Geopolitical Developments: Eurasian Chauvinism Is Spreading And That Makes Destroying The Russian Army The Immediate Imperative

Autocrats are rallying across the world and explicitly or implicitly rooting for Vladimir Putin and against popular democracies that oppose him. The dreadful consequences are clear for anyone to see in Ukraine but can also be discerned in the markets, which have grown more volatile since February 24 as they inexorably trend downwards. The volatility risk premium points to a market fall over the next few days, while my technical reading of key stocks in the S&P 500 is bearish. There are several negative factors across global asset classes. Gold is trading as a risk-off asset. The action in currencies signifies $US strength. The US yield curve is rising and in the current context that is bearish. Inflation expectations are rising based on measures of Treasuries and TIPS. Expect the S&P 500 to fall over the next few days.

Russian chauvinism exerts its full force in Ukraine but it’s not the only aggressor. Since Xi Jinping’s tenure China has shifted from a “hiding and biding” foreign policy to an aggressive and chauvinistic posture toward its neighbors across the China seas. And in Narendra Modi’s India such chauvinism claims victims among its hundreds of millions of muslims, but also increasingly emerges in the comically incoherent public discourse about Indian greatness and historical slights from the West. Where once the brain drain of educated and energetic Indians to the West was considered a national shame today it’s regarded as a proud export that India beneficently awards the world. The underlying causes of Eurasian chauvinism are twin insecurities about domestic cohesion and international relations across its borders, but also a more defensible and understandable disdain for Western cultural values. The US and Europe can do little to affect Eurasian insecurity, but cultural changes can vitiate Eurasian disdain and set about a new thrust of liberalism across the globe.

The fundamental cultural change the West needs is a redefinition of individualism from an entitlement to a value, where people can be judged on whether they are good/high individualists or bad/low individualists. Since WWII the West has been pilloried for low individualism, namely the traits of materialism, narcissism and vanity, where relatively high rates of violent crime and white collar crime can be clearly traced to these traits that easily develop into pathologies. By contrast high individualism reflects values such as self-expression, shrewdness, fitness and objectivity, out of which flows a liberal perspective that looks skeptically at majority power and self-entitlement. High individualism recognizes the power of popular democracy as the foundation for a peaceful progressive society, not a tool for improving people towards mandated cultural standards or perfectability. A nation based on limited democracy and a limited state leverages high individualism by awarding the highest status and prestige to self-expression and self-motivation, not political power or economic status. Such a nation is not only venerable in its own right but unthreatening to other nations with different perspectives and histories.

Unfortunately the West is trending toward self-entitlement with an ever-increasing focus on legal rights that try to mandate new cultural standards. Eurasian chauvinists have easy pickings when they list out the forms of decadence and self-centeredness that flow from these entitlements, which vitiate rather than extend basic human rights. The latest trend of self-entitlement is The Great Resignation and its corollary belief in universal basic income and national standards of employee dignity. These trends can only hasten automation as managers and shareholders balk at redistributing their power to workers whom history shows have been completely replaced by technology and entrepreneurial disruption as the attributable sources of rising prosperity.

Supply Chain Brain notes “…the new generations typically don’t stay in any one job for long, and they have low tolerance levels for jobs they don’t like. You can get a job working at McDonald’s for $18 an hour, with less labor than required in a warehouse…In the workplace, they (millennials) are considered the most independent workers, preferring to create their own processes rather than being told what to do. That makes them innovative self-starters, but not as enthusiastic team players as the prior generation. They also tend to be concerned with the ethics and social responsibility bona fides of the organization they work for. And they want feedback, constantly, via text, tweet and any other form of electronic communication available, rather than face-to-face…The important point to take away from these characteristics is that the new generations of warehouse workers are not motivated purely by wages. Baby Boomers and Gen Xers chiefly sought good salaries, benefits and retirement packages, with maybe some stocks thrown in. Millennials and Gen Z want flexible schedules and social rewards, including affirmation that the work they’re doing actually matters…recognition of warehouse workers’ contributions to the overall business is absolutely key…(as given in a) story about a picker in a warehouse who saw that the company’s top sales rep had been given a trip to Cancun as a reward. That worker wanted to know why he couldn’t win a trip to Cancun, since without his efforts, those sales wouldn’t have been fulfilled. “We want businesses to be collar-blind,” Wood said, referring to the idea that traditionally blue-collar jobs such as warehouse workers are just as critical to the wider outcome as white-collar management jobs. “We have to treat them the same as other workers.”

The labor share of income in the US has been declining for decades along with union membership. These twin trends can’t be explained by legal changes or policies, since the leading companies have changed in this period, while real wages have stayed level but consumption has grown along with wealth. These trends can only be coherently explained if one recognizes that labor is not more productive than it used to be, but technology is much more productive and entrepreneurial disruption has drastically changed the American corporate landscape. What America can leverage is not worker productivity but the self-expression and self-motivation of workers, which when shrewdly combined raise human capital and get workers into better jobs or create entrepreneurs out of employees. Such a cultural refocus would not only blunt the economic threats coming from South and East Asia but reinvigorate the respect America once commanded, and set back the Eurasian autocrats who threaten the world with mutually assured destruction.

Ukraine is the current battlefield against the autocrats and it’s imperative that the West give it whatever it takes to not just defeat the Russian army but destroy it. And in the West, we can do our part by committing to the high virtues of individual self-expression and motivation, and make the Ukrainian fight consequential to the world’s future. Until then expect rising volatility in every sphere of life, as viscerally evident in the current downtrend in global equity markets.

My current positions include a large cash position, Goldman Sachs (GS), 3M (MMM), Pfizer (PFE), Starbucks (SBUX), Titan Machinery (TITN) and the offsetting levered ETFs UPRO and SPXU.