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Date: Mon, 21 Sep 1998 08:57:06 -0400
Sender: Forum on Labor in the Global Economy <LABOR-L@YORKU.CA>
From: Charles Brown <CharlesB@CNCL.CI.DETROIT.MI.US>
Subject: The Global Intelligence Update --

The End of the New World Order

Global Intelligence Update, 31 August 1998

Last week marked the collision of the New World Order with reality. Toward the end of the week, reality was winning.

Proclaimed by George Bush after the collapse of communism, the New World Order was neither an empty phrase nor a hidden conspiracy. It represented a radical vision of what the world had become, now that U.S.-Soviet confrontation had ceased to define the international system, and it was a vision widely shared by much of the world's elite. According to this vision, fundamental political disagreements between nations had disappeared. Rather than being ideologically divided, all major nations now agreed on fundamental core principles. Reasonable people everywhere accepted the proposition that economic growth and prosperity were interests that transcended all others. That being the case, it was essential to maintain international stability in order to facilitate that prosperity.

Because all major nations agreed on the desirability of prosperity and international stability, fundamental international disputes, like those that led to the two World Wars and the Cold War, were no longer a significant problem. The only international problems faced by the United States and its allies were the management of marginal outlaw states like Iraq and North Korea, internal instability as in Yugoslavia and Somalia, and outbreaks of international terrorism. Because all nations were now reasonable, and any reasonable nation could see the need to prevent outlaw nations, civil wars, or terrorism from spreading misery and upsetting financial markets, it followed that all nations would be prepared to cooperate in managing these marginal problems. These were, after all, marginal issues. What really had to be managed was the international economic system, especially the integration of former Communist nations into that system.

In Bush's view, an effective mechanism existed which could achieve all these goals, one that derived from the Cold War itself. During the Cold War, the Western powers had created a complex of alliances designed to contain the Soviet Union, from Norway's North Cape to Japan's Hokkaido. One part of this alliance system was military, including institutions ranging from NATO to the U.S.-Japan Mutual Security Treaty.

But another part of U.S. strategy was economic. The United States understood that maintaining the prosperity of the Western alliance was a fundamental part of containing the Soviet Union. Prosperity persuaded allies to remain in the alliance, persuaded neutrals to work with the alliance, and undermined the legitimacy of the Soviet-led alliance. The maintenance of the West's prosperity was placed in the hands of a group of multilateral organizations, including the International Monetary Fund to manage financial relations, the GATT (now replaced by the World Trade Organization) to manage trade, the World Bank to develop the Third World, and so on. There were many other such organizations. All of them had the same purpose. They did their jobs extremely well.

The New World Order and Transnational Institutions

At the heart of Bush's New World Order concept was the idea that these transnational institutions would not be abandoned now that the Cold War was over, but would in fact have their role expanded to include the management of international economic relations with the former Soviet empire. Indeed, Bush went so far as to envision a world in which states that hadn't abandoned Communism formally, such as China, could be included in this global, multilateral system. After all, the Chinese, whatever they said officially, wanted the same thing as Belgium or Canada: a stable business environment in which to develop their own economy. Bush expanded this multilateral vision to include the United Nations, which had previously been paralyzed by U.S.-Soviet competition, but which could now fulfill its original mandate as global policeman.

Obviously, the United States, as the world's leading nation, would play a special and decisive role in defining the mission of these multilateral organizations. However, since all nations now had the same basic interests, it followed that no reasonable nation would object to U.S. leadership. Indeed, the world would welcome it. And for a while it all worked. There were no major international conflicts. The world accepted U.S. leadership in dealing with outlaws like Iraq and Serbia. The international financial system was well served by the IMF, by G-7 meetings, and so on.

Then reality set in. Asia, which had postponed the inevitable as long as it could, buckled under the weight of its own inefficiency, and no multilateral organization could do anything to prevent it. However, it was still possible to fantasize that the Asian crisis could be contained, that it would have no lasting political repercussions, or that it was not as bad as it looked. None of this was true, but it was possible to fantasize.

The Russian Collapse and the New World Order

Then last week, reality mugged the New World Order with some brutal finality. As the Russian financial markets collapsed, Russia passed beyond the help of the IMF, the World Bank, or anyone else. The financial meltdown in Russia is irretrievable. There is nothing that the West possibly can do to resurrect the Russian economy. It is not a matter of money.

The problem is that in Russia, money does not turn into capital. All investments are hopelessly squandered through a combination of inefficiency and theft. For money to turn into capital, for investments to flourish, institutions must exist which guarantee such things as the lawful, predictable enforcement of contracts, reliable transportation of goods from one point to another, government neutrality in economic competition, and so on. None of those things exist in Russia. Contracts are unenforceable, basic reliable infrastructure is non-existent, and the government is not only unpredictable in its treatment of participants, but is at times deliberately destructive.

Russia is a different place. But the ideology of the New World Order held that there are no different places, that all reasonable people behave in the same reasonable way and that, therefore, given advice by Harvard and Goldman Sachs, Russia would evolve economically. It was also assumed that Russia would evolve politically, because it was assumed in general that, with a growing economy, all reasonable people would come to look like everyone else. Thus, prosperity would yield liberal democracy, and = liberal democracy would make Russia an enthusiastic member of the international community, just like people from Wisconsin but with more beets in the diet.

Instead of this happy scenario, last week saw the re-emergence of the Communist Party as the decisive force in Russian politics. The political issue last week was not what Yeltsin or Chernomyrdin would do, but what the Communist Party, the largest party in the Duma, would permit them to do. The fact is that Yeltsin can no longer govern without the support of the Duma, and power in the Duma lies in the hands of the Communists and the nationalist parties, including the strange fascist Zhirinovsky, as well as other factions. On the surface, this would seem to create a split in the Duma that the Yeltsin/Chernomyrdin faction should be able to exploit. In fact, there is a much closer bond between the Communists and the nationalists than one might think. Indeed, it is this commonality of interest that brings us to the end of the New World Order.

The Communist Party speaks for the lost Russia. It was a Russia of relative poverty, but not the utter misery that has gripped most of Russia since the collapse of the Soviet Union. More importantly, Russia was a land in which the misery was shared, on the whole. The fantastic gap that has opened between a tiny oligarchy of wealthy men who have used the new regime to enrich themselves, and the masses who can barely feed themselves, powers the Communists' claim that, as bad as the past might have been, at least it was better than the present.

Thus, it is the Communists who are pressing Yeltsin to reject the demands of the IMF and the West that economic reforms be maintained and even expanded. Arguing that Western help hurt Russia rather than helped, and also that no further help is being offered anyway, the Communists are demanding that reforms be rolled back. They want to re-nationalize the economy, impose wage and price controls, re-institute central planning, and end the convertibility of the ruble. In other words, they want to return to the status quo ante.

Implicit in the Communist position is a rejection of the assumption that Russia's salvation lies with the West. This technical anti-Westernism among the Communists is reinforced by the visceral anti-Westernism of Zhirinovsky's Liberal Democrats, the third largest party in the Duma. For Zhirinovsky and other nationalists, the economic disaster is coupled with a geopolitical disaster. Under communism, Russia was a superpower, with equal standing to that of the United States. Today, Russia is seen as a vassal of the United States, with any Deputy Assistant Under Secretary of anything having the right to lecture and scold Russia's leaders as if they were school children. Even more infuriating, the great Russian empire was given away, in return for nothing. Not only Eastern Europe, but also the Baltics, Ukraine, Central Asia, and the Caucasus were lost. Even parts of Russia itself, like Chechnya, can barely be contained.

The economic anti-Westernism of the Communists combines with the geopolitical anti-Westernism of the nationalists to create a powerful ideology that used to be called Stalinism. Central planning together with powerful internal controls and a deep sense of the geopolitical interests of the Soviet Union was, after all, Stalin's greatest achievement. Personalities aside, this Stalinism will now reemerge, as it is the only logical outcome of the current situation. Because no meaningful Western help is possible, and thus mild internal reforms cannot possibly contain the situation, power will devolve to the Communists and nationalists.

The logical bridge between the two is, of course, Alexander Lebed. We wrote in our forecast for 1997 that, If the Westernizers surrounding Yeltsin manage to squeeze Lebed out or into irrelevancy, they will have sown the wind. The whirlwind will be a counter-revolution of epic and bloody proportions. If Lebed is given room to maneuver, he may manage a restoration that keeps the vestiges of democracy and capitalism alive. In either event, liberal democratic capitalism in Russia will fail in 1997—and its replacement will be the traditional Russian alternative to Westernizing businessmen and intellectuals: xenophobic, Slavophile bureaucrats and policemen. We were premature on our date, but believe we were correct on our core prediction. Lebed was forced out. The whirlwind is at hand.

Western Strategy Toward Russia After the Communist/Nationalist Revival

It is therefore time for the West in general, and the United States in particular, to begin defining a post-reform policy toward Russia. Russia's foreign policy will be eminently clear—first, and above all else, the reclamation of the Soviet Union to its old borders. The key to this, of course, is Ukraine. Russia is already in a close confederation with Belorussia, and the reintegration of Ukraine is therefore critical. Here, of course, the Bush-Clinton obsession with Moscow's nuclear weapons will cost us dearly. Rather than strengthening Ukraine to resist reemerging Russian imperialism, the United States focused on strengthening ties with Moscow, hoping to encourage reform. This leaves Ukraine vulnerable to Russian pressure. We believe that it is too late. The Ukrainians will not be able to resist.

It is the West's good fortune that recovering the Soviet empire will take the Russians a generation. But that process leaves the West with critical decisions to make. The United States has made massive investments in Central Asia. To what extent will the U.S. resist Russia's return? Will the U.S. extend NATO protection to the Baltics? If not, what policy does the U.S. propose? Iran and Turkey will both oppose Russia's return to the Caucasus. What will U.S. policy be there? If the Russians become more assertive, should NATO be further expanded to include utterly strategic Slovakia? If not, should we attempt to include Poland and Hungary in NATO, or are they too exposed?

And then there is the return of the abysmal and eternal German question: should the U.S. shoulder the burden of defending Europe again, or should Germany be forced into that role, recreating the problem that has burdened Europe ever since German unification in the nineteenth century? Fortunately, Russia's strategic position is such that it will not readily return to global eminence. Many Armenians, Lithuanians, and Uzbeks will have to die before that moment comes. But even a regional imperialism by Russia poses a critical question to which Madeleine Albright and Sandy Berger appear not to have given any thought: what is U.S. policy on a thousand issues if Yeltsin falls and, for example, Lebed takes power?

These and endless other questions are political and military in nature. They are not economic. The New World Order assumed that political and military questions were now marginal. Therefore, strategic planners in the Clinton administration, which inherited and celebrated the strategic legacy of the Bush administration, continue to ignore these questions in favor of familiar issues like IMF bailouts and reforms. These questions are closed as far as Russia is concerned. Clinton doesn't seem to realize it. These critical questions are being ignored in favor of a fantasy: that the Russian experiment in economic liberalism is not yet dead.

Therefore, Clinton's visit to Russia will be disastrous. First, he is meeting with the wrong leader. Yeltsin leads nothing. Clinton is meeting with a political corpse, and infuriating the leaders who have already usurped power in every sense but the official. Second, Clinton will be discussing economic issues that can no longer be managed, rather than posing the difficult political and military questions which now frame Russia's relations with the world.

The new Stalinism cannot be stopped. Communists and nationalists will form a coalition to govern Russia, sooner rather than later. They have a very different agenda than the old regime. Clinton's summit makes no sense, save that he believes that the economics-centered New World Order can still be saved. We expect Clinton to meet with Lebed and perhaps others. But what is he going to say to them? What is America's strategy? Thus far, it appears to be to avoid the obvious and to pretend that what is impossible can happen if we close our eyes and wish real hard.

Asia and the Return to Politics

It is not simply a matter of Russia. Asia's problems are no more amenable to economic solutions than are Russia's. The core issue in Asia is political. Asia is no longer economically viable. It cannot compete with the United States except by exporting at or near a loss. Asia is being forced to take political measures to protect its economic security. Asian countries can solve their economic problems internally only through political action. Externally, they can stabilize their economies only by forming a regional trading bloc that protects their weakened economies and by creating a new reserve currency to substitute for the dollar. This is not only an economic decision, but also one with profound political and even military consequences.

The current economic crisis is forcing the world back to politics. In the very long run, the return of politics will resurrect war in the traditional sense of Great Power conflict. In the immediate future, this crisis has demonstrated the impotence of multilateral organizations to manage the world. The United Nations can't deal with Iraq, the IMF can't do anything with Russia or Indonesia, and the WTO can't stop the trade war that will be the inevitable consequence of Asian export surges and protectionism. The multilateralism of the New World Order has shown the hollowness of these institutions by revealing that it really isn't a small world after all, but a very complex, variegated and dangerous one.

Like the Congress of Vienna, the New World Order tried to freeze in place institutions that had meaning only in the context of a great struggle. Whether that struggle was against Napoleon or Brezhnev, the fact is that when the war ends, the institutions that made the alliance function must go away. This crisis shows the impotence of such institutions in the face of reality. It also shows that the New World Order, rather than being a brilliant vision or a dark conspiracy, was merely a failure of imagination.

Or more precisely, it was imagination run wild, believing that politics and war would be replaced by economics and good feelings.

So, now the history of the post-Cold War period finally begins in earnest. It is not, in our view, the Russian question that will be the most important. That is merely the first question. The most important question is the relationship of the United States to Asia. More precisely, the question is the relationship of the United States to the genuine if reluctant leader of Asia: Japan. First, a redefinition of Japanese politics is going to occur, with a more political and nationalist view of the world emerging. Then, just as economic reality is prying U.S. and Japanese interests apart, political reality will divide their interests as well. As American and Japanese interests are forced apart, a new global politics, the politics of the 21st Century, will be defined.