The New World Disorder

April 23, 2022

We should embrace the ideas and values that made the West great and that helped people prosper around the world. Our freedom is our most precious tool for addressing the problems and opportunities that lie before us.

Two events took place in 1989 that signaled two possible directions for the world. On June 4, the Chinese Army massacred thousands of protesting students at Tiananmen Square in Beijing. On November 9, the Berlin Wall fell when the East German government declared that its citizens were free to cross the border to the West. One event signaled a repressive regime unwilling to let go of power; the other signaled the end of such a regime.

Upon the dissolution of the USSR, its constituent Soviet Socialist Republics (SSRs) gained their independence. The USSR had occupied Estonia, Latvia, and Lithuania during World War II, and these countries also regained their freedom. Former Warsaw Pact countries sought a return to democracy and protection from Russia.

Most joined NATO. East Germany gained NATO membership first through its reunification with West Germany in 1990. In 1999, Poland, Hungary, and the Czech Republic joined, followed by Bulgaria, Estonia, Latvia, Lithuania, Romania, Slovakia, and Slovenia in 2004. Albania and Croatia joined in 2009, Montenegro in 2017, and North Macedonia in 2020.

Former Warsaw Pact members also joined the European Union. The Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia, and Slovenia joined in 2004, Romania and Bulgaria in 2007, and Croatia in 2015.

Russia complained about the NATO expansion, but the countries that joined NATO and the EU wanted to be part of an oecumene that brought freedom, prosperity – and protection from Russia.

Within Russia, liberal democracy did not take hold despite engagement and assistance from the West. The collapse of the USSR and ensuing economic reforms brought opportunity and prosperity for many, but it also brought chaos and corruption. The government provided loans to private investors who wanted to acquire privatized state-owned enterprises. This gave rise to a new class of enormously wealthy and politically influential businessmen – The Oligarchs. State-owned enterprises were often sold for a fraction of their actual value, which was difficult to determine in a new economy created out of thin air.

Perhaps it was naive to expect Russia to become a modern democratic country. It had no history of political freedom, and inside Russia, governance was shaky. The brand-new Russian Federation had territories, and constituent republics stretched over eleven time zones. Many were replete with corruption, ethnic tensions, and resentment against Russian rule. Russia was still a nuclear power, but it was vulnerable economically and demographically. The “defection” of former allies to a new and more attractive value network was viewed by Moscow as a threat.

During two decades under Vladimir Putin, Russians have experienced steadily increasing authoritarianism, including suppression of the media and the jailing and murder of political opponents and journalists. Putin has increasingly appealed to nationalism and patriotism. It has worked well enough to launch an invasion into Ukraine while making it illegal to call it a war. Even now, Putin appears to have the support of a majority of Russians.

The World Order that emerged after the Second World War was one where democracies and global trade were protected by military might. NATO, to which the US made the most significant contribution, held the USSR and its allies at bay. The US also forged alliances and provided security guarantees elsewhere in the world. The doctrine of Mutually Assured Destruction made it clear that no one could “win” in a global nuclear conflict.

Leaders must now face the fact that the post-war security architecture is no longer functioning, in large part because Russia no longer feels bound by past agreements and is willing to use force against its neighbors. Instead of being deterred by nuclear weapons, Russia hides behind them, threatening to use these weapons if the West interferes directly in Ukraine.

The security architecture breakdown started some years ago. In a 1994 agreement known as the Budapest Memorandum, Russia, the US, and the UK guaranteed an independent Ukraine’s security and territorial integrity. The same agreement required Ukraine to give up its Soviet-era nuclear weapons. In 2008, Russia invaded Georgia. In 2014, Russia annexed Crimea, in blatant violation of Ukraine’s security guarantees. With this year’s invasion of Ukraine, Russia has sparked the largest military conflict in Europe since the Second World War.

It’s not just Russia we should be concerned about. The Chinese government has censored Internet content for more than twenty years, does not respect press freedom, and routinely jails and tortures anyone who speaks in opposition to the regime. China has been widely condemned for its oppression of the Uyghur people in the Xinjiang province. It has also repeatedly threatened to invade Taiwan.

On April 4, 2022, Admiral Charles Richard, head of the American Strategic Command, testified on China to the House Defense Appropriations Committee. He told the committee that China’s “breathtaking” expansion of its strategic and nuclear arsenal is a quickly escalating risk for the US. China’s first test of an intercontinental hypersonic glide vehicle in July 2021 shocked many. Admiral Richard described it as a “technological achievement with serious implications for strategic stability.”

This is the New World Disorder. The world is less stable, and the risk of global conflict has increased. The military strength of Western countries and their allies may no longer be sufficient to keep Russia and China at bay. Other bad actors may be emboldened as well.

The immediate effect of Russia’s assault on Ukraine has been an unprecedented level of economic sanctions, accompanied by severed relationships in the cultural sphere. Western companies have withdrawn from Russia at a pace that must have come as a shock to the Kremlin. The multitude of war crimes committed by Russian troops are leading to further condemnations and even more severe sanctions.

Where do we go from here?

We do need a New World Order, one with a sound philosophical basis. In the West we must finally recognize once and for all that one cannot separate political and economic freedom. We cannot have peace and prosperity without individual rights. Free countries must have a consistent and coordinated trade and foreign policy that takes this into account. Compromises will only serve to make us less safe and less prosperous. Military strength comes from economic strength, and economic strength comes from freedom.

Investors and business leaders can play an important role as well. Pulling out of Russia is a good start, but we hope more companies will take a look at their business dealings elsewhere too. Even when not legally required, businesses and investors should avoid doing business in countries that oppress their citizens and threaten their neighbors.

Businesses in free countries should seek alternative sources for goods imported from dictatorships – and not just from Russia. It will be difficult in the near term, but it will reduce the influence of these dictatorships in the free world. It will also make it more difficult for them to spend more money on their armed forces. It is also essential to deny advanced technologies and critical raw materials to dictatorships.

There are good people in countries like Russia and China who support political and economic freedom. We must not forget them. We should ask policymakers to make it easy for them to immigrate and thereby contribute to the brain drain at home. Businesses should also consider donating to non-profits that support political and economic freedom, since freedom is vital to value creation for shareholders.

The USSR collapsed in part due to a worsening economy and in part because the regime had lost the confidence of too many of its citizens. Even so, that did not translate into enduring freedom, which would require widespread acceptance of a new political philosophy. Given the lack of respect for freedom of speech in Russia and China, it is unlikely we will see this anytime soon. 

A New World Order also brings tremendous commercial opportunities in sectors like energy, education, and cybersecurity. Due to the urgent need for better energy security, nuclear power is likely to make a comeback in Europe and elsewhere. There will also be a greater interest in recycling critical raw materials in short supply. Defense spending will increase significantly as well. Investors will be looking for more fruitful jurisdictions, and capital will be deployed to fund startups in jurisdictions that provide a competitive environment for business.

In 2005, NY Times Journalist Thomas Friedman published “The World Is Flat: A Brief History of the Twenty-first Century.” It was a book with a hopeful message about how technology was allowing people around the world to access a global market and benefit at scale from new innovations. As attractive as the vision was, it could not be realized.

We should not give up, however. Those of us who are fortunate enough to live and work in free societies should appreciate our freedoms and take them more seriously. In the last few years, we have seen a resurgence of protectionism in the United States and of digital protectionism in the European Union. Politicians are “cracking down” on the technology industry. This is destructive and short-sighted. Instead, we should embrace the ideas and values that made the West great and that helped people prosper around the world. Our freedom is our most precious tool for addressing the problems and opportunities that lie before us.