In my freshman year in college, I fell in love with economics and switched my major. Like my friend and fellow economist Scott in a different time and place, I felt Aha! This is a tool that can be used to make the world a better place. It is, indeed, a very useful tool. But economics can also lead to worship of the golden calf and become an alternative religion. I have always found that disturbing. Not only does greed fuel the system, but greed itself, or at least a narrow self-interest, becomes a virtue. (Remember Gordon Gecko and Greed is good?) Like Putin’s Russia, a capitalist system requires government constraints to keep it from an unbalanced concentration of wealth and power in the hands of the few (or as Russians say, the oligarchs).
I held firmly to that view until 2022, but I confess that I am quite ready to make an exception. Capitalism is famous for its ability to innovate and turn around more rapidly than the cumbersome bureaucracy of government, as this nation learned when Henry Ford’s assembly line in World War II was retrofitted to switch from producing cars to turning out planes. Capitalism, dedicated to the accumulation of wealth, found the Achilles’ heel of the Russian system to create a new nonlethal weapon of war, using the greed of the Russian oligarchs to undermine support inside Russia for the Ukraine war.
The initial Western response to the unprovoked invasion of Ukraine was to turn to conventional economic weapons along with arms and humanitarian aid. Sanctions, which had been used with relatively little effect in Iran, included freezing government assets held abroad. Many foreign business firms ceased to do business in or with Russia. NATO countries reluctantly upped the ante by refusing to buy Russian oil and gas, a major Russian industry. Other nations cut off credit to the Russian government and to private borrowers inside Russia, including those who depended on their American and European issued credit cards. Russia was disconnected from the international banking system. The ruble fell sharply, the central bank was unable to function, and the Russian financial system , tightly linked to the rest of the world through SWIFT and networks of lenders and borrowers, was reduced to as much rubble as the streets of Kyiv.
Those economic weapons were powerful tools, but they were not enough to dissuade Putin from focusing on his mission—to restore Russia to the good old days of the czars, territory included. The newest economic weapon is customized to Russia, although it could be useful elsewhere. That nonlethal weapon is to seize the assets of the supporters of the government, the oligarchs who flaunt their wealth in yachts and villas and a sumptuous lifestyle financed by billions in ill-gotten assets stashed around the world. Governments in NATO nations and elsewhere are seizing those assets. It is relatively easy to hide financial assets, although it has become harder when banks have been cooperating with governments to identify Russian-owned assets. But it’s hard to hide a villa in Italy, or a yacht, or a personal jet airplane. The extravagant toys that were the reason for oligarchs to support and enable Putin have become a means to detach many of these oligarchs from his side.
Putin has managed to restore the Western alliance, bankrupt his country, and alienate his support among the military and his wealthy friends. He has made heroes of Ukrainians and their president. So on this side of the ocean, I suggest two cheers for capitalism for its contribution of creativity and innovation in combatting this unjust war, but still withholding a third cheer withheld to acknowledge the inequality and concentration of wealth and power that the market system has allowed to flourish here at home.