The New Power Play

Something I have often said as a joke is that Germany realized after World War II that it could never take over Europe militarily, so it switched to trying to take over monetarily. Somehow, that joke always slipped into conversations regarding the European Union and the Euro. I made the joke initially because the Euro was so heavily backed be the German economy and banking system. As it stands now, to join the Euro community, a country must meet the "Maastricht Criteria." These conditions (which include domestic price stability, measurements of responsible public finances, exchange rate, and others) were put in place to insure financial stability amongst the nations involved with the single European currency. Basically, a country subordinates its economic and monetary policy to the wisdom and wishes of the European Central Bank.

While the purpose of the ECB is to maintain stable growth throughout the EU, policy will always favor the major players, in this case, the two largest players in the European economy are Germany and France, with Germany typically leading (of the $18.85 trillion dollar Gross Domestic Product, $3.82 trillion is Germany and $2.98 trillion if France.) Germany and France are also two of the countries that do not follow the economic and public finance guidelines set down as requirements of the member states, specifically the percentage of public deficit and debt allowable(60.7% and 67% public debt respective of GDP, respectively, with the maximum allowed by the ECB set at 60%.) For those interested, or in need of reading material as sleep aids, here is the Maastricht Treaty.

Why do I find it interesting to point all of this out? Russia recently tossed out the idea of proposing a global currency at the next G20 summit. With the Gross World Product at $78.36 trillion and the US economy running a Gross Domestic Product of $14.33 trillion, that puts the United States at 18.3% of the world's economy. Would Russia (GDP of $1.76 trillion, or 2.25% of the world's economy) be willing to subordinate itself to the needs of the largest segment of a globalized economy, or would this proposal turn into a device to institute "parity" in the world's economic systems? With some of the other recent moves by Russia, I would think motivations need to be carefully considered.

Is There Truth in Правда?

It has been a little while since my last post, and quite some time since the last time I touched on the problem of Russia. With the recent invasion of Georgia, I decided to delve into that complicated subject. First, I want to know what Russian news is saying about it. Правда, the state run news service, has a number of stories on the matter. What I find most interesting about the writings in Pravda is the heavy handed style of reporting. For example, the article on overt US support of Georgian aggression seems less concerned with facts and more with stating the approved opinion, editorial style.

I also find some of the justification for Russia's actions, in their own words, a bit alarming.

"A[s] for history, the question of separatism – Georgia or Ossetia – is disputable. It was Georgia which decided to pull out from the USSR, whereas the Ossetians protested against such a decision. "

Where have we seen this sort of reasoning in recent history? It seems to me that the last time the world dissolved into conflict, one country had been touting the right and duty of all people of a certain national heritage to flock back to their "homeland" or the Fatherland... A country which stated after mediation that "We want no Czechs." Then proceeded to invade the whole of eastern Europe.

Russia's advance into Georgia has been mediated. They cry peace, pending the resolution of South Ossetia and Abkhazia's desires to secede. Desires which I am sure will be influenced by their rescuers and occupiers, the military of their neighbor to the north.

It seems to me that Russia's initial advance was a little too quick to be purely motivated by the idea of sparing Georgian citizens from the ravages of a civil war. Although there is international precedent for stepping in to halt civil war, it has generally only been done after human rights atrocities in the conflict, such as in the case of Bosnia. However, there is also a good case for allowing internal conflict to remain internal, especially when dealing with Russia stepping into a conflict outside its borders, e.g. Austria-Hungary. I hesitate to say that this conflict could ever escalate the way either of the history lessons earlier did, but that would also require knowing what the southern neighbors in the region will do in reaction to and/or in support of Russia.

In the interest of comparison, BBC and CNN have slightly different takes on what is happening in the region.

Side note: I just noticed this article from the BBC. A little something to further annoy the former Soviet Union when they are trying to consolidate the old lines of influence.

From Russia With Love

In my last post I briefly mentioned my concerns over Russia and its actions in the Middle East, I would like to take this space to comment on my growing concern over Russia's actions and political developments. When the Cold War ended almost two decades ago, it seemed that the USSR under Gorbachev and then Russia under Yeltsin would be able to slowly re-integrate itself to the expanding global economy. Gorbachev started the trend toward real economic development and integration with the glasnost and perestroika policies, gradually pulling his government away from state domination of the internal markets, allowing for foreign competition, and releasing the communist strangle hold on civil liberties. With the demise of the Soviet Union and the election of Boris Yeltsin as the first ever popularly elected leader of Russia, the country continued to attempt a decentralization of economic power and the privatization of corporations. Unfortunately, much of the corruption present under communist rule remained in place and derailed the planned economic development, centralizing it once again. After Yeltsin's resignation, Putin was elected by the people to contain the corruption and expand economic freedom. Here is where Russia's progress becomes cloudy.

Putin has led an interesting life, and I think it offers insight into the man's leadership style and goals. He has a history of combining state positions, but only to consolidate his own power. Beyond that he has ballooned the size of the bureaucracy (11-17% in 2005 alone) and nationalized corporations in an attempt to regulate and control economic growth. By statistical standards, he has succeeded in leaps and bounds with an economic growth rate of 6.7%, compared to the US's rate of 2.9%. Growth in personal incomes has been approximately 12% per year. While these figures are good, there are some problems. The most well known problem in Russia's economy is the well-publicised corruption and organized crime network, both of which act as a funnel for wealth away from the Russian labor force. Also, there is the problem of not having a diverse basis of exportable products. The majority (80%) of exports consists of market driven commodities, such as oil, natural gas, metals, and timber. With any sort of global downturn in the market, or even a recession within one of Russia's major trading partners, a major source of income could vanish. As I mentioned in the last post, much of the state's exports in industrial goods comes in the form of military technology and equipment. Lastly, while productivity and income are up, they still lag far behind the rest of the developed world. Russia's work force is about half of that of the United states and the total GDP is one thirteenth of ours. Russia's GDP per capita in 2006 was just over $12,000, as compared to the United States GDP per capita of around $43,000. None of that can sit well with the world's only former-superpower.

In addition to the economic troubles, some of Russia's policies are disconcerting as well. Putin has developed such a cult-of-personality (his 2000 election was with a 56% majority vote, followed by the 2004 election by over 70% of the vote, along with a high approval rate) that he can organize the wildly popular youth movement, the Nashi, and even name his successor, Dmitri Medvedev. Putin's nationalistic youth movement indoctrinates the next generation of leaders to state (read: Vladimir Putin) approved ways of thinking and revisionist history, glorifying the exploits of the USSR. The group is strikingly reminiscent of the Hilter-Jugend in the 1930's, even being accused of silencing dissenting voices within the country. Also, Russia's handling of the situation with Chechnya demonstrates the lessons in diplomacy Putin learned during his time in the KGB. Finally, Putin's ability to virtually assure Medvedev's election this year tells me that the former state security officer become president will continue to be a major player in the formation of policy and diplomatic affairs.

Let us not forget, Putin is a man who was trained by one if the best propaganda machines the world has ever seen, the KGB. Win the hearts and minds of the people, or beat them into agreement, all is fair in the secretive and brutal world of the secret police.