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The war in Ukraine has clear economic roots, but few economic winners

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A woman stands near her shelling-damaged house in the village of Novoselivka, Chernihiv Oblast, Ukraine. CC BY-ND 2.0, Photo: Oleksandr Ratushniak/UNDP Ukraine

In contemporary globalized capitalism, war economies always also contain a certain promise of prosperity. The war itself and the period that follows generate demand, facilitate new geopolitical hierarchies, and take care of excess capacity. Yet the horror of war and the singular misery of the two World Wars in particular tell a different story: it is vital that we talk about the link between war economy and economic growth, for when they are not destroying everyone and everything, wars also serve to favour certain interest groups, boost profits, and foster political advantages for some.

Lutz Brangsch is a research fellow at the Rosa Luxemburg Foundation’s Institute for Critical Social Analysis.

This article first appeared in maldekstra #16. Translated by Gegensatz Translation Collective.

The tragedy of our current moment consists of the fact that Russia’s war of conquest and Ukraine’s war of independence is at the same time a globalized war from which no one can desert, while simultaneously obscuring a new, global war that must end: namely, the war our mode of economic production wages against the foundation of life on earth, generating skyrocketing inequality and planetary destruction.

How does the current war fit into a wider historical context of globalized neoliberalism and expanding inequality? Who stands to gain, and who stands to lose the most? Kathrin Gerlof spoke with the Rosa Luxemburg Foundation’s Lutz Brangsch about these questions and more.

I grew up, in a system that is now history, with very simple truths. One of them was that economic interests lie behind every war. They serve as a basis for what unbridled capitalism wreaks in recurring patterns in order to achieve its profit rates. We’ve long known that things are not so simple, but it is interesting that much has been said and written about the causes of the new war that Russia started in February, yet comparatively little about what economic interests and desires are at play.

At stake is nothing less than the nature of the future global economic order. Until now, the confrontation with China was in the foreground. But that was only the first stage in the struggle for dominance in the global economy. The war over and in Ukraine escalated it in a completely new and unexpected way.

The big promise made to the former Soviet republics, that pure neoliberalization would bring prosperity, turned out to be hollow. The recommendations of Western advisors, the International Monetary Fund, the World Bank, and the World Trade Organization, have led to a situation in which the economic and social foundations for sustainable development could not even be laid. The way these countries were subsumed into the international division of labour completely deformed their political and economic systems.

Russia’s attempts to implement innovations and structural economic changes through public programmes failed on such a constrained playing field. Free trade and the free circulation of capital turned out to be limits. Thus, in terms of the reconfiguration of the global economic order, Russia’s interests completely coincide with those of China and other countries. That is the economic backdrop to this war. That said, there are of course many other reasons too.

Is there an attempt to obscure this context, or a lack of cognitive abilities, which we can also observe on the Left?

We are part of the problem. Even while in the most radical opposition and precisely as a social-democratic Left, from a global perspective we can live pretty well with things as they are. This has led to an identification with the political system that partially obscures the underbelly of the trans-Atlantic “community of shared values”.

Now it’s becoming patently clear that we have been too shallow and selective in our critique of capitalism. The erosion of the oft-invoked “budget of values”, such as can be understood from reading the annual report on basic human rights, and the critique of the global economic order, are mostly treated as two separate things. The implications of the “diversity of capitalisms” have not been understood.

We show solidarity with Argentina when the sovereign debt crisis escalates and the neoliberal attacks begin, but such a perspective has hardly developed toward Russia, or more precisely the Left in Russia. Russia and the former Soviet republics have not particularly been of interest to the Left in recent years. Solidarity with unions is kept within limits, despite a recognition of the efforts of particular organizations.

The fact that, given Russia’s dimensions in all respects, problems manifest and intensify there much more sharply is also still being neglected. In addition, surely for historical reasons, latent anti-Soviet attitudes are being displaced onto Russia — wrongly, as Russia was not the Soviet Union.

We’re caught in a kind of joint liability company?

One we can’t escape from. Given the completely different political constellations, the idea that “our” system could simply be transposed onto Russia, Ukraine, or Kazakhstan has always been an illusion, and is particularly so today. The bourgeoisie there has a completely different character — it is much more unscrupulous than in Western Europe or the US, for instance. The Left is even weaker than here, the union movement is not strong enough to slow down neoliberalization. This aspect of the Western economic system was never on the agenda of the reform advisors active in the former Soviet republics.

All of this makes the fixation on a military solution to the conflict particularly questionable. Even a defeat of Russia, however one imagines it, will not suddenly solve the problems and magically conjure up an elite inclined to social welfare and democracy.

Even a coup, an idea that is being pursued by the liberal opposition in Russia, could not manage that. Either might lead to a temporary solution regarding Ukraine, but would also lead to completely new and even sharper contradictions that would destroy whatever respite had been won and lead to new wars.

What then can still be won with and by this war, economically speaking? We have a long period behind us in which neoliberalism took on all kinds of forms in order to spread its interests throughout the world. One of those forms is Russian neoliberalism.

Concretely, since the beginning of the 1990s, nothing has been won by wars any more. Nowhere has stability been secured — we only need think of the Middle East or Afghanistan.

The economic goals invoked in the last few decades, such as the securing of supply chains and trade routes or access to raw materials, have hardly been achieved. Most countries effected by war are extremely unstable or ruled by authoritarian leaders. They are often dependent on international aid, so they cost more money. The only economic winners are the weapons manufacturers and other companies linked to warfare.

Yet we should also not forget the indirect effects, such as those on financial markets, in wartime. It all amounts to a massive redistribution that does not make the world a safer place.

It sounds like the economic calculations and goals of the Global North have not come to fruition.

If we consider the stability of the global economic order, then the calculations have not come to fruition. The war in Ukraine is part of Russia’s attempt to create an “other”, a second global economy that takes its own interests into account. The regulative capacity of the global economic order, which is based on the premises established by the neoliberal revolution in the 1970s and 1980s, has turned out to be incapable of solving the problems they created, as in the case of Russia, for instance.

Moreover, it could not solve these problems without calling its own essence, i.e. its strict market orientation, into question. With the rise of China and India, but also of Turkey and Iran, i.e. of completely new forms of capitalism, the old model’s capacity to integrate is completely exhausted.

The economic power that will ultimately be strengthened by and through this war is the US. This is a hypothesis — the proof is not yet at hand. Could the war ultimately have the effect of leading to a much starker distribution of economic power? Of consolidating centres of power?

It’s still completely unclear. This war is part of a wide-ranging crisis of the global economic system. If China, for example, reflects on the sanctions against Russia, becomes aware of the weaknesses of its own structure, and starts to tackle these weaknesses with the capacities it has developed, then this could of course lead, given the country’s resources, to the technological advantages now enjoyed by the US quickly evaporating.

Russia is aiming to modernize through import substitution, particularly with innovative products, and to open up new markets. Now as then, the world is split in relation to this war. Many countries of the Global South, which are of interest to the “West” as suppliers of raw materials or intelligent labour power, see a chance to liberate themselves from this dependency and to achieve a certain level of independence as part of another world order. That is also the calculation made by parts of the Russian elite. They’re aiming for multipolarity — China, the BRICS countries generally, Turkey, and Iran as recognized regional powers, and Russia not on the same level as China but still an independent player.

This is not unrealistic if we take into account that the rest of the world’s enthusiasm for the Western course is not as emphatic as people claim. The wounds are far too deep. At the moment it is unclear how things will turn out.

In addition, the US is too dependent on foreign economic relationships. It can retreat to its domestic market, but China also has this strength. The argument that China remains dependent on exports doesn’t mean it will stay that way and that the US will remain the decisive market. The dominant view that China is peripheral is behind the times. From China’s perspective, the EU is the periphery. But this all remains totally open, because it really depends on how the domestic political constellations develop in all countries concerned.

The novel aspect of the current situation perhaps consists of the fact that, in the end, a different world order, a different global economic order, may arise. Recent wars, those since the early 1990s, didn’t have such power.

That’s true. It’s not a matter of a change of hegemon, but of a fundamentally different constellation of power. It is the first war of the twenty-first century, and it cannot be compared to earlier wars.

The US invested much more on waging war in Syria and Iraq than Russia has done to date in Ukraine. As perverse as it sounds, when Putin says that Russia has not really begun a war, he is telling the truth. A completely new and different potential for escalation in all areas is possible here.

The present is sometimes described in the papers as the “frenzy of keeping pace with the zeitgeist”. The taboo-breaking of this war means it is well-suited to being blamed for all of the multifarious crises we face.

At issue is the self-image of the “West”, to use a gross generalization. Everything that goes wrong seems like a mere episode that can be overcome, supposedly the system works in general. Fundamental contradictions are represented as difficulties limited to a given situation. And that is precisely how the rest of the world can be plundered — in the belief that all the problems encountered can be managed.

Now a form of sufficiency is being enforced about which we might say — and we can see this with gas — that it is going to work “by disaster”, although we had the chance, despite the war, to do it “by design”. This imposed resources emergency actually offers the chance to change course. But there’s no popular support for that.

The EU and the US want to solve the problem without having to tackle it at the root. Even businesses suggest that everything is possible given subsidies and the relaxing of regulation.

That’s also how things are being tackled in Russia. Both sides are trying to square a circle. They know that the reproduction process of their economic system is in crisis. Both are attempting to remain exclusively within the framework of a market economy. Russia’s financial system has still not caught up with the current conditions. Its central bank has an extremely conservative monetary and financial policy, which forms part of the blockade of the innovative areas of the economy that are ripe for development.

Time is the decisive element in both of the systems presently confronting each other. Of course, every crisis situation will lead to creativity in the development of new forms. The question is whether people are willing to pivot to a military-Keynesian course, or whether we just let things unfold as they are and run headlong into the wall.

We initially gave this issue of maldekstra the working title “War: The Growth Machine”, but then we thought it was perhaps too simplistic and blunt, because things are no longer so straightforward. And yet it’s true: a reconstruction plan for Ukraine is already being drafted, funding is being called for and promised. In this sense, the working title is somehow still justified.

War remains a growth machine for some. But more important is the issue of the stability of relations as a guarantee of future growth, however we may define it.

There are conflicting images of the future, and all sides are willing to stake a lot on them. In Russia’s case, the crucial moment is 2024, when presidential elections will be held. The attempt to redefine Russia’s place in the global economy aims to stabilize the existing accumulation regime through modernization, while the war aims to force that modernization.

Russia’s growth projections strike me as excessively high. But that’s precisely what indicates stagnation in social relations. No one is expecting anything better. Keep everything at a certain level and make sure you don’t slip in too deep.

This approach will also set in here sooner or later. Given existing income and wealth disparities, the war will only be profitable for the upper classes at best. And that will also be the case with the reconstruction of Ukraine, in whatever area and under whatever authority.

But it must be financed in advance, before wealth flows back. If we don’t succeed in demilitarizing the region, it will always be a point of instability. Perhaps in that case then, both sides will continually shoot down newly built infrastructure.

But at some point that will no longer drive growth — with all the consequences that entails, which are not being discussed at present. Ecological consequences, for instance. If thousands of tonnes of metals, electronic waste, and other materials are lying around in a relatively small area, where there have already been other battles in the past, then decontamination would only consume more resources for the sake of making the region somewhat liveable.

We think a lot about how the present is and what catastrophic scenarios may eventuate. Do you have a more optimistic version of how things might unfold, one somehow still grounded in how things stand?

The optimistic version would be a freezing of the conflict. Anything else at present is illusory. If the losses on both sides become too heavy, a military solution could be impossible due to domestic unrest and related social risks.

Nationalism and patriotism also have their limits. The interests of the EU as an indirect party to the war are by no means unified. Poland, the Baltic states, France, Germany, Romania, Hungary, Greece, etc. — all have their own interests regarding the war in Ukraine and the circumstances accompanying it.

A drawn-out war would also be a burden for the US. If it becomes clear that it is no longer able to manage the conflict, then the others will realize that they no longer need to take the US into account in such cases. Everyone needs to come out of the conflict without losing face. And the costs of doing so will be shifted onto the Ukrainian and Russian people. Adjourning the war then,