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Analysis & Opinion
29.07.11 Russia Profile Weekly Experts Panel: Is The West Turning Reckless?
Introduced by Vladimir Frolov

Contributors: Vladimir Belaeff, Eric Kraus, Edward Lozansky, Vlad Sobell

In a recent column for RIA-Novosti, Fyodor Lukyanov, editor in chief of Russia in Global Affairs Magazine, wrote that continued political gridlock in the EU (over the Greek debt crisis) and in the United States (over raising the national debt ceiling and cutting the budget deficit) are threatening to drag the fragile global economy into a new, deep recession while raising the specter of economic and political chaos across the globe. Is the West turning reckless? What are the geopolitical implications from political gridlock and ideological rigidity in major Western powers that are threatening to destabilize global financial and political order?

“Europe is now grappling with domestic problems, while the euro, the would-be second global reserve currency, has become a giant headache for Europe and the rest of the world. Meanwhile, the United States has shown the main danger of hegemony: political polarization in the dominant country can plunge the entire global economy into a deep crisis. In both the EU and the United States, the problem is essentially political,” Lukyanov writes.

He argues further that politicians in Europe and America are acting recklessly and selfishly, jeopardizing the fragile economic recovery and threatening the established world order based on Western primacy. “Lost in the internal debate in America is the fact that global stability hangs in the balance. But the Americans don't seem terribly concerned about the rest of the world. The current consensus is that it would be better to maintain the current global order for want of a better option. The great paradox is that politicians in America and Western Europe, on whom the future of the world depends, have become the main obstacle to preserving the status quo and a smooth recovery from the crisis.”

“The policies of great powers have repeatedly resulted in catastrophe, especially in the 20th century,” warns Lukyanov.

On the foreign policy front, similar recklessness pervades. The United States and its NATO allies will soon have to decide whether to send in NATO ground troops into Libya to topple the regime of Colonel Muammar Gaddafi. The NATO air war in Libya, undertaken within the ambiguous wording of UNSC Resolution 1973, is stalling and has failed to secure a victory for the anti-Gaddafi’s rebellion.

The West has grossly misjudged the revolutionary riots in the Arab world and has misread the situation in Libya. According to Alexander Rahr of the Berthold Beitz Center for Russia, Ukraine, Belarus and Central Asia, “Few people realized that the events in Libya were not actually a rebellion against the dictator. The Libyan events became the civil war, in which a half of the Libyan population supported Gaddafi. It will be extremely difficult to achieve victory in this situation, and NATO is trying to find a way out.”

NATO appears to have boxed itself in and has set itself up for an epic failure with potentially devastating consequences for global security. It will either destroy the Gaddafi regime, or becomes a laughing stock around the globe. “If the alliance admits that it is unable to do away with Gaddafi, whom everyone at NATO took for a clown, it will be possible to sell NATO for scrap, because the organization would show its inability to establish law and order near its own borders. Who is going to treat NATO seriously after that? That is why the operation will be continued and expanded,” said Rahr.

Yet, in Washington President Barack Obama does not have congressional authorization to send ground troops into Libya, and under the current circumstances it is hard to imagine him getting one even though the future of NATO might be at stake.

Is the West turning reckless? What are the geopolitical implications from political gridlock and ideological rigidity in major Western powers that are putting at risk global financial and political stability? How could Western politicians be so lacking in strategic vision and so selfish in their search for quick fixes to domestic problems? Are there new indispensable and responsible global powers on the horizon, like China or Russia? Could they fill the strategic void that is being created by the West? Are there leaders in Russia and China who could rise up to the challenge?

Eric Kraus, Moscow-based Fund Manager and Author of Truth and Beauty (Russian Finance)

In one of the most unintentionally funny footnotes to the fall of the Soviet communist system, Francis Fukayama foresaw the “End of History.” Needless to say, history shrugged off the news of its own demise – indeed, as long as men crave material advancement, power and dominance over their neighbors, history has some very good years ahead!

There is no arguing that history advances in waves – that there is an underlying logic to the seemingly random variability; however banal it may now sound (ten years ago, it seemed quite revolutionary!) we are now entering the New Chinese Century. As a corollary to it, the West is clearly condemned to at least a relative decline.

What is most striking is that, when societies feel the icy wind of history turning against them, rather than struggling to reverse or delay the inevitable, they act as if they subconsciously wished to accelerate the process.

Thus, having delayed the inevitable decline in living standards and the ability to finance foreign military adventures, the Western countries indulged in a 20-year period of leveraged growth, with increasing quantities of credit creation supporting gradually declining rates of economic growth.

The inevitable crunch was accelerated by the global credit crisis of 2008, which tipped the largest G7 countries into totally unsustainable debt dynamics. This is culminating in the most threatening economic crisis of the past hundred years.

The paralysis of the political systems is quite terrifying. The fundamental problem with democracy is that it requires a particularly strong and manipulative leader to cajole the populace into accepting the temporary pain necessary to allow for long-term stability. The Americans here have become the ultimate champions of economic hedonism, declaring that "deficits don't matter," "the Chinese will buy U.S. Treasury bills until Kingdom Come," and the fact that the treasury market is the world’s "deepest and most liquid" somehow ensures that, despite obviously unsustainable debt dynamics, the world will continue to finance the American deficit eternally.

The problem with the European leadership is that there is none. Watching the discussions about the virtues of private sector participation in a Greek bailout leaves one with the feeling of watching a group of innocent children happily playing with a live hand grenade. The politicians argue against the dominance of markets – akin to arguing against the weather or the laws of physics. The markets care not a fig for justice, democracy or fairness. They are a force of nature and must be reckoned with. Alas, any politician seeking to address the situation in a non-sentimental fashion would be killed in the next elections. The German press is screaming about how the Greeks are enjoying life on the beach while the good Germans work hard and retire late.

The fact that the German economic locomotive was largely driven by exports to Southern Europe is lost upon their readers.

A Greek bailout six weeks ago would have cost only a tiny fraction of what protecting Spain and Italy will now cost. A few more months of incompetence and the amounts required will go far beyond the amounts they can muster, and while to their credit, the Europeans are at least trying desperately to avoid a default, the Americans appear to be doing their level best to create one!

Markets are always and everywhere a great confidence game. Confidence is now quickly being lost. It will be up to our Asian friends to now take the baton. We can only hope that the Russian leadership will understand this fundamental shift and align itself with history – rather than making a desperate swim for a sinking ship.

Vlad Sobell, Independent analyst, London

In his article “The reckless West,” Fyodor Lukyanov concludes that in both the United States and the EU the problem is “essentially political.” I fear that Lukyanov is much too generous. Unfortunately, the problem is not just political; it is in fact deeply systemic.

In the 1980s we witnessed the terminal nosedive of Soviet communism driven by incurable flaws of an over-centralized economy and a sclerotic totalitarian political culture. The unraveling of the Soviet empire conclusively proved that although communism may have looked like a great idea on paper, it had in reality turned out to be utopian nonsense.

Today we are witnessing the demise of the other great delusion of our time. Namely, the edifice of Western democracy erected after World War II and proclaimed to have been not only the triumphant answer to communism, but also the Holy Grail of human political order. This immodest (to put it politely) idea was famously expressed in Francis Fukuyama’s (undeservedly) celebrated book “The End of History and the Last Man” (1992), and it has since become an unquestioned part of Western Orthodoxy. Indeed, the “Arab Spring” supplies further evidence that democracy undoubtedly is the most widely desired form of governance.

But the fact that it is the most desired form does not do away with its intractable systemic defects. And since our Orthodoxy, like that of any other closed system, continues to wreak considerable havoc, it must be challenged.

A rudimentary sketch of democracy’s intractable structural flaws would be as follows: far from elevating citizenship responsibility to the status of supreme operating principle, Western democracy is designed to do the opposite. Politicians (and their parties) operate in what essentially is a market for solutions to the pressing problems of the day. The logic of this market makes it rational for the politician to satisfy the largest number of potential “customers.”

This reality has two corrosive consequences. Firstly, striving to outbid their rivals, politicians are pressured and hence motivated to indulge in irresponsible populism. As a result, they make promises on which they are unable to deliver; and, worse still, they knowingly engage in intellectual dishonesty, for they need to pretend they have straightforward and not least (relatively) painless answers to problems for which such easy solutions do not – and cannot – exist. Ultimately, these pressures and practices engender an environment of cynicism and moral decay.

Secondly, on the “demand side,” voters indulge in a similarly destructive charade. Even sophisticated sections of the electorate cannot have sufficient grasp of all the intricacies of policy. Indeed, the management of modern economies, social policies or international relations is so complex as to have become the subject of extensive scholarship: and analysts themselves frequently (and probably inevitably) come up with directly opposing and/or inconclusive, tentative answers. A sophisticated electorate, by definition, is made of specialists in their own occupations and hence cannot be au fait with every policy-related subject.

As for the “unsophisticated” or simply disinterested parts of the electorate, they merely demand entertainment or “infotainment” and instinctively switch to non-news channels to escape the “boredom of politics.” And why shouldn’t they? After all, life is short and so why not let professional politicians sort out things on our behalf (like visiting a doctor or hiring a builder or a car mechanic)? All you need do is vote for a politician who looks most likely to work on your behalf (or whom you are told by the media will most likely work on your behalf) – that is, if you bother to vote at all.

The combined outcome of this kind of “marketplace politics” is the abdication of responsibility on both the supply and demand side. The failure of the West noted by Fyodor Lukyanov is its inevitable cumulative result.

That democracy suffers from serious systemic flaws has long been acknowledged by some of the sharpest minds in Western political theory – for example, the Austrian economist Joseph Schumpeter, who was writing in the first half of last century. However, the Democratic Orthodoxy has argued that whatever the system’s flaws, it is still the best arrangement we can think of.

I believe that this comforting conclusion is no longer sustainable or acceptable. The time has come to take a fresh look at the very foundations of democracy and commence a root and branch reformation. As a possible first step, we could take a serious look at the post-totalitarian experience of China and Russia, rather than scoff at those countries’ democratic credentials. Over the past two decades both civilizations have experienced secular resurgence, while the West has been in relative decline. This suggests that their technocratic “managed democracy” may well be an effective system under certain conditions – if not superior even to Western democracy in its current (degenerated) state.

There is no need to fret about the consequences of taking such a step. Unlike the communist reformation of the 1980s, a rethink/renewal of democracy would not lead to the destruction of that very system – or to the ushering in of totalitarianism/autocracy or something similar. On the contrary, the sooner we recognize the need to take action, the more likely it is we can avoid such a troubling outcome.

Edward Lozansky, President, American University in Moscow and World Russia Forum in Washington, DC

Surely there is reason to talk of the West as a whole turning reckless. Still, the undisputable fact should be borne in mind that, like it or not, it is the United States, due to the size of its economy and its exclusive ownership of the green bucks printing presses, that can at least make an effort to help the entire global economy – or run it off a cliff. This is why the current political debate in Washington is watched with huge concern throughout the world.

Two important factors are overlooked in the current political debate on reducing the United States’ astronomical national debt, approaching the mind-boggling figure of $15 trillion, or close to 100 percent of the country’s GDP.

Firstly, you do not have to be a high-brow economist, just a six-grader, to figure out that even if the Republicans force Obama to accept a $4 trillion "deficit reduction" over the next decade, it does not mean that the current national debt will diminish by $4 trillion. It only means that the growth in the national debt will be $4 trillion less than otherwise, but ten years from now the debt will still be much higher than the current $15 trillion. However, all these calculations may become totally meaningless, as the West’s reckless policies lead to global economic and financial collapse.

Secondly, although the main directions for the austerity measures are proposed for Medicare, Medicaid, and social security, it is the military and security budgets that amount to about 70 percent of the current annual federal budget deficit.

According to reliable statistics, the wars in Iraq and Afghanistan cost U.S. taxpayers the same $4 trillion by which Congress hopes to cut federal spending over the next ten years. Add to this those thousands of lives of the brave American young men and women who died in these wars. Died for what? What is there to show for the nation’s enormous sacrifices, besides huge financial and economic losses and, yes, America’s diminished moral standing both within and outside the country? Is America now safer or better liked in the world or, say, in Afghanistan and Iraq? What are the geopolitical gains? Are the Afghans and the Iraqis much happier now? Are their countries more democratic – or less corrupt? Hasn’t the war in Iraq helped America’s most obdurate rival Iran to hugely increase its influence in the region?

One would have thought that all these questions should be the subject of the Congressional hearings on foreign and security affairs. Instead, Ileana Ros-Lehtinen (Republican from Florida), the chairperson of the House Foreign Affairs Committee, is calling a hearing titled “Time to Pause the Reset? Defending U.S. Interests in the Face of Russian Aggression.”

Russian aggression? Pause the “reset?” What’s going on here? If Congress considers Russia an aggressor, why all this talk about partnership and cooperation? Why does the Pentagon propose collaboration with Moscow on missile defense through a joint operations center, with military officers from both countries considering different scenarios? Is there a highly placed Russian mole in the Pentagon – or does this collaboration make sense after all?

Also, does Ros-Lehtinen really want to pause the “reset” – which would also mean a pause in the use of Russian railroads and airspace for shipping American military supplies to Afghanistan? We now know that the use of the alternative supply routes often requires substantial kickbacks and protection payments to…are you ready?…The Taliban!

The investigation still goes on, but it is pretty obvious already that U.S. taxpayers’ money has been indirectly funneled to the Taliban under a $2.16 billion transportation contract that the United States has funded in part to promote Afghan businesses. Congressman John F. Tierney (a Democrat from Massachusetts) said in this connection: "I would hate like hell to think my kid was over there," and the Taliban was "coming after them with something bought with our money."

For some reason, I have lately developed a need to finish my articles with this one-liner: “God, save America.” It looks like more and more people wish to add, “And the rest of us.” For when America sneezes, the rest of the world catches pneumonia.

Vladimir Belaeff, Global Society Institute, San Francisco, CA

To most Russian analysts, “the West” appears as a solid, powerful and opposing bloc. In fact, “the West” is an agglomeration of interests, past histories, future expectations and national points of view. Spain, Britain, France and Ireland are all in the geographic West – yet their needs, interests and policies evidently do not always coincide. This may seem a trite repetition of an obvious reality, but it seems necessary to make the point yet one more time.

The issues referenced by Lukyanov and elsewhere in the introduction are diverse, have different origins, different dynamics and will have separate resolutions.

The debt ceiling and budget deficit debate gripping the U.S. government is ideological recalcitrance, ultimately driven by a radical-conservative electorate, proudly “small town” and exhibitionistic in their denial of macroeconomics. They believe that national and global economies are functionally identical to the economics of individual households and have a profound distrust of intellectual discourse, foreigners and any governance above the level of a small municipality. The awareness or interest of this electorate about international issues is nearly nil. These voters elected conservative Republicans to the U.S. House of Representatives; the new delegates follow the economic ideology of their voters.

Therefore, the American portion of “the West” is busy resolving domestic economic policy issues. There is no evidence that the United States ever undertook any formal responsibility for the well-being and economic stability of the rest of the world. If some (many) countries decided to attach themselves to the American train, that was their own choice. So to accuse America of being “reckless” with respect to the interests of its foreign associates is just not accepted by the Republican electorate described above. They do not accept responsibility for foreign economies, and generally reject U.S. “foreign entanglement” (per George Washington), with only one or two exceptions.

The EU situation is of an entirely different nature. There is an opinion that the root cause is the hurried expansion of the EU in the years when the Maastricht requirements for membership were relaxed in order to admit countries like Greece and Portugal, with structurally weaker economies. In retrospect, a reduced level of integration (an “associate” status, so to speak) would have been more effective at that point in the past.

Therefore, if the American issue is one of domestic economic ideology, the EU situation is more of financial mechanics. In the EU, there appears a consensus that a recovery program shall be implemented and the debate is about the mechanization of such a program. That is not really a “gridlock.” In the United States, a true ideological gridlock does exist, and although most likely it shall be overcome on a pro tem basis, to advance the business of government, the fundamental ideological contradiction is unlikely to be resolved because it is due to profoundly differing world-views.

The issue of Libya is yet another different issue and it is a profound threat not just to “the West,” but also to the entire world order. If a stubborn dictator can resist directives of the UN Security Council (regardless of how well or poorly implemented), then the challenge is not against NATO, but the entire post-1945 order. The League of Nations and its demise do come to mind.

Russians seem to gloat a bit about the problems “the West” is encountering in Libya. Apparently, in a kind of post-Marxist hangover, they have residual fondness for the Che Guevara of the sands. In fact, they should be very concerned how the appearance of disunity may be encouraging the forces of chaos, which no one wants to see rampant in the world.
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