Economist Brian Easton says Putin may have done irreparable damage to Russia’s place in the world

This is a re-post of an article originally published on pundit.co.nz. It is here with permission.

For the past two centuries, the world order has been dominated by a single country, powerful enough to be described as a ‘global hegemon’. (Such a dominance was not true for the whole world much earlier.) In the nineteenth century the hegemon was the United Kingdom; in the twentieth it was the United States. There was a period of transition in the early twentieth century, complicated by the US’s isolationism. It was not until the late 1940s that it fully adopted its dominant role.

Throughout the postwar era the relative power of the US has been diminishing. In 1950 it was producing over 27 percent of the world’s goods and services (measured in the same international prices). Seventy years later the US share was less than 16 percent. Despite the US quadrupling per capita GDP over these seven decades, the productivity and populations of other countries have grown even faster, catching up by adopting the technologies pioneered by the technologically advanced economies.

In contrast, China, which produced only 4.5 percent of the world’s GDP in 1950 – recovering from decades of civil war and over a century of economic colonisation – was nearing 18 percent of world GDP in 2019 (including a New Zealand-size contribution from Hong Kong), greater than that of the US.

It is easy to draw a straight line between the years to predict that China will be the next world hegemon. However, the world does not develop in straight lines. We need to avoid the fallacy that because there has been an international hegemon for the last two centuries, there will be one in the twenty-first century. Even so, undoubtedly China will be a major player in the future international order, an order which is still adjusting to accommodate its rise.

This is nicely illustrated by comparing GDP shares over time. The next one down in 1950 from the US 27 percent was the United Kingdom at 6.5 percent, or a quarter of the US’s. Nowadays Britain – it is hardly united – is more like 2.5 percent. Today China is almost 18 percent with the US at 16 percent; behind them ranks the EU at 15 percent, India at 7 percent and Japan at 4 percent. Further down, Brazil and Russia join Britain in the 2 to 3 percent range, while the ten member states of ASEAN produce almost 3.5 percent. (Australia is about 1 percent, New Zealand a fifth of that.) This not an international order led by a hegemon but a multipolar world.

It is difficult to operate in a multipolar (or bipolar) world, especially when one player is led by an autocrat proclaiming a messianic mission to return to a past that never was. Russia’s invasion of Ukraine illustrates both the difficulty of doing so and how an unrealistic self-assessment gets a country into trouble.

Despite its huge area (32 percent of the continents of Asia and Europe), Russia is only a small part of the region, with about 3 percent of its population and about 3.5 percent of its GDP. (It does have nuclear weapons though.) Its President, Vladimir Putin, thinks it is more important, big enough to wage war against its next-door neighbours in order to redraw territorial boundaries without undue consequences to Russia, on the basis of an imagined history.

Russia is an important part of the world and has its integrity as a nation. The practical issue is how to maintain that integrity. Surely, the sensible strategy would be to play those on its west (primarily the EU but practically including the US and its NATO allies) against the east (primarily China, but Japan and India having a role too).

Such a strategy has turned to custard with the invasion of Ukraine. Practically, Putin has pushed Russia into the arms of China. While China has reservations about the invasion – it stresses state sovereignty and territorial integrity and does not wish its economic relations with Europe, the US and Japan to be jeopardised unnecessarily – it is waiting for the Russian ‘lemon’ to drop into its basket. Russia will become a vassal state as it was during the two centuries of Mongol overlordship – the actual past catching up with Putin.

This is good news for Beijing. Not only will Russia’s dependence add to China’s geopolitical leverage (including a second veto on the Security Council) and consolidate the buffer on its north and west borders but Russia’s underpopulated far east is rich in natural resources. Not just oil, gas and minerals, but the water which China needs, once the new supplies from the Himalayas are fully utilised.

Currently the logistic links between Russia and China are weak, which has limited China’s ability to supply arms to Russia during the Ukrainian invasion. There were no plans for China’s westward linking Belt and Road to go through Russia. Expect a revision of plans.

Here is a lesson for much littler New Zealand. Whatever the rhetoric, do not overestimate international significance. If New Zealand were to sink below the waves – as it was trying to do 22 million years ago – the US would not even contemplate anchoring an aircraft carrier here.

An inventory of New Zealand major connections indicates just how complex the is challenge of a multipolar world. Culturally, New Zealand depends on English-speaking countries, particularly the US and Britain – the latter having more influence than its population share. But the increasing diversity of the population, especially of Asians and Pasifika, means that the cultural background of the minority communities is adding to the richness of Aotearoa New Zealand life.

Militarily, despite being non-nuclear, New Zealand is aligned with the United States and its allies – Australia is particularly important.

The economic connections story is quite different. Around two-thirds of New Zealand's exports go to a group of interconnected East Asian economies including Australia. The dominance of China in New Zealand's trade is extraordinary. It is the biggest market for milk products, sheepmeats (for beef it was only second), fish, apples, wine and honey (for kiwifruit it was third). Thirty years earlier, China did not make New Zealand's top ten export destinations in any of these products. Significantly, each presents particular political problems in the international economy – most notably, widespread barriers to entry for pastoral products. So while these products do not make up the dominant share of New Zealand's exports, they are particularly difficult to manage – as Australia's recent tensions with China illustrate.

New Zealand’s engagement with any American-led – or Chinese-led – coalition is likely to be cautious rather than enthusiastic.

Consider what is happening among the South-East Asians. ASEAN is ten politically diverse countries creating a single economic market (while sharing some cultural aspirations). As in the case of Europe and the US, market unification was seen as means of reducing military conflict. However, in contrast to them, the group is unlikely to seek any degree of effective political unity. Each country, located between China and Australasia, has to evolve a position with China which it may see as some kind of imperial threat to their region. (China denies such a threat exists, but its behaviour in the South China Sea does not give ASEAN nations great confidence in the denial.) While acknowledging China’s significance, they look to the US and its associates to provide an offsetting balance. New Zealand may have to follow a similar course. There is as much to be learned by watching the South-East Asians as there is from the backward-looking and bumbling Russian policy.

Brian Easton, an independent scholar, is an economist, social statistician, public policy analyst and historian. He was the Listener economic columnist from 1978 to 2014. This is a re-post of an article originally published on pundit.co.nz. It is here with permission.