A global ‘Democratic Market’ is needed to protect democracy

Putin has shot himself in the foot. His recent expropriations of Western companies will actually help the West by damaging the Russian economy.

Expropriating the Russian assets of French company Danone and Danish company Carlsberg’s Baltika subsidiary is reprehensible, but Putin is unwittingly actually harming Russia. He has bitten the hand that feeds him.

The more links that are cut between Russia and the West, the more the Russian economy will suffer. Russia will find it more difficult to finance its aggression, and Russian people will become more disillusioned with the Russian regime as they become poorer.

It doesn’t matter whether the Russian economy is disconnected by Western government sanctions, Western companies’ ethical voluntary exits, or by Putin expropriating the assets of unethical companies. They all lead to Russia becoming disconnected from the global economy.

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Desert island economy

Russia should have been unplugged economically when it invaded Ukraine on Feb. 24, 2022. Western governments failed to implement widespread sanctions, and the companies that have been embarrassed out of Russia are helping to make up for this failure.

Anything Putin does to disconnect Russia from Western investment and markets actually helps us finish the job we have failed to do fully ourselves.

In addition to actual expropriations, Western companies will assess the risk of being expropriated on top of the embarrassment of being seen to profit from Russia. Russia is steadily moving in the direction of becoming a “desert island economy.”

If we can make Russia a “desert island economy,” it will be destroyed financially because Russia is more dependent on exports than any other major nation as a percentage of its GNP, producing vastly more oil, gas, and minerals than its needs. This dependence on the West is Russia’s “Achilles’ heel.” If unplugged, it will not be able to survive as a stand-alone economy.

Read also: Risk of ‘big disruptions’ high in grain markets, says Black Sea expert

Why economic separation is good

The West should not pull its punches but do everything to weaken the Russian economy. We are already fighting a proxy war with Russia militarily and are fighting an open war for values. By any measure, Putin is an enemy of every democratic nation and person, and its market must be treated like an “enemy economy.”

The West should encourage the nascent trend toward two economic blocs in the world.

Russia will become more and more dependent on China, which is a much less rich market than OECD nations. If China supports Russia with excess trade to fill the gap, it will be doing something that hasn’t been economically optimal to date, just as Eastern bloc nations were forced to trade with each other before the break-up of the USSR.

The pain of this inferior economic opportunity will be suffered either by Russia taking the hit on pricing or by China having to subsidize Russia, which will only serve to weaken one or both of these undemocratic nations.

Read also: Kenneth Rogoff: Europe must lead Ukraine’s reconstruction

The end game

Unplugging Russia is the first step to separate the world into two economic blocs: a “Democratic Market” and an “Undemocratic Market.” Autocratic and totalitarian countries like Russia and China will cooperate with each other due to a lack of alternatives and become poorer and less powerful together.

The “Democratic Market” will be many times larger and will make democratic nations much richer than countries run by dictators. This would eventually consist of free trade between the U.S., EU, U.K., India, and every democratic country, which would impose barriers to the totalitarian and autocratic world.

We need to shift the wealth gap from dividing people and from dividing developed and developing economies, and intentionally apply it to democratic and undemocratic nations.

If an undemocratic nation wants to escape economic decline, it will need to become democratic. Its people will be motivated to remove their dictator so they can be welcomed into the “Democratic Market.” This will be a free market in which economic survival is the reward for democratic behavior and economic failure is the consequence of undemocratic or autocratic behavior.

The way we play our economic cards will determine whether we give democracy a long-term chance on the planet or we continue to finance totalitarianism to the point where it overpowers democracy in the end.

Editor’s Note: The opinions expressed in the op-ed section are those of the authors and do not purport to reflect the views of the Kyiv Independent.

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