And let me be even clearer. Military force is now not nearly as hard a form of power as what critics imply; and global economic power, reinforced by institutions of personal liberty, is not nearly as soft. Because of unprecedented changes in the ways we create wealth in our age of burgeoning global networks, the power of economic sanctions by advanced democracies, acting in common, is far greater than the power of any military — though sanctions are not as photogenic as bombs when feeding the 24/7 cycle.
Consider this: When President Putin moved troops into the Crimea, Russian forces also massed along the Eastern Ukraine. Under my leadership, the U.S. and its European allies responded, strong and united, with preliminary sanctions. The fate of the Ukraine is still uncertain, and the America and its allies are vigilant. But a month later, Russian the troops have been withdrawn and President Putin is making clear that he wants to settle matters diplomatically, which we welcome. Secretary Kerry, for his part, said at the time of Russia's action that Mr. Putin was employing 19th century methods of power in a 21st century world. Secretary Kerry was mocked for this by some. But the sanctions are clearly working. What did Secretary Kerry mean? Why, in the 21st. century, do such things as economic sanctions act as such a powerful deterrent?
Let me put things simply. The United States and Western democracies together are a zone of free enterprise with a combined GDP of approximately $32 trillion. Add Japan, our close ally, and we are $38 trillion. Add China, whose interests do not always accord with ours, but whose financial institutions and domestic corporations are fully integrated with ours, and we are at $46 trillion. This zone is not without inequalities and crises, which we will have to mitigate. But we know how to create unprecedented wealth. In 1975, a television cost the average worker about 60 hours of work. Today, about 6 hours of work — and the TV today can stream YouTube, and virtually everything ever thought said and done, for the cost of a wireless connection.
But that is not all. The companies that produce our wealth are vastly changed from what they were just two generations ago. In 1975, the tangible assets — the cash, buildings, raw materials, and so forth — of the Standard & Poor's 500 largest corporations constituted about 80 percent of their market value, while the intangible assets — the collective know-how — were about 20 percent of value. Today, those proportions are reversed. Intangible assets, the knowledge, are 82 percent of what produces wealth and tangible assets, the stuff, is 18 percent.
This knowledge knows no borders. Nor can knowledge know boundaries. That's because, unlike money and other assets, the person who gives you knowledge still has it. Our companies create wealth and advance continually because they are largely integrated in shared networks, which are more and more valuable for all — the more that skilled, ambitious entrepreneurs and scientists join them. Cut yourself off from these global networks, or fail to access them, or just make yourself distrusted in them, and you condemn your people to poverty. It is just this world the people in the streets of Kiev have been determined to join.
Now let's look at Russia's economy. Out of its $2 trillion GDP about $1.2 trillion is oil and gas — mostly companies that are 80 percent stuff. Mr. Putin can dare to use the Russian military to expand and defend oil and gas deposits, as it did in the Crimea. That's what armies have been good for since ancient times, to secure the geographic boundaries around a tribe's or a nation's control of its stuff: so that their laborers can farm, and mine, and drill, and assemble in peace. That's why in the 19th century, and even up to the middle of the 20th, kings and tyrants thought they could enrich their nation by making imperial war — after all, a huge, organized form of theft.
But war in the 21st century is a little like one power station in a grid making war against another power station in the same grid: you resort to violence and threaten to bring down the whole network upon which your welfare depends. Mr. Putin may have thought that moving into the Crimea secured him a better reserve of oil and gas and a better way of exporting it. Perhaps it did in the short term; perhaps the people who profit from oil and gas are satisfied with his action.
But what about the people not directly enjoying profit from drilled stuff. What about the much larger number of Russians who, like the protesters in Ukraine, want to join global wealth-creating networks and will now see foreign companies pull back and foreign investment drop off. During the crisis, the Russian stock exchange immediately dropped over 10 percent, a loss of more wealth than the cost of the Sochi Olympics. Curious, is it not? that what seems an expansion of Russian power caused even domestic investors to short the Russian economy.
In short, we have to redefine what we mean by international power. Getting expelled from the global system is hard power; military power is, in addition to being tragic, comparatively soft. It gets you nowhere. It is destructive. It leads you to places you cannot foresee. Writers about foreign affairs who have not digested the new realities can scare us with absurd scenarios, like this particularly hysterical writer in a recent issue of The New Republic:
Could the United States survive if Syria remains under the control of Assad or, more likely, disintegrates into a chaos of territories, some of which will be controlled by jihadi terrorists? Could it survive if Iran acquires a nuclear weapon, and if in turn Saudi Arabia, Turkey, and Egypt acquire nuclear weapons? Or if North Korea launches a war on the South? Could it survive in a world where China dominates much of East Asia, or where China and Japan resume their old conflict? Could it survive in a world where Russia dominates Eastern Europe, including not only Ukraine but the Baltic states and perhaps even Poland?
The implication is that, somehow, American military power could have neatly toppled Assad, or that Iran is not itself looking to join the world, or that North Korea could act with impunity. But notice also the silliness of speaking in this context of Chinese "domination" of the Far East and the reversion to conflict with Japan, as if the Chinese are some kind of huge island, and not dependent on the global system. And the idea that a second-rate power like Russia could dominate Eastern Europe and Poland, members of NATO, and racing ahead of Russia in terms of development — well, this kind of talk is beyond silly.
Which brings me to a final point about military force — why I prefer to organize international diplomatic responses to common acts of aggression. Some, like this writer, will interpret my strategy of patient sanctions as opting for appeasement rather than timely preemption. Demagogues always say this kind of thing. In his History of The Peloponnesian War, Thucydides noticed how certain people "altered words to suit their deeds."
"A moderate attitude," he writes, "was deemed a mere shield for lack of virility, and a reasoned understanding with regard to all sides of an issue meant that one was indolent and of no use for anything."
My critics often mock my foreign policy in just this way. Given America's military superiority, they say, virtually any global problem is presumably the result of my failure to deter evil: the Syrian civil war, Iran's nuclear program, frictions in the South China Sea, Egypt's military coup, Russia's annexation of the Crimea. If only, critics say, I were more credible in my willingness to use force. Which means actually using or threatening military force in virtually every case, if only to prove my willingness to use it.
Thucydides adds, "One who displayed violent anger was considered eternally faithful." Now as then, passion can be mistaken for courage and determination. Now as then, blaming leaders for not being intimidating enough is a nice career move.