Very interesting to see the international reaction to Russia’s recognition of South Ossetia and Abkhazia. Russia is a gap state — a Central Asian dictatorship best analyzed in terms of functionally similar countries such as Kazakhstan, Uzbekistan, Turkmenistan, Tajikistan, and the Kyrgyz Republic — and its invasion of Georgia was an attempt to increase the amount of wealth it could extract from the Core. It appears that the Functioning Core is closing ranks, and expressing its near-unanimous disapproval of Russia’s use of war as a tool of politics.
Russian Prime Minister Vladimir Putin’s an incompetent when it comes to foreign policy, and the Georgia debacle is no exception. If you look close at the map, you see that he has even brought Serbia and Kosovo together!
From Russia’s perspective
Grand strategic: increase the capacity for the Russian state to exist on its own terms
Strategic: extend “hard” control to the former Soviet satellites to the extent possible
Operational: Overthrow the Saakashvelli government of Georgia, halt European and Atlantic expansion
Tactical: Use secessionist regions to either cajole former soviet Republics or directly incorporate them into the Russian Federation
From our perspective:
Grand strategic: Shrink the gap
Strategic: Limit the ability of gap states such as Russia from slowing or reversing economic, political, and military integration
Operational: Add Ukraine and Georgia to NATO and the EU, expel Soviet forces from Ukraine, Moldova, and Georgia, and so on
Tactical: presere the Saakasvhelli government, limit recognition of South Ossetia and Abkhazia
It is in this perspective that cheap talk of “Old European” solidarity (from Britain, France, and Germany) is heartening. Also encouraging is that even Russia’s client Serbia (for whom this whole mess started) is against Russia’s move.
Putin’s policy of “alienating friends and repelling people” is heartening for the West, because it helps our objective of shrinking the Gap, preventing the Gap from interferring with the Core, adding new states to the Core, and preserving our allies.
Whatâ€™s more, the Chinese National Bureau of Statistics recently reported that the Chinese economyâ€™s dependency rate on foreign economies exceeded 60 percent. For the first time, Beijing officially admitted for the first time that Chinaâ€™s more than 10 percent annual economic expansion is heavily dependent on the West. How the US goes, so goes the world. A lot of countries are going to start to discover that very shortly.
The China Explat:
Thatâ€™s not to say that malinvestment has not occurred thanks to false demand from America (or more accurately, false supply from the very non-free market central banks of China and the US – there are very few individual Chinese investors stupid enough to throw a bunch of money into US treasuries). But this malinvestment only creates the illusion of wealth – an illusion that is now being pierced and would be shattered if China suddenly tried to exchange all of their US IOUâ€™s for real goods.
The moment China gives up this illusion of wealth in the form of paper IOUâ€™s, China will be better off, even if it means a painful restructuring of Chinese industry.
When China does this, they will have even more real savings to plunge back into the Chinese economy. And that means that Chinaâ€™s days of growth are far from over.
The reality: the economies of China and America are intertwined to the extent that disinvestment of one from the other is economically unthinkable.