Streetwise Professor

May 27, 2014

La Plus Ca Change, German Sellout/See No Evil Edition

Filed under: Economics,History,Military,Politics,Russia — The Professor @ 1:02 am

Re-reading Pipes’s account of the Russian Revolution. I’m at the part where he is discussing Brest-Litovsk, and the relations between Germany and the Bolshevik regime.  The more things change, the more they stay the same. Large German firms succeeded in pressuring the government then, as they do now, to turn a blind eye to the true nature of the regime in Russia, all in order to facilitate German business with that regime.

Soviet ambassador to Imperial Germany Ioffe had three missions, one of which was to cultivate German business by holding out “dazzling prospects of profits in Soviet Russia.” Despite the fact that Ioffe was also fomenting unrest among German workers, German businesses fell for the transparent lie that this was the work of the “private” Communist Party, rather than the Soviet government. According to Pipes:

Hard-headed businessmen fell for this ploy in part because they wanted to believe it and in part because they could not conceive that anyone in his right mind could take Bolshevik slogans seriously. The Krupps, the Thyssens and the Stinneses, all future supporters of Hitler, pressured their government to maintain good relations with the new rulers of Russia in order to secure German hegemony over the country. The coalition of diplomats, industrialists, and bankers managed to neutralize the military.

Later Pipes discusses post-War relations between the German government and the USSR. Again, very much a see-no-evil, go along to get along, cynical and amoral approach.

Fast forward to the present. The entire German elite is now bending over backwards in order to appease Putin. Merkel makes some scolding noises now and again, but (a) never takes action, and (b) completely undercuts those messages with conciliatory remarks about needing to extend an “open hand” with Putin. Even normally sensible figures like Schaeubel counsel cooperation at all costs. The German business community is pulling out all the stops to make sure that Germany derails any attempt to impose costs on Putin.

But as Pipes shows, such attitudes have a long pedigree. The Germans like to claim that they are different. In very crucial ways, and in very unattractive ways, they are not.

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  1. Two things:

    1) I’ve said this before, but a common complaint from Europeans is that American Big Business drives their foreign policy, e.g. the Iraq War. This is not only greatly exaggerated (really, the Iraq War was *not* fought to increase Halliburton’s market cap.) but stated by Europeans with breathtaking hypocrisy as we are seeing now. I’m sure if you stopped a German on the street they would be convinced the American government is in hock to Big Business whilst their own is not, and genuinely believe it.

    2) The Germans do not appear to have learned the lesson that many, many people learned the hard way and even more (BP, Shell, etc.) also refuse to learn: compromise, accommodation, and concession is treated with utter contempt in Russian culture *unless* the opposition has first demonstrated ruthlessness and strength. Two Russian guys fighting in a bar can quite happily sort their differences out after being chucked out into the snow to the point they will be let back in *provided* each party has put up a half-decent effort. If one party shows weakness and tries to back down, the other will pursue him all night until he’s kicked the shit out of him. Russians genuinely respect strength and bloody-mindedness, which is why they were a lot more wary of George W. Bush than they are Obama. Even now, the Russians respect Thatcher – because she was strong. The Germans haven’t learned this, and think that by cosying up to the Russians they are buying favours they can cash in on later. They’ve utterly failed to understand Russian culture, and no doubt will be awfully disappointed when the Russians inevitably fuck them over in the future. How people can be so blind to this fundamental nature of Russian business culture after so many vivid demonstrations is utterly beyond me. I can only conclude that the modern international business manager is a piss-weak yes-man who has been promoted for his conformity, acquiescence, and sheep-like character over and above anything else. That’s certainly been my experience in my industry, anyway.

    Comment by Tim Newman — May 27, 2014 @ 3:01 am

  2. @Tim. Spot on. Every word.

    I won’t make any excuses for US government shilling for US corporations: I know that Exxon et al are putting on heavy pressure, and no doubt that’s had an effect. But like you say, we are not even close to being in Germany’s league on this one. And what makes it worse is their sanctimony. It would be bad enough if they merely denied the obvious about Siemens et al, but they compound that sin by casting stones at the US in particular. “We Germans are different. We learned from our mistakes. We are advanced human beings.” Bullshit. Maybe they aren’t making the same mistakes they did in the 30s, but they are making pretty bad ones now. Indeed,as is often the case by bending over backwards to avoid the same mistakes of the past, they are essentially making the opposite ones.

    Going beyond Germany, the whole scene of “piss-weak yes-men” trooping before Sechin was beyond nauseating. I think your industry experience in taking the measure of the “leaders” in the business has allowed you to see the truth.

    The ProfessorComment by The Professor — May 27, 2014 @ 3:48 am

  3. I think your industry experience in taking the measure of the “leaders” in the business has allowed you to see the truth.

    The worst part of it is that the toadying is expected at all levels, not just the top. I could understand if the top management held their nose, did a spot of arse-licking, and got the deal done then retreated to their offices and told their staff Jeez, don’t ask me to do *that* to often!. But they don’t, these guys are genuine arse-lickers and have been all their lives: indeed, it’s a necessary trait to hold high office in an oil company. So they expect their subordinates to engage in the same pathetic behaviour, always praising “local” achievements in the same way you praise a toddler for getting all of his shit in the potty, treading on eggshells whenever sensitive topics are raised (such as “Why are we using a company with no welding standards?”) and brushing incidents under the carpet that border on criminal.

    This I might be able to understand, just, if it showed any signs of actually making a difference. But it doesn’t: the locals still go about with a chip on their shoulder the size of Gibraltar, their deluded beliefs in their own technical, organisational, and managerial abilities are reinforced, and the demands are merely increased, ratchet-like, with every concession. And the few decent local engineers can’t stand the toadying behaviour either because it reflects what they can see is so wrong with their country, and it encourages and strengthens those who keep it that way. It is so short-sighted that it’s quite unbelievable, but a staggering number of decisions are made in the oil business with the aim of buying a few more months of peace and to hell with the long-term effects.

    I had a conversation recently with a Russian engineer who worked for a major western oil company in Russia, who told me the local contractors played with them “as a cat plays with a mouse” and made themselves countless millions in the process. All because the management is piss-weak. I think the oil companies continue to operate like this because, so far, they have somehow always managed to pump oil and make money and they’ve had no major accidents that have created political problems in such countries. But the recent debacle of the Kashagan project, and Angola LNG has shown that these mega-projects *can* fail and it is no longer a given that they will be completed, somehow, eventually, like Sakhalin II was. And if anyone thinks the political fallout from Macondo was bad in the US, wait until a western oil company kills a load of people in Russia or Nigeria and see how politicians in Moscow or Abuja take advantage. The oil companies are sleepwalking into this: the drive for oil and profits is fine, but it needs strong people to manage it and protect their interests at the same time. But their current behaviour is bordering on negligence, for which they will pay heavily.

    Comment by Tim Newman — May 27, 2014 @ 5:48 am

  4. And what is really hilarious is that the US basically created the Soviet industry from the ground up between the wars.

    Comment by So? — May 27, 2014 @ 6:32 am

  5. Hmmm, isn’it the case that the germans were eager to strike a deal in brest litowsk (1918) since their capacities were exhausted after four years of fighting at the western front. What alternative did they have? Invade russia? Not buy from them, given their lack of raw materials? Buy from the british? Lots of open questions, and not necessarily as clear cut as depicted here, professor.
    If i understand correctly, you seem to suggest that crony capitalism is a german character trait. By corollary then American business somehow not only considers the profitability of a deal but its moral implications as well. Iraq war? Cooperation with the saudi royal family for decades? Only a hypoctite could have issues with that! I see……
    Question: if only hypocrites have a problem with nsa spying, it supposedly is good from a moral perspective, right? So what do we make of all those american tech ceos who, facing reduced revenues abroad because of rheir nsa involvement, are urging the government to reduce nsa activity? Do they put profit above the morally correct path? Probably they have german ancestors 🙂

    Comment by Viennacapitalist — May 27, 2014 @ 2:34 pm

  6. @Viennacapitalist. Your understanding of Brest-Litovsk leaves a lot to be desired. More tomorrow.

    The ProfessorComment by The Professor — May 27, 2014 @ 4:23 pm

  7. Good, prof. Curious to hear what u have to say. Just below I have copied in a german wiki article. it seems that at least the austrian delegation’s count czernin had a very good understanding of the bolshevik’s nature. His opinion on the aforementioned yoffe makes interesting reading…

    Comment by Viennacapitalist — May 27, 2014 @ 11:53 pm

  8. @viennacapitalist-You have things upside down re Brest-Litovsk. It was the Bolsheviks who were desperate. They were at the Germans’ mercy. But making peace with the Germans was very controversial among the Bolshevik leadership. Lenin wanted to enter into the treaty, but lost several votes. He threatened to resign if he did not get his way. The Germans concluded that the Bolsheviks were temporizing and delaying, and actually began to advance again, meeting no resistance. Petrograd was threatened, and eventually Trotsky changed his vote to favor Lenin’s position, and the treaty was signed. So yes, the Germans did invade when it appeared that the Bolsheviks would not capitulate.

    The terms of the treaty were overwhelmingly in favor of Germany, and humiliating to the Bolsheviks, which is why there was such resistance to signing. There was an attempt on Lenin’s life by a Left SR who was outraged at the treaty.

    If it had been an act of German desperation, the Germans would not have offered such punitive terms and the Bolsheviks would have been the ones pushing the treaty.

    Once it was signed large numbers of German troops were freed from the east, and spearheaded the massive German offensives in March and April of 1918.

    More on character traits later. In a nutshell: that’s a mischaracterization of my point.

    The ProfessorComment by The Professor — May 28, 2014 @ 5:25 am

  9. You are right, sorry, I was not experessing myself clearly. Therefore the misunderstanding: the treaty was certainly in Germany’s favour and they no doubt (given the militaristic attitude in Europe attitute at the time) capitalized on the disorganized state of the bolsheviks. The bolsheviks after all, rode to power pathy by pacifist attitude, which was supported by the russian they had to strike a deal quickly-agree!
    (there is an interesting History channel video on youtube about the roles of the soldiers of Kronstadt and their important role in the initial phases of the revolution

    But from a military perspective they nevertheless were eager to strike a deal, since they had wanted to avoid a “Zweifrontenkrieg” from the beginning of the war (always eager to learn more about history but on this point most historians agree to my knowledge). They had had encircling fears (rational or not, you decide), similar to Putin and Nato nowadays. Therefore the distructive power of pre-WWI alliances.
    And yes, they probably could have advanced to Petrograd from a short term military perspective, but consoldating these gains over vast distances is a logistic nightmare and a different matter entirely. Also due to blockade they were running out of supplies..Not saying that I have a detailed knowledge of all these matters, but considering the following points, it seems plausible and rational to me that German industry favored appeasement (which businessman, apart from an arms merchant doesn’t?):
    1.) I deduce the Germans cannot have been in such a powerful position as their ulitmate defeat was only months away – yes, with hindsight but it is unlikely this came out of the blue.

    2.) the bolsheviks were a disorganized lot (you have read the thought of count czernin on this yoffe), and given that their absolute control of Russia was a brutal civil war away (the whites and the reds), it is certainly understandable that the German industry did not think of them as much of a menace. Put yourself into their shoes: would you consider unwashed guys comming from a siberian Gulag dangerous if you were a German industrial leader or politician at that time? Unlikely!
    As an analogy: Do you think any CEO on Wall street or the US administration thinks (whether true or not) that the tribes of Afghanistan are a danger to US supremacy…I think there is a lot of hindsight bias in this view (“they must have seen this coming, therefore they have some bad character traits”). They thought that after the war the status quo would prevail (Kaiser, tsar you know). Nobody in 1918 could have foreseen the mad outcome over the next decades…and I am reading a lot of primary literature from those days (mostly, economists of the Austrian school)

    3.) don’t forget that the Germans were not only a few months away from defeat but also from a bolshevik uprising in Germany proper, these things again don’t happen out of the blue: I deduce again, there was considerable sympathy not only accross germany (but also across the english speaking world, by the way) with the russian “experiment” (there was even a famous quarrel between Schumpeter and Max Weber in a Viennese coffehouse about this in 1919, the latter appalled at Schumpeter’s excitement) so, public opinion was not at all twisted against the bolsheviks. Wilson, as you know, was mainly on a personal crusade against “monarchies”…”bring democracy to the world…”)

    couriously awaiting your analyisis of German character traits…

    Comment by Viennacapitalist — May 28, 2014 @ 10:10 am

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