The latest, and by far the most serious, round of US sanctions
against Russia has shown two things very clearly—neither of which has received much
publicity in the comments so far. The first is the extraordinary power of the modern
state. The second is that when powerful states impose sanctions that limit one’s
access to markets, technology and capital, the only remaining option turns out
to be autarky.
I will discuss the two points in turn.
Despite all the talk about the waning power of the state and
the rising power of ”foot-loose” large corporations what the sanctions do show
is that the state is still the most powerful actor in contemporary global capitalism.
Apple or Amazon could not impose sanctions and destroy Rusal. Actually, no
company in the world —even those who are Rusal’s major customers—could not
destroy it. But a state can. Putin showed the power of the Russian state, at
the time when it seemed weak and insignificant, when he overnight imprisoned Khodorkovsky,
the richest man in Russia, and despoiled him of Yukos. Trump, or rather US
treasury, shows the power of US state in destroying overnight the largest aluminum
producer in the world
The second lesson is, to a large degree, for Russia the replay
of the 1920s. It is today often wrongly asserted that the USSR chose a policy
of economic autarky. On the contrary, all the 1920s, as soon as War Communism
and foreign intervention ended, was spent by Russia in pursuit of foreign capital
with which to rebuild its destroyed industry, and optimistically, to catch up
with the West. But that capital was not forthcoming. The Western powers refused
to recognize the Soviet government, and since the Soviets repudiated previous
debt of the Tsarist Russia, their access to capital markets was shut both
because of default on the debt and because of ideological reasons.
This created the situation in which Soviet development had to
be conducted entirely based on domestic accumulation and technology. As is well
known, the implications of that was first seized by Trotsky and Preobrazhensky:
it meant comprehensive planning of the economy and extraction of the surplus
from the only segment of the population that could generate it: the Soviet peasantry.
Soviet industrialization thus took place on the “blood and toil” of Soviet (which
essentially meant Ukrainian) peasantry. This policy, which by definition included
collectivization, was then, beginning with the First Five-Year plan in 1928
conducted with characteristic brutality by Stalin.
What current sanctions, and those that may yet come (as for example
on Gazprom), show is that Russia is now at the same crossroads at which it was
in the early 1920s. Its access to Western markets, technology and capital is
all but cut off. It is true that there
are nowadays other sources for all three, including in China. But the breadth
of sanctions is such that Chinese actors, if they themselves plan to do business
or raise money in the United States, will too avoid doing business with Russian
entities. So Russian industry will be left to grow, if it can, using only
domestic resources, which compared to global resources, are small and inadequate
(given how Russia’s relative economic and population role in the world has
declined). Autarky is thus preordained.
The questions is then whether such an economic choice will
also entail, as it did in the 1920s, dictatorial domestic politics. This is quite
possible because autarkic developments are hard to implement if there is no
corresponding political pressure. Moreover, there would be for sure attempts from
those who are affected by sanctions and all those who need access to global
markets to reverse the policies that have led to the sanctions. Such attempts
make them become direct political foes of the current government. The logic of
political repression then becomes inescapable.
It would be wrong however to believe that the current impasse
in which Russia finds itself can be overcome through different policies. It
could have been done several years ago, but no longer. The reasons listed in
the imposition of sanctions that cover everything from the annexation of Crimea
to fake news are so comprehensive that no new post-Putin government of any
conceivable kind can accept them all. They can be accepted only by a totally defeated
country. In addition, US sanctions are notoriously difficult to overturn. The
US sanctions against the Soviet Union started in 1948 and were practically
never discontinued. The Jackson-Vanik amendment that linked trade to the
freedom of Jewish emigration was on the books from 1974 until 2012, i.e. lasted
more than a quarter century after the ostensible reason for its imposition
ended. And it was repealed only to be replaced by another set of sanctions
contained in the Magnitsky Act. The sanctions against Iran have been on, and
despite the recent talk of their loosening, for almost 40 years. The sanctions on
Cuba have lasted, and many still do, for more than half-century.
Putin has thus, through a series of tactical successes,
brought to Russia a comprehensive strategic defeat from which neither him, nor
the governments that succeed him, will be able to extricate the country. There
is moreover no ideology, short of extreme nationalism, on which the autarkic
system can be built. Bolsheviks in the 1920s had an ideology which led them
ultimately to accept autarky and to work within it. Such an ideology does not
exist in today’s capitalist Russia. Yet the industrialization debate of the
1920 may again become indispensable literature for economic policy-making.