A Timeline of Western Decline

Everyone wants to name the moment it all went wrong. Most people name 2016, and one man, and an election they’re sure the next election can undo.

Our guest on this week’s WhoWhatWhy podcast, Bianka Banova, says they’re off by decades.

Banova, a Bulgarian-born, Switzerland-based journalist and academic, writes the Substack Waronomics: Balkan candor meeting systems thinking. 

She grew up where great-power miscalculation gets paid for locally, which is why she’ll say what most Western analysts won’t: that we are the frog, and the water has been heating since 1945.

The disorder people feel now — the cost of living that won’t fall, the wars that won’t stop, the ground shifting underfoot — isn’t the beginning of anything. It’s the moment the water got hot enough to feel. She argues the world came apart slowly, one comfortable choice at a time, beginning with decisions made decades ago.

Her hinge is 2008. Russia took Georgia and paid no price; Washington rescued the banks and, in the same stroke, taught Moscow and Beijing that the West defends its financial class before its own order. That was the starting gun for what she calls the Second Cold War — the one we’re already fighting without admitting we’re in it.

The tell was in plain sight. Our rivals said out loud what they meant to do. We chose to believe otherwise.

Iraq and Afghanistan finished the job. The West’s wars in those countries didn’t just fail; they taught a generation that the American military was the villain, and let us forget it was the force holding open every trade route we depend on. We hollowed out the industry behind our own arsenal, and now can’t build the weapons we need.

She is not without hope — she believes the West can still make the hard choices. She just won’t pretend they’ll be painless, or optional. The bill comes due either way. The only question left is whether we pay it now, on our own terms, or wait until it’s forced on us and the costs and the pain are far greater.

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Full Text Transcript:

Jeff Schechtman: Welcome to the WhoWhatWhy podcast. I’m your host, Jeff Schechtman. There is a comfort in believing that everything went wrong recently: that the disorder in our politics, the fraying of our alliances, the sense that the ground has shifted under every old certainty — all of it arrived with one man and will leave when he does. It lets us treat the moment as an interruption rather than a destination. It lets us imagine that normal is only an election away.

But my guest today, Bianka Banova, says that comfort is a story we tell ourselves so we won’t have to look at the choices underneath it. The world we’re mourning, she argues, did not end recently, and it did not end by accident. It came apart slowly over the better part of a century, one comfortable decision at a time.

There was an order once, and it was a bargain. American power kept the sea lanes open, goods moved, and prosperity followed on a scale the world had never seen. But the peace that made all of it possible rested on something nobody much wanted to pay for. And so, year by year, we stopped paying for it; we enjoyed the calm and let the walls that held it up go quietly unattended. We found it easier to trade with our rivals than to confront them, and when those rivals told us in plain language what they meant to build and who they meant to break, we decided we had better things to believe in.

In a recent piece in her Substack, Waronomics, entitled “A Timeline of Western Decline,” Banova traces the unraveling step by step, from the postwar order of 1945 to the wreckage of 2026. She marks the real turn not at Trump and not even at Crimea, but at 2008, the year Russia rolled into Georgia and paid no price for it, the year Washington rescued the banks and taught every rival capital that the American establishment could be bought. What follows from there is the slow bleed of the two pillars everything rests on: the dollar and the military, each one eroded less by an enemy than by our own long preference for the easy path. Every step, she insists, was a choice, and almost none of them looked like catastrophe on the day they were made.

This is the unsettling heart of what she wants us to see. Decline rarely announces itself. It comes instead as a long sequence of reasonable accommodations, and the bill for all of them is only now sitting on the table, where it can no longer be ignored.

Bianka Banova is Bulgarian-born, Switzerland-based, and she runs a Substack called Waronomics, described accurately as “Balkan candor meeting system thinking.” She has spent two decades studying history, macroeconomics, defense, energy, trade, philosophy, and ideology across multiple languages and multiple worldviews. She grew up in the part of Europe that has always paid the bill for great-power miscalculation, and she has watched the slow, painful, incomplete dismantling of Soviet-era governance. She knows from the inside what captured institutions look like, what extractive politics smell like, and what it costs a people to finally decide they have had enough.

It is my pleasure to welcome Bianka Banova back to the WhoWhatWhy podcast. Bianka, thanks so much for joining us.

Bianka Banova: Thank you very much for having me back, Jeff.

Jeff: Well, it is a delight to have you here. Thank you so much. I want to start with this general idea that this sense that people have — this feeling that things are not normal anymore, that the world has fundamentally changed — is a much larger frame than most people give it, in that it is not just about Donald Trump and what changed in 2016. Talk about that in a general sense first.

Bianka: Well, I think that the reason why people have this general sense right now is because, for the first time since that process started, they actually really started feeling the pain of what that accumulation of choices have led to. And we’re seeing that with our economies, our rising cost of living, inflation, proliferation of wars, breakdown of supply chains, bottlenecks when it comes to industry and production and output, constant layoffs across not just the software industry that we’re seeing now with AI, but all of the other industries across the board.

So people are, for the first time, really seeing that there is a permanence to this crisis because, back in 2008, when it happened, it was a shock, but because of the choices that were made to bail out the banks and to bail out the insurance companies that were insuring those loans, it kind of went away quickly enough. So people thought, “Okay, you know, this is a recession, and we’re going to recover.” But that recovery never truly came. It just continued to erode further and further. And now we live in a world where people are just looking around, and they’re like, “I can’t afford what I used to be able to afford 10 years ago. Every time I turn on the news, there are new wars happening all across the globe, attacks, and basic instability and volatility all around.” And at the same time, there is this discontent where, on the one hand, people can feel it in their daily lives that it’s not only that their lives are not as stable and as prosperous as they used to be 10, 20, or 30 years ago, but also there is lack of hope that this is going to change in the next election cycle, or next year, or even in the next 10 years for a lot of people. And this is where that general feeling that things are falling apart is coming to people, and rightfully so, because they have been falling apart for quite some time.

And, yeah, this is one of the reasons why this article was conceived, because I wanted to help people connect the dots, and for them to realize that we have been the frog that has been slowly boiled on a low heat. And this didn’t happen just because Trump was elected or just because the Ukraine war happened or something like that. This has been a long time in the making. And their current standards of living and their current lives are experiencing that sort of volatility because certain political choices were made for far, far too long, and nobody really bothered to seek accountability.

Jeff: And let’s talk a little about those choices, because you argue that, really, in order to understand the full picture, we need to go back to 1945 and some of the choices made then.

Bianka: Well, I think that after the Second World War — and soon after that, the Cold War started — there was a good deal that was struck for the Western world. And that deal was: The United States is going to be the new global superpower. They’re going to be the new Pax Romana. The United States military and the United States Navy is going to be protecting the sea, the trade routes, the sea lanes, the choke points, and trade is just going to be moving freely and openly, and this is where globalization started manifesting itself. And after the end of the Cold War, in 1991, it exploded even further when the Soviet Union collapsed and when China and Russia and all the former Soviet republics and satellite states were also introduced into that world order.

So that was a very good deal for a very long time. And it was a very good deal for everyone involved because a lot of other states didn’t have to invest so heavily in their military. They could just literally pay the United States to do that for them. So basically, the deal was: “You’re going to invest in your military, and you’re going to be the new Pax Romana or, you know, the Pax Americana. And you’re going to protect globalization, and you’re going to protect supply chains and the trade routes. And we’re just going to continue producing, and your ports are going to be clogged with products that were produced from all over the world and were shipped just in time for use, at a very reasonable price.”

That worked well for the people that were manufacturing those products and those goods, whether they were based in China or Vietnam or Romania; it didn’t matter. And it also worked great for the United States because you had this abundance of products that you could choose from, and they were all very affordable and accessible for the majority of the population. So that was a very, very good deal for a very long time.

Unfortunately, it was based on the premise that once we start trading… And this is a lot of the German school of thought here. The idea was, once we integrate our economies and once we intertwine our trade, wars are just going to organically cease to exist, and what used to be our former adversaries in the face of the Sino-Soviet axis of Russia and China, they’re just going to come to the table, play by the international rules, engage in fair trade. And they will realize that it’s much better for them to just peacefully trade amongst each other and with the rest of the world so they can become more wealthy and become more prosperous. And at some point, they’ll just give up on any ideas of waging another war.

Unfortunately, this is not what happened because this is not how the East operates.

Jeff: Talk a little bit about the Cold War, the impact that that had, and what was perceived to be what was going to happen going forward after the West, quote unquote, won the Cold War.

Bianka: Well, after the end of the Cold War, especially in Russia and in Eastern Europe, a lot of us went through what is now called shock therapy because the Soviet system was just so inefficient and dysfunctional. I think that most people in the West are just… When you tell them stories of queuing for bread for hours at a time or not even having access to plastic — like, for example, we skipped the plastic revolution. So if you wanted to go and take, for example, yogurt or sour milk, you had to bring your own glass jars, and then they filled them up at the supermarket, and then you went back home, and so on and so forth. So just something as little as plastic: it was not part of the Soviet system.

So when the Soviet system collapsed, it was incredibly humiliating because, when you spend 50 years saying that this is the superior system — and I have a bunch of books here back home, the Soviet books that are on biology and chemistry and so on and so forth — that propaganda of the superiority of the Soviet system, of the superiority of socialism and communism, was ingrained in every single facet of society. I’ll give you an example. I was reading a biochem book, and they were explaining the molecule of morphine. And there was a footnote that said, “Oh, FYI, excessive use of morphine leads to addiction, but this is something that doesn’t happen in the superior Soviet system. It is a disease that is much more common in the rotten capitalist system.” And I’m quoting: they basically say “rotten capitalist system.”

So they spent 50 years propagandizing that. And at some point, it came to a point where the Communist elite in Russia and in Eastern Europe realized that an American woman — like an American single mother on food stamps — has higher purchasing power than they do. And there was a… I don’t remember which book it was, but it was someone that was present at that event where Gorbachev went to a supermarket in Texas. And there’s actually a picture of him. He was just grabbing his hair because he couldn’t believe the amount of abundance that was just in an average supermarket in Texas. And apparently Gorbachev turned to one of his aides and he said, “The Cold War is over.” So that realization that the Western system of free-market capitalism won, was an incredibly brutal realization for the people in the Soviet Union, especially in Russia, because they were taught that their system is superior. And they didn’t take it well.

And this is where I’ve talked very often about the difference between the Eastern mindset and the Western mindset. The West had its empires, whether it’s Portuguese, Dutch, the British, the French; they lost their empires. Yes, it was a very humiliating defeat. But they lick their wounds for a while, and then they moved forward and said, “Okay, now we’re going to building prosperity because that is the best way to have a peaceful society, to provide prosperity for as many people as possible — not just for the aristocracy, not just for the upper class, but for as many people as possible, like the middle class, working class, so on and so forth.” And that’s the project that they have been engaged with for several decades.

The Eastern world does not operate on that software. It’s all about imperial pride, and the fact that they lost the Cold War really wounded their ego and really wounded their pride because they see themselves as empires, and I’m talking both about China and Russia. And when they started reforming — and they started reforming very differently — the path that both sides took was quite different, yet similar in some cases, but quite different. It wasn’t the reforms for the sake of, “Let’s reform and create an environment where our citizens can actually improve their living standards and improve their conditions, and we can actually become competitive,” so on and so forth. It was a very strategic decision taken with the idea of one day rebuilding those empires, or at least the impact that those empires have, which is why, in both Russia and China, especially in Russia, the raw-materials industry, whether it’s oil, gas, rare earths, so on and so forth, they were usurped either by the state — in the case of China, that was the Chinese Communist Party — or by oligarchs. And the idea was not to create a thriving industry for the sake of creating factories and making life better for citizens, but it was to weaponize that against the West when the time comes. And that boils down to the Eastern world inability to face that humiliating, post–Cold War humiliating defeat. What they essentially did for the past 30, 35 years, they’ve weaponized every tool that they have at their disposal. And now they’ve launched a second Cold War. And that’s exactly what we’re living through right now: a second Cold War.

Jeff: And talk about the impact of Russia’s invasion of Georgia and that being a key moment, as you argue.

Bianka: Yeah. So Russia always does this. They always test gradually what they can get away with. In the early ’90s, they tested that with Chechnya, with Grozny; they basically just leveled Grozny to the ground. But at the time, because it was the ’90s, it was very chaotic, and nobody in the West really understood what Chechnya was and what was happening over there. They kind of assumed it was just an internal conflict between Moscow and one of its federal republics. So nobody paid attention to that, and that kind of got swept under the rug. And it was kind of ironic because the president of Chechnya at the time, he said that Russia will go for Crimea one day and they will go for the rest of Ukraine. And he said that in 1995, so he was a very serious prophet at the time.

Anyway, after that, they got away with that, and they decided, “Okay, now we’re going to try with something else.” And that was Georgia because Georgia and Ukraine were kind of always… You know it wasn’t so much about NATO expansion, but it was something that was talked about: that maybe — whether it’s the European Union, whether it’s NATO — we should eventually incorporate them into the larger alliance, although there wasn’t that much popular support about that at the time. But it was something that was definitely discussed in certain circles.

So the Russians decided in 2008 to launch the war in Georgia. It was a very short-lived war, I think it was about two weeks or something, and they annexed 20 percent of the territory there. And, of course, you know what happened after that. They conducted some cleansing of the local population; they moved Russian citizens to live there, which is basically their playbook — they’ve done that over and over for the last several centuries.

The problem is nobody did anything. It wasn’t… It was treated as some sort of regional quarrel or conflict or something like that. Nobody from Washington, nobody from Brussels. Absolutely nothing happened there. And that was the moment where Russia realized, “Okay, if I can get away with Chechnya and if I can get away with Georgia, then I can get away with more.”

Unfortunately for us, that coincided with the financial crisis of 2008, and nobody wanted to… Nobody cared about what was happening in Georgia at the time. As we started bailing out banks, Moscow — and Beijing as well — realized that the political elite of the West, it is going to side with the financial institutions and with the banking system and with the too-big-to-fail insurance companies or private equity and so on and so forth, than with the actual population, which means our political elite is for sale. And if that political elite is for sale, you don’t actually have to go and buy the political elite, whether it’s in Washington or London. You just have to make good relations with the banks of London and Wall Street, and they’re going to be doing the bidding for you because they’re going to be paying their… They’re going to be financing the political campaigns of politicians and lobbyists and so on and so forth.

So those two events were the moment where Russia and China realized that the West is not as powerful as it used to be during the first Cold War, and now is their time to continue executing their plans. And a few years later, Crimea happened. One year after Crimea, Beijing started doing embargo on rare earths, so our capacity to produce missiles and fighter jets and defense equipment was significantly reduced because of bottlenecks, because a single F-35 requires half a ton of rare-earth minerals. We don’t own the supply chains for those; we don’t own the refining, the processing, the mines, nothing. Eighty to 90 percent of that is in China.

So, yeah, it was 2008. It was kind of a domino effect: the 2008 financial crisis and Georgia, and that was the green light. The West is not going to do anything about it, so we can proceed with our plans. And they did.

Jeff: Talk a little bit about decisions that the US — that the West could have made at those points that might have changed the outcomes.

Bianka: In the Western world, especially in the Anglosphere, I have noticed that, in particular, it operates on the basis of precedent. Now, in continental Europe, precedents do happen, but they’re not treated — they are treated as precedents — [but] you don’t actually go back and say, “Well, because this happened, we’re going to change the system, and that system is going to continue based on that precedent.” The whole purpose of international law is to not break it. And once you break it, there should be some sort of cost for you, just like in any society, if you break the law, you’re going to get either a fine or go to jail, depending on the severity of which law and how you broke it; the same applies for international law. And if there’s no consequences for you for breaking international law, then international law has no merit.

And this is — just to scale it back for your listeners — when you go to societies where you see a lot of corruption and you see a lot of crime, and you’re wondering, “Why is that happening?” It’s exactly because of that: because institutions that were supposed to keep the order and that were supposed to enforce those laws and that order, they no longer function. And when people don’t see enforcement, they’re not going to follow the rules. It’s the same with geopolitics. If Russia can attack Georgia and invade and annex 20% of its territory without any repercussions… People should remember that this happened in 2008: in 2014, Russia was hosting the Winter Olympics, so nothing happened in terms of any serious repercussions for breaking international law and invading a sovereign nation and annexing 20% of its territory. No sanctions. No repercussions. Nothing.

I think that was the moment where the Western world needed to realize that if they let that one slide, the Russians and the Chinese were just going to be coming back for more and more. And they’re not going to be satisfied with… Especially Russia: it’s not going to be satisfied with just 20% of Georgia. As we saw, because six years later they attacked Crimea. And the West committed the same mistake. They said, “Well, maybe we’ll let that one slide. Maybe if they take Crimea, it’s going to be fine.” It wasn’t fine, because then they launched the war in eastern Ukraine in Donbas, and that continued for eight years. Then, in 2022, they launched the full-scale invasion, and now we have the largest war on European soil since the Second World War.

So the mistakes that the Western world made is basically not sticking to the values and principles that they have professed all throughout the Cold War and the post–Cold War period. One, to not take decisive actions of punishing people that break international law. That also applies for China, because China has broken every single rule of the World Trade Organization, which they are part of, and have no cost for doing that. And basically just projecting their wishful thinking onto Russia and China. This is something that… I’ve said that in the article, like one of my biggest quarrels with the Western world is that people don’t seem — especially the political, including the intellectual class — they do not seem to believe when their own adversaries are telling them what they’re going to do to them, right to their face.

So if you go back to, I think it was 1992 or ’93, when there was a conversation between Yeltsin and US President Clinton — and it’s in the archives; there was a stenographer there, and everything that was said between these two was recorded — Yeltsin was very open, and he basically just said to Clinton, “Yes, we want to take back the rest of Europe. You can go back to your Western Hemisphere and provide security and protect their supply chains. And Russia is half European, so we’re going to be… This is our own backyard. So eventually we’re going to agree on this. It’s not going to be now, but down the line, this is our plan.” He basically said to Clinton, “We have a plan to rebuild the Soviet Union in some shape or form.” Clinton didn’t believe him.

The same with China. They’re not hiding. And if people start reading Russian media and Russian analysts, the same for the Chinese, they’re not… neither the politicians nor the intellectual elites in these countries, they’re not hiding their plans. They’re having them in plain sight. But nobody is paying attention. I feel like this is the biggest mistake of the West: projecting their views and their values and their ideas onto others and thinking, “Oh, just because we won’t do it — because who on earth would want to start a war? When wars are destroying wealth. Who would want to do that? We will never do it. Why would they?”

But that’s unfortunately not how the world works. And that projection got us here. And if it wasn’t for that projection, we’d be living in a very different world right now.

Jeff: Talk a little bit about the impact of the US military failures in Iraq and Afghanistan and the role that played.

Bianka: Unfortunately, you know, we can debate the reasons or the need for those military interventions for a very long time. There’s the official version of why it happened, and then there’s another version, depending on how people are analyzing these events and these wars. I usually analyze them from a geopolitical, trade, and supply-chain perspective. Other people are analyzing it from other perspectives.

But anyway, because these wars were not well run and well executed in a way that they didn’t produce the outcomes that the politicians and the military establishment promised that they were going to deliver, and they had to move the goalposts over the next 20 years, the legitimacy of the American military started eroding. And as I said in the article, there is a difference between criticizing the way that these wars were run and basically saying that the American military is not a legitimate force and painting it as some sort of warmongering, international-law-destroying, genocidal force — which, I can tell you from personal experience, was the narrative that was coming from Russia. And that narrative, it kind of spread its tentacles all across Europe, including in the United States, including on people on the left and on the right. I have heard everyone from Noam Chomsky to all sorts of other prominent intellectuals on both sides of the political spectrum repeat things that I have personally heard from Russian Kremlin propagandists.

So unfortunately, that social credit — that social capital that the American military had — was wasted on these Middle Eastern wars, especially in the war in Afghanistan, because that one took 20 years. Basically, It’s rather unfortunate, but the running joke is spending 20 years and however many trillions of dollars replacing the Taliban with the Taliban, because ultimately that was the outcome of that war. So that was a very long time of bad propaganda against the American military. Yes, of course, as with any propaganda, there was a level of truth when it came to how these wars were conceived and how they were led and managed, but ultimately basically destroyed the credibility of the American military. 

The unfortunate aspect of a prolonged period of prosperity is that people forget where it comes from. People totally forgot that the reason why they had such a long period of peace and prosperity was because that vast machine called the American US military and the American Navy was making sure that the trade routes were open, that all the choke points through which our trade goes is well protected, and your cargo can go from point A to point B, and we can have this just-in-time supply-chain management work perfectly, where we don’t have to spend money on warehouses and we don’t have to stockpile on anything because you can order one product from somewhere, and it’s going to be assembled in four different countries, and everything is going to come just in time. And the vast majority of people, unfortunately, don’t realize that this was built on the back of the American military and American military supremacy. They don’t realize that, and this is not their fault, actually: this is the fault of the Fourth Estate, our journalists and analysts and academics that did, unfortunately, a very poor job at educating people on the basis of how globalization works.

And globalization works not because everybody is willing to do it. Globalization works is because there’s one superpower that is an enforcer of these laws, the same way that the Romans were enforcing the laws and making sure that all the trade routes of the Mediterranean were open and traders and merchants can pass through without getting attacked by robbers and thieves and pirates and so on and so forth. It’s the same. It is absolutely the same situation: Roman Empire 2.0, but at the global scale.

And, yeah, unfortunately, the wars in the Middle East, they kind of gradually destroyed the credibility of the American military. And as we can see, both in the United States and abroad, people don’t want to hear about increasing budgets of the military. They don’t think that the military should have big budgets. They don’t think that foreign entanglements are a good idea. But they also don’t understand that without those foreign bases and without those foreign entanglements, you’re leaving the arteries of our global system vulnerable to Iran, to Russia, to China. And at some point, you’re not going to be able to order the goods that you want to order. And somebody needs to do that job. And unfortunately, the United States is coming to a point where they either don’t want to or they are not capable of doing that job anymore.

Jeff: Talk about the failure of globalization, the idea that the de-escalation of the world could happen if people could trade with each other and if there was this economic currency that could travel throughout the world.

Bianka: Well, I was actually talking about this recently. So the more I listen to people discuss the current realities of our situation, the more I realize that many people do not really understand the difference between consumer supply chains and industrial supply chains. The Western world excels at the former; we’re absolutely exceptional when it comes to consumer supply chains. You can go to Amazon or any other alternative. You can order anything from supplements to technology to phones, whatever. 

But we have allowed much of our industrial base beneath those products to erode for the past several decades. And I don’t think that many people will be that heartbroken if their shoes or T-shirts are not produced locally. But the unfortunate reality is that in many critical sectors, starting from energy, moving through defense, semiconductors, telecommunications, advanced manufacturing, and including agriculture, in the West, we no longer control the complete supply-chain infrastructure that is required to produce either locally or within the western alliance system. And that vulnerability is not just limited to raw materials like oil and gas and rare earths and stuff like that. It actually extends to refining, processing, specialized components, chemicals manufacturing, and including the skilled labor that that actually requires for industrial capacity to produce output and to assemble everything at scale. So a product in the West may carry an American or European logo, but it still remains fundamentally dependent on China or other third-country inputs at several crucial stages.

And this is the distinction that a lot of people fail to [understand]. There is a difference between having access to a finished product and having the industrial capacity to produce that product independently from China or Russia or even India and the Global South. This is the problem where I think that globalization started breaking down because consumer abundance created the illusion of industrial strength. And when a certain crisis — whether it’s the Suez Canal crisis in the past, the current crisis with the Hormuz choke point, the war in Ukraine, trade relations or geopolitical tensions, or trade wars happening, like they’re happening right now with tariffs — when these things happen, they disrupt an otherwise operational system, which is globalization. Unfortunately, globalization relies on the idea that everything will happen perfectly. So for you to have this iPhone, for example, everything needs to go perfectly. All the components and all the raw materials and all the manufacturing and all the assembling — it has to go perfectly for you to be able to click ‘order’ and for you to be able to get that phone in 24 hours.

Unfortunately, it has started to break down, and it has been breaking down for the past 10 years because China has been leveraging their chokehold on critical components and on rare-earth minerals. And again, just a reminder, a single F-35 contains half a ton of rare-earth minerals. Our laptops or all of our complex technologies, they all use those materials. And we have given up our… We have hollowed out our industrial base and given it all up to our adversaries. I’ll give you another example with the current crisis with the Patriot missiles. In reality, the United States no longer has the industrial capacity to produce missiles at scale. And we currently need that production at scale because we are at war. And that war requires a lot of missiles and a lot of shells and a lot of ammunition and a lot of drones. And all of these things, they don’t grow on trees. They require raw materials: raw materials which we no longer have access to because we don’t control the supply chains that produce them.

And, yeah, this is where, unfortunately, globalization started breaking down. And people haven’t felt it yet personally because drones are not flying over their heads and because they can still order stuff from Amazon, but they’re feeling it in other ways, and they’ll continue to feel it in the next 10, 15 to 20 years until we solve this. And we have to solve this because it’s about our own survival.

Jeff: Talk a little bit about the solving-it part, because the instinct today seems to bring up the drawbridge and just move in on ourselves.

Bianka: The ‘solving’ is that the West has to finally come to terms with the fact that they are a member of a club I call the real 1 percent, which I actually call the “Exceptionals.” The reality of our world is that corruption and ideology and nepotism are the de facto operational software for 99 percent of the world. And that has been the case for thousands and thousands of years, by the way. You can take any century, whether it’s the Roman governors that were squeezing bribes out of the provinces or prerevolutionary France. It really doesn’t matter. It was patronage. It was family before the law. It was strongmen above it. This is the oldest political technology that humanity has.

Until very, very, very recently, literally a handful of countries decided to experiment with something very radical called constitutional democracies, trying to build reputable and functional institutions, creating high-trust societies, establish processes governing a nation with an overall consensus between the government and its citizens, having equality of citizens before the law. It’s crucial for people to realize that all of this is very, very new. And if you do the rough math, out of 8 billion people alive today, those that are living in genuinely high-trust, functional constitutional democracies are a very modest minority.

And unfortunately, people in the West have to understand two things. First of all, you have to stop projecting your values, your views, and your successes to the rest of the world, because we see that 99 percent of the world is not operating as a constitutional democracy with a free-market capitalist system, with meritocratic institutions and so on and so forth, however flawed. Because I’m sure that there are going to be a lot of people saying, “Oh, it’s not that peachy.” Well, it’s not that peachy, but in comparison to what? If you’re comparing yourself to the rest of the world, you have to understand that it is actually quite peachy. But also, people in the West have to understand that this exception, and being a true exceptionalist like the American societies, like most European societies are, this is not a permanent future of the Western order. It is a practice. It’s kind of like a muscle: you need to continue training that muscle consistently; otherwise, it’s going to atrophy.

Moving forward, people have to realize that we’ve tried with Russia and China and with other people to go with the appeasement, to go with, “Let’s trade. We’re going to close our eyes for certain human-rights violations that you’re doing within your borders or even a little bit outside your borders.” When it comes to states like Russia, we tried that. We’ve been trying that for decades. This is the result that we’re seeing now, and the result that we’re seeing now is the complete breakdown of supply chains and wars proliferating. I think that it’s time, if we’re going to be fixing this, to realize that moving forward, we should not make the same mistakes. And if we’re going to be the winners of the second Cold War as well, first of all, we have to keep the alliance strong. And we have to realize that despite our differences between the United States, Canada, American or Pacific allies, our East Asian allies like South Korea and Japan, we’re all in this together. However flawed our societies are, we’re all trying to be… We’re all doing our best to become part of the 1 percent of the exceptional societies with constitutional democracies and free-market capitalist and so on and so forth.

And the only way to move forward is, from now on, we have to realize that. We cannot depend — especially for crucial things like defense and all of the other critical industries that I mentioned earlier in our conversations — we cannot depend on adversarial powers like China, no matter how good they seem at the time. We have to understand that these are authoritarian states, and they’re going to remain authoritarian because liberal democracy is never going to work in China, and it’s never going to work in Russia. That’s how their societies were built. The Chinese one, in particular, is way too vast, so it just needs centralized control. Russia is a whole different story, but you cannot let people that have such opposing values and worldviews from your own to have such a crucial input on your survival. Because if they decide to close down the choke points, like the one in Iran and Taiwan and the Red Sea lanes and so on and so forth, and if they decide to close the tab on rare earths and all the raw materials and everything, we are — and excuse my French — screwed.

So that strategy of trade through appeasement and peace through weakness, it’s not going to work. So we have to show some teeth, and we have to do the incredibly hard work of rebuilding our own supply chains and rebuilding our industrial capability within the Western alliance, which means that we have to drop the illusion that we can have these service-based economies where everybody is going to be working in an office and they’re going to be making six figures, or whatever people on Instagram and social media are trying to… whatever illusion they’re trying to sell. This is not going to work. We need to become industrial powerhouses like we used to be back in — before all of that happened. So I hope I answered your question.

Jeff: Indeed. What do you make of the argument that we hear more and more, that it’s free-market capitalism here that’s part of the problem?

Bianka: Well, it is actually part of the problem. And I’m saying that as a free-market capitalist myself. That is, I am a Hayekian at heart. Friedrich Hayek, for me, is the ultimate economist. I think that your listeners should definitely go and listen to a few interviews with Gina Raimondo. She used to be the secretary of commerce under the Biden administration. She talked about industrial policy, and she made that argument as a free-market capitalist as well. She was like, “Look, you have to understand that there are certain crucial industries that are part of national security.” And I’ll actually put agriculture as well under the national-security umbrella, not just energy and defense and semiconductors and telecommunications and so on and so forth.

Those industries are not always profitable, and they’re not always profitable at the scale that we’re used to seeing profit from, say, the service-based economy and from tech startups and financial fintech companies and so on and so forth. China is operating on a loss when it comes to, say, rare-earth processing and refining. They’re not making that much. They’re not making tons of money from selling those, despite the fact that those are crucial components and crucial materials, but they have had to sell them on the cheap side to make sure that nobody else in the world was competitive. Nobody else in Europe or anywhere else was able to compete with Chinese rare earths, so what they would do was just, “Okay, we just close down the mines and close down the refineries because we can just buy them from China.”

And this is where the invisible hand of the market can’t solve that problem because, for them, it’s a math problem. And the math problem is: “I want higher returns. I want better margins.” And the best way to do that is to go and outsource. And it’s fine to outsource. Don’t get me wrong. I love globalization. Everybody does. But when you start outsourcing your defense and your telecommunications, your crucial industries that are part of your national security, well, then you have a problem. And unfortunately, we live in a situation where I feel like it’s only the military and national-security establishment that actually realizes that risk. And everybody else, whether it’s the political class, whether it’s the business class, people in finance, or a wide range of businesses, they don’t realize that risk because, for them, they would rather cooperate with China and cooperate with Russia, even if it means that a whole bunch of people in Taiwan and Eastern Europe need to be enslaved under those nations. That is a better deal for them. This is what they would prefer. And, yeah, this is where free-market capitalism actually fails because, for them, it’s a math problem. And for us, it’s a matter of national security. It’s also a matter of survival because, yes, it is cheaper to buy raw materials from Russia and China, but the geopolitical price that we pay is so much higher.

Jeff: That, of course, as you talk about in the end of the piece, requires the West making some very hard choices. And part of your point is we can make them now or later, but we’re going to have to make them.

Bianka: Oh, yeah. I mean, I think that, if you look back, once you start examining the world from that prism and from that perspective, there were multiple times in the past 20 years where we could have made those choices, and it was going to be less painful for us. But because they were made by a political class that  can’t think strategically, they’re just sweeping things under the rug and hoping that the next guy is going to deal with that mess. So there comes a point where those choices become very, very painful. Just to scale it down, say, for example, you’re someone that’s not taking good care of yourself in terms of physical activity, good nutrition, good sleep. When you’re in your 20s, you can get away with it. When you’re in your 30s, yeah, you can kind of get away with it. But moving from 40 up, if you don’t do something, it’s just going to get worse and worse and worse.

So, yeah, the more we postpone the difficult decisions, the worse it’s going to get. And I fear that there’s a lot of populists on the rise right now, both in the United States and in Europe, that are promising things to people that are just impossible, and people are going to fall for it.

Jeff: Talk about that. What are the promises that you hear that are so dangerous, as you see it?

Bianka: They will come and say, “Oh, well, we’re going to fix the cost-of-living crisis.” How are you going to fix the cost-of-living crisis? Or, “We’re going to lower inflation.” I mean, your supply chains are breaking down, my guy. There are multiple wars going on. Seriously, this is how you’re going there, promising people… Basically, populists are making two promises. The first promise is — and the product that they’re basically selling to their electorate is — a time machine. They’re telling people, “We’re going to stop time right now, because it’s too crazy, and we’re going to turn back the clock to some time,” whether it’s going to be the ’90s, where the labor market was better, or the ’50s and the ’60s, where a steelworker could raise three and a half children and a stay-at-home wife on a single salary. Whatever their idea of a golden age is, this is what they promise people that they’re going to revert back to, which is absolutely impossible, first of all. And the second: they’re basically promising things that are physically impossible to deliver. You can’t fix the cost-of-living crisis because you have spent the last 50 years hollowing out your industrial base and creating a service-based economy and printing money and subsidizing all sorts of ridiculous ventures. You can’t just stop that and go back to a time where the economy worked better.

And unfortunately, because people that are now in their 30s and their 40s do remember times when things were more rational and they were more sane and there were more job opportunities and the labor market was better, a lot of people are going to fall for that because nobody’s going to come and tell the hard truth. And the hard truth is that, for the past 50 years, we have made some absolutely terrible political choices, and those political choices have led to that point. And this is basically what I’m trying to do with Waronomics. I’m trying to connect the dots between decision A and outcome B, and sometimes decision A happened 30 years ago or 40 years ago, and the outcome of that decision, we’re feeling it right now.

Jeff: Finally, talk a little bit about whether or not you have any optimism about any of this. Do you think that we’re capable, at this point, of making those hard choices?

Bianka: Oh, I think we’re very capable of making those hard choices. And I’m actually optimistic about it, but I’m just not optimistic the way that people usually are, which is in the short term. I do believe that in 20 years’ time, I will be living in a much better world than I’m living today. And I believe that when people reach — well, when the knife reaches the bone, this is it. Yeah, it requires more pain, unfortunately, especially for people that have lived in peace and prosperity, and God bless them for that. This is the absolute best way to live your life: in peace and prosperity. They need more pain, and when they get to that point, they’re going to change their tune.

And this is something that happened in Ukraine. I mean, not so much the peace and prosperity part, but I was just talking with a friend recently that, up until the morning of the invasion, most people didn’t believe this was going to happen. They just believed that this was not real. And then, when it happened and it continued to happen, people changed very much. And oftentimes there’s this study that circulates where they ask people from various countries in the West whether they’re going to fight for their country, and most people say no. I don’t think that’s true. I think that if it comes down to it, I… Because those studies were done in Ukraine as well prior to the full-scale invasion in 2022. Yes, most people say that, “No, I’m not going to fight for this country.” And then, at the end of the day, look at what happened. They are fighting, and they’re winning.

Jeff: Bianka Banova, her Substack is Waronomics. I thank you so very much for spending time with us.

Bianka: Thank you very much for having me. It’s always a pleasure.

Jeff: Thank you. And thank you for listening and joining us here on the WhoWhatWhy podcast. I hope you join us next week for another WhoWhatWhy podcast. I’m Jeff Schechtman. If you like this podcast, please feel free to share and help others find it by rating and reviewing it on iTunes. You can also support this podcast and all the work we do by going to WhoWhatWhy.org/donate.