The “invisible hand” of capitalism first described by Adam Smith has always been assumed by its critics to be callous and uncaring. But never has the caring heart of capitalism beaten so loud as in the global business community’s solidarity and support for Ukraine against the brutal attack by Vladimir Putin’s war machine.
If only Putin had a heart, we would not be witnessing the shocking scenes of death and destruction raining down on Ukraine’s courageous citizens.
Corporations have stepped up in an unprecedented display of humane leadership and marched their merchandise and services out of Russia with dizzying speed – and at significant risk to their own bottom line.
The corporate exodus from Russia by Visa, Mastercard, McDonalds, Starbucks, Pepsi, Coca-Cola and a Who’s Who of the biggest brands in the world often preceded and even surpassed the actions of western governments.
Beyond corporate inconvenience, some decisions could trigger global disruptions not seen since the energy crisis of the 1970s.
BP will dump its $25 billion investment in Rosneft. Shell will end its involvement in the now mothballed Nord Stream 2 pipeline project and exit its equity partnerships with Gazprom, including its 27.5 percent stake in the Sakhalin-II liquefied natural gas facility, its 50 percent stake in the Salym Petroleum Development and the Gydan energy venture.
This corporate activism is in stark contrast to previous chapters in the encounter between Russia and the capital markets. In the heady days of the 1990s, western businesses were falling over themselves to open branches in Moscow and offer goods and services to Russia’s new wealthy. They barely stopped to consider the sources of much of the wealth suddenly deployed by a new generation of Russian oligarchs, many of whom now find themselves sanctioned and spurned as allies of Putin and enablers of the atrocities he is now inflicting upon Ukraine.
Further back, in the dark days of the Soviet police state and its ruthless oppression of Soviet Jews, US corporations refused to use their economic leverage to help the cause of human rights and fiercely opposed the Jackson-Vanik amendment which linked US-Soviet trade to improved Soviet Jewish emigration.
Despite the riches to be made in Russia, and the fear of reprisals from Putin’s henchmen, the corporate world has thrown its lot in with Ukraine and its awe-inspiring president, Volodymyr Zelenskyy.
The Ukraine-Russia mismatch is not just David and Goliath.
Ukraine is a young, newly democratic nation with a nimble tech sector led by world-beating companies like Grammarly and an ecosystem hosting some of the startup world’s finest engineers – some of them currently working on projects for us at OurCrowd. Tens of thousands of Ukrainian programmers are currently providing tech support and skills for Israel’s startup nation.
In 2020, the value of Ukraine’s high-tech exports reached $5 billion, growing by a whopping 36 percent to $6.8 billion in 2021. It employs 285,000 people in 5,000 IT companies, of which 1,400 are startups, according to a report by the IT Ukraine Association.
Russia also has some marquee tech brands, including Telegram and Yandex, its home-grown search engine that has now expanded into a multi-sector tech behemoth. But despite Russia’s vast size, its total IT exports in 2020 amounted to just $6.75 billion, according to IDC – although it was also forecast to grow in 2021.
While investment in Ukraine startups was about $534 million in 2020 (down from $674 million in 2019), VC investment in Russian startups has averaged a meager $80 million annually between 2017 and 2020.
Russia represents the very worst of crony capitalism, riddled with corruption, hamstrung by autocracy, blinded by a lack of transparency and home to a creaking, under-producing economy almost entirely reliant on fossil fuels and old, heavy industry. Russia is trying to hang on to the crumbling capitalism of the past, while Ukraine strides forward into the high-tech capitalism of the future.
The good Russian people deserve better than the ultimate ruin being brought on them by Putin’s madness. When Russia’s considerable human capital and energy are finally matched with a progressive and democratic leadership, this proud nation will unleash tremendous and constructive capitalist growth.
The Russian invasion of Ukraine is simply an attempt by a cynical dinosaur dictatorship to roll back the tide of political and economic progress since the fall of the Soviet Union. It is doomed to failure because, despite the fog of war, the business world sees clearly that the prospect of a better future comes from Kyiv, not from Moscow.
At this historic moment, capitalists’ hearts, minds and hands are fully aligned with the heroes of Ukraine.