A main obstacle to success in international business is the tendency to view a foreign market through the same cultural lenses that you use to analyze your own domestic market.
There are many illustrations of this simple problem. Kellogg marketed dry cereal with cold milk in India, unaware that Indians culturally have an aversion to cold milk. When Disney first opened Euro Disney outside of Paris, it did not allow wine to be served.
Countries have the same problem. How can they see the world as it is, not how they believe it to be? How do they separate their political and cultural myth systems from their rational views of the world?
Countries are not companies. Countries have historical memories that companies easily ditch in pursuit of profits, markets, and innovation. In fact, companies that don’t turn away from their histories as markets change often don’t survive. It is enough to remember that GE’s main business was once light bulbs, and then home appliances.
There is no profit motive big enough for a country to ignore its cultural and historical myths. Cultural myths are what bind a country together, whether it is America’s self-characterization as the land of the free, Russia’s belief that it is the Third Rome, the inheritor of Constantine’s Christian mission, or China’s memory of one hundred years of humiliation. When a country perceives an existential threat, it does not matter how unrealistic that threat seems when viewed from abroad. The country will do whatever is necessary to protect or further its cultural belief system.
Russia, as we all now know, has moved tens of thousands of troops to its border with Ukraine. Putin is threatening Ukraine as a pressure point to push the Western nations allied under NATO to draw back their presence and grant Russia what it believes is its historically legitimate dominance over Eastern Europe. Of course, from an outsider’s view, Putin’s position is totally illogical and extremely warlike. He is looking at the world through the myopic lens of 19th-Century Russian interests. Eastern Europe is not a threat to Russia. NATO is a defensive organization, not an offensive one. But from the Kremlin’s point of view, the need to restore Russia to its 19th century greatness is paramount, ignoring the fact that Europe is no longer a continent of spheres of influence, but rather one of interlinking economic relationships.
The biggest real threat Russia faces is not from Eastern Europe, but from its eastern neighbor, China. The gap between Russia’s plodding kleptomaniac economy and the dynamic engine of China is almost immeasurable. Russia, with all its natural resource wealth, has a GDP only slightly larger than Spain’s. Setting aside the daily ups and downs of the oil market, Russia’s oil wealth is an asset that is rapidly declining in value.
Countries — especially those run by autocrats — magnify the glories of their past. They bury their defeats and the lessons of those defeats. For Putin, recreating the grandeur of the Russian empire is the all-encompassing dream. But that dream skips over the Russo–Japanese War of 1904-1905, when a nation that the Russian mindset of the time saw as inferior was able to rapidly defeat and humiliate the mighty Russian Empire.
Imperial Russia saw only what it wanted to see. It ignored the massive industrial and technological growth that Japan had achieved during the forty years preceding the war. In their mind, the mighty Russian Empire could easily defeat an Asian country. During the beginning of the war, when Russia was already outgunned, it ignored Japan’s willingness to seek arbitration in The Hague. Even after it became obvious that Russia could not win, Emperor Nicholas II chose to continue the war to prevent what he called a “humiliating peace.”
To call Russia “defeated” at the war’s end is probably too mild a word. Russia suffered significant casualties, and it lost almost all of its Pacific and Baltic fleets. The military loss was small, however, compared to the political consequences. The European geopolitics of the early 20th century hinged on the balance of powers. With its defeat against Japan, Russia appeared to all of Europe as a hollow power. Germany adjusted its strategic calculations to include a weak Russia in the years that led to World War I.
Russia’s humiliating defeat echoed the loudest at home. The invincibility of the czar was now called into question, leading to what is called the first Russian Revolution in 1905, and later to the Russian Revolution of 1917.
Russia lost a war of technology, industrialization, and logistics. Imperial Czarist Russia, much like imperial Putinist Russia today, was more interested in seeking out buffer states as a demonstration of security and aggrandizement. Both ignored the ways their internal economy was falling behind their competitors daily. The Russo-Japanese war was a harsh wake-up call for the Russian people: Control of Poland or Ukraine does not make your country a modern nation. Living next to China, with its supercharged technology and industrial sectors, it is amazing that Putin has not learned that lesson.
Edward Goldberg is an assistant adjunct professor at New York University Center for Global Affairs where he teaches International Political Economy. He is the author of “Why Globalization Works for America: How Nationalist Trade Policies Are Destroying Our Country. Previously he wrote “The Joint Ventured Nation: Why America Needs A New Foreign Policy.” The views expressed are the author's own.