Hard Power and the Re-Industrialization of Russia

29 december 2011

Material Production as an Instrument of National Power

Nikolay Spasskiy is Ambassador Extraordinary and Plenipotentiary. He holds a Doctorate in Political Science.

Resume: Since the time of Kievan Rus, Russia has been a key element of the world order through a multitude of circumstances. Therefore, in strengthening Russia we will strengthen the entire world order and render it more durable. In the overall scheme of things, this step will meet the real strategic interests of all responsible members of the international community, including the EU, the U.S., China and India.

In his book Microtrends, American sociologist Mark Penn considers contemporary tendencies, such as how people fall in love, make friends, and raise children. According to Penn’s data, men are delaying fatherhood.

I represent this trend and must say that being a father at a later age is a daunting prospect. Among other things, belated fatherhood leads one to unexpected conclusions.

Clearly, by virtue of natural life expectancy, a belated father will have little chance to see his daughter grow up to be well-established and safe. Therefore he cannot be indifferent to what the world she is destined to live in will be like seventy years from now.

I am not going to indulge in social forecasting, for it is an unrewarding activity. Consider instead some facts of history.

No other period in human history had such a glittering start as the 20th century. At that time all the great powers underwent an economic boom, world trade expanded, and dependent territories and colonies were drawn into a common cultural and economic space. These changes were driven by globalization, not exactly like the one of today, but effective nonetheless. Democracy, the supremacy of law, and civil society were emerging and gaining momentum. In Europe, Russia, and the United States, cultural and intellectual life flourished. The surge of creative endeavor in literature, music, fine arts and architecture had been unparalleled in intensity and scope in Europe since the Renaissance.

However, all these promising trends at the start of the 20th century resulted in the most brutal revolution of all times and the two bloodiest wars in history. The rise of civil society gave way to the emergence of totalitarian regimes – Soviet, Fascist, Nazi, Maoist and others – across the globe. Countless disasters and misfortunes afflicted humanity in the 20th century. Who could have thought history would take that road? Yet an alternate path is possible. Today’s chaotic, imbalanced world, intermittently exploding with extremism, does not necessarily signal an imminent universal catastrophe.

Therefore one should refrain from predictions, though such restraint should not be carried to absurdity. There are two types of predictions: long-term forecasting and elementary analysis. If a country is heading towards economic collapse and widespread socio-political crisis, the chances that country will see an economic upturn are very slim if it does not make drastic changes in its policy.

 

BEHIND SOFT POWER

Much has been said about the world’s sweeping changes in the 21st century and its unpredictable development teeming with new challenges and risks, which we will not repeat here. Instead, recall this fundamental law, well-known but often neglected: no matter how fast the world changes, it still fashions itself on the balance of power.

Indeed, the parameters of power are changing. During the First Crusade at the end of the 11th century, the key factor was a territory’s ability to raise and support the most armored knights possible. Today the measure of a powerful country is different, but the bases of power remain the same. These include population and territory large enough to foster a strong modern economy and large armed forces. In fact, the critical factor is an economy capable of maintaining the people’s quality of life, expansion, and military construction. Finally, the military forces must possess the potential to contain foreign aggression and guarantee its country’s global position in time of peace. Moreover, it must protect the country’s independence and territorial integrity in time of war.

The economy remains the central element of power, though one should not succumb to the lures of faddish theories.

There is no doubt that a digital economy is beneficial. The numbers illustrating the capitalization of such companies as Microsoft, Apple, Google and Facebook are fascinating when compared to the traditional giants of the energy and electrical engineering industries (see Table 1).

Table 1. Market capitalization as of Dec. 31, 2010, $ bln

ExxonMobil 417

Apple 321

Royal Dutch Shell 228

Microsoft 213

General Electric 212

IBM 198

Gazprom 190

Google 147

Toyota 139

Facebook 70

Source: Financial Times Global 500

It goes without saying that Apple, Google and Facebook are the most significant agents of American influence and power. Do not forget the simple truth that people do not live and move in virtual space. They live in real houses, built of reinforced concrete. They ride in cars made of steel, plastic and fiberglass. They fly planes and navigate boats, which are also made of materials with specific parameters such as weight and density. Millions of tons of oil and billions of cubic meters of natural gas are required to produce, heat, cool and run these features of contemporary life.

One can change over to more modern and economical materials, but, for the foreseeable future, it is impossible to completely reject the material conditions of existence in a human society and to leap into the “realm of pure spirit.” We can and should implement energy-saving technologies, harness alternative sources of energy, and speed up the development of hydrogen and thermonuclear energy. But it would be naХve to hope that the energy required to support life and the progress of approximately seven billion people would be produced freely and easily without the extensive use of different materials or without massive investment in human labor and energy.

I dwell on these seemingly obvious things in order to emphasize a simple and, apparently, not-always-obvious point. In order to become a great power in the modern world, a state needs “iron and steel.” Not in the ton-per-capita style of Soviet statistics that drew sarcastic remarks from some Soviet dissidents such as Yuz Aleshkovsky, but in the sense of “hardware.” In other words, the state must be able to produce the material assets, which require manpower and material resources, that determine modern economic, scientific and military-technical progress.

If a state – even the most highly developed one – lacks modern, highly efficient production that minimizes the use of human labor and material resources, it cannot expect that it will retain the commanding heights in world politics and economy for long, i.e., remain a world power. Other, “soft” elements of power, such as the strength of financial institutions, higher education, mass communications and culture, research and development, can reinforce and partially compensate for the lack of ‘hard power’, to use the term coined by Joseph Nye. Soft power alone cannot replace the lack of hard power. It can reinforce hard power, or even substitute for it for a while, but soft power cannot replace it.

Historical examples showing that soft power can beat hard power, if one makes no allowances for human stupidity (the role of this factor in history is incredibly high), are revealed to be fictitious, as a rule. Hard power almost always hides behind the seeming success of soft power.

An illustration of this principle comes from the Middle Ages. The Florentine Medici family agreed to subsidize King Henry IV of France, who had gained control over all France after long religious wars and desperately needed loans. The Grand Duke Ferdinando I of Tuscany (1587-1605) provided the money for these loans to gain leverage on the policy of Henry IV. To consolidate his influence, Ferdinando I arranged the marriage of his niece Marie de Medici and Henry IV (1600). At the beginning of the 17th century, France, along with Spain, was the most powerful country in Europe, while the Grand Duchy of Tuscany was a small territory of approximately 20 thousand square kilometers and a population of 700,000. This example illustrates that, if correctly applied, soft power can achieve much, especially if there is hard power behind it.

There was such power behind Ferdinando I. In Rome, members of the Florentine Medici family regularly ascended to the papacy. The Vatican at that time had not only a powerful ideological potential (although the days of kings walking barefoot in the snow to petition popes lent fond memories to 1077), but also controlled half of Italy and a solid complement of troops.

 

THE PERILS OF DE-INDUSTRIALIZATION

Reduced to a basic thesis, soft power can temporarily work as a safety net to compensate for a shortage of certain components of hard power, but cannot fully replace it. It is for this reason that the U.S., despite the gradual degradation of its heavy industry and workforce, still remains and will remain the only superpower for a while. However, if current trends continue, the U.S. will inevitably be replaced in this capacity by China.

I must stipulate that I will not argue with Joseph Nye; in fact, I am in complete agreement with him. Without advancing any new discoveries, Nye clearly articulated, as no one before him had, a fundamentally important idea: the dramatically increasing importance of soft power elements in comparison with hard power. This process has been ongoing since the cavemen, although even then strong muscles and sharp teeth were not always the most decisive assets. One also had to be cunning and smart to properly hide in ambush and to choose the right time to attack. This process has acquired a new dimension in recent times in the context of globalization and total access to information.

The biggest foe of any new theory is theory itself. Nye wrote of a relative increase in the value of soft power. His followers ineptly take as guaranteed that soft power can replace hard power. This position is categorically wrong. It is not true today, and it will not be so in the foreseeable future. Even when fighting robots replace soldiers, they will be real robots (not virtual ones) with real weight and spatial parameters, and consume real energy.

I have recently finished reading A Story of My People, by the Italian Edoardo Nesi. For this work he won the 2011 Strega Prize, the most prestigious literary award in Italy. Though this award is not the equal of a Goncourt or Booker because the Strega is a purely Italian honor, it has not been devalued like many other once respectable and prestigious national awards. In Italy, the announcement of the Strega winner is not only a literary event, but also a political one.

By genre, Nesi’s book is purely Italian. It is partly a historical and biographical narrative, and partly a tersely worded journalistic essay. Nesi illustrates the story of the rise, success and collapse of the textile industry in central Italy through the example of three generations of his own family and the family business, in Prato near Florence, which failed, in the context of open borders, in competition with cheap Chinese products. Though it is possible to disagree with the means by which Nesi explains the causes of this disaster and with the prescriptions he offers, his diagnosis is correct.

Nesi chronicles the de-industrialization of Italy, in essence the de-industrialization of the entire Western world, which includes Russia.

Russia still remains, however we may posture and albeit with reservations, an integral part of the Western world – historically, politically and in socio-cultural and civil relations. We have no alliance with the U.S., we are not joining the European Union, and we have no reason to do so. I myself have written much on the preference for an autonomous way for Russia, although it does not change the essentials of Russia’s position.

Russia’s roots are in Byzantium, but Western civilization is where it belongs. We were untouched by the Renaissance and the Reformation, but we participated limitedly in the Enlightenment. From the West came Peter the Great’s modernization and Catherine the Great’s imperialism, Mikhail Speransky’s reforms and the Social-Democratic infection. The Bolshevik revolution with all of its national flavor was a purely Western phenomenon, as the anti-Soviet revolution of 1991 was a purely Western phenomenon in its drive, pathos and attributes.

And today, even when Russia argues with the West, takes offense, and suffers from complexes, it still remains in the realm of Western values and principles. To position itself as the natural leader of the Third World is normal and right for a country that claims the status of an independent power. Though, thank God, there is little that Russia shares with the Third World.

The de-industrialization of the Western world, I repeat, affects Russia directly. Moreover, many aspects of this trend manifest themselves in this country in harsher, cruder, and more vulgar ways than in Europe or the U.S., because Russia has not built sufficiently effective shock-absorbing mechanisms after the collapse of the Soviet Union.

THE CONTOURS OF A DIFFERENT WORLD

Consider these facts, such as the changes in the shares of major world powers in global industrial production against the background of a classic indicator of hard power, such as steel production in absolute terms (see Table 2 and 3).

Table 2. Share in world industrial production, %

 


Sources: World Economy: Global Trends over 100 Years. Moscow: Yurist Publishers, 2003 (in Russian); Financial Times.

 

Table 3. Production of steel, mln tons

 


Sources: United States Geological Survey (USGS); World Economy: Exit from the Crisis. Moscow: IMEMO RAN, 2010 (in Russian); Pacific Partnership: United States-Japan Trade, Lexington Books; Russia in the Surrounding World: 2002 (Analytical Annual Report), Moscow: MNEPU, 2002 (in Russian); Robert C. Hsu, The MIT Encyclopedia of the Japanese Economy, MIT Press, 1999; Ezra F.Vogel, Deng Xiaoping and the Transformation of China, Harvard University Press, 2011.

 

It is evident that Russia is the leader of the West’s de-industrialization. Everyday experience and sights confirm this conclusion only too well.

Has any one of you ever happened to use a personal computer of Russian manufacture? I did, only once in my life, when in the late 1980s computers began to be installed at the Russian Foreign Affairs Ministry. There were two options. One could get a standard small IBM per room, or an Elektronika, of domestic manufacture, but, truly personal, for one’s desk. As an individualist by birth, I decided on an Elektronika only to bitterly regret my choice later as this experience instilled in me an aversion to PCs for many years to come.

How often today do Russians see Russian-made cars on the streets of their cities? Or when did they last see a Russian airplane, an Ilyushin, Tupolev or Yakovlev, make an international flight? The current drastic situation in the auto and aircraft-manufacturing industries is illustrated by the figures in Table 4 and 5.

Table 4. Production of cars in 2010, mln

Russia 1. 4

U.S. 7. 76

China 18. 26

Source: OICA 2010 statistics.

Table 5. Production of passenger airliners in 2010, units

Russia 7

U.S. 459

China 32

Sources: Russian presidential website; U.S. Census Bureau, Statistical Abstract of the United States; Xinhua news agency.

De-industrialization is not confined to a drop in the production of certain goods within national borders, though that is the main criterion. De-industrialization can also manifest itself in the extent to which the population is willing and able to take part in material production.

Nesi emotionally describes how in Prato clandestine textile shops emerge everywhere alongside the closings of local, mostly family-run textile workshops, which had taken special pride in the high quality of their products, respected their employees and complied with labor laws. In the fly-by-night workshops, illegal Chinese migrants live in appalling conditions and convert imported Chinese materials into massive quantities of counterfeit goods of famous brands carrying a ‘Made in Italy’ label.

This trend has become especially widespread in the U.S. According to various estimates, the U.S. now has 11 million illegal immigrants, though, clearly, there are no accurate statistics. They are employed either in the services sector, in jobs that are considered non-prestigious, hard and dirty, or in the equally non-prestigious material production industries. Thus highly qualified labor, with its professional pride, ethics and culture, is being destroyed, which in turn erodes the material matrix of the national way of life. The ugly and damaging effects of this phenomenon can be clearly seen in the American film Fast Food Nation.

We are being confronted by a large-scale, long-term and serious trend. In historical context it indicates that the center of industrial production is drifting from the West, from the Euro-Atlantic area, which includes the European part of Russia (with a population, including the Urals, of 117 million, or 82 percent of the country’s population) towards the East and the South, i.e., primarily to China and partly to India. Lagging slightly behind, the center of world economic power is moving in the same direction, and with it is shifting the center of military power, although with significant delay. Even if these shifts culminate in the 22nd century, the facts of the matter do not change.

The duration of the delay is determined by many factors. The primary factor is the compensatory effect of American soft power. No doubt, the U.S. has gained a huge advantage in terms of soft power in a wide range of factors, some of which include banks, universities, patents, the media, and the Internet. Also, the U.S. still possesses an enormous superiority in hard power: its army, air force and navy. Nonetheless, the tendency remains; moreover, we have seen unhappy examples of how it works.

There once was, around the beginning of the 20th century, a fading superpower, Britain, which had an impressive advantage in several key factors of hard power (see Table 6).

Table 6. Great powers in 1914

 


Sources: Niall Ferguson, The Pity of War, Basic Books, 1999; Lapinsky P.L., London Naval Conference, Moscow, 1930 (in Russian); Kolenkovsky A.K. The Maneuvering Period of the First Imperialist World War of 1914. – Moscow: Voyenizdat NKO SSSR, 1940 (in Russian).

 

What happened? Through enormous effort Britain repelled the challenge of an emerging superpower, Germany, which had already overtaken it by the main parameters of material production, but it could not compete with the United States, and in fact voluntarily ceded to the U.S. the privileged position in the world. Britain’s decline from first place in the world took a mere fifty years.

Of course, there are no absolute historical analogies. The contemporary U.S. is not Britain of the beginning of the 20th century; the accumulated U.S. advantage by far exceeds Britain’s previous one. This is all true. However, if the world continues to evolve according to the current model, the U.S. will be doomed to suffer the same plight as its Anglo-Saxon predecessor. For this reason we again return to the question: What will this situation signify for the global balance of power, for the system of international relations, and for Russia in particular?

First of all, China would emerge as the dominant world power and, therefore, by analogy with the U.S., as an international arbitrator, global financier and trendsetter in global culture, lifestyle and daily routine. Of course, not everyone would eat with chopsticks, though this may be not far from the truth. Yet the aggregate effect would be enormous.

It would be a totally different world, with different rules of the game, with a different mentality and philosophy of life, and style of living. Here, perhaps, I must elaborate.

We Europeans, who have to our credit the French Revolution and the October Socialist Revolution, the Gulag, Auschwitz, genocide and three of the four classical totalitarian ideologies: fascism, Nazism and communism (for Maoism lies on the Chinese conscience), are not in the position to moralize. We have no moral right to lecture anyone else, not even the Tutsi and Hutu or the Cambodians. It is one thing to take a hypocritical moralizing stance, but to analyze the facts and call a spade a spade is quite a different affair.

Whether life would get better or worse for all of us if China became the dominant world power in terms of human rights, the triumph of democracy, quality of life, freedom of the Internet, the presence of mobile phones, and the availability of drinking water and toilets per capita, I cannot say. But one thing I do know: it would be a different world and a different life for us all.

Thus far, regardless of many changes of world leader, we have stayed within one historical paradigm, i.e., Western/European. Classical Greece, Ancient Rome, Byzantium, the Holy Roman Empire, Charles V, France under Louis XIV, England for two centuries, the United States and even the Soviet Union under Stalin and Brezhnev did not violate this historical paradigm. China is different. It is not Europe, even though it can reach across the Atlantic to America and through of the Urals to Siberia. It is not the West. It is the East, a different world. It might be better than ours – kinder, more moral, more spiritual and more sophisticated, who knows? But one thing is clear: it is different.

For this reason alone it is enough to heed basic common sense and follow a fundamental instinct of human nature – caution in the face of that which is unknown and unfamiliar. In Russia we should try to adjust to this trend. It would not be excessive to prepare for the advent of a new China-centered world and to minimize its impact on us. There is only one path for such an objective: stop the de-industrialization of Russia.

I put a special emphasis on Russia not only because it is my country, but also because Russia could play an important role in geopolitical reconfiguration in coming decades. Russia has certain advantages, including ones not connected to oil and gas, that neither the U.S. nor the EU has today.

Before enumerating these advantages, it is necessary to digress for a moment.

BALANCING INTERNAL POLICIES

Disregarding the usual Marxist categories and speculating at the level of common sense, every society appears as a dynamic balance of three components: the government, business and the people.

If the government and business put too much pressure on the people, and the people, in both absolute and relative terms, live poorly when compared to their neighbors, the people will naturally protest and rebel. Conversely, if the people live well and are protected by many social guarantees, if they have too many rights, especially socio-economic ones, while having few responsibilities, then the people naturally lose incentive to work and will simply stop working.

The same holds true for business.

If the government gives business too much freedom and too many rights to reap uncontrolled super-profits, business loses its sense of moderation, and in a drive for more profits exploits employees too vigorously. Then the people rise in revolt.

If, on other hand, the government imposes all kinds of restrictions on business in favor of the employees, if it imposes too many taxes and levies on business, if it gives trade unions huge rights, then doing business and investing become unprofitable.

Business will naturally try to defy these restrictions and regulations. But challenging the government is useless in principle. Therefore, in such a situation business has two options. One is to reconcile itself to minimum profitability, abandon innovation, invent no new products and services, and generally do nothing, i.e., behave the way businesses usually do under state capitalism. The other option is to move production outside the country, and so invest and make profits elsewhere.

Finally, the government.

When it is too soft and cannot establish for business and the people uniform, clear and understandable rules of the game, however harsh and unjust they may seem (because justice is relative), then basic social needs fail to be met. Security starts to crumble; chaos ensues as it did in February 1917 or August 1991 in Russia, and a revolutionary situation emerges, to quote Lenin. The government cannot govern, business does not want to invest and produce, and the people do not want to work.

When the governmental policy is too strict, when it fetters business with excessive regulations and does not give the people even the most elementary rights and freedoms, then they both will protest.

For society to function properly, a balance must be struck concerning the rights and duties of these three main elements in relation to each other. Business should be encouraged to invest and produce. The people should want to work and work well. The government should ensure maximally favorable conditions for business and the people, without giving preference to either.

Most importantly, the government should not engage in social demagogy, as the inevitable result of social demagogy in favor of employees is disproportionate concessions for business, because the system would not function otherwise. These concessions are made not in the legal sphere, but through corruption.

The clearest example of this type of arrangement in developed countries is Italy. Its system of social guarantees is bloated to absurdity, allowing employees to essentially simulate work rather than working, as was the situation in the Soviet Union. Business is compensated by an equally inflated system of kickbacks, manifested by complete governmental tolerance of the huge shadow economy, widespread non-payment of taxes, public finance abuse, and so forth.

A state such as Italy can stay afloat until the first serious social panic. Thereafter follows a crash, either in the form of a government collapse, like what happened in Russia in 1917 and 1991, or the establishment of a dictatorship. It is true that the possibility exists of the rise of a hardline, right-wing liberal leader with a mandate to correct the direction of social development, like Margaret Thatcher in Britain or Ronald Reagan in the U.S. Only if one is very lucky will this take place.

RECIPES FOR REVIVAL

Any society must produce in order to exist. Material production is the basis of national power. When a society ceases to produce, it undermines the basis of its national power, and in the long run is doomed to self-destruction.

I have already written on this topic elsewhere and on a different occasion. The government of any country should have a vision of the future to present to the people and business. If this vision is convincing and if the people and business believe that the government has the power and the will to bring it to life, then they will accept leadership by the government and voluntarily agree to the restrictions and rules required for the program to materialize.

Then business will invest within the country, and where needed, such as in innovative technologies and in the heavy and defense industries. The people will begin to work diligently and respect the existing social hierarchy, recognizing that people are not equal and their incomes differ. They will also recognize that not everyone can become a super-financier, a football star, or a top model, and that someone has to work steel and plow the land, especially as metalworking and plowing these days are done with the use of computerized cutting-edge equipment. And that these occupations are decent and respected.

A society that has developed such a set of values and principles not only will provide its citizens with a satisfactory life, but, as a rule, will win the competition with other powers.

Now, resuming our topic, reconsider Russia. By my assertion that Russia has a major advantage over its Western competitors, I meant that the government does not need to win the support of the voters to initiate its policy for national re-unification and re-industrialization. The authorities need only to articulate their program properly and to explain it honestly to the people and business. Russians, even the younger generation, well remember the 1990s and are ready to follow a strong government, provided that it is able to explain its plans.

Russia has the ability to revive industrial production and agriculture in a short timeframe, provided the government has offered an honest and clear social contract. In taking this action, Russia will markedly strengthen the fundamental principles of its hard power. (A few helicopter carriers and nuclear submarines armed with ballistic missiles are not enough.) Only then will Russia’s bid for the position of an independent power appear impressive.

Concurrently, Russia will secure its position in relation to the Western community: no longer an outsider, however influential, but a full-fledged member with special status, autonomy and independence. Furthermore, Russia will emerge as one of the leaders of that community.

Since the time of Kievan Rus, Russia has been a key element of the world order through a multitude of circumstances. Therefore, in strengthening Russia we will strengthen the entire world order and render it more durable. In the overall scheme of things, this step will meet the real strategic interests of all responsible members of the international community, including the EU, the U.S., China and India.

In fact, the true intention of the upcoming extended six-year presidency must be to lay the foundations of this policy. Six years is a sufficiently long time to accomplish a great deal, but for this to happen we need to understand some simple points.

The matter at hand is a major adjustment of the general trend in Russia’s development. No more, no less. This current trend has halted the creeping disintegration of the Russian state, rebuilt it almost anew, raised living standards, and restored the positive self-image of large segments of the population. Yet it is not enough. This trend cannot guarantee Russia a place among the leading powers of the 21st century. It would be foolish to expect so. The trend must be changed.

In order for this change to occur, we all simply must begin to work more and better, to strive for something tangible for the benefit of country and people. The ‘what’ does not matter: a nice car, a computer program or a beefsteak.

Only if all of us, or at least a consolidated majority of us, change our attitude towards work and life, will Russia be able to change the trajectory of its development. Then the re-industrialization of the country can occur. Hard power and soft power will begin to accumulate. The specter of a new decay with which we are being menaced on the airwaves will remain a shadow. Most importantly, our children will know what their fathers accomplished for a strong Russia.

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