Popular notions being bandied about in the media portray a Russia virtually on
the verge of collapse, increasingly desperate for the kind of cooperation with
the West that would bring back the floods of foreign capital investment that
have recently been lost.
Russia is thus portrayed as potentially more willing now to compromise on the
West's terms rather than to so assertively insist that the West meet it on its
own terms. China is popularly
portrayed as perpetually locked into a bilateral financial, economic and trade
bargain with the US that obliges it to tread very carefully and to seek
compromise with the US rather than confrontation.
Therefore, the East is increasingly depicted as having virtually no viable
option other than to arrive at a strategic compromise with the West that
results in a grand accommodation, one that would see the East meet the West
significantly on the West's terms, meaning that the East will largely have to
meet the West's preferred conditions for (1) restoring the vital capital
investment inflows into Russia; (2) keeping the vital de facto bilateral
financial, economic and trade bargain with China in place; and (3) refraining
from mounting an even more energetic implementation of the Ronald Reagan
Doctrine against Russia and China to exploit their growing susceptibilities to
internal dissension and civil disorder, a campaign that would be potentially
deadly to both the Russian and the Chinese regimes.
Further, US President Barack Obama is portrayed as the right leader who has
arrived on the scene at potentially the right moment to achieve just such a
grand bargain that would tend to work toward fully re-establishing and
solidifying the West's increasingly shaky global position of dominance.
Is anything wrong with this picture? Yes, plenty! Following are 10 reasons why
the epic match between East and West over world domination will strategically
intensify rather than move toward any meaningful accommodation:
Reason 1
Russia won't be so foolish as to agree any deal with the West for a restoration
of vital investment capital inflows. Why not? Because Western governments and
financial institutions don't directly control the flow of global investment
capital, though their voice can have a significant effect on investor
psychology in various ways.
But this indirect effect is dubious at best when we're talking about targeting
specific investment opportunities, such as Russia and/or China, because
investors have clearly shown they will base their decisions much more on profit
potential and risk assessment than they will on purely political and
ideological considerations.
They have little compunction against investing in a country that makes a
mockery of liberal democracy, as long as the profit potential is obvious and
there exists sufficient confidence in the stability and creditworthiness of the
regime. If Russia, for example, proves significantly better able to withstand
the effects of the global crisis than the current risk assessment by the West
indicates, perhaps because oil prices return to a desirable level some time
later this year, then investors, who fled Russia with the collapse of the price
of oil, will return in force when and if they see investment value there.
Two main factors will potentially determine whether capital flows into Russia
resume. One is the price of oil, and the other is the potential bursting of the
US Treasuries bubble. In such a bubble burst, investors would tend to flee
Treasuries and the dollar and buy into hard assets as a safer store of value,
and that would benefit Russia. Hence, Western governments and financial
institutions cannot themselves decide Russia's financial and economic future.
Factors outside their direct control will do so. Therefore, Russia won't
bargain with the West for a return of those capital flows because it knows
Western governments and financial institutions can't actually deliver on any
promise they might make in that regard.
Reason 2
China won't significantly risk, diminish or sacrifice its own geopolitical
interests and aspirations in order to agree any deal with the US to keep the de
facto bilateral trade, financial and economic bargain with the US in place. Why
not? Because China knows that with the US constituting the vortex of the global
economic crisis, and seeing the US suffering an ever-deeper strategic collapse
of consumer spending and an increasingly severe recession that has all
likelihood of continuing for a long time, the benefits to China of keeping the
bargain with the US fully in place are diminishing fast, while the risks of
keeping it in place (meaning too great an exposure to, and reliance on, the
dollar) are mounting equally as fast.
As the global crisis increasingly weighs on China's export-based economy, it
will have no choice but to stabilize the yuan at a meaningfully low level
against the dollar so as to underpin its export-based earnings. And foreseeing
that its bargain with the US will wither due to its diminishing returns, China
will also accelerate its efforts in two other directions - continue to bolster
trade with the rest of the world outside the US and bolster domestic
consumption via its own stimulus packages.
These measures will help to buffer China against the worst effects of the
inevitable withering of its bargain with the US. So, why should China feel
obliged to meet the US inordinately on its terms when its bargain with the US
pays increasingly dubious and risky benefits?
Reason 3
China won't significantly risk, diminish or sacrifice its own geopolitical
interests and aspirations to agree any deal with the US to protect the value of
its massive reserves. Why not? China has the problem of reducing its exposure
to the dollar, foreseeing that the skyrocketing issuance of colossal new sums
of US sovereign debt and the massive printing of more dollars will inevitably
undermine the value of its huge dollar holdings.
It cannot sell off Treasuries and dollars without triggering a panic on the
dollar and seeing the dollar-denominated portion of its wealth ravaged. With
the US plunging ever-deeper into strategic weak-dollar policies, there aren't
any agreements the US can offer China that will be to its strategic benefit and
satisfaction.
Instead, China will decrease its exposure to the dollar by using some of its
dollar-denominated reserves to buy stockpiles of raw materials and commodities,
and to invest in such stocks and equities, all of which are a terrific value at
the present because their prices have been beaten down hard by the bursting of
the commodities bubble.
Those prices will inevitably rise, and China can thus accomplish
diversification out of the dollar and position itself to make huge gains, all
at the same time. Consequently, why would China bow to the US in any meaningful
way to get a set of agreements that would utterly fail to address China's
strategic interests and aspirations, and might well compromise them instead?
Reason 4
The global crisis has resulted fundamentally because the US took on far too
much debt, both public and private, and invented far too exotic and risky forms
of debt, creating a massive credit excess "house of cards" that is now
collapsing in the wind. The collapse of the US-dominated global financial and
economic order is ongoing, and it is accelerating, despite every attempt to
stem the tide of forces crashing against it from within and from without.
The hardships caused by the collapse are mounting in the East, not just in the
West. As the US, Britain and certain of their allies attempt to spend their way
out of the morass, the global ill-effects are only likely to increase. Why
would Russia and or China make any accommodation with the West that would work
to keep intact a profoundly unstable, troubled and undesirable order that is
unquestionably passing off the scene? They would not. Instead, they will expend
their energy and influence to bring about a new order much more to their
liking, one that comes at the expense of the West's shaky and discredited
position of global economic dominance.
Reason 5
The mounting hardship on the East resulting from the deepening global crisis is
not producing any tangible signs of an increased willingness of the East to
compromise with the West and to meet the West more on its terms. In fact, the
precise opposite is true as both Russia and China harden their position that
the US and its style of capitalism are centrally at fault for the crisis.
They demand that the current global order be transformed, not preserved. And
they are each using the current crisis to extend state control over their own
financial and economic systems. They are stiffening against Western pressures
aimed at getting them to align more fully with Western free-market principles
in managing their currencies and their economies.
As they suffer greater hardship in the global crisis, they must so stiffen
their position, unless they wish to allow the West greater leverage over their
financial, economic and geopolitical eventualities. Nationalism and
protectionism are thus moving to the fore. That fact undermines the prospects
for reaching any meaningful accommodation with the West.
Reason 6
Rather than seeing an overriding necessity to suddenly compromise with the
West, thereby potentially risking a reversal of the key, hard-won gains the
East has achieved against the
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