over the edge. But for many Europeans, it was Europe’s liberal values that ultimately won the day and West Germany’s Ostpolitik, a policy of improved relations with the Soviet Union and its allies, that hastened the conflict’s end.
These divisions color today’s policy discussions in predictable ways. Take the question of whether Europe and the United States should arm Ukraine in the ongoing fight against Russian-backed rebels in the east of the country. If the primary goal is to increase the price of Russian revisionism, then the move makes sense, even if the conflict escalates as a result. But if the chief aim is to protect the EU’s distinctive mode of conduct and preserve the EU’s unity in the face of Russia, then anything fueling further violence would stand in the way of the only acceptable outcome: an orderly political settlement. That explains why many members of the U.S. foreign policy establishment support arming the Ukrainian military, whereas most of their European counterparts oppose it. Even in Poland, where most citizens think that the Ukraine crisis presents a clear and present danger to their security, a majority do not favor arming Ukraine, according to a survey conducted by Warsaw’s Institute of Public Affairs this past February.
It was always unrealistic to expect the Ukraine crisis to alter Europe’s DNA, at least in the short term. Neither European publics nor EU elites are ready to abandon the hope that economic interdependence remains the most viable source of European security. Although U.S. security guarantees are critical to ensuring that the European order survives, they also threaten its integrity. Were the EU to collaborate with the United States in arming Ukraine, it would suggest that peaceful mediation had failed.
Europe finds itself in this predicament for a simple reason: in the years leading up to the Ukraine crisis, Western governments fundamentally misread Russia. They mistook Moscow’s failure to block the post–Cold War order as support for it, assumed that Russia’s integration into the world economy would invest the country in the status quo, and failed to see that although few Russians longed for a return to Soviet communism, most were nostalgic for superpower status.
To be sure, the sanctions have proved critically important in uniting Western countries against Putin’s aggression. But damaging the Russian economy has also undermined Europe’s longer-term goals.
They also missed the importance of Ukraine’s so-called Orange Revolution in 2004, which saw mass street protests help bring a pro-Western leader to power. Russian President Vladimir Putin, convinced that Western governments incited the demonstrations in order to carry out regime change, has since come to see street protests as a significant threat to his rule. In this context, resistance to Western liberalism and to Washington’s democracy promotion now defines his understanding of sovereignty.
For over a decade, Putin’s regime has been searching for a new order, one that can ensure its long-term survival. In 1943, Joseph Stalin dissolved the Communist International (also known as the Comintern), an organization dedicated to spreading communism internationally, in order to convince Franklin Roosevelt and Winston Churchill that his priority was the defeat of Nazi Germany, not global revolution. Putin hoped that the West would make a similar overture by halting its promotion of democracy. He wanted a guarantee that the Kremlin would not confront Western-backed protests on the streets of Minsk or Moscow. But Brussels and Washington could not dissolve what did not exist; regardless of what Putin and his advisers might believe, the wave of global protests that has swept the world in recent years is the result of cultural, political, and technological changes. What former U.S. National Security Adviser Zbigniew Brzezinski has called “the global political awakening” is a real trend, not the code name of a CIA operation.
Western powers also misjudged their ability to coerce Putin through sanctions and diplomatic isolation. Sanctions have not altered Russia’s behavior in eastern Ukraine, and few experts think that any financial penalty could be great enough to convince Moscow to hand back Crimea. Although the sanctions have contributed to Russia’s current financial woes, there is little evidence that they have weakened Putin’s grip on power. And even if they did, a post-Putin Russia would unlikely be a pro-Western democracy. “It is impossible to say when the system will fall,” the former Putin adviser Gleb Pavlovsky told The New Republic in 2013, “but when it falls . . . the one to replace it will be a copy of this one.”
To be sure, the sanctions have proved critically important in uniting Western countries against Putin’s aggression. But damaging the Russian economy has also undermined Europe’s longer-term goals. Moscow’s policy in Ukraine does not represent a revival of Russian imperialism; it is an expression of the Kremlin’s isolationism. By cutting off the Russian economy, the sanctions have served Putin’s effort to limit Russia’s exposure to the West, giving his regime cover to restrict the Internet, curb foreign ownership of the media, repatriate Russian money from Western banks, and limit travel abroad. They have also obscured his failure to grow the economy.
Worst of all, the sanctions have encouraged Russia to compete with the West for military dominance rather than on economic terms, an arena in which the EU’s advantage is far greater. One of the union’s great successes of the last decade was its European Neighborhood Policy, which aimed to draw in the states on its periphery through economic and political agreements. Although the policy hardly transformed those countries in any fundamental way, it did influence Russian foreign policy. After the Orange Revolution, Russia tried to vie for influence in Ukraine and other postcommunist countries by offering similar incentives, such as trade agreements and aid packages. Even in the fall of 2013, Moscow did not move to occupy Ukraine before attempting to buy it, offering the government of then President Viktor Yanukovych a multibillion-dollar loan. But now that Russia’s economy is even less competitive, owing to low oil prices and new sanctions, Moscow will be more inclined to expand its influence through military adventurism.
In defining its Russia policy, Europe faces only hard choices. It is unrealistic to expect that in the coming year the EU will transform itself into a great military power. It is also unlikely that sanctions alone can change the Kremlin’s policy in the short term, or that unanimous support for comprehensive sanctions can be sustained over the long term, especially if the conflict in Ukraine somehow subsides. Moving forward, Europe must find a policy that doesn’t attempt to turn Russia into a Western-style democracy but that forces the country into a position the West can live with. Cold War–style containment, however, is insufficient. Russia poses a threat to not only the territorial integrity of the EU member states but also the union’s very existence. Already, it has begun infiltrating European politics in order to undermine European unity, principally by supporting political leaders friendly to Russia and hostile to the union.
Guarding against this threat will require Europeans to make a clear distinction between two different kinds of institutions. The first are those, such as the Council of Europe and the EU, that embody European values and therefore have no place for authoritarian regimes such as Putin’s. The second are those, such as the Organization for Security and Cooperation in Europe and the United Nations, that can bridge Europe’s divide with illiberal governments. European leaders need to make the former more disciplined and rigid and the latter more flexible and accommodating.
Take the Council of Europe. Moscow’s membership, a privilege theoretically reserved for democracies—the body is tasked with promoting human rights and the rule of law—has done little to liberalize Russia and has undermined the council’s credibility. Handing out membership to other countries with repressive regimes, such as Azerbaijan, has similarly failed to hasten their democratic transitions. After Azerbaijan’s 2010 parliamentary elections, for instance, the council failed to even issue a critical statement in response to reports of widespread violations of due process. The organization now serves as a convenient vehicle that allows authoritarian regimes to appear democratic abroad while suppressing human rights at home. Only by kicking out its illiberal members can the council truly stand up for its founding values once again.
Decontaminating values-based institutions by removing Russian influence is all the more urgent given the growing popularity of Putin’s governing model in some eastern European EU member states and the Kremlin’s efforts to support Euroskeptical parties—including both those on the left, such as Syriza in Greece, and those on the right, such the National Front in France. These moves, designed to mirror Western support for opposition movements and election monitoring in Russia, initially functioned as a kind of slap in the face. But now they are in danger of seriously fraying EU unity. Last year, Hungarian Prime Minister Viktor Orban spoke publicly of “parting ways with western European dogmas, making ourselves independent from them.” He went on to state his intention to turn Hungary into an “illiberal state,” listing Russia as an example of a country that, like China and Turkey, has a governing system that is neither Western nor liberal but is “capable of making us competitive.” Orban, in an effort to cozy up to his role model, has since opposed plans for a European energy union, an EU flagship policy designed to reduce member states’ dependence on Russian gas. In return, Putin has ensured that Russian gas will flow to Hungary for at least the next four to five years.
To prevent other fragile EU states, such as Cyprus and Greece, from falling prey to Russian bribes or blackmail, the union needs to help them deal with their economic crises by continuing to provide loans and other forms of financial support. It must also push member states to realize that in the growing conflict between Brussels and Moscow, they have to choose sides. At present, illiberal regimes such as Hungary’s have the best of both worlds: EU funds sustain them even as they benefit from anti-EU rhetoric at home and special relations with Moscow, and so they have little incentive to change course.
Europe and the United States can never recognize Russia’s annexation of Crimea, just as they could not recognize the Soviet occupation of the Baltic states during the Cold War. They will need to keep sanctions in place, since they remain the only available instrument capable of maintaining European unity and taming Moscow’s willingness to spread the current conflict to other parts of Ukraine. But sanctions alone—guided by a misplaced hope that Russia will one day reverse course and return Crimea to Ukraine—are not enough.
The EEU is precisely the sort of project that Brussels might have invented itself. It is the only institution capable of reducing Moscow’s reliance on military pressure and nationalist rhetoric.
The West needs a long-term Russia strategy that allows for cooperation but does not shy away from confrontation. The crisis began because of a tussle over whether Ukraine would participate in the Eastern Partnership, a European program aimed at integrating eastern European countries into the EU economy, or the Eurasian Economic Union (EEU), a competing trade bloc that Moscow established with Belarus and Kazakhstan this past January. Ironically, the best way of establishing a new working relationship with Russia will be through this very Russian project—an approach that top European officials, including German Chancellor Angela Merkel and French President François Hollande, have publicly backed.
Most Europeans agree that the EEU is a flawed economic project that will do more to serve Russia’s geostrategic ambitions than to bring prosperity to such places as Armenia and Kyrgyzstan. They also find it hard to believe that any country would choose a repressive Russian model of development over an enlightened European one. That choice, however, belongs to sovereign governments. And if the EU recognizes the right of Belarus and Kazakhstan to join a Russian integration project, Brussels can more credibly insist that Moscow should recognize the right of Georgia and Moldova, for example, to chose not to join.
Europe has failed to recognize what the EEU actually represents. To be sure, Moscow established the union in order to pose a geopolitical challenge to Brussels, but it sought to do so by engaging with other countries on the EU’s terms—through economic links rather than military competition. What’s more, the EEU is inclusive, largely devoid of Russian assertions of ethnic nationalism, and overtly committed to the concept of economic interdependence. And by virtue of their value in propping up a signature Russian initiative, the union’s members have Moscow’s ear. In fact, Belarus and Kazakhstan, owing to their veto power, may have the best shot at taming Russia’s aggression in eastern Ukraine.
In short, the EEU is precisely the sort of project that Brussels might have invented itself. It is the only institution capable of reducing Moscow’s reliance on military pressure and nationalist rhetoric. But instead of recognizing its own influence on the EEU, Brussels has interpreted Moscow’s imitation as an affront, missing a critical opportunity to moderate the conflict in Ukraine.
Engaging with Russia over its plans for the EEU would have been easier before the Ukraine crisis, but it is far from impossible now. An EU overture to the EEU, such as an invitation to establish formal diplomatic relations between the two organizations, would send a clear signal that Brussels recognizes Moscow’s right to an integration process of its own but firmly opposes Russia’s right to a sphere of influence. It would suggest that going forward, the European order will not be built only around the enlargement of the EU and NATO, which Russia bitterly opposes. Instead, it would set the stage for a peaceful competition between two integration projects, based on different philosophies but at least nominally aimed at pursuing similar goals.
Legitimizing the EEU would also drive a wedge between the world’s two largest authoritarian powers, China and Russia, who have grown dangerously close in recent years, with an outcome likely to strengthen the declining partner at the expense of the rising one. Indeed, Beijing’s expanded role in eastern Europe has been one of the least noticed and most consequential outcomes of the Ukraine crisis. As Brussels and Washington sanctioned Moscow over Crimea, Chinese President Xi Jinping launched two ambitious initiatives designed to restructure the Eurasian economy: the so-called Silk Road Economic Belt, a program of infrastructure and trade investments that will stretch from Bangkok to Budapest, and the Twenty-First-Century Maritime Silk Road, a similar program focused on the waterways between the South China Sea and the Mediterranean. The two projects, which Chinese officials have touted under the slogan “one-belt, one-road,” essentially aim to draw all the countries of Central Asia into China’s gravitational field, which would provide Beijing with a much-needed source of natural resources, foreign markets, and economic diversification.
But China’s approach to regional integration differs markedly from both Russian-style spheres of influence and EU-style regionalism. As the scholar David Arase has argued, rather than use multilateral treaties to liberalize markets or offer generous payoffs, China promises to give other countries access to its continuing growth primarily through investments in infrastructure, such as railways, highways, ports, pipelines, customs facilities, and so on. Beijing is setting itself up as an independent hub for global trade, operating through an overlapping series of bilateral ties. At present, little stands in the way of this plan; because its economy is so much larger than those in Central Asia, China can relegate its partners to a peripheral zone, where they have no formal processes for resolving disagreements and few ways of resisting China’s pull. If Western countries remain narrowly focused on combating Russia and undermining the EEU, China could emerge as the preeminent regional power—much in the same way that the United States came to dominate Europe after World War I.
Neither Europe nor the United States can afford to allow Xi’s grandiose vision to materialize. And so they must allow Russia to compete with China for influence in its own backyard. Of course, Brussels and Washington should not have any illusions about the Kremlin’s dream to divide and weaken the EU—but that is precisely why they should establish formal relations with the EEU rather than ignore it. A prolonged standoff with Russia will only put Europe’s distinctive order at further risk and allow Beijing to step in while Brussels and Moscow squabble. This least bad option isn’t perfect, but the others are far worse.