War in Ukraine: as globalisation wanes expect the emergence of regional blocs

Published: Mar 2022

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The Ukraine war has once again put into the spotlight the relationship between globalisation on the one hand and liberalisation, growth, democratisation and peace on the other.

It is generally assumed that globalisation leads to more international cooperation and stability. This was also the assumption – certainly vis-à-vis the outside world – that underpinned the foreign agenda of leaders such as Bill Clinton and Tony Blair, who propagated free trade and open markets as the road to peace and prosperity. Although this causal relationship is nowhere near as strong as it seems and as many politicians want to suggest, globalisation is certainly able to contribute to a better international political climate in two ways:

  • Great powers generally opt for a different approach depending on whether they operate in a globalised or in a deglobalised world. Even when globalisation is rampant, great powers will not shun rivalry. However, they will be more inclined to use soft power instruments and they will be less likely to adopt a tough approach. If states are embedded in a world characterised by deglobalisation, there will be fewer brakes on their actions and they are more likely to escalate affairs via hard power – leading to war in extreme cases.
  • In the liberal US-led world order, China and Russia regularly chose to conform to this order in the 1990s and beyond – in the sense that they implemented economic reforms and made many political concessions in order to reap the benefits from being embedded in the global economy. For example, in 1994 Russia agreed to the Budapest Memorandum (which was basically intended to prevent Russian interference in Belarus, Kazakhstan and Ukraine) and Moscow reluctantly agreed to NATO expansion in Eastern Europe. China increasingly opened up its economy at the time and even became a member of the WTO, in spite of its conflicts with the West that might have knocked China off its globalisation course. Importantly, it was not just globalisation that made China and Russia back off so as to be able to profit economically. Indeed, the US, as the biggest advocate of that globalised, liberal world order, seemed virtually untouchable. Others therefore had little choice but to partly dance to the tune of Washington in order to participate in this world order.

In any event, the most plausible conclusion is that globalisation largely resulted from geopolitical stability in the post-Cold War era. Globalisation seems to require (more) cooperation between countries, whereby globalisation may subsequently solidify this cooperation and trigger some sort of positive spiral that leads to more prosperity and stability. But this is certainly not a law set in stone. Just as globalisation is not the cause of improved relations between great powers, so too is deglobalisation not the driver of deteriorating geopolitical relations.

As Professor of International Relations Norrin M Ripsman wrote in International Affairs: “The liberal economic order…appears to be a casualty, rather than a catalyst, of broader political and geostrategic changes such as waning US hegemony, nationalist demands for protection and the emergence of populist leaders less committed to the liberal agenda.”

If deglobalisation mainly results from a deteriorating geopolitical climate – rather than triggering such a climate – then this does not bode well for global trade, international capital flows and other forms of globalisation.

At any rate, there have been consistent attempts in recent decades to downplay the importance of geopolitics and hard power. Violence was thought to have increasingly less impact as a means of power, because the world was said to be/is dominated by capital flows, trade and the internet, among other factors. Just before the Russian invasion, we heard a renowned foreign affairs commentator claim that “war with conventional weapons is hopelessly old-fashioned.” Obviously, this was/is naive.

The world has known four regimes in the last century, each of which has killed over ten million people: the Soviet Union from 1917-1987 (62 million), the Communist Party of China from 1949-1987 (35 million), the Nazis (21 million) and the Chinese nationalists between 1928 and 1949 (ten million). After the Second World War, 1.5-2 million Germans, among others, were murdered in and around Poland, and there were the atrocities in Rwanda and Cambodia, among other places. In short, in the words of Dutch writer Arnon Grunberg: “Excessive violence has been a constant in human history. The idea that we have reached the pinnacle of the civilisation process and left the aggressive impulse behind us has always proved haughty.”

Humankind has fairly regularly fought large-scale wars since its origin and will continue to do so in all likelihood. Certainly as long as the world remains divided between democratic and autocratic political systems.

These autocracies persist for a long time and, according to some analysts, are even prevailing. In light of Russia’s current actions, an essay by Anne Applebaum published several months ago in The Atlantic is particularly topical. It is certainly possible to critique the article, but Applebaum makes many striking observations that we should keep in mind:

  • Autocracies are not run by a single bad guy, but by networks of kleptocratic financial structures, security services (military, police, militias and surveillance) and professional propaganda channels. These authoritarian networks are often linked to similar networks in other dictatorships, but are also – actively and passively – supported by numerous players in the democratic world (lawyers, trust offices, banks, etcetera).
  • These autocratic networks do not operate as a bloc or alliance (as, for example, during the Cold War or during the Second World War), but as a loose association based on deals rather than ideals; Applebaum speaks of Autocracy Inc.
  • As an autocrat, you do not usually have to resort to mass incarceration, abuse and/or murdering of opponents. It will suffice to pick a few prominent figures and crack down on them. The rest will largely keep quiet.
  • The lessons of 1989 and the Arab Spring were not lost on autocrats: democratic revolutions can be extremely contagious. This is why Putin was so shocked by the revolutions in Georgia, Ukraine and Kyrgyzstan about a decade and a half ago, and why he brutally crushed protests in his own country in the ensuing years.
  • Putin – as well as other authoritarian leaders, such as Lukashenko and Assad – is convinced that a regime change in his country will irrevocably lead to his imprisonment, exile or death. This means that there are barely any limits on what Putin and associates are willing to do to stay in power.

The Ukraine war will accelerate and deepen the trend of deglobalisation and bloc formation, which we have often touched upon in several of our reports. The corona pandemic had already made countries very aware of their reliance on international supply lines, and the current geopolitical instability is compounding this to a considerable extent. To an increasing extent, companies will move production closer to home, increasingly locating production sites and supply companies in countries with more stable political structures and choosing security of supply over the cheapest options. More broadly, it is quite likely that we will see more and more bloc formation with America as the centre of one bloc and China as leader of the other bloc. This will exert structural upward pressure on inflation, as production costs will rise.

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