SHARE
contributors
Illustration by Mike Trukhachev via Shutterstock
Sep 7, 2018

What Putin and Trump Have in Common

Both leaders are preoccupied with constructs of the past, when they really should be looking to the future.

In a time of unprecedented change and technological progress, two key world leaders, Presidents Putin and Trump, are each fighting wars that were once considered over; wars that, plainly, should have remained in the past.

Putin, who hates the perceived loss of status he believes due the former Soviet Union, still wages the Cold War. Now, he applies the modern weapons of a cyber civilization to ply the old tricks of division and destabilization, with greater effect than Khrushchev or Andropov ever achieved in a pre-digital world. Living memory is long in Putin—long enough that what should have ended in 1991 has found its way back.

Trump is fighting an older war still: protectionism, with the desire for a “fortress America.” I won’t rehash the calamity that was the Smoot-Hawley Tariff Act or note myriad other times protectionism damaged major, strong economies. Suffice it to say that using taxes to restrict the flow of goods is generally destructive of jobs, inflationary, and just bad for business.

These two conflicts of the past differ in that one has subjected the world to repeated recessions and depressions, while the other, on several occasions, came close to causing catastrophic war. What these worldviews and leaders have in common, though, is a zero-sum view: If you win in any way, I must have lost. The idea of positive-sum collaboration seems to be lost on both men.

It’s not clear to what extent either leader cares about the nuances of the past, but that has not prevented them from using nostalgia and imagery of an imagined better time to push their zero-sum strategies. This historical framing is key to their rhetoric: We were great once, but we’re not now because someone else is winning, and we can be great again if we accept my authority and vision.

For Putin—who was steeped in the Soviet regime as a KGB apparatchik—the breakup of the USSR was the ultimate loss of face. The zero-est of sums. As journalist Julia Ioffe wrote in The Atlantic, Putin was “raised to be a person of the Soviet state, to admire its many achievements, which is why he famously referred to the fall of the Soviet Union as ‘the greatest geopolitical catastrophe of the 20th century.’ Putin governs with the twin collapses of 1917 and 1991 at the forefront of his thinking. He fears for himself when another collapse comes—because collapse always comes, because it has already come twice in 100 years. He is constantly trying to avoid it.”

In a piece for Foreign Policy, Ioffe quotes Putin saying, “We all know that after the end of the Cold War—everybody knows this—the world was left with only one center of dominance. And then those who found themselves at the top of this pyramid were tempted to think that if they’re so strong and exceptional, then they know best.”

This resentful outlook has manifested in ways that are damaging to the Russian economy. Russia—famously known for suffering a “resource curse”—has long had vested fossil fuel interests in neighboring ex-Soviet countries. Since at least the mid-2000s, Putin has watched Ukraine slip out of Russia’s sphere of influence as Ukraine grasped for stronger ties to the EU. From Putin’s perspective, a truly democratic, pro-EU Ukrainian government would result in almost total loss of Russian influence on the country, including vital fossil fuel assets. Russia would lose, the West would win.

Is a positive-sum collaboration possible in the Russia-Ukraine situation? What if, instead of being mired in this legacy geo-economic view, Russia phased out oil and gas subsidies while investing in its massive renewable energy potential and made substantial efforts to diversify its economy? This could position Russia as a global economic leader going forward, rather than a country clinging to risky fossil fuel markets via bullying resistant neighbors. To boot, such repositioning could steer the international community toward lifting sanctions. Of course, this is all hypothetical and highly aspirational given Putin’s track record, but it does tell us this: Backward-looking, zero-sum thinking is not an effective way to gain or retain economic power. It is a destabilizing, unsustainable force.

Trump, for his part, comes by zero-sum thinking another way. He is insecure, so much so that all his ideas to Make America Great Again really revolve around personal face. In his eyes, a U.S. trade deficit on his watch means he is losing. Trump believes the U.S. is being played for chumps—but are we?

This past June, the U.S. posted a $33.48 billion trade deficit with China. In Trump’s view, China took us for a $33.5 billion ride. He doesn’t seem to understand that the balance of trade payments always equals zero when you net goods, services and payments. Yes, American firms paid their Chinese counterparties per contracts, but goods and services were received in exchange–a positive sum collaboration. Another way to look at it is that the U.S. got $33.5 billion more goods out of China than they got from us. We sent them bits and electrons representing money; they sent us the greater sum in tangible goods, in stuff that we want and need.

One stated reason for Trump’s tariffs on Chinese goods is retaliation for their theft of IP, especially in tech. No question, this has been an issue for decades. The U.S. and the EU share concerns about China’s trade and IP practices, like the requirement that foreign businesses setting up shop in China have a Chinese partner with whom they share IP (although there are now exceptions to this policy to encourage more direct investment).

Time to declare a trade war, right? Nope, and here’s why:

First, because Trump’s tariffs seem to be merely punitive and lack concrete objectives. They mainly serve to inspire retaliation from trading partners, without any valuable resolutions in sight.

Second, because the tech innovation horse is leaving the barn. China is now surpassing America and everyone else in the world on several technological fronts. Consider quantum computing, a technological holy grail. Azeem Azhar, curator of the Exponential View newsletter, estimates there is about $315 million in venture funds and $2.2 billion in government funds flowing annually into quantum research. Azhar observes that these are quite modest levels for a technology with such potentially transformative power, but this could all change with China. The Chinese National Laboratory for Quantum Information Sciences will attract investments between $10 billion and $16 billion when it opens, likely to put China in the lead in developing this technology. China won’t need to steal any quantum computing IP so much as it will need to protect its own. You can read more about China’s emerging tech prowess here and here.

If Trump launches a full-blown trade war on his backward-looking, zero-sum terms, the tech leadership horse, long free from the barn, will end up enjoying life on a Chinese beach while American workers wither in coal mines.

Here’s another angle: Every trade deal struck between a U.S. company and a Chinese company was made because both sides felt like it was an advantageous deal. If the negotiation was bad or unfavorable, that should be on the company that made it. It makes little sense for a president to second-guess an American firm that believes it has made a favorable arrangement to import this or that material or product. If businesses are not allowed to compete on their own terms, they become less competitive.

For now, Trump and Putin both have the practical ability to wage their wars of the past, while justifying their retrograde policies and other actions via the legitimacy of their authority. But legitimacy is just a fancy word for whatever they can get away with, and they don’t seem to care that their ego-identified world views are destructive. They want to assure the safety of their authority and legacy, whitewashing any political uncertainty about the next (or last) election. For this, they need to achieve total ownership of reality, to be the only source of truth—their static, self-aggrandizing version of truth.

But the real world doesn’t work like that. It changes, it evolves, innovation happens, is happening now. Life is bigger than the nostalgia and vanity of old men. So enough with the fantasies of the past, with intransigent men who can’t imagine relaxing their authority or letting go of what they think they know. We can no longer wait for leaders who look forward and want to imagine and define what can be next. As the old chestnut goes, each of us now needs to be that leader. The best way to ensure our well-being is to innovate, invent, grow and stay curious. We shouldn’t strive in vain to protect our old inventions, we should compete with—even dominate with—the next ones.

We can lead ourselves to a much de-risked, global economy, but only if we stop waiting. We need to think, act and live for what’s next. Given the tools our global civilization is rapidly developing, our time should be spent building the foundations for a safer, more abundant world, not cowering behind walls or defaulting to bellicosity. Since money is one of the world’s most powerful levers—deployable across borders in a way policy cannot be—how we invest our assets is a critical part of realizing the de-risked world.

That means investing capital like we care what’s next and like we understand that living in the past never solved anything—or earned much in terms of returns. Investing is literally buying the future. You are buying what you believe is next—what you think will grow in advance of it actually happening.

What’s the opportunity the economy is offering today? Fortress America? I don’t think so. We’re so much more than that.

RECENT TWEETS

back to top