Saturday, August 16, 2008

The End of Pax Americana?

Saturday morning's are reserved for geopolitical news and there was plenty to read and maul over this week.

First, I am appalled at the biased press coverage on the Russian "invasion" of Georgia. The most brilliant and balanced analysis of the events that led up to Russia's response was written by Stratfor in their geopolitical report, The Russo-Georgian War and the Balance of Power.

I quote the following:

By invading Georgia as Russia did (competently if not brilliantly), Putin re-established the credibility of the Russian army. But far more importantly, by doing this Putin revealed an open secret: While the United States is tied down in the Middle East, American guarantees have no value. This lesson is not for American consumption. It is something that, from the Russian point of view, the Ukrainians, the Balts and the Central Asians need to digest. Indeed, it is a lesson Putin wants to transmit to Poland and the Czech Republic as well. The United States wants to place ballistic missile defense installations in those countries, and the Russians want them to understand that allowing this to happen increases their risk, not their security.

The Russians knew the United States would denounce their attack. This actually plays into Russian hands. The more vocal senior leaders are, the greater the contrast with their inaction, and the Russians wanted to drive home the idea that American guarantees are empty talk.

The Russians also know something else that is of vital importance: For the United States, the Middle East is far more important than the Caucasus, and Iran is particularly important. The United States wants the Russians to participate in sanctions against Iran. Even more importantly, they do not want the Russians to sell weapons to Iran, particularly the highly effective S-300 air defense system. Georgia is a marginal issue to the United States; Iran is a central issue. The Russians are in a position to pose serious problems for the United States not only in Iran, but also with weapons sales to other countries, like Syria.

Therefore, the United States has a problem — it either must reorient its strategy away from the Middle East and toward the Caucasus, or it has to seriously limit its response to Georgia to avoid a Russian counter in Iran. Even if the United States had an appetite for another war in Georgia at this time, it would have to calculate the Russian response in Iran — and possibly in Afghanistan (even though Moscow’s interests there are currently aligned with those of Washington).

In other words, the Russians have backed the Americans into a corner. The Europeans, who for the most part lack expeditionary militaries and are dependent upon Russian energy exports, have even fewer options. If nothing else happens, the Russians will have demonstrated that they have resumed their role as a regional power. Russia is not a global power by any means, but a significant regional power with lots of nuclear weapons and an economy that isn’t all too shabby at the moment. It has also compelled every state on the Russian periphery to re-evaluate its position relative to Moscow. As for Georgia, the Russians appear ready to demand the resignation of President Mikhail Saakashvili. Militarily, that is their option. That is all they wanted to demonstrate, and they have demonstrated it.

The war in Georgia, therefore, is Russia’s public return to great power status. This is not something that just happened — it has been unfolding ever since Putin took power, and with growing intensity in the past five years. Part of it has to do with the increase of Russian power, but a great deal of it has to do with the fact that the Middle Eastern wars have left the United States off-balance and short on resources. As we have written, this conflict created a window of opportunity. The Russian goal is to use that window to assert a new reality throughout the region while the Americans are tied down elsewhere and dependent on the Russians. The war was far from a surprise; it has been building for months. But the geopolitical foundations of the war have been building since 1992. Russia has been an empire for centuries. The last 15 years or so were not the new reality, but simply an aberration that would be rectified. And now it is being rectified.

The second article that caught my attention was Ellen Brown's, Wag the Dog: How to Conceal Massive Economic Collapse. Ms. Brown raises the conspiracy theory that the "Plunge Protection Team" was busy manipulating markets this past week:

Just as central banks manipulate currencies in concert, so gold can be manipulated by massive selling of central bank reserves. Oil and any other market can be manipulated as well. But markets can be manipulated by only so much and for only so long without fixing the underlying problem. There is more bad news coming down the pike, news of such magnitude that no amount of ordinary manipulation is liable to conceal it.

For one thing, roughly $400 billion in ARMs (adjustable rate mortgages) have or will reset between March and October of this year. Assuming 3 to 6 months for strapped debtors to actually hit the wall with their payments, a huge wave of defaults is about to strike, continuing through March 2009 – just in time for the next huge wave of resets, in option ARMs. Option ARMs are loans with the option to pay even less than just the interest on the loan monthly, increasing the loan balance until the loan reaches a certain amount (typically 110% to 125% of the original loan balance), when it resets. The $800 billion credit line recently opened to Fannie Mae and Freddie Mac may be not only tapped but tapped out, at taxpayer expense. The underlying problem is little discussed but impossible to repair – a one quadrillion dollar derivatives scheme that is now imploding. Banks everywhere are facing massive writeoffs, putting the whole banking system on the brink of collapse. Only public bailouts will save it, but they could bankrupt the nation.

Ms. Brown then states that the dire economic situation requires a massive diversion, including faking a war:

What to do? War and threats of war have been used historically to distract the population and deflect public scrutiny from economic calamity. As the scheme was summed up in the trailer to the 1997 movie "Wag the Dog" -- "There’s a crisis in the White House, and to save the election, they’d have to fake a war."

The third article that caught my attention was written by Paul Craig Roberts, Assistant Secretary of the Treasury in the Reagan Administration. Mr. Roberts was also Associate Editor of the Wall Street and a Contributing Editor of the National Review.

In his provocative article, Two Morons: Bush and Saakashvili "President Bush Will You Please Shut Up", Mr. Roberts does not mince his words:

The only military threat that Europe faces comes from being dragged into America’s wars for American hegemony.

The US is financially bankrupt, with budget and trade deficits that exceed the combined deficits of the rest of the world together. The dollar has wilted. The American consumer market is dying from the offshoring of American jobs and, thereby, incomes, and from the wealth effect of the real estate and derivatives collapses. The US has nothing to offer Europe. Indeed, American economic decline is killing European exports by driving up the value of the euro.

America long ago lost the moral high ground. Hypocrisy has become America’s best known hallmark. Bush, the invader of Afghanistan and Iraq on the basis of lies and deception, thunders at Russia for coming to the defense of its peacekeepers and Russian citizens in South Ossetia. Bush who ripped Kosovo out of Serbia’s heart and handed it to the Muslims, has taken an adamant stand against other separatist movements, especially the South Ossetians who wish to be part of the Russian Federation.

The neoconned Bush Regime is furious that the Russian bear was not intimidated by the US supported aggression of the American puppet state, Georgia. Instead of accepting the act of American hegemony that the neocon script called for, Russia sent the Americanized Georgian army fleeing in fear.

Having failed with weapons, the Bush Regime now unleashes the rhetoric. The White House is warning Russia that failure to acquiesce to US hegemony could have a “significant, long-term impact on relations between Washington and Moscow.”

Do the morons who comprise the Bush Regime really not understand that short of a surprise nuclear attack on Russia there is nothing whatsoever the US can do to Moscow?

Mr. Roberts ends his visceral attack by stating that:

The US is not a superpower. It is a bankrupt farce run by imbeciles who were installed by stolen elections arranged by Karl Rove and Diebold. It is a laughing stock, that ignorantly affronts and attempts to bully an enormous country equipped with tens of thousands of nuclear weapons.

Keep in mind this is a former Assistant Secretary of the Treasury of the Reagan Administration and a staunch conservative. The fact that he is publicly attacking another Republican Administration could signal that there is a momentous shift going on among conservatives in Washington these days.

Finally, take the time to read Paul Krugman's op-ed piece, The Great Illusion. I quote the following:

Writing in 1919, the great British economist John Maynard Keynes described the world economy as it was on the eve of World War I. "The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth ... he could at the same moment and by the same means adventure his wealth in the natural resources and new enterprises of any quarter of the world."

And Keynes' Londoner "regarded this state of affairs as normal, certain, and permanent, except in the direction of further improvement ... The projects and politics of militarism and imperialism, of racial and cultural rivalries, of monopolies, restrictions, and exclusion ... appeared to exercise almost no influence at all on the ordinary course of social and economic life, the internationalization of which was nearly complete in practice."

But then came three decades of war, revolution, political instability, depression and more war. By the end of World War II, the world was fragmented economically as well as politically. And it took a couple of generations to put it back together.

So, can things fall apart again? Yes, they can.

Consider how things have played out in the current food crisis. For years we were told that self-sufficiency was an outmoded concept, and that it was safe to rely on world markets for food supplies. But when the prices of wheat, rice and corn soared, Keynes' "projects and politics" of "restrictions and exclusion" made a comeback: Many governments rushed to protect domestic consumers by banning or limiting exports, leaving food-importing countries in dire straits.

And now comes "militarism and imperialism." By itself, as I said, the war in Georgia isn't that big a deal economically. But it does mark the end of the Pax Americana - the era in which the United States more or less maintained a monopoly on the use of military force. And that raises some real questions about the future of globalization.

Most obviously, Europe's dependence on Russian energy, especially natural gas, now looks very dangerous - more dangerous, arguably, than its dependence on Middle Eastern oil. After all, Russia has already used gas as a weapon: in 2006, it cut off supplies to Ukraine amid a dispute over prices.

And if Russia is willing and able to use force to assert control over its self-declared sphere of influence, won't others do the same? Just think about the global economic disruption that would follow if China - which is about to surpass the United States as the world's largest manufacturing nation - were to forcibly assert its claim to Taiwan.

Some analysts tell us not to worry: Global economic integration itself protects us against war, they argue, because successful trading economies won't risk their prosperity by engaging in military adventurism. But this, too, raises unpleasant historical memories.

Shortly before World War I another British author, Norman Angell, published a famous book titled "The Great Illusion," in which he argued that war had become obsolete, that in the modern industrial era even military victors lose far more than they gain. He was right - but wars kept happening anyway.

So are the foundations of the second global economy any more solid than those of the first? In some ways, yes. For example, war among the nations of Western Europe really does seem inconceivable now, not so much because of economic ties as because of shared democratic values.

Much of the world, however, including nations that play a key role in the global economy, doesn't share those values. Most of us have proceeded on the belief that, at least as far as economics goes, this doesn't matter - that we can count on world trade continuing to flow freely simply because it's so profitable. But that's not a safe assumption.

We should all pay attention to Krugman's warning. Despite the increase in global economic integration, the world is far more politically unstable now than it has ever been. Some see the end of Pax Americana as a good thing but others worry that it opens the door to a far more dangerous world.

I remain cautiously optimistic that diplomacy will prevail but one thing is for sure, the geopolitical landscape has changed and we all better be ready for this seismic shift.

Update: Jack Dean of PensionWatch was kind enough to remind me of another great article written by Justin Raimondo, The Real Aggressor. Mr. Raimondo tells it like it is:

Please don't tell me Saakashvili just woke up one day and decided to attack Ossetia, and that the Americans weren't notified well in advance. Georgia depends on U.S. military and economic aid, and Saakashvili is a savvy operator: he is pulling a Lebanon, having learned from the Israeli example, and the Bush administration is more than glad to oblige him. Georgian tanks would never have rolled into South Ossetia without being given a green light by Washington.

And he ends it off with this ominous warning:

The War Party has been running on some pretty low energy lately, and this revival of the Cold War will no doubt recharge its batteries. The warmongers need a new enemy, a fresh face in their rogues' gallery, to get the masses excited again, and Putin's Russia fits the bill. I've been warning of this possibility for what seems like years, and now the moment is upon us. What's interesting is how many left-liberal "peaceniks" are falling for the War Party's guff and lining up behind McCain, their hero Obama, and the neocons in the march to confrontation with the Kremlin.

One last excellent article worth reading is Andrew Bacevich's, Is Perpetual War Our Future? Mr. Bacevich rightly notes:

As measured by results achieved, the performance of the military since the end of the Cold War and especially since 9/11 has been unimpressive. This indifferent record of success leads some observers to argue that we need a bigger army or a different army.

But the problem lies less with the army that we have -- a very fine one, which every citizen should wish to preserve -- than with the requirements that we have imposed on our soldiers. Rather than expanding or reconfiguring that army, we need to treat it with the respect that it deserves. That means protecting it from further abuse of the sort that it has endured since 2001.

America doesn't need a bigger army. It needs a smaller -- that is, more modest -- foreign policy, one that assigns soldiers missions that are consistent with their capabilities. Modesty implies giving up on the illusions of grandeur to which the end of the Cold War and then 9/11 gave rise. It also means reining in the imperial presidents who expect the army to make good on those illusions. When it comes to supporting the troops, here lies the essence of a citizen's obligation.

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