The Cost of Cold Fries | Liam Rosenberg
Are we entering a new Cold War? That seems to be the question on everyone's minds after McDonald's revealed that it would be exiting the Russian market in a press release.
"... We have a commitment to our global community and must remain steadfast in our values," said McDonald's President and CEO Chris Kempczinski on Monday. "And our commitment to our values means that we can no longer keep the Arches shining [in Russia]."
But why are pundits contemplating such a serious question from such an ordinary fast-food franchise? Well, McDonald's response to the humanitarian crisis in Ukraine isn't just a profit forfeiture to the tune of $275 million. It's also symbolic of the American corporate sphere abandoning the Eastern European country for the first time since convening there after the fall of the Soviet Union.
During the Gorbachev era, the Soviet Union implemented economic reform known as perestroika, literally meaning "reconstruction." It was a bold movement whose reforms were meant to ease decades-worth of growing pains in the crumbling Soviet economy. A hallmark of this policy was its elimination of the state's monopoly on trade, with the aspiration of igniting American capital inflow.
While the United States never pledged foreign aid to the USSR, American businesses quickly moved in on the emerging Eastern market. In 1988, the Canadian franchise of McDonald's signed a joint venture with the city council of Moscow, enabling the establishment of 20 restaurants in the Soviet capital.
George Cohon, President and CEO of McDonald's Canada at the time, said, "McDonald's is bringing more than just restaurants to the Soviet Union," adding that the Western concept of service and efficiency would come in tow.
While the Golden Arches might seem mundane to you and me, they ushered in a new era of global economic cooperation at the turn of the 21st century. According to Bernd Kaussler, a professor of political science at James Madison University, this revolutionary act earned its own political philosophy: the Golden Arches Theory. In it, Kaussler posits that two countries both home to McDonald's won't engage in war, which indicates the countries' interdependence and alignment with the United States. But after Russia annexed Crimea in 2014, Kaussler's theory dissolved.
"As the Russian economy is becoming less inter-dependent [sic] with the U.S. and Europe, we basically have fewer domestic economic factors that could mitigate current aggressive policies," said Kaussler in an interview with the Associated Press.
American businesses are following McDonald's lead en masse. With that in mind, it seems that conflict escalation is inevitable. Or, as we might say – in the United States, you walk out of McDonald's. In Russia, McDonald's walks out on you.