Why The World Can't Buy Peace With McDonalds' Burgers Anymore

The weaponising of the McDonald's in the Russia-Ukraine war has left the neutrals in this conflict, like India, asking one question—how to immunize the state and economy against such a scenario potentially happening to us?

The vividness of images from the Russia-Ukraine war—burning tanks, flattened-out cities, and dogfights in the air—are both stark and somewhat of a déjà vu. Televised wars, which started with Gulf War 1, are common now. Indians have had a close and personal taste of it in Kargil. 

Lost in the vivid and tragic images was an interesting one—that of the massive McDonald's branch in Moscow serving its last burgers and shakes before shutting down. It was oddly illustrative of perhaps the final nail in the coffin of a 30-year-old mirage of McDonald’s peace lines overriding political rivalries across nations. Thomas Friedman articulated it in 1999 in his bestselling novel Lexus and the Olive Tree and said that no two countries with a McDonald’s franchise can go to war. Friedman doubled down on that thesis a few years later, in his bluntly titled The World Is Flat. The McDonald’s hypothesis was essentially a pop articulation of the post-Cold War American hope—that the world has bought into the values of the “victorious side” and will henceforth privilege making money over fighting to resolve political disputes.

The shutting down of the Moscow McDonald’s has another message. Not only are its golden arches insufficient insurance against wars, but McDonald’s itself, as a metaphor of American economic power, can be weaponized during a war. 

While the Big Macs are obviously trivial, the war in Ukraine has seen the political West (the US and its treaty allies in Europe) unleash the potential of a vast arsenal of economic weapons. From currency settlement systems like SWIFT, US dollar holdings as a global reserve to wide-ranging trade sanctions, western ownership of several parts of the global commons architecture has been made starkly obvious. The longer-term question for neutrals in this conflict, like India, is—how to immunize the state and economy against such a scenario potentially happening to us?

India has seen this playbook, at a smaller level, in recent times. Since the early 1990s, India has sought to manage its territorial disputes with China by keeping the boundary issues frozen at the status quo level while concentrating on trade and commerce. It worked for a couple of decades before it stopped working. Sharp political conflicts over the disputed Line of Actual Control have become regular in the last decade. And even as trade flourished—China is India’s largest trade partner and one where we have the largest trade deficit—armies of both countries shed blood on the Galwan peaks in 2020 for the first time since 1967. Consequently, India has resorted to limited economic counters, limiting Chinese investments in certain sectors and banning some Chinese digital platforms. In a nutshell, the Sino-Indian case is a good case study of how economic logic has not triumphed over political differences and how the affected parties look to manage their own side of the equation.

The scale and impact of the American sanctions, using key pieces of global economic commons, is of a different level altogether. There has been a flurry of commentary on how countries can immunize themselves against such weaponization of the economic commons. Alternative financial messaging systems (to SWIFT) are relatively easy. Replacing the US dollar as a global reserve currency is far less so. Which other country would agree to give up control over its own money supply as the US has done by allowing global institutions to issue Eurodollar financial instruments i.e. bonds denominated in US dollar but issued outside of the US and sold to mostly non-American investors? Several alternatives have been discussed—Rupee-Ruble trade is a likely solution. A regional currency union would be a longer-term project. Gold as an alternative has been suggested. Some have even suggested using commodities like oil—cryptocurrencies, too—as a store of reserves. But none of them are scalable and some are not even feasible. Commodities and cryptos, for example, are too volatile to be a store of value or medium of transactional exchange. And all of them have a basic feature—they are political instruments first and economically efficient instruments later. Which brings us to the crux of the issue—politics.

Instead of the Friedman world of McDonald’s influencing politics, we are back to the scenario where McDonald’s is following the politics. Early signs were visible long before the Ukraine war. India opted out of the marquee Regional Comprehensive Economic Partnership trade agreement, the world’s largest, pointedly on account of China’s presence and influence in the grouping. US President Joe Biden launched a massive initiative to diversify America’s supply chain vulnerabilities, especially in China. The world has not proven to be flat at all—it remains curved with politics providing sharper edges to the curves.

Consequently, the imperatives for India fall heavily on the political side even as alternative economic chains are explored. Economic choices are going to be informed a lot more by politics. For example, instead of building huge foreign exchange reserves at a high fiscal cost, as we have traditionally done to help ride through large external economic shocks, are we better off negotiating a US dollar swap line from the US Fed, a facility available only to some of America’s treaty allies? Instead of traditional trade agreements, are there new opportunities in striking coordinated supply chain arrangements like giant oil storage whose operations are coordinated with, say, America? Is there any merit left for attracting foreign savings into Indian bonds, given how quickly the same became a weapon against Russia?

In short, the luxury of letting India’s large and growing market take care of political choices automatically does not exist anymore. Markets must be weaponized to strike political deals, the rest of the economics will follow. It is a new world. India’s politicians will need to step up to it.

(The author is the Managing Partner and CIO of ASK Wealth Advisors. The views and opinions expressed in this article are personal.)