June 28, 2022, 9:05

Why Big Corporations Pulled Out of Russia

Why Big Corporations Pulled Out of Russia

In the months since Russia invaded Ukraine in February 2022, nearly 1,000 Western companies have partially or fully curtailed their operations within the Russian Federation. On the surface, this is unsurprising: Russia has been the target of an unprecedented sanctions package by the West, and it is natural that corporate ties will be reduced during a period of economic warfare. The remarkable thing here is not that these companies have left Russia, but that they did so voluntarily: Rather than being compelled to do so by their governments, these companies unilaterally chose to go above and beyond the minimums required by the Western sanctions program. 

In statements explaining these decisions, the exiting companies have almost unanimously cited moral objections to Russia’s war—in essence, they do not wish to do business with bad people. While this is a commendable sentiment, it is worth asking why the moral compasses of these companies have not inspired them to leave numerous other markets around the world. An obvious example of this “selective morality” is seen in the case of China, which continues to enjoy good relations with virtually every company listed in the S&P 500 despite its numerous human-rights abuses, including ongoing enslavement and persecution of its Uyghur Muslim minority. 

So what explains this double standard? In this case, the normal models of economics are inadequate. The conservative capitalist would argue that the primary goal of a private corporation is to enrich its shareholders, which pulling out of Russia obviously does not accomplish. The liberal capitalist would cite the long-held theory that economic prosperity leads to liberal values; the 1990 photos of thousands of Soviet citizens standing in line for the first McDonald’s in Moscow are among the most iconic images of capitalism’s victory in the Cold War. The orthodox Marxist would claim that war itself is a tool of the capitalist classes to extend their dominance into new markets, using examples such as the economic imperialism of the British East India Company or the corporate-motivated “Banana Wars” of the early 20th century, a dark chapter in America’s history that famously provoked the U.S. Marine Corps hero Smedley Butler to proclaim “war is a racket” and spend the rest of his life advocating noninterventionism. 

But in this case, businesses are acting contrary to all these models of economic behavior. The conservative cannot explain why so many companies would violate their fiduciary duty by voluntarily leaving a profitable market; to use a single example, Shell Global (SHEL) announced it expects to lose $4 to $5 billion in this quarter alone after its divestiture of its Russian branch. The liberal cannot explain why we would forfeit our influence over and access to Russian society; Western prosperity has traditionally been treated as arguably the strongest advertisement for the superiority of the Western liberal system over authoritarianism, and the withdrawal of Western tech companies in particular is devastating to Russia’s liberal, anti-Putin opposition, which previously relied on apps such as Facebook and TikTok to spread information and organize on platforms not dominated by the state. The Marxist is left simply confused: In a worldview that views war as a tool to spread capitalist markets, the voluntary withdrawal of these companies from a largely untapped market in the world’s biggest country in order to protest war is inexplicable. 

Instead of relying on the usual models to explain this decidedly unusual situation, we can instead gain insight by drawing on the works of one of the most underappreciated philosophers and commentators of the 20th century. Antonio Gramsci lived in the early 1900s in Italy, writing his magnum opus Prison Notebooks while behind bars for criticizing Mussolini’s Fascist government. Considered a Marxist, he nevertheless rejected orthodox Marxism’s emphasis on economic determinism as the motivating factor in human affairs and produced a unique body of syncretic thought. Perhaps his most enduring idea, and the most relevant for analyzing this conundrum, is the idea of “cultural hegemony.” In seeking to explain how a relatively small minority of bourgeois elites successfully prevented the masses, which dramatically outnumbered the elites, from bringing about Marxist revolutions in most of the world, he posited that the true motivator of social interactions between classes is not force, but culture. 

Rather than coercing the masses into obedience, according to Gramsci, the elites use the institutions of everyday life to inculcate the masses with their values. When viewed through this model, the Western withdrawal makes much more sense: While the use of economic power in an attempt to dissuade Russian aggression is certainly a useful bonus, the leaders of our greatest companies are not fools. They understand that these voluntary sanctions are unlikely to meaningfully hinder Russia’s war effort. The ultimate end here is not economic, but cultural. The great rejection of Russia is intended to reinforce liberal values, in order to remind those at home and abroad that nationalism and revanchism against the established international order are bad things that good people don’t do. Whereas China is perhaps irrevocably entrenched in American culture, Russia’s influence is much smaller, and so the forces of Gramscian cultural hegemony can be mobilized much more easily against the latter when provoked by moral outrage. As such, this provides an ideal opportunity for the West’s cultural elites to contextualize world events in a classic “us vs. them” morality play, which reinforces support for the liberal order among the population as a whole. 

Understandably, many readers may balk at the idea of trusting a Marxist’s explanation of an economic process, but Gramsci was not the only predictor of this phenomenon. Augusto Del Noce, a more recent and decidedly conservative-leaning Italian philosopher who passed away in 1989, likewise foresaw that Western capitalism would come to advocate for social causes. Before his death, he famously prophesied that “Marxism died in the East because it realized itself in the West,” arguing that the increasingly secular character of Western society would result in a convergence with Marxist philosophy. In his view, both Western rationalism and Marxism, as ideologies devoid of the spiritual, establish materialism as the ultimate good, and so both will ultimately come to view the acquisition and redistribution of material wealth as the key to a utopian society.

Del Noce thus predicted our era of corporate activism and social advocacy by those capitalist elements that in earlier generations would have been the strongest bastions of conservatism. While Del Noce and Gramsci were opposites in many ways and would have disagreed on the ultimate causes of corporate activism, they both would have agreed that corporations act in such a way as to enforce a moral agenda, thus lending credence to the use of this model in analyzing cases where the more established models of behavior have failed, as in the current case of the corporate withdrawal from Russia. 

The idea of corporations sacrificing profit in the interest of moral goals is unlikely to be surprising to most Americans, who are quite familiar with major companies expressing their support for a bevy of social-justice causes. But this blasé acceptance fails to recognize the degree to which the Russo-Ukrainian War precedent breaks with tradition. Even during World War II, perhaps the most indisputable case of good versus evil in recent history, iconic American companies ranging from IBM to Ford to Standard Oil continued to do business with the Nazi regime. 

The only case comparable to this current wave of divestment occurred in South Africa over the second half of the 20th century as Western companies protested the apartheid regime, but the scale and scope of these efforts were significantly smaller than the present anti-Russian movement. Approximately 200 Western businesses left South Africa over the course of decades, in contrast to the thousand leaving Russia in a handful of months. Additionally, there was a crucial difference in the motivation and origin of these efforts. The South Africa boycott was largely a bottom-up, grassroots effort by citizen groups who pressured corporations to take a stand, with the movement beginning in student-organized efforts to pressure their colleges to divest from South Africa and only later spreading to the business sector as a whole. In contrast, it took less than three weeks for more than 300 companies to announce their boycotts of Russia. This stark distinction illustrates the degree to which the withdrawal from Russia was a top-down movement orchestrated by company leaders themselves rather than by consumer pressure. 

Why does this matter? Even in the modern era of corporate activism, this is a groundbreaking precedent. On other issues, corporations generally have kept the profit motive in mind by focusing their social-justice efforts on receptive markets rather than risking losing access to more conservative markets: recent examples include the tendency of major companies to not celebrate “Pride Month” at their Middle Eastern branches, and Disney’s infamous decision to deemphasize black characters from the Chinese poster for Star Wars: The Force Awakens. This is the first example of Western corporate leaders voluntarily rejecting the profit motive in order to advocate for a moral cause on a large scale, but it is unlikely to be the last: The broad corporate consensus on the matter indicates that voluntary withdrawal as a method of advocacy is here to stay. 

On the international level, such actions will promote efforts by non-Western countries to grow less dependent on the West for their economic prosperity. As we move towards a more multipolar world, the very status of the dollar as the global reserve currency is in serious question. In addition to the effects this will have on the American economy, already clearly visible to anyone who has bought gas or entered a grocery store since the beginning of the war, this will serve only to reinforce the role of corporations as political entities, with all that that implies. In this era of activist capitalism, the classic “pro-business/pro-worker” divide between right and left is unlikely to hold. The conservative will not support a business solely because of capitalist ideals in an era where that business opposes his values, nor will the liberal oppose mega-corporations whose politics match his own. The full scope of this transformation has yet to be seen, but one thing seems certain: In the future, the withdrawal from Russia will be remembered as a seminal moment in the history of both business and politics. 

Ryan Klopp is a recent graduate of the College of William & Mary, with degrees in international relations and Russian & Post-Soviet studies. All views expressed in this article are his own.

Sourse: theamericanconservative.com

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