Ukraine Between Hobbes and Adam Smith
Kyiv is beautiful in springtime. The atmosphere is energetic and forward-looking. The war is present, yet surprisingly often feels far away.
The Air Alert mobile app sends warnings about incoming drones and missiles. A wake-up call. Time to head for the nearest shelter. Upon a recent alert, an associate pointed out that we should finish our coffee - relax, we are not in Kharkiv. Meaning: keep calm and carry on, we have work to do!
Although escalating Russian aggression has pushed Ukraine closer to Hobbes Leviathan, the war is primarily characterised by the invisible hand and entrepreneurial logic of The Wealth of Nations.
In Ukraine, war does not stifle free enterprise. It is the driving force. Everyone plays a part. The aspiration to live in freedom brings out the best in everybody. It is noticeable. Yet long before Russia’s invasion in 2014, Ukraine was at the forefront of innovation and entrepreneurship, despite the centrally planned Soviet era legacy.
The ongoing war has, out of necessity, acted as a catalyst for the country’s existing entrepreneurial spirit. Decentralised specialisation, trade and free markets generate prosperity more effectively than central control. It is evident. In fact, today’s Ukraine is probably the world’s best handbook on entrepreneurship and self-reliance. The examples are numerous. Nato member-countries have started to take notice, but is the pace of change fast enough?
Russia’s full-scale invasion more than four years ago should be regarded as Europe’s greatest geopolitical failure in modern times. For many years, cheap energy, trade and political convenience were prioritised over strategic realism.
An unwillingness to bear the economic and political costs required for credible deterrence has left Europe vulnerable. Peace is ultimately preserved not through declarations and processes, but through strength, military capability and above all the adversary’s belief that the cost of attack will be too high. European rearmament is now accelerating, but time is short.
Ukraine’s resilience against a significantly larger and more ruthless adversary rests not only on free enterprise, but also on a reformed and agile bureaucracy. The sluggish regulatory inertia that often defines European institutions is conspicuously absent.
Ukraine possesses unique expertise in modern warfare. Through digitalisation, decentralisation and innovation, an exceptional military-industrial ecosystem has emerged. Its products, technologies and tactics are rapidly gaining ground internationally. The war in Iran has demonstrated with brutal clarity that Nato has much to learn.
At its core, this is about cost asymmetry and effect per pound invested. The pace of innovation, in which armed forces and their procurement organisations play a decisive role, happens in months, not years or decades. Nato members defence processes have become more agile, but traditional bureaucracies don´t change overnight.
Military relevance and endurance depend on a flexible, agile model that tightly integrates development, production and operational feedback. In Ukraine, battlefield data is collected in real time and used to analyse the effectiveness of different weapons systems. A continuous feedback loop between battlefield, bureaucracy and manufacturer.
For manufacturers in Ukraine, the issue is no longer who is best at selling, but who delivers effect. When performance becomes visible, suppliers compete on results rather than relationships. Transparency is often a powerful tool against corruption, and the room for manipulation shrinks. The pace of iteration accelerates; weak solutions are progressively eliminated. Is NATO militaries are structurally set up to encourage adaptation?
Despite its traditionally top-down military structure, Russia has made significant progress in adapting to modern warfare over recent years. Given battle experience gained it is probably a stronger adversary today than before 2022. To remain effective, NATO must adapt and improve at an equally rapid pace.
During the Cold War, my father used to joke that winning a war required American logistics, a British navy, Finnish soldiers and Swedish weapons systems (yes, I´m Swedish by birth). His experience was shaped the post Second World War. But conditions change. It is not possible to prepare for today’s wars based solely on yesterday’s experience.
Over the past few years, the nature of warfare has changed dramatically. Ukrainian defence technology should now be included as well. It is driven by world-leading technologies and processes developed by hundreds of start-ups in cooperation with the military procurement organisation and active frontline units. These new systems also reduce dependence on American logistics, strengthening Europe's strategic autonomy.
However, Ukrainian technology cannot, and should not, replace existing Nato systems. The requirements of a large-scale conflict, be it in Europe or the Pacific, are fundamentally different. The real challenge is how to fast and effectively integrate these technologies and tactics. A hybrid model, in which a billion-pound frigate operates alongside hundreds of low-cost unmanned aerial and surface vehicles?
Government debt across the West is rising rapidly. Ukraine's decentralised, market-driven model is leading the way. Complex and expensive weapons systems that are relevant today may be obsolete tomorrow. It is crucial that established defence companies embrace and integrate new technologies, while military procurement organisations create space for new entrants and faster innovation.
In the end, every state has an army. Either its own or someone else’s.
Martin Boldt-Christmas