Capitalisn’t: Ukraine—The Price of Democracy

Tymofiy Mylovanov: You know, a journalist from Norway asked me, “Do you feel betrayed by Russians?” I’m like, you know, what the (expletive)? They’ve been in war with us for eight years. I don’t feel betrayed by them. They are our enemies. But I feel betrayed by Europe.

Bethany: I’m Bethany McLean.

Phil Donahue: Did you ever have a moment of doubt about capitalism and whether greed’s a good idea?

Luigi: And I’m Luigi Zingales.

Bernie Sanders: We have socialism for the very rich, rugged individualism for the poor.

Bethany: And this is Capitalisn’t, a podcast about what is working in capitalism.

Milton Friedman: First of all, tell me, is there some society you know that doesn’t run on greed?

Luigi: And, most importantly, what isn’t.

Warren Buffett: We ought to do better by the people that get left behind. I don’t think we should kill the capitalist system in the process.

Luigi: Since the start of the war in Ukraine, we have had a number of episodes about the war itself—in particular, economic sanctions. But so far, we didn’t have the chance to speak with somebody actually there: a Ukrainian person and, even better, a Ukrainian economist. Even better, a top Ukrainian economist who lives in Kyiv and is now the president of the Kyiv School of Economics and was the former minister of economic development. His name is Tymofiy Mylovanov, and we are lucky to be able to catch him in between some much more important issues he’s dealing with at the moment.

Bethany: One of the things we’ve talked about on this podcast before is the effectiveness of sanctions. I was curious about why it is that the ruble is back up to prewar levels, and I’m wondering if that has anything to do with the effectiveness of sanctions. So, I guess it’s a two-part question. Why is the ruble back up to prewar levels, and how effective do you think the sanctions have been so far?

Tymofiy Mylovanov: The ruble exchange rate has no meaning because there’s no free trade in rubles. Currently, Russian citizens are not allowed to buy US dollars. Even if they have deposits in banks, let’s say they have $100,000 in deposits. They’re only allowed to withdraw $10,000, and the rest will be in rubles at the official exchange rate. So, in that sense, if you’re withdrawing money from a currency account, the lower the exchange rate, the less the state has to pay.

Similarly, because of the sanctions, there’s not much importing going on. Only critical imports. What you’re penalizing is, you’re penalizing state-owned and private companies for exports with a lower exchange rate. In other words, since there’s no free market, and the exchange rate is not determined by supply and demand forces, and there are capital controls on imports, you essentially are robbing the private and state-owned companies in Russia by having a lower exchange rate than the market rate would be. And, also, it looks good for propaganda.

Luigi: But the fact that Russia runs a big current-account surplus suggests that even the freezing of central-bank assets did not have a major impact, because they keep receiving a lot of foreign currency through their continuous export of gas and oil, and so they have money to pay. As long as other countries like China and India are willing to sell, they have a market.

Tymofiy Mylovanov: Correct. So, first, we have to separate the stock and flow. The fact that the stock is frozen is irrelevant during the war, because it’s cash flow that matters to finance critical needs. You’ll figure it out after the war. When things settle down, some of your assets will be unrestricted. Unless the assets are confiscated—and they’re not, they are restricted—then, you’re not really losing it. So, if you want to confiscate these assets, the stock, it has to be a political decision. It cannot be a technical decision or a legal decision. So, it’s going to take forever.

Now, in terms of flow, the question is, how much do you really need to finance the war? Because I’m focused on the war rather than on the economy. The idea that, somehow, because of the collapse in the economy, Russians will not elect Putin in the next election seems to be a fantasy to me. Or that Russian people will revolt because McDonald’s is out or because central bank reserves are frozen. They will revolt against Putin. Against the Kremlin. I think it’s ridiculous to think that way.

If anything, there will be mobilization, and there is a mobilization effect in the opposite direction. So, we have a paradox there. We have tens of millions of Russians denying the war and, at the same time, supporting it. So, I don’t think the economy or the economic sanctions are really about forcing the opinions of people in Russia or forcing them to behave differently or creating some kind of conflict with respect to the Kremlin. But I think what you really need is heating equipment provided by Bosch or high-precision targeting equipment or software provided by some French companies to operate your tanks or missiles. And that doesn’t cost that much. That doesn’t cost hundreds of millions of euros. Sometimes it costs hundreds of thousands of euros or millions of euros. That’s affordable.

You mentioned one more thing, whether you can bypass sanctions through China. Actually, I think it’s easier to bypass them through Georgia rather than through China. Because China is a bit worried . . . At least, private companies, which are kind of semi-private, very aligned with the government, or just private companies. As long as they have some private interest, they’re a little bit concerned and reluctant to trade with Russia because they have a bigger market. It’s not the biggest war from the perspective of those companies supplying military equipment or technology. There’s always Africa. There’s the Middle East. There’s Asia. There’s Latin America. There’s North America. There are bigger markets, and they’re risking getting secondary sanctions or losing suppliers from Europe or from North America. It’s not a very good proposition, so they will be sabotaging things. They will be supplying things, but maybe using old contracts and so on. So, I’m more concerned about Georgia being a hotspot for bypassing sanctions rather than China, frankly, although that might not be the most popular or common opinion.

So, I think you are correct. The sanctions are symbolic and political. They’re going to work in the longer run by weakening the economy of Russia, but then there’s the question of the Western resolve to maintain sanctions long enough for them to matter. In the short run, it’s really about critical imports.

Bethany: Back to something you said. If you had to choose, and perhaps this is a far too blunt or simplistic way to ask the question. But if you had to choose between sanctions and the supply of military equipment, the supply of necessary military equipment, which one would you pick?

Tymofiy Mylovanov: I would, of course, cut the supply of necessary equipment. Because if Russia can take another town, if Russia can kill another thousand or ten thousand civilians, that in a very perverse way strengthens their position, although it should weaken it in the modern world. But the infrastructure of the modern world, the security infrastructure, is not set up that way. It actually strengthens their position. So, weakening it should be the objective. And I’m a little bit frustrated by NATO’s inability to build a strategic capacity to weaken this ability of Russia. Russia clearly has engaged not only Ukraine but NATO through info ops, through cyber ops, through political ops, through corruption, through polarization. It’s not kinetic warfare, but it’s all kinds of nonkinetic warfare.

It takes Ukraine . . . Ukraine is better suited now, in a better position, let’s say, to force Bosch or German or French companies or some other European companies to provide critical equipment for Russia to be able to continue to run cyber ops or info ops than NATO. Because NATO doesn’t have an operational mechanism, a working mechanism, to prevent German and French and other European companies from supplying critical technology, information, or equipment to Russia, while Ukraine today has a mechanism. It’s, of course, a political mechanism, where our president or the government, the minister of foreign affairs through diplomatic channels, apply pressure, and it’s de facto sanctioning companies because they start pulling out from Russia. It’s not the de jure, but it’s de facto. And I think that mechanism is working. If I were to pick, I think that mechanism is much more important.

Although everyone is talking about an embargo on gas and oil. If that were to happen, then it would cut down flows, right? Not stock but flows. And that would be painful. That would probably have an effect. I agree with that. But still, even then, I think it’s much more important to identify the critical . . . the weakest links in supply chains, where the technology Russia has would take them years to develop if they are cut off from the critical imports and make sure that they don’t bypass it, don’t import it through secondary markets or through gray military markets, which are there, unfortunately.

Luigi: If you had to point out the three biggest offenders, the three Western companies that are still supplying Russia with crucial wartime stuff that you would like to stop and have not stopped . . . Can you name three names?

Tymofiy Mylovanov: I’m not going to name the companies because I do not know, or what I know is classified, but I’m going to name countries. It’s still France and Germany, and then Georgia is facilitating bypassing sanctions.

Luigi: I’m glad Italy is not on the list, but it’s pretty close there, no?

Tymofiy Mylovanov: It would be number four. If I went on to say . . . if I were not to say Georgia.

Bethany: Is there a way to think about how much of what’s happening is official companies selling their products and how much of it is the black market? How much of this can be reduced by pressure on corporations, and how much just is a shadow world of the black market that official pressure has no means of reaching?

Tymofiy Mylovanov: There is a very active military market. And it’s a little bit gray or at least grayer than many other markets. It’s not a dark market, because most of the things, you actually have to ship them and they’re sizeable, so they are observable. It’s not like cyber ops or information. You’re not trading information. Let’s say WHO, for example, which is a little bit of a ridiculous example, where the information is flowing to Russia.

Bethany: Before we move on, will you just pause on the WHO example that you were going to mention?

Tymofiy Mylovanov: The WHO is upset that our government has not given them information about the health situation, wounded and hospital needs, but they’re not willing to exclude Russia from WHO. And so, as a member, Russia has access to this information, and it somehow doesn’t click together in the bureaucrats’ minds that the information about how many wounded or what are the needs of our hospitals or which hospitals require renovation actually provides critical operational intelligence to Russia.

Bethany: Wow.

Tymofiy Mylovanov: In the case of these things . . . This is actual equipment that is being shipped, unless it’s software, and software is more difficult to track. You can just link the code. But this is observable. This is shippable. It’s usually dual-purpose. It’s difficult to control dual-purpose markets, but they are export-controlled, there are licenses, and there are all kinds of violations of those during wartime.

It’s very difficult to . . . How are you going to monitor it? If someone ships something to Russia, how are you going to monitor whether it was shipped to a hospital or later used by a military? It’s impossible to monitor, right? You need observability. During wartime, you lose observability. So, the standard reaction . . . There actually are protocols which prohibit companies from trade. You really have to . . . You can’t, during wartime, supply a lot of standard things, which you would normally be supplying or allowed to buy. But then there are all the intermediary companies. There are, really, tons of them. They have things in stock, and they are usually in some third countries, and they will supply things to you.

Luigi: There is much discussion in the West, and particularly in the European Union, about stopping the import of gas and oil from Russia. How important do you think that is for the success of Ukraine or for the defense of Ukraine? Number one. And, two, I read somewhere . . . But it might be wrong. I want to double-check. Isn’t there some Russian oil or gas that is still flowing through Ukraine?

Tymofiy Mylovanov: Yeah. So, there is gas and oil flowing through, actually, pipeline Druzhba . . . “Friendship.” The Soviet pipeline Druzhba is through Ukraine. We have our pipeline network, and it’s flowing through Ukraine, and Russia is supposed to be paying us for it.

Luigi: So, why don’t you stop it? You are at war with Russia. Why don’t you stop the pipeline?

Tymofiy Mylovanov: It makes no sense for us to stop it because, if we stop it, it’s going to be shipped through other pipelines through other countries. It will just paint us as an unreliable partner and will help them with their propaganda. And they have tried to use this trick. I mean, that’s not the only reason, of course. If they actually . . . I frankly don’t think they will pay us, but some people might think, oh yeah, they’re also going to pay you, so there are some revenues. But I think it’s a little bit . . . We are past that point to think about two months’ revenue for rental of the pipelines. We’re not in that business now. Unfortunately, for us and the world.

But Russia has used that in their propaganda. In 2004, during the Orange Revolution and later, they were claiming that Ukraine has been stealing gas and Ukraine is not a reliable supplier, and we just need to bypass Ukraine. There were gas wars. If we look at the headlines, every five, seven years, Russia would cut off gas to Ukraine and to Europe. Then there was a question of whether it’s Ukraine stealing gas or Russia is not pumping enough and there would be all that.

Ukraine also is a country which has never defaulted despite all of this harassment and wars and annexations, while Russia has defaulted in the late ’90s. 1998. So, we’re trying to keep our reputation of not defaulting on our obligations. That is consistent. For example, there was a blockade in the Middle East. One country blockaded another one in terms of food security. Ukraine continued to supply . . . Ukraine and private companies continued to supply food to the Middle East, and that helps us. I talked to the ministers. I don’t want to reveal specific countries, but when I was in the government and when I was advising, I spoke with multiple ministers in the Middle East and they said, well, we actually have a reputation of being a reliable partner. If something happens, we don’t take sides. We continue to supply. So, I think there’s part of that thinking, and maybe it’s institutionalized.

Of course, we can make a decision to stop pipelines. The question is, unless it is coupled together with an embargo, it’s just useless, right? Because that’s going to put technological strain on our system. Pressure issues. You have reverse-direction issues. All kinds of issues. You’re stressing your own system. And so what? They will just ship it through Nord Stream 1. They will ship it through the South Stream. They will ship it through other streams, in the case of gas, so it’s not going to achieve any goal.

Now, your first question was, how much does it really matter? The embargo. Well, it’s not the embargo which matters, but Russia not being paid that matters. So, as far as I’m concerned, pump all the gas you want. And I think it’s a little bit of a silly discussion. Let’s make sure it’s being pumped. That’s fine. Just make sure Russia doesn’t get a penny of it until some conditions are met. This condition better be not even stopping the war in Ukraine, but demilitarization. Because it’s an aggressive regime now willing to use military force in Europe and that’s probably not acceptable . . . should not be acceptable to most people who are thinking strategically about the future of Europe.

Bethany: How far away on that front are we from where we need to be? I mean, if where we need to be is a total embargo and making sure Russia doesn’t get paid for its oil and gas, where are we? And can we get from A to B?

Tymofiy Mylovanov: Technologically, let’s think. In terms of Russia not being paid, we can do it. We can stop paying Russia while still pumping gas. It’s likely that Russia will respond to this by cutting the gas supplies, but they cannot do it forever. They will really have to start burning this gas. Their reaction is unpredictable, but you can try. People might say I’m a hawk now, and for obvious reasons, because I’m in the country which is under a war. I would try it. I would say, pump your gas, pump your oil. We not paying you until A, B, C.

How far are we politically from it? I think we’re still pretty far. Central European countries, many of them, at least politicians, are still afraid and still . . . Not all of them, but many are still living in a fantasy world that somehow there could be some negotiation if only Ukraine agrees not to ever join NATO. No one ever offered that to Ukraine in good faith. So, I think, politically, we’re not ready for that.

Now, paradoxically, it’s easier politically to do the other thing. Just to cut down demand and continue to pay for what’s consumed. Even there, we are pretty far, but there’s a serious discussion now in Europe that we should depend less on Russian energy.

So, while I’m on this train about energy being used as a strategic weapon, Russia actually has three, and we only talk about one. Energy security is one. The other one is logistics. Some of the North China trade is going through Russia. Not all goes by sea. But even if it does, it often gets shipped through the Black Sea or Mediterranean and the Baltic Sea. So basically, if you destabilize the Baltic to the south of the Black Sea, this area, which is destabilized now, the logistical costs go up, and your ability to control how much destabilization you are doing gives you a lot of leverage. So, that’s weapon number two.

The third weapon is food security. Russia and Ukraine together supply between a quarter and 30 percent of wheat and corn and some other grains. Out of the top 10, top five grains, at least two sorts are Russia and Ukraine. They’re not immediately being supplied to the EU. I’ve seen people say things like, oh, it doesn’t really matter because . . . There will be a bit of inflation, but the EU and North America won’t be affected by this food-security issue. If Russia kicks out Ukraine from the market and becomes a local monopolist, it’s not going to be a big deal.

It’s not going to be a big deal, except that it matters for North Africa, for the Middle East and some of the Asian countries. You don’t want to have Russia with another tool where it now can create food shortages in the Middle East and northern Africa. That’s going to destabilize the region when they want it destabilized or at least put some pressure on it.

So, if they kick out Ukraine from the food-security map . . . Currently, 385 million people in the world, in this region, depend on Ukraine for food security. That’s about 5 percent of the world population. That’s a big deal, because you can create a lot of destabilization in those parts of the world, and Russia has been using it strategically, as we have seen in Syria, to get leverage through refugee crises and other elements, to get a seat at the table in some discussions and have something to bargain for. So, it’s in the strategic interest of Russia to destabilize the region for logistics and to kick out Ukraine from the food supply chain so it can have a local monopoly. So, those are two additional weapons to energy.

Luigi: Now, you are a game theorist, mechanism-design economist, right? Now, you are facing the challenge of a lifetime. How do you start thinking strategically about a negotiation for peace and hopefully a peace that will last? How do you think about these topics?

Tymofiy Mylovanov: The strategy of conflict, of course, and game-theory conflict, it tells you have to be strong to be able to deter. You can’t deter by compliance or by being weak. In an emotional world, you can deter by saying, “I’m not challenging you,” but in a game-theoretical world, you actually have to create very strong incentives not to escalate. And that means commitment to punishment. And so, what some of the Western countries, including the US, were doing . . . They were committing not to do something. They said, “No matter what, we’re not going to put boots on the ground.”

Well, that’s really wrong from the perspective of game theory. You might not be willing to do that, but you don’t announce it. On the things you are not planning to do, on the threats you are not planning to execute, you’re saying, “I don’t know. I might or might not.”

You’re staying ambiguous. Think of how you’re talking to a child. If you’re saying, “I’m not going to tell you how I’m going to punish you if you’re going to eat more candy,” OK, the kid’s going to eat more candy. So, I think the West has gotten it wrong or forgotten what the Cold War was. The Cold War was essentially about deterrence where there is commitment to act. You need to . . . It’s counterintuitive, as it often is in game theory. You have to escalate to deescalate. You have to commit to escalate in order to create incentives not to escalate.

Now, in terms of what’s happening right now in the theater, it looks like history is a better predictor than our logic. Because we are denying our rationality somehow by compounding this with wishful thinking that we are living in a different world. We are hoping that people cannot be that nasty, but they are that nasty. We are hoping that people are not going to shoot at nuclear facilities. We are hoping that people are not going to dig trenches in Chernobyl, but they are. We are hoping they’re not going to shell civilians or they’re not going to execute civilians, but they do. We’re hoping they’re not going to bomb Kyiv, but they do. So, all assumptions we have, they have been falsified.

In my view, Russia is going to push as far as it is given, as far as it can. The way to stop it is actually to have a number of decisive losses for Russia so that it will be forced to withdraw. I don’t think anything is going to happen until both sides can declare some sort of victory. So, there should be a decisive battle. Clearly, Kyiv was not that. Mariupol is not going to be that, either. So, a lot of people right now are hoping that the next battle for Dombas, which is starting in two, three, four days or in several days. Just before May 9th or May 8th, the symbolic date of the end of the war with Germany. For Russia, at least, it’s very symbolic. So, there’s going to be a battle for Dombas, and this battle for the Donbas, somehow . . . If both sides could claim victory there, both Ukraine and Russia, then there’s a possibility for some kind of settlement.

But fundamentally, the settlement could be of three types. I’m thinking very technically here. Ukraine will lose territory, Ukraine will have the same territory as in 2014, or it will gain some territory back. So, if it’s going to lose territory, it’s just another episode. It just was bad luck. Russia tried this time, it still got some additional territory, but maybe not as much as in the case of Crimea and at a higher cost, but it’s still working. So, they will attempt to gain.

If Ukraine gains some of the territory back, now Ukraine really poses a threat to Russia. And then, if Ukraine doesn’t gain and Russia doesn’t gain any territory back . . . so we’re basically back to 2014 . . . then there is some hope for stability. At least, temporarily, some stability.

I think that’s the best the world can hope for, in my view. But nonetheless, even if that happens, we have a problem that there is a very aggressive regime, nondemocratic, with maybe 40 to 80 million people out of 140 million, their population, are supporting aggressive . . . supporting military reaction to reach their unclear goals. Because it’s unclear what their goal in Russia is . . . Sorry. It’s unclear what the Russian goal in Ukraine is. It’s unclear what they’re trying to achieve. Are they trying to take Mariupol? No, they destroyed it. Are they trying to take Kyiv? No, they are not taking Kyiv. What is it? Are they trying to cut to Odessa? No, they’re not. It’s unclear what the objective is, actually.

Even though 40 to 80 million people, really, however you devise the polls, are actively supporting the war. That’s a problem for Europe. That’s a very unstable situation. That means there will be continuation of hostilities. Maybe they’ll try to cut to Leningrad. Maybe they’ll be doing something in Moldova. Maybe something in Georgia. Who knows? They’ll be doing something. Maybe in Syria. So, essentially, I think we will have to wait for Russia to implode and watch how we can decouple the aggressive regime in Russia from nuclear weapons. And that’s going to be a challenge for the next couple of decades for the world.

Bethany: Are there things that have surprised you? If the West has been naive or the West has forgotten some of the lessons of the Cold War that perhaps we should have learned? Are there things that have surprised you as you’ve watched this unfold from where you sit?

Tymofiy Mylovanov: Two things surprised me. In Russia, it would surprise me how many people support the war. Truly. I don’t believe the polls, but I still believe a lot of people support the war. To me, this is really scary. It’s not the Kremlin that is scary, but the fact that tens of millions of people are supporting killing civilians en masse. That is really scary in the 21st century. That is something I thought we left in the 20th century. I can see how governments become nasty. I can see how there are dictators. I can see how there are things like ISIS, ideological terrorist organizations, destroying culture and destroying humanity. But I have not seen it institutionalized at the state level in the 21st century, and now I do.

And we haven’t seen any of the worst. We just see the dynamics. That they started with Georgia later . . . Well, they started with Chechnya, but later there was Georgia. They bombed Georgia. Then, there was Syria. Before that, there was Crimea. And now, there is Ukraine as a country. But it’s getting worse and worse. It’s progressing, that business. That is really scary. They are bombing the cities in which they had most of the support. They’re bombing Kharkiv. They’re bombing Mariupol. These are the cities in which all our previous analyses, with which I disagree, but anyway, claims their largest share of Russian people. That’s what they’re bombing. They’re bombing their own kind of electoral-base potential. So, it doesn’t really matter if it’s Ukraine or something else. Doesn’t matter. So, that is really surprising for me. How is it that I missed it? I have no illusion about how nasty Putin is in his values, but how did I miss that there are 80 million people that nasty? That’s a disease and that’s really scary.

The second one is I really can’t believe how weak the European response is and how not serious it is. I’m not surprised there. I’m really frustrated. I had a question . . . Someone asked me a question earlier which almost insulted me. A journalist from Norway asked me, “Do you feel betrayed by Russians?” I’m like, you know, what the (expletive). They’ve been at war with us for eight years. I don’t feel betrayed by them. They are our enemy.

But I feel betrayed by Europe that we’re not getting arms. That, for the first week, everyone felt that, OK, they’re just going to collapse now. Let’s wait and see what happens. So, that’s why I feel betrayed. And then that they still choose economy over humanity. The price will be high for them, too. Just not now. We also tried that in Ukraine. For 20 years, we were subsidized by Russia . . . Our gas was 10 times less than the market prices. See where it got us? Not far. I think the same principle is at work there. So, I’m fundamentally surprised by these two things.

Luigi: Tym, I think we’ve run out of the time you allocated us, and we don’t want to overextend our welcome, because we know you have a very busy day, but let me ask one last question. Because one thing that really surprised everybody . . . You said what surprised you. What surprised everybody in the West is the quality of Zelenskyy’s leadership. The image we had of Ukraine was of a country that wasn’t working particularly well. That was corrupt. That was not working. What did we miss? What is the secret that brought Ukraine together to this success?

Tymofiy Mylovanov: I think intellectual arrogance. Not willing to pay attention to the detail. We all studied Russia in the West. We forgot to study Ukraine. It was all about Russia. What Putin thinks. What Navalny thinks. No one has been trying to understand Zelenskyy or, for example, the dynamics or the history. If you really look at it carefully, this escalation is no surprise because . . . Zelenskyy is in his second year in the office. Soon, it will be the third, but it’s his second year. And so, in the first year, he was not challenged by pro-Russian oligarchs, but in the second year, he got challenged. And what was his response? He put Medvedchuk, who is a relative connected to Putin, under house arrest. And so, what did Russia do? They started an energy war. Of course, we missed it, but it was there. It was in the news. What did Zelenskyy do? Got through it.

Russia put some troops in April 2021. 100,000, 120,000. What did Zelenskyy do? He didn’t budge. An person in Zelenskyy’s inner circle gets an assassination attempt that is unsuccessful. But Shefir was driving in August to the office of the president and he was shot at. That was a clear message. What happens? Zelenskyy doesn’t budge.

So, the escalation was much more gradual, and Zelenskyy’s resilience to pressure was obvious. We talked about de-oligarchization, where he actually took on all the oligarchs in Ukraine simultaneously. Yeah, people are accusing him of connections with Kolomoisky, but I don’t think there is evidence that Kolomoisky is somehow faring much better than anyone else in Ukraine. So, Zelenskyy really has been fighting all the oligarchs and not giving space to Russia in negotiations at the same time. It’s somehow not surprising that he’s shown leadership like that.

And then, if you look at Ukraine, this is the only Slavic country, post-Soviet Union Slavic country, which successfully resisted multiple attempts at dictatorship or authoritarian government being installed. Belarus lost the case. Russia lost the case. But Ukraine had two revolutions to kick out Yanukovych, essentially. So, there is history, recent history, in people believing in the fact . . . And the last revolution cost people’s lives, right? There was an invasion in the east, and Crimea was up next, and people were shot. By our own government, people were shot in downtown Kyiv, and still protestors didn’t disperse. More died. And the government toppled. So, the Ukrainian people have this history of succeeding. They believe that life is dark, but if they push hard enough, there’ll be a sunrise after that. Not everyone will see it, but it will happen. It’s not new for us. 2014 taught us the price.

What surprised me most in 2014 . . . Not in 2022. In 2014, my main surprise was that I realized that the price of democracy is paid in lives. That every country has to pay it in human lives. Like the US paid a hundred years ago, like Europe paid hundreds of years ago, we have to pay, too. We don’t just inherit it after the Soviet Union collapsed. And we’re willing to pay this price—unfortunately, for people who die. Other countries like Russia and Belarus are not willing to do it. So, I think that had people studied it, they would have understood this. That it’s going to get to that.

Luigi: That was amazing. Thank you very much. And good luck to you and all your family and your country.

Bethany: Yes. Good luck to you.

Tymofiy Mylovanov: Thank you very much.

Can I pitch one thing in the end? Sorry. I have to leverage it. Guys, we raised $17 million at the Kyiv School of Economics, mostly to buy medical kits. Medical kits are important. You’ve all seen the news today at Kramtorsk, where people were trying to evacuate, and Russians just bombed the train station. That’s how most people die. Because, in the first minutes, if they don’t stop losing blood, they die. So, we’re supplying thousands, tens of thousands, of medical kits, which are designed specifically to stop blood loss and can be applied by people, self-applied. Essentially, a police officer or a medic can be throwing 20 of them at the same time to the crowd and people will . . . It’s like masks in the airplane when the cabin is depressurized. So, we’re supplying them. It’s not easy. They cost a hundred bucks a piece. We have been raising tons of money. If you know anyone who can support that effort, please do. If you can put any of this in the podcast, I would appreciate it. I’ll send you a link. Maybe you can promote it. If not, that’s fine, too.

Luigi: No, no. Please. Send us a link. Thank you very much.

Tymofiy Mylovanov: Thank you.

Bethany: What did you find to be the most surprising thing he said, Luigi, since part of the theme of this interview is things that surprised us? What did you find most surprising?

Luigi: Many things. The first is that we in the West, and particularly we Europeans, feel like we are congratulating ourselves for how well we have done, what we’re doing, how pro-Ukraine we are. We even shun everybody who has any vague resemblance to a Russian supporter and so on and so forth. Seeing it from his perspective, we’re doing terribly. I think that, to me, it was very moving when he said that there will be a sunrise, but not everybody will see it. That the price of democracy is measured in human lives. I think that that’s . . . And that’s not empty rhetoric from somebody who is driving to Kyiv tomorrow.

Bethany: It’s also interesting . . . His response that the reason we all missed how strong Ukraine would be was intellectual arrogance. I suppose there is . . . In all the celebratory comments about the wonderful Ukrainians, there is a little bit of condescension, right? There is an attitude of, oh, look at them! We didn’t think they could do it. I can see how that could . . . Especially given the history there, I can see how that could be actually insulting.

Luigi: Yeah. Many years ago, I saw this movie, Fog of War, with Robert McNamara, an interview with Robert McNamara, and he said that, if he had understood how much the Vietnamese hated the Chinese, he would have conducted the war in a completely different way. And so, maybe one theme here is that we need to study history better, and we need to teach history better. Because I think that these misunderstandings are dramatic in terms of cost.

Bethany: You can’t learn that lesson too many times about the benefits of history. I was struck, in his response to your excellent question about game theory, his comments about how we do seem to have forgotten some of the lessons of the Cold War. And perhaps . . . I was wondering if it’s living in this Information Age, where we tell people too much instead of keeping it a secret that we’ve decided not to do something. We don’t know where to draw the lines on information anymore. I wondered if that’s a broader . . . I don’t mean broader. There’s nothing broader, more important, than the war right now. But if that’s a human issue in the Information Age that we don’t know when to be quiet. We don’t know where to draw the lines around information.

Luigi: As an economist, he also reasoned in terms of market monopoly and threat that this market monopoly can bring. One of the aspects that I did not consider is, with Ukraine out of the picture, is that not only is there a shortage of wheat, but there is an incredible market power for Russia in destabilizing the rest of the world. Because if you just cut out the supply of wheat, the entire Middle East might go up in flames. Now, I understand why, for example, Israel has been incredibly soft-spoken in all this negotiation and not taking sides very aggressively. Because they know they’re sitting on top of a ticking bomb, and it seems that Russia is the combination to activate that bomb.

Bethany: The issue not just of food security, but of food weaponization. I thought that was fascinating. We’ve talked about and seen pieces about food security, about the percentage of wheat that comes from Russia and Ukraine, but I had not thought of that. I still tend to, I guess, have boxes in my mind and think, well, food is humanitarian, food isn’t a weapon, but of course it can be a weapon. I thought that opened my mind to a possibility . . . I’m not sure I’m glad my mind is open to this possibility. It’s one more thing to worry about. But that was not something that I had thought about until his comments.

We’re all struggling to make sense of the war. We’re all struggling to make sense of who saw it coming, who didn’t see it coming, how we could have ended up here. And I thought his comments were incredibly crystallizing about not expecting to see some of the things we’ve seen in the 21st century. We all think of naivete as being a bad thing and, in some ways, it is, but naivete is also delightful. I would have preferred to have stayed naive to the fact that people in warfare is no better than it ever was. That, for all the advances that we’ve made, people are as ugly and more as they ever were.

Luigi: Yeah, I think that’s very sobering, and the fact is very sobering that you do see a massive amount of people supporting this brutality against people that they consider their brothers. Sometimes they even speak the same language. They have a long history in common. How can you be so brutal? I think that that is the question. The other is, in the United States, we tend to reduce everything to the villain. Putin is the villain, and if only Putin were to disappear tomorrow, the world would be a better place. Unfortunately, it’s not true.

Bethany: The other thing he said that I found really interesting, which I want to mention, was his point about how Ukraine taking territory . . . these three scenarios that he laid out where Ukraine loses territory, it remains even, Ukraine takes territory . . . and that he as a Ukrainian . . . You would have expected him to say, we get territory out of this, but he doesn’t, because he sees it through the historical lens and sees the danger it would cause with Russia or Ukraine to come out of this with more territory. I thought that was incredibly wise of him and an interesting ability for intellect to override emotion.

Luigi: Absolutely.