KABANOVSKY: The fall of the USSR – a disaster for the West?

KABANOVSKY: The fall of the USSR – a disaster for the West?
Rome passed its peak with the destruction of Carthage. Big powers need rivals to flourish. / bne IntelliNews
By Alexander Kabanovsky in Berlin May 10, 2023

"The seeds of decline were sown with the triumph over Carthage."

"The breakup of the Soviet Union was the greatest geopolitical tragedy of the 20th century," Vladimir Putin famously said in April 2005.

Of the many questionable statements Vladimir Putin has made over the years, the one concerning the tragedy of the collapse of the Soviet Union may have been the closest to the truth, but not in the way he intended. While it was disastrous for Russia, the fall of the USSR was not the unmitigated triumph it initially seemed to be for the West. Thirty years after our victory, we seem to have lost our way, our economies are facing grave challenges and gross mismanagement while our societies are splintering into ideological warfare, with every disagreement serving as a cause for vitriol instead of an opportunity for rational discussion. It seems that today there are no truths that we hold to be “self-evident.”

Comparing GDP growth, government debt, depression rates and inequality between the Cold War and post-Cold War periods reveals that the new era has brought significant challenges and warning signs of mismanagement and irrational policies. As the West grapples with these issues, we must learn from history and address the root causes of these problems to build a more prosperous and equitable future.

The beginning of the decline of the Roman Empire is often attributed to its victory over Carthage, its greatest adversary. Rome’s complete triumph removed a persistent existential threat that hung over the Empire and preoccupied its leaders' thoughts. Carthaginian dominance of the seas led Rome to unprecedented achievements when in a matter of months, it created a navy capable of defeating its most pernicious foe. Hannibal’s invasion of Italy forced Rome to band together as never before, with every citizen sacrificing for the goal of ultimate victory and defence of Roman values. Carthage always brought out the best in Rome. By destroying Carthage, Rome fed its own hubris, putting it on a path of its downfall.

The same could be said for the West in the aftermath of the USSR's collapse in 1991. While the event was celebrated as a triumph of democracy and capitalism, the ensuing years have been marked by economic stagnation, rising debt, and social issues. This article will examine the economic and social consequences of the USSR's fall on the United States and Europe, comparing critical indicators from the Cold War era (1945-1991) and the post-Cold War period (1991-2021).

Economic Comparison: GDP Growth

The United States and Europe experienced impressive GDP growth during the Cold War. Between 1945 and 1991, US GDP grew at an average annual rate of 3.4% (2), while Western Europe experienced a growth rate of around 4.5% during the same period (3). This growth, fueled by rebuilding efforts and technological advancements, laid the foundation for the West's economic dominance.

​However, the post-Cold War era saw a significant slowdown in GDP growth. From 1991 to 2021, the US experienced an average annual GDP growth rate of just 2.46% (4), while Europe's growth rate dropped to around 1.8% (5). The decline in growth rates points to a loss of economic momentum in the West following the USSR's collapse, suggesting that the victory may have had unintended consequences.

Fiscal Comparison: Government Debt

The Cold War era saw relatively low levels of government debt in both the United States and Europe. In 1945, US public debt as a percentage of GDP was around 104% (6), but it steadily decreased to approximately 61% by 1991. Europe experienced a similar trend, with the average public debt-to-GDP ratio for Western European countries dropping from 80% in 1945 to 44% in 1991 (7).

​In stark contrast, the post-Cold War period has been characterised by a significant increase in government debt. By 2021 US public debt had skyrocketed to nearly 130% of GDP (8), while the average debt-to-GDP ratio in Europe had risen to about 100% (9). The ballooning debt in the West can be attributed to factors such as the 2008 financial crisis, sluggish economic growth, and growing social welfare expenditures.

Social comparison: mental health and inequality

The West's decline since the fall of the USSR is not limited to economic indicators; social issues have also worsened. Depression rates among teens and young adults have surged since the turn of the century. In the US, the prevalence of major depressive episodes among adolescents increased from 8.7% in 2005 to 14.8% in 2021 (10). Europe also faced a growing mental health crisis, with depression rates among young people increasing by more than 50% in some countries during the same period (11).

Inequality, measured by the Gini co-efficient, has also risen in both the United States and Europe since the fall of the USSR. In the United States, the Gini co-efficient increased from 0.34 in 1991 to 0.38 in 2021 (12). Europe saw a similar trend, with inequality rising in several countries over the same period (13). This growing inequality has led to social unrest and a sense of disillusionment among many citizens, further exacerbating the challenges facing the West.

Conclusion:

While the victory over the USSR may have been cause for celebration at the time, it is crucial to recognise the challenges that have arisen in its aftermath. The emergence of a multipolar world with rising global players like China, India, Latin America and Africa offers both challenges and opportunities for the US and Europe. This new world order can be beneficial for the West, as the need to compete and face existential military threats, as well as the race for technological advancements to address global issues, will demand that the collective West runs a tighter ship. Fiscal irresponsibility, social indifference, debasement of our culture, history, and excessive coddling of our children will no longer cut it in the new realities.

To adapt to this increasingly competitive global environment, it is imperative for Western nations to address issues such as profligate government spending, corruption and waste. Additionally, there is an urgent need to tackle the failing education system and the diminishing demands placed on our children, who are growing softer in a world that is turning harder. Our laxity will not bode well in this new world order. If we truly want to protect the fundamental tenets of Western democracy, we must adapt to a more hostile global environment than the one we had before.

By embracing the challenges presented by a multipolar world and addressing the issues that have arisen since the fall of the USSR, the West has the potential not to only survive but also thrive in this new era. Through co-operation and competition with new global powers, the West can reinvigorate its economy, strengthen its democratic institutions, and maintain its position as a bastion of freedom and progress. Ultimately, the key to a brighter future lies in our ability to learn from the past, adapt to the present, and forge ahead toward a more stable, equitable, and prosperous world.

Alexander Kabanovsky is formerly Russia-based banker and entrepreneur. This article first appeared on his substack “Thinking Out Loud” here.

“Politics, history, culture, and whatever strikes me as important or interesting. For the time being, highly focused on the war in Ukraine.”

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