Reforming under new Russian ownership and now named “Vkusno & Tochka” (which translates to “Tasty and That’s It”), the golden arches of over 800 former McDonald’s fast-food restaurants in Russia have come crashing down.
Joining other western businesses, McDonald’s made the costly decision to penalize Russian President Vladimir Putin for the invasion of Ukraine. It entirely vacated the world’s 11th largest economy. Quite possibly, this event will be seen as a marker for resurging nationalism worldwide. That would make it another step in reversing an era of globalization that yielded vast increases in wealth but also created forces that deeply disturbed competitive local industries and traditional social foundations.
Some of you will remember how, in 1990, and with much celebration, the first golden arches showed up in Moscow. McDonald’s was then seen as a symbol of globalization and rising prosperity and indirectly as a paragon of how market activity and relatively free movement of goods, people, and cross-country corporate investments help turn swords into pruning hooks. Indeed, writer-journalist Thomas Friedman, in his book Lexus and the Olive Tree, went so far as to develop a golden arches theory of conflict prevention. The idea was that countries with large enough middle classes to support a string of McDonald’s restaurants were not likely to be gullible enough to be led off to war by power-hungry or misguided politicians.
While many optimistically accepted Friedman’s proposition, it crashed several years later when Serbia invaded Kosovo. Common sense alone suggests that Friedman had a point, but maybe for other reasons. For example, when investors worldwide place their funds into buildings and bricks and mortar in far-flung places, they must surely be less inclined to support political leaders who wish to bomb those same places. And the reverse seems to hold true as well: International investors are not eager to be seen as aiding tyrants in invading other places where they may also have made large investments. I suggest we should not give up on Friedman’s argument.
Whether or not Russia’s falling arches embody a reversal in globalization, they do signal something else. In Russia or anywhere else, McDonald’s golden arches are a highly specific form of capital. In bankruptcy, they have little salvage value. They encourage maintaining reputations, and investment in them can be seen as a way to force franchise holders to search constantly for ways to serve customers better while keeping costs under control. Lots of hamburgers have to be produced and sold to generate enough profit to cover the cost of the arches.
McDonald’s Russian successor will not be beholden to U.S. corporate interests. It may be a bit more relaxed, somewhat less inclined to improve relentlessly, and less likely to worry about bankruptcy. That, in turn, may make it less interested in turning Putin’s swords into pruning hooks.
It’s a complicated world indeed. But let’s hope that whatever pause we see in the idea that trade and free markets lead nations away from war is temporary. And let’s keep alive the possibility that we’re merely seeing an exception to the rule.
Bruce Yandle is a distinguished adjunct fellow with the Mercatus Center at George Mason University, a dean emeritus of the Clemson College of Business and Behavioral Sciences, and a former executive director of the Federal Trade Commission.
