Extra! Extra! The corporations have broken the back of the Russian War effort
Stephen Viz | Thursday, February 9, 2023
I really hope no one reads this title and agrees with my sarcasm.
A year ago this month, the world came to a halt as Russian tanks roared across the Ukrainian border. After eight years of political standstill and insurgency encounters, the full might of Putin’s army finally made good on the promise to reclaim parts of Russia now held by the Ukraine. The world looked to Twitter and major news to get our updates, and it has been a long year of rhetoric, debate, and ordinary heroism.
But so much has changed since February of 2022, and honestly, the future is somewhat terrifying. As American and United Nation aid ramps up in favor of Ukrainian support, one can only wonder what the world will look like in six, 12 or even 18 months. It is a brave new world, and big and small business alike just might come to shape the future as we know it. And boy, they could it for the better if they did anything but the bare minimum. Let me explain.
I grew up on ’90s action thrillers that owned the stereotype of Russian villains in a post-Soviet world. Classics like “Crimson Tide” and “Air Force One” made these dynamics both highly entertaining and thought-provoking. These movies featured Russian nationalists only steps away from restoring “Mother Russia” to its former glory, which even for fictional worlds that had seen the horrors of communism, seemed like a potential reality. But in the movies ,drinking the pro-democratic Kool-Aid always prevails, and even today I can hear Harrison Ford’s President Marshall snarl “Get off my plane!” And yes, I am glad that these movies were perpetually on Cinemax in 2012, because they sparked an interest in geopolitics that no 300-level lecture ever could.
And through my career as a varsity Wikipedia reader, I have come to see that business, my chosen field in this life, intersects with geopolitics more than any other factor on the planet. Whether we like it or not, business interests are second to none in the geopolitical pecking order. If there is money to be made, business will make it work. And because of this, scenarios as seen in my favorite movies never came to fruition. After the fall of the Berlin Wall, billions in international and domestic investment flocked into Eastern Europe. In Russia especially, exports of oil and gas, agriculture, textiles, manufacturing and professional services all exploded. Being a country with a strong labor force and abundant natural resources, Russia was poised to continue from the emerging stage to the developing stage as an economy. And then, Putin’s invasion of Ukraine got in the way.
This takes us to last March. After Russian boots were on the ground in the Ukraine, the international community was quick to condemn Putin’s actions. This coupled with harsh economic sanctions forcefully placed a squeeze on the Russian war effort. McDonald’s, Coca-Cola, UPS, Visa, YUM Brands, Ford, General Motors, KPMG and dozens of other companies suspended or permanently terminated operations in Russia. These moves were very significant, as these businesses earned substantial profits in Russia’s population of 150 million people. But guess what? Even after all these crippling economic sanctions have toppled the global supply chain and energy markets, the Russian war effort has kept on churning. Even after hundreds of foreign corporations packed up shop, the war effort has kept on churning. Economic sanctions are a slow burn, and there is no end in sight to the war at hand.
Understanding power distance can be helpful in this analysis. Power distance is a metric in international management that understands the extent to which the less-powerful members of institutions and organizations within a country expect and accept that power is distributed equally. Want to know what Russia scored? A 93 on a 100-point scale (for context power distance in the United States is a 40). So, for those of you who might argue that Russians should’ve overthrown Putin when they had the chance, you really don’t have a clue. Russian oligarchs are synonymous with being Bond villains for a reason, as dozens of these billionaires hold most of the controlling interest in the Russian economy. If that doesn’t speak to the factsthat large swathes of the Russian populous stand against this war, then I don’t know what does. Because of this power distance, Russia has replaced trading partners in the West for reliable (and emerging) trading partners in India and China. And yes, while sanctions have cost Russia billions due to the deflated price of crude oil and municipal bonds have been downgraded to “junk,” Putin will find a way. Do you really think Putin cares that his state has entered a recession? Yeah, let me think. No. He will find a way to continue financing his war.
Futile gestures of solidarity that have arisen amongst decision makers in business since last March have acted as nothing more than a slap on the wrist. For all the alcohol wholesalers and liquor stores who removed Russian vodka from your inventory, good for you. That’ll show Putin. This is like if Bernie Madoff received a 15-minute timeout after defrauding billions from investors. But I digress, and level with this.
While the business world has acted passively, this war has reeked more havoc than any of us will ever know. Just one year later, thousands of soldiers and civilians are dead. Millions of Ukrainians are displaced. Billions in infrastructure and development has been destroyed. A global food crisis has affected “the breadbasket” in these countries, as wheat shortages have accelerated the hunger crises in Yemen, Afghanistan and East Africa. Rising energy prices due to this war have raised the price of agriculture globally, contributing to increased food prices. The ripple effect is real, and while companies such as Disney, Netflix and Apple all regroup to replace revenue lost in the Russian markets, millions of people are suffering in real time.
But there is some good news. When business leaders decide to critically think and respond actively, the bulk of the world’s problems become inconsequential to such efficiency and clear intentions. And yes, while war profiteering and shareholder interest come into discussion regarding the motives behind corporate actions, is it too much to ask companies to think outside the box? This is not business as usual, and as showed in the American mobilization for World War II, big business can be all the difference in changing the tides of war.
To me, companies in the international business community are not doing enough. Too many times since last March has leaving the Russian business landscape become the new norm. What about reverting those utilized assets into the aid of Ukrainian defense and refugees? What about utilizing logistics to ease the global supply chain? What about coordinated efforts from big tech to disrupt hostile communications? What about efforts of aid for food insecure populations? For aspiring business leaders, let it be known that this passive lack of inaction is a cancer, and history will separate the well-intended from the just. You would think saving customer lives would act as a noble business pursuit, but at this point, the world will have to wait and see. Do better big business and use some of those earnings-per-share numbers to bless our Ukrainian brothers and sisters.
Stephen Viz is a one-year MBA candidate and graduate of Holy Cross College. Hailing from Orland Park, Illinois, his columns are all trains of thoughts, and he can be found at either Decio Cafe or in Mendoza. He can be reached at [email protected] or on Twitter at @StephenViz.
The views expressed in this column are those of the author and not necessarily those of The Observer.