This November I attended a symposium organized by the Czech CERGE-EI foundation at Westminster. The topic: “The Price of War.” I don’t know what good fortune got me invited. But the prospect of hearing David Petraeus speak—the US General who pacified Iraq—drew me in.
The price of war is immense. Which is why investments in deterrence have great return. This raises an immediate question: how to invest? The problems outlined during the conference made an economist’s head spin. Hold-up was on the table when one attendee shared an anecdote of a government pressuring a weapon’s manufacturer to expand production—without a commitment to buy their ammunition in the long run. Another attendee outlined mismatch in procurement: government defence funds poured into legacy industries such as tanks that could not traverse the modern battlefield: a 30km wide grey zone where precision missiles launched from hidden shelters would quickly blow anything heavy that moves in the open into pieces. And if unmanned vehicles and attack drones are the future, a third participant in some European investment bank relayed that the startups developing these prefer tinkering at small scale over teaming up with legacy industry to make use of their superior manufacturing capacity. Europe’s predicament, it seemed, are underdeveloped supply chains, scarce venture capital and government procurement that moves at the speed of committee.
One especially painful symptom of Europe’s malaise is limited crowd-in of private investment. In the US, every dollar that the government invests in defence, crowds in 1 additional dollar of private investment. Not so in Europe. There is an element of adverse selection here—those most eager to seek out funding are not always the ones who have most to offer. Upon attending an event for the German business community in early December, I stumbled upon an Englishman headed to a big defence show in Dusseldorf. Not that he knew much about defence. But, as he relayed disarmingly, if the German government was splashing money into preparing for war, he could well have a role in it as a consultant. I was shocked—or maybe not—to learn that my acquaintance was already consulting staff at the Bank of England. Being well-spoken dazzles too many people, it seems.
Part 1: Incentives
Preserving Peace through Strength
What’s my expertise in matters of war? I cherish peace. And game theory, deterrence and strategic thinking has a role to play in preserving peace through strength. Peace through strength means preparedness for war as to signal to the opponent: It is not in your interest to attack me, as the counterattack will hurt. Or, to preserve the peace, the price of war must be steep. Judging by the many activists who in the early 1980s protested the NATO Dual-Track Decision, peace through strength is a counterintuitive concept. Polls from the time found majorities opposed in about every major European country. (It is a revealing fact about democratic politics that the strategically correct decision was implemented regardless.)
There are many lessons to be learnt here. One that I seek to emphasize to my students (in the context of repeated games) is this: When seeking to force a decision—such as military restraint or climate action—upon your opponent, be sure there’s an upside for them to complying and a downside for failing to do so. It’s the logic of carrot and stick, Zuckerbrot and Peitsche, disarmament or engaging in a winnable yet costly arm’s race. There’s also a caveat here. Dictating the terms of trade—selecting the equilibrium to be played—is the privilege of those who have the economic and military upper hand (a thought that should give Europeans pause that are inexplicably content with the current state of low GDP growth).
When Russia attacked Ukraine, the logic of using sticks that were once only threatened played out. I remember contacting German MPs and ministers at the time, advocating for muscular armament support for Ukraine just two days after Russia had started their advance on Kyiv. What’s less clear is where to go from here. The current conflict has brought us off-path in a game-theoretic sense. Since there is an ongoing war in Europe, the theory of preserving peace through strength is of limited use. Yes, we can and should use strength to prevent the war from spreading into NATO’s Eastern flank. But fighting it out until the bitter end? In chess, that’s for amateurs. What’s needed now is a theory of how to end war.
Making Peace with Crazies
To rationalists, the prevalence of war poses a logical conundrum. War is, coldly considered, a sequence of actions played to resolve a bargaining problem. Two players, disputing a cake. How to split it? With knives drawn? Foundational game-theoretic models, such as Nash or Kalai-Smorodinsky, consider that bargaining problems are resolved on the Pareto frontier. This rules out violence: Instead of fighting, each player could already claim their expected diminished wealth held by the end of the war and split the riches saved (economists call this surplus) evenly.
This theory faces two obstacles.
First, both sides must abhor loss of life and destruction. This was obviously not a given in 1939-1945 WWII where one side pursued industrial-scale genocide. In such instance, deterrence and negotiation over economic gains become ineffective tools. What is there to negotiate if one side chooses to pursue the other’s annihilation, even when it costs economically speaking?
Second, both sides must agree on the likely consequences of fighting it out. This was the error of the 1914-1919 Great War or WWI where at the outset neither side correctly foresaw the loss of life and dispiriting agony the war would cause. If both sides hold on to the delusion of securing victory, expected surplus is negative. And even on the off-chance that warring parties are deluded, the non-deluded player has every incentive to overstate their case: A pretend-belief in future victory increases the price the other side must pay to settle the war. Feigning irrationality, however collectively more deadly, can be individually rational before a negotiation breakthrough has been reached. (Models of reputation building in the presence of commitment types formalize this logic. But this is not the place to discuss explicitly dynamic models of conflict resolution as they do not add to my key point.)
Both obstacles show: Wars persist when beliefs diverge, and end when they converge. The policy question is whether anything can accelerate that process. The historical record is poor. WWI, like most other 20th century wars, was essentially decided on the battlefield.
Carrot and Sticks in Ukraine
If the incentives and beliefs are so that wars are fought for too long, a question imposes itself: Why do we not re-calibrate and negotiate with greater urgency for peace? I say this especially with an eye towards Ukraine where early war aims have long been secured. Ukraine continues to exist as a state allied to the West. Russian troops do not control Kyiv. And the majority Ukrainian-speaking population holds a nucleus territory in which their nation, culture and language can prosper. Compared to those larger achievements, it seems of secondary importance whether the majority Russian-speaking eastern territories remain part of Ukraine or not. (According to the 2001 Ukraine Census, Luhansk is 91%, Donetsk 93% and Crimea 95% Russian-speaking.)
Looking at the conflict with cold eyes, I would focus on (i) counting one’s losses, i.e., ceding Luhansk, Donbass, and Crimea, and (ii) securing the gains made. This calls for swift integration of rest-Ukraine into the EU single market and deterrence to prevent the war from spreading further: a European military presence in rest-Ukraine and a no-fly zone over rest-Ukraine enforced by the Europeans. Critically, European troops must not arrive in rest-Ukraine after territory has been ceded but before to avoid the country’s de-stabilization.
In hindsight, I consider it funny that it was a German Christian democrat who blocked Ukraine’s Nato membership in 2008. Adenauer’s post-war wisdom was that no country—let alone Germany—could remain neutral between two zones of influence. I would certainly also admit rest-Ukraine into Nato as the ultimate deterrent.
Letting the current Ukrainian leadership make the call when to settle fails to recognize that Ukraine’s leadership is governed by the same incentives that have led to the record of dragged-out conflict in the 20th century. Part of this is not just overoptimistic beliefs but also an agency problem: Zelensky cannot politically survive a settlement that cedes territory. It would be better for Ukrainians to adopt the new status quo—ceding territories, EU and Nato membership—via a referendum.
To increase the upside for Russia, trade would have to resume, sanctions be lifted, and frozen assets released as soon as European troops are stationed in rest-Ukraine as to signal to Russia that Europe’s acceptance of the new status quo is earnest, whereas further incursions will not be tolerated. Admittedly, the re-establishment of the pre-2022 economic status goes beyond what EU countries are currently considering. It is essential, however. All levers must be on the table to sweeten peace and make bitter the taste of war.
As things stand, I consider that many in Western Europe are looking at the conflict from a purely moralistic angle. We like to fight those in the wrong. Unfortunately, at this point such stance only achieves the ultimate moral injustice: a delay of peace. To the extent that strategic thinking exists, it is beholden to upholding past deterrence. This overlooks the fact that Russia has already incurred a cost far greater than she expected. The question now is whether Europe has the strategic clarity to consolidate what has been achieved—or whether we will sacrifice another hundred thousand lives for territories that do not change the fundamental outcome.
Part 2: Reconciliation
Wars have been fought since time began. Most were materialistic (fought by sleepwalkers), not of ideological nature. In a materialistic war, each side seeks to secure access to resources that allow its civilization to thrive further. But having, following WWII, built the institutions that sustain trade and migration of labour at a global scale, there is hardly any rationale anymore to wage war for materialistic motives. Whichever resource one may hope to secure through military action can simply be bought. What’s left is the spectre of ideological war: War fought for cultural, linguistic, ethnic or religious reasons.
Ideology and the End of History
In his influential essay “The End of History?”, Fukuyama, months before the fall of the iron curtain, speculated that all major civilizations might have reached a self-stabilizing state of liberal consciousness that eclipses the ideological. His writing imagined an exceedingly peaceful future where markets would neuter incentives for materialistic war, and pre-occupation with economic welfare rather than totalitarian fantasies eliminated the spectre of ideological war. (To his credit, Fukuyama’s essay was titled with a question mark and included the following visionary passage: “Ultranationalists in the USSR believe in their Slavophile cause passionately, and one gets the sense that the fascist alternative is not one that has played itself out entirely there.”)
What Fukuyama calls consciousness can only be preferences in an economic model. Preferences decide whether labour supply is backward-bending (as Max Weber claimed for Catholics contrary to Protestants), whether a polity votes for higher marginal income tax, or the minimal financial gain for which an individual willingly defrauds the government and withholds tax. As the examples easily show and Fukuyama pointed out in his essay, some preferences (or the Hegelian “consciousness” if you will) are more conducive to economic activity than others: The right kind of preferences lead to labour supply that is more responsive to wages, tolerance of inequality strengthens incentives for entrepreneurship, and greater moral qualms over fraud facilitate the task of governing.
Fukuyama’s claim to the end of history—and by extension the end of ideological wars—rested on a supposed feedback loop between preferences and experience that over time would converge to a steady state where liberal preferences within a liberal form of government would both enable and be strengthened by the abundance of a modern free market economy. Applying his thinking to the Russia-Ukraine war, one might suspect that hope for reconciliation rests on both countries adopting common liberal preferences, becoming like Western Europe if you will.
The Liberal Error and the Return of History
In my view, Fukuyama makes several errors:
First, liberalism (understood by Fukuyama as representative government and universal rights) is not the great defender of free markets and economic prosperity that Fukuyama makes it out to be. Just consider the political economics of demographics that skew old. Or the fact that bad economic ideas such as rent control at times command majority support in the electorate. In consequence, it is a real possibility that representative government within liberal polities fail to produce the material abundance that sustain the liberal consciousness.
Second, Fukuyama presents the proto-European Union as an example of how liberalism underpins democracy and supports markets. But this is historically false. The idea of the single market was not conceived by the non-ideological secular liberals that govern it today, but Christian democrats, staunch ideologues if you will. The core architects of the European project—Adenauer, Schuman, De Gasperi—were devout Catholics. Two of them are on the path to canonization as saints. Schuman taught that the radical idea of the equality of all people—a core tenet of liberal thought—only follows once we recognize each other as children of the same God. A priest involved in De Gasperi’s beatification said “providence allowed these three politicians to lay the foundations of a Europe that respects human rights, promotes the dignity of the person.”
Third, Fukuyama overestimates the integrative force of liberalism. (Fukuyama asking about—rather than affirming the end of history—reveals that he feared as much.)
In my thinking, liberalism is a shell of an ideology. It posits values (of merit) that lack metaphysics. It’s highest beliefs are a procedure (democracy) and a method (science). But procedures and methods cannot command awe. As a consequence, liberalism lacks the conviction to end history. It fails to inspire the sacrifices needed to protect its tenets.
Ross Douthat, in The Decadent Society, has documented what Fukuyama’s end of history actually looks like: economic growth has slowed; technological progress has narrowed; birthrates have dwindled. Nietzsche rightly recognized that human nature would find such state repulsive. It is not by coincidence that the two most economically dynamic places on earth right now—China and the US—are also engulfed in ideological struggle. Strange philosophies such as effective altruism, Thiel’s speculation on the anti-Christ, squaring Marxist-Leninist thought with free enterprise, and the rising number of young devout Christians document this.
The crisis of liberalism, I believe, stems from the failure to recognize that secular liberalism is like a hybrid seed. It brings great fruit. But stripped of its Christian roots, its fruit cannot reproduce as they do not contain any seed. It fails to inspire sacrifice, compassion and service. The abolishment of slavery, the recognition of universal rights, even post-WWII reconciliation were not just liberal projects, but informed by religious faith. Where faith is lacking, liberalism is poorly equipped to end ideological war.
Vézelay and the Scapegoat Mechanism
It was in Toulouse that I learnt from a French scout about one of the most moving post-World War II events: The large-scale “Crusade for Peace” pilgrimage in 1946 held at Vézelay, France. A response to papal appeals for acts of penance to restore peace, the pilgrims were 450 men, mostly from France, though one travelled from England, and others from Italy, Belgium, Switzerland and Luxembourg, walking in fourteen contingents, as there are fourteen Stations of the Cross. Now, rather anachronistically, a fifteenth contingent joined them. These were German prisoners of war.
What then occurred at Vézelay does not fit the usual pattern of how humans throughout history have resolved conflict. Sociologist René Girard offered the following framework: First, in response to a crisis, a community converges on a victim. It matters little whether the victim is truly responsible, so long as the community can convince itself of its guilt. Second, the victim is killed or expelled. Third, the killing offers temporary peace by papering over the contradictions that caused the crisis. Fourth, the cycle repeats.
The resolution of World War I fit this pattern. The crisis was the realisation of how senseless the death and destruction had been. The victim was Germany (in terms of scapegoating, not WWI) as it was uniquely identified as responsible. The scapegoating took the form of reparations that crippled the German economy and bred lasting resentment—preventing Franco-German reconciliation in spite of honest efforts by politicians on both sides, several of whom were assassinated (Erzberger, Rathenau). The ensuing crisis led to a far darker convergence: Germany pursued WWII and found its own scapegoat in the Jews. Regarding the current Russia-Ukraine war, I worry that any settlement that plunges one side into a post-war crisis might likewise force it to repeat the cycle of scapegoating.
Vézelay is astounding because it broke the cycle. People converged, in penance, not on another victim. A test whether we can do the same will be no less than this: Can Ukrainian and Russian veterans do a joint pilgrimage to the shrine in Kyiv? If this makes you shudder, you’re not alone. In 1946, Germans were not officially invited to Vézelay. It was an individual French Jesuit priest that accepted their participation. The Germans were denied entrance into the Cathedral. The cross they carried, made from beams of a bombed house, later had to be protected from being vandalized. But protected it was. A basic fact about geography makes apparent the analogy: Much like France and Germany, Russia is Ukraine’s neighbour. And while Ukraine and Europe cannot forge the Russia that we want on the battlefield, we can seek to reconcile with her—and thus transform her from within. This requires, yes, love. If you wish to start somewhere, start with Tchaikovsky.
Blessed be the peacemakers.
