Commentary on Political Economy

Tuesday 1 March 2022


 Putin’s Ukraine invasion has killed Pollyanna politics

Barack Obama with Angela Merkel, who showed ‘wishful thinking’ by throwing Germany to the mercies of Putin and his gas fields. Picture: AFP
Barack Obama with Angela Merkel, who showed ‘wishful thinking’ by throwing Germany to the mercies of Putin and his gas fields. Picture: AFP

Vladimir Putin has not just invaded Ukraine, he effectively has slaughtered Pollyanna politics on his way to the capital, Kyiv. Pollyanna politics devises policy and implements it based on what we would like, or hope, mankind to be, not on what it is. Pollyanna politics is sweet, utopian and laudable but, alas, deluded.

Some of its hallmark beliefs include that war is terrible and thus we should not prepare for it; that even dictators are rational and thus can be appeased; that fossil fuels are disgusting and thus we should turn to renewables now even though renewables don’t yet supply baseload power. Pollyanna politics believes a rules-based global order in trade and defence is so manifestly preferable to the law of the jungle that even the kings of the jungle will play by the rules.

Angela Merkel was the poster girl for Pollyanna politics, though Barack Obama was a close second and Joe Biden is not far behind.

Merkel ran her country’s defence forces into the ground, phased out nuclear power and coal industries, rendering Germany reliant on Russian oil and gas in the deluded belief the Russians would play nice until the world found a way to make renewable energy supply our power needs instantly and without intermissions. When Merkel signed the Nord Stream 2 deal, the Kremlin put out this statement: “The Russian president praised the German side’s steadfast loyalty regarding the completion of this purely commercial project that is designed to strengthen Germany’s energy security.”

That Merkel, a patently smart woman, hoped Putin would comply with the global rules-based order long enough for Germany to invent renewable technology demonstrates the seductive power of Pollyanna politics.

The former German chancellor was surely well-motivated, generous and believed in the goodness and perfectibility of mankind. Just as she did when she swung open borders to refugees in 2015, only to have reality step in and force some restrictions on her migration policies. What’s German for Pollyanna politics? Wir schaffen das: we’ll manage this. Merkel used the phrase over and over again.

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    The problem with Pollyanna politics is it ignores the world as it is. It assumes that even all-powerful dictators such as Putin – and, it must be said, Xi Jinping – suffer enough checks and balances to make them rational and logical. This was clearly wrong in Putin’s case. While we should take talk of Putin suffering mental health issues with a grain of salt, clearly he lacks nay-sayers or political counterbalances that would cause him to worry about the consequences of his actions.

    Even his military chiefs reportedly are concerned that he has put his nuclear deterrence forces on special alert. That said, Putin’s success in Chechnya, Syria, Crimea and in domestic Russian politics has led him to believe his propaganda. And Western weakness has only emboldened him.

    This weakness has produced the appalling violence and terror of the invasion of Ukraine and will cause a profound shock in global trading systems. It will force countries, especially Germany, to re-evaluate the speed of carbon transition. The sanctions on Russia and the world’s increasing unwillingness to trade with it will largely sever Russia from the global trading system and dry up investment flows.

    For too long the world has turned a blind eye to corrupt Russian inflows of money. And cosied up to Russian companies; former German chancellor Gerhard Schroeder is on the board of Russian oil giant Rosneft. BP has announced it will offload its 19.75 per cent stake in Rosneft, which produces huge dividends for BP shareholders (including Australian and other global pension funds). BP is likely to receive a pittance for this stake, only a fortnight ago worth $US14bn ($19.3bn), given the only buyers will be Russian. These sorts of economic shocks will be echoed and multiplied across many companies and industries.

    While Western economies and their voters and pensioners will survive the loss of trade with Russia because it is only a middle power economically, what if Xi takes Western weakness as a cue to invade Taiwan?

    We can only hope that if China decides to offer the West a choice between trading with it and allowing it to invade Taiwan, our decision-makers are not Italian or Belgian. When, last week, the EU finally decided to impose serious sanctions on Russia, the Italians sought an exemption so its fashion industry could continue to sell Prada clothes and Gucci handbags to oligarchs and Belgium wanted an exemption to continue selling diamonds to Russia. The lesson for non-Pollyanna leaders is to start planning now for the day when trade with China may be suddenly cut off.

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      The headlong plunge into a carbon transition without reliable replacements for fossil fuels is also something that could survive only in a Pollyanna world. Merkel meant well but it was wishful thinking to throw Germany to the mercies of Putin and his gas fields by closing German nuclear and coal-fired power industries. Similarly, it’s surely not smart for Joe Biden to declare war on America’s oil and gas industries before the world works out how to fill the gap in energy supplies caused by Russia gas being declared unwelcome. This is not an argument against carbon transition – only an argument about its pace. There is no sense in ostracising fossil fuels until we have a reliable replacement in all reasonably foreseeable circumstances, including the circumstances we now face as a result of Russian aggression.

      There are many other limbs to Pollyanna politics but the one to dwell on today is defence. After years of American pleading, the German government has acknowledged that it has denuded itself of a realistic defence capability and will now lift its defence spending above the 2 per cent of gross domestic product demanded by the US.

      Western democracies, especially in Europe, for too long have buried their collective heads in the sand, preferring to spend money on welfare, not defence. Understandable, perhaps even laudable, at least in intent. But stupid, and predictably so.

      There is an abject lesson for Australia, and other countries, given Xi shows all the signs of treating Putin’s Ukraine adventure as a test run for Taiwan. The non-Pollyanna thing to do would be to start planning now for the worst scenarios. By all means, let’s hope for the best – but let us plan for the worst.

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