The trade trap, p.1
The Trade Trap, page 1
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To my children.
“The secret to happiness is freedom and the secret to freedom is courage.”
most likely Pericles, circa 495–429 BC
PREFACE MY LOVE FOR DEMOCRACY
I love democracy. Democracy is freedom. Democracy is humor. Democracy is respect. Democracy is compromise. Democracy is frivolity. Democracy is competition and creativity. Democracy is contradictory. Democracy makes mistakes—just like us humans.
I love democracy because it is the opposite of Auschwitz, the Holocaust’s largest extermination camp. Auschwitz is a global symbol of inhumanity. It stands for genocide and hatred and arbitrary power—everything that is possible where democracy is absent.
When democracy is vigorous and intact, it protects us from genocide, hatred, and arbitrary power.
And I’m afraid of arbitrary power. I remember a night on a work trip to Moscow, back in 1988—Soviet times. I was visiting a Russian pianist I represented for the artists management agency I worked for. That night, I was driven alone in a taxi through icy, snowy, dark streets, to a restaurant someone had recommended. Down in the cellar you could get Crimean champagne and caviar. It didn’t taste good to me, because I couldn’t shake the feeling that someone might come and take me away. Why would they? I hadn’t done anything wrong. I wasn’t being threatened. There was no particular reason for my concern. But I knew of the kind of arbitrary power that existed in the Soviet Union. I had been warned by the pianist that my hotel room was most likely bugged and that I should put on some music while speaking. Experiencing such fear was profound after a life in a free country. I never wanted to feel that way again. It taught me to love democracy.
Democracies are far from perfect. They make lots of mistakes, including ones that resemble or are even identical to those made by autocracies. But there’s a big difference: In democracies you get to criticize the mistakes. There are almost always people who do. And if there are enough of them, then there are consequences.
Equally, democracy is the promise that I can be accused of something and still be given a fair chance—in a court of law with my very own lawyer and an independent judge. Put simply, it’s about the dignity of the individual—the citizen—rather than the arbitrary actions of authority. The rule of law is the oxygen of democracy. It would suffocate without it. That’s why things such as the Berlin District Court exist. Or the Idaho Supreme Court. In courts big and small throughout the democratic world, prosecutors, defense lawyers, and impartial judges try to make fair and just decisions. They protect those who are weaker from those who are stronger, and ensure that everyone has the same rights before the law. I used to think the rule of law was a technicality, less important than freedom and democracy. Today, I am convinced it is their foundation. The law is civilization’s most important achievement, far superior to the “law” of the jungle. In Darwinian nature, the fittest—those who run faster or are physically more powerful—win. But in civilizations based on the rule of law, those who are weaker stand a chance too. There’s justice.
That is democracy’s core promise.
That is why I love democracy.
That is why we must protect democracy.
That is why we need a values-based trade alliance of democracies.
And that is why I wrote this book.
The idea for this book came about shortly after Russia’s annexation of Crimea in 2014. It was a time when the CEOs of most global companies were raving about opportunities in the Chinese market. Anyone who questioned the reliability of these kinds of business links was labeled a killjoy.
I began to think about a values-based trade policy in 2015. I was convinced we needed a better solution than just a unilateral decoupling. And I came up with the idea of a new democratic and transatlantic trade alliance that would strengthen democracies to grow independent of dictators. The people I ran it past were critical: The vision was unrealistic, unaffordable, naïve, and dangerous. Good friends warned me that my reputation would suffer. All who benefit from doing business with nondemocratic countries would try to discredit this book. It would be best to drop it, they said, and so I did.
A few years later, I wrote a synopsis for the book anyway, and sent it both to the literary agent Andrew Wylie and a big German publisher. The response of the publisher was less than enthusiastic: It was an absurd idea. What made me think I was qualified to write on this topic? I’d be better off just giving speeches instead.
And then, when the war in Ukraine began in February 2022 and pretty much everything turned out as I’d predicted—Andrew Wylie called me up and said I should try again: “Mathias, you have to write this book.”
This book isn’t about economics, even though it contains quite a few figures. It is a book about the future. While it includes extensive discussion of politics, it’s mostly about us, the citizens of democracies. Our behavior. Our values. And the consequences of our actions. It’s about the future of our freedom.
The book combines my experience as the CEO of an international media company—my role has helped my convictions develop and mature—with objective analysis and sober facts. I’m also adding in some robust personal opinions and commentary.
The book has no party political agenda. It is about strengthening democracy. Does that mean fostering the renaissance of “neocon” politics or rather “liberal” dreams? No. It’s a bipartisan necessity. It is as impartial and ideologically unpredictable as I am. For the Left, I am too far to the Right. And for the Right, I am too far to the Left. I don’t fit into any political box, which is appropriate for a publisher, I think.
The idea I outline in this book may seem impossible at first glance. And yes, it is hardly achievable immediately. But there is a wonderful saying, attributed to Otto von Bismarck: “Politics is the art of the possible.” That saying is often misunderstood—especially by politicians—to mean that politics can only do what is possible in a given moment. This is more or less the opposite of what Bismarck meant, because otherwise politics wouldn’t be an art. Anyone could do it and there would be no need for politicians. The “art of the possible” actually has more to do with making possible, at any given moment, what seems impossible. That is the art—and also the craft—of politics.
Viewed like this, much more is possible than we think. Sometimes even the impossible.
Thirty Minutes with Vladimir Putin
I was invited to a conversation in the Kremlin in 2005, a few months after Paul Klebnikov, the editor of Forbes Russia, was killed right outside the magazine’s Moscow offices. At the time, Forbes Russia was a licensed edition of the American magazine published in Russia by the Axel Springer publishing group, of which I had been CEO for two years.
On July 9, 2004, leaving work late at night, Paul was attacked by unidentified gunmen, who shot him nine times from a slow-moving car. A father of three young children, he initially survived the attack, but died in the hospital when the elevator taking him to the operating theater got stuck between two floors. Witnesses described the attack as an assassination. Commentators speculated that a Forbes Russia story about the tax affairs of Russia’s one hundred richest individuals might have prompted the ambush. Some reckoned oligarchs were behind the murder; others, the government itself.
Our meeting was organized by the German government. The aim: to encourage our publishing company to keep doing business in Russia.
In the early morning hours of January 20, 2005, I flew to Moscow from Berlin and spent almost three hours inching through the traffic jam on the monumental road that leads to the city center and Red Square. As soon as I arrived at the Kremlin, my cell phone was confiscated (weeks later, I could still hear Russian voices during calls and on my voicemail; I ultimately changed my handset and number). I was escorted through labyrinthine corridors to a reception room where an interpreter was waiting for me. There was some coffee and sparkling water. When the appointed time rolled round, nothing happened. Half an hour later, still nothing, and no indication of how long the delay would be.
After an hour or so, I got the interpreter to ask the secretary what was going on. Her response: All of this is normal, the president has important matters to attend to, it isn’t possible to give an exact time, please have another coffee. I thought of the legendary trip my company’s founder, Axel Springer, made to Moscow in 1958. He had to wait for two weeks before Nikita Khrushchev finally received him. Was Putin trying to copy this? Two and a half hours later—and after another five or so inquiries on my part—I wasn’t just annoyed by the blatant humiliation ritual, but also genuinely concerned. There was a crucial board meeting in Berlin the following morning which I couldn’t afford to miss. Given the airport’s operating hours and the three-hour drive back, I was going to be compelled to say something in order to get home in time. Politely, I explained my dilemma to the wide-eyed secretary, and said that unfortunately, I’d have to postpone the meeting if it didn’t take place within the next hour. They clearly weren’t expecting this. Lots of commotion ensued: Men started scurrying around the office, doors slammed. Then, after half an h our, the big moment arrived. The president was ready.
Together with the interpreter and a Kremlin aide, I stood before an oversized double door. It suddenly opened onto a never-ending ceremonial hall with ornate, gold-leaf stucco ceilings. A guard gestured to me that I should wait. Only when Vladimir Putin entered through the opposite door was I allowed to start walking. Protocol dictated we meet in the exact center of the room—every movement precisely orchestrated like a court ritual. We took our prescribed seats at a gigantic table. The interpreter sat beside us but never uttered a single word. Putin spoke in a low voice that was difficult to understand, but in excellent, almost accent-free German with a slight Saxonian lilt.
He opened the discussion by saying how much he regretted the Klebnikov incident and that our publishing company must not, under any circumstances, let this terrible event deter it from doing business in Russia. The crime would be investigated as a matter of utmost urgency. We will find the perpetrators, he said in what was practically a whisper, forcing me to lean forward to catch his words. We will find them, he promised. You can be sure of that.
Then we moved on to broader issues. One part of the conversation lodged itself in my memory. Putin said that Chechen terrorism was a major challenge for his country. I asked: Isn’t the fight against Islamism arguably a common challenge, and thus a common concern for the United States, the EU, and Russia? Yes, he replied, we have many commonalities and shared concerns. And then he uttered the crucial words: If only the United States would stop treating us like a colony. Our Russian culture is much older than theirs, our feelings run much deeper than theirs. We have our own traditions, we have our own sense of pride. We are not an American colony.
And there it was, flashing away quite unmistakably: the wounded pride of the head of a former superpower, which now found itself downgraded to middling status. He was consumed with an ambition to change precisely this status, an ambition that would take an increasingly radicalized form over the next few years. Even then, in that earlier phase, which looks relatively benign from today’s perspective, it still felt unsettling, and dangerous.
After a few more turns on the conversational merry-go-round, and exactly thirty minutes later, Putin brought the discussion to a close. I hear you’re in a hurry, he said. Don’t worry, we’ll give you an escort to the airport to speed things up.
With motorcycles riding in formation both in front of and behind my car, blue lights flashing, and megaphones blaring, we raced to the airport. It was a demonstration of power, intimidating for all concerned. I sat behind my car window, hiding from outside viewers and feeling embarrassed. I reached the airport much too early.
Following the murder of our editor, we kept the magazine open and didn’t change a thing editorially. Its coverage remained just as critical as before. We held our course when, years later, the mayor of Moscow threatened another editor in a bid to stop the publication of an article about his wife. And especially during the annexation of Crimea in 2014, when our publication took a highly independent stance that criticized the government.
The conflict was finally resolved in a different way. In 2014, the Russian government passed a law limiting the foreign holdings of Russian media to 20 percent—a law that took effect in 2017 with retroactive force. As a result, we would have to sell 80 percent of our business to a Russian national. We were discreetly informed of the expectation to find a pro-government buyer. That way, we could continue making money in Russia, but editorial control would be in “safer” hands. The Axel Springer publishing group instead “sold” 100 percent of the business for a symbolic price to a regime critic.
The damage to the company was considerable and the conclusion obvious: It would have been better if we had never done business in Russia.
PART I THE STATUS QUO: OLD AND NEW ENEMIES
DEMOCRACY ON THE DEFENSIVE
Some ideas write history. Some ideas describe history. But some ideas shape history.
Writing history: In 1992, political scientist Francis Fukuyama published his famous book The End of History and the Last Man. As early as 1989—influenced by the fall of the Berlin Wall—he’d already outlined his core idea in an article for a small foreign policy journal, The National Interest: “What we may be witnessing is not just the end of the Cold War, or the passing of a particular period of postwar history, but the end of history as such: that is, the end point of mankind’s ideological evolution and the universalization of Western liberal democracy as the final form of human government.” “The triumph of the West, of the Western idea,” he wrote, “is evident first of all in the total exhaustion of viable systematic alternatives to Western liberalism.”
Describing history: In 2015, historian Yuval Noah Harari’s book Homo Deus predicted a new, godlike era for humanity, because all of its old problems and limitations had been overcome: “At the dawn of the third millennium, humanity wakes up to an amazing realization. Most people rarely think about it, but in the last few decades we have managed to rein in famine, plague and war. Of course, these problems have not been completely solved, but they have been transformed from incomprehensible and uncontrollable forces of nature into manageable challenges. We don’t need to pray to any god or saint to rescue us from them. We know quite well what needs to be done in order to prevent famine, plague and war—and we usually succeed in doing it.”
Shaping history: This is what the world-famous maxim “Wandel durch Handel” tried to do. It originated in the 1960s, when Berlin politician Egon Bahr dubbed Ostpolitik, the West German outreach to the nations of the Eastern Bloc, “change through rapprochement.” This then morphed into “Wandel durch Handel,” or “change through trade”—a hope, promise, and incantation that appeared without fail in speeches by Chancellors Helmut Kohl and Gerhard Schröder in the 1980s and 1990s when calling for an intensification of economic relations with China or Russia. Bankers also liked to use the concept when courting undemocratic countries.
These three famous quotes have one thing in common: They were considered visionary and realistic. Today, in the third decade of the third millennium, they have turned out to be wrong and even dangerous. In essence, they were too optimistic in their assumptions: Democracy had triumphed. Famines, epidemics, and wars had been overcome. And as long as we did as much business as possible with undemocratic states and dictatorships, things would take a liberal turn there too. Three false promises. Three utopias shattered by reality.
Democracy and freedom have not prevailed across the globe. On the contrary: They are globally in retreat. Free and open societies are facing a number of existential threats. For the seventeenth year in a row, independent think tank Freedom House has recorded a decline in democracy, and now speaks of a “long freedom recession.” It has downgraded more and more countries from “Free” to “Partly Free” and then from “Partly Free” to “Not Free.” Only 20 percent of the world’s population live in countries that are “Free.” And 40 percent live in states that are “Not Free.” This is the highest level since 1997. Viewed objectively, freedom is on the defensive all around the world.
According to projections by Bloomberg Economics, the share of global production by “free” or “mostly free” economies is projected to decline from around 60 percent in 2000 to 33 percent in 2050. The share of those classified as “mostly unfree”—that is, economies with high levels of state ownership and control—is projected to rise from 12 percent to 43 percent. So the story is far from over. In fact, it’s only just beginning to get really dangerous again.
Hunger, disease, and war are not under control. They have not vanished. They’re back with a vengeance and now dominate our lives. War is raging in Ukraine, and even the most advanced science hasn’t managed to halt the COVID-19 pandemic. And because a dictator has chosen to block grain and gas deliveries, people in Africa and beyond are starving.
Nor has “Wandel durch Handel” succeeded in shaping history as so many hoped. In fact, the maxim of “change through trade” has led to a macabre outcome that’s quite the opposite of the one intended: Instead of becoming more liberal, tolerant, and cosmopolitan through intensified business links with Western democracies, the world’s autocracies, like Russia and China, have become even more radical and undemocratic. So there has been “change through trade,” but this change ended up weakening democracy rather than strengthening it and effectively led the West into a trade trap.
