China and the Magna Carta

As a tribute to Sino-British relations, an exhibit of one of the early parchment copies of the Magna Carta was supposed to take place this week at Beijing’s Renmin University.  This is part of the 800th anniversary celebration of the great charter, originally signed in 1215 by King John of England.

Yet at the last minute, Chinese authorities decided it was too dangerous to bring the young people of Renmin U. (appropriately “People’s University” in English) into direct contact with the great charter.  Fearful it might inspire them to think about constraining the leader of China, Xi Jinping, the exhibit was instead held inside the British Ambassador’s residence.   People can still line up to see the great charter on display there, but it is not as easily accessible as it would have been on the Renmin U. campus.

This turnabout highlights the interesting paranoia about democracy and constraints on authority in China.  On the one hand, the authorities frequently denounce the human-rights violations occurring in American against urban blacks; and the turmoil and dysfunction of western democracies.  They claim the superior economic performance and stability of China are held up as clear reasons why it’s system works much better for China than any alternative.  All of this suggests the authorities are confident than an objective and open analysis would find that democracy is undesirable, or certainly not yet right, for China.

On the other hand, an objective and open discussion of alternatives seems to be the thing the authorities fear most.  The Chinese Communist Party has warned that western ideas such as “constitutional democracy,”  “separation of powers,” “multi-party competition” and other ways to constrain executive power and hold it accountable should never be discussed in China’s classrooms.

It seems that, whatever their pronouncements, China’s leaders fear that their people do want to hold them accountable, and to constrain their power.  Xi Jinping’s sweeping anti-corruption campaign is above all an effort to prove that the party can hold its own members accountable, and therefore that none of the western democratic institutions are necessary.  Yet the very intensity of this campaign, its unpredictable reach, and the inability of those ensnared to have any appeal or accountability for those leading the campaign, show the problems in accountability below without accountability above.  In the words of the Party, this is rule “by law,”  but rule in which the very top leaders enforce the law according to their own judgment, not according to a higher standard — a constitution — to which they are accountable in turn.

The Party is therefore also fearful that the examples of Hong Kong and Taiwan, where the leadership is constrained by law and (in Taiwan but not yet Hong Kong) by elections for the head of state, will put ideas in the minds of mainland Chinese.  Chinese officials even recently tried to claim that Hong Kong’s chief executive, due to his special role for China, was above Hong Kong’s judges, legislators, and laws and accountable to Beijing but not to Hong Kong for his actions.  (This suggestion was swiftly disputed by Hong Kong’s judges and legislators).

Treatment of the Magna Carta this week shows the tensions in China’s position.  China knows it has to deal with other democracies in the world — Japan, the U.S., Britain, and at the moment Taiwan and Hong Kong.  It wants to understand these democratic societies and have good relations with them.  Yet it doesn’t want these foreign political systems to influence how China manages its own affairs.  So the Magna Carta can come to China — but only if it stays in its proper place, in a British setting, not at large in China’s universities.

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After the collapse of the Soviet Union, it seemed the New World Order would eternally favor the wealthy democracies of the United States and Europe.  After all, the superiority of the liberal market economy had been proven, and there was no compelling alternative to the ideal of democratic market societies.

Yet today Europe is in chaos, riven by economic divisions, weak growth, and a flood of immigrants.  The European Union seems to be breaking under the strain, with Hungary and other nations wanting to go their own way, and the United Kingdom about to vote on exiting.  America’s politics remain paralyzed by polarization, and we seem startled by newly aggressive actions by Russia and China.  Areas where America sought to project its influence – Afghanistan, Iraq, Libya and Yemen – have become scenes of turmoil and terrorism.

What went wrong?

The answer is that the West was unprepared for any further challenges, believing it had won the only conflict that mattered — the contest with communism.  Yet the victory over communism, like the victories over fascism and militarism half a century earlier, did not put an end to war and terror.

There seemed to be three compelling reasons to believe that “this time was different,” and that liberal market societies would enjoy a final triumph.  First, the economies of the West had led the way in developing the next phase of economic and technological growth, the “knowledge economy.”  To this day, no other regions except Japan and South Korea, now close allies of the West, have participated in a meaningful way in creating new industries based on innovation.  Thus it seemed that all other societies would also have to adopt open, free and market societies or be left ever further behind.

Second, several of the products of that innovation – the internet, smart phones, and personal computers – seemed to ensure that personal freedom would expand, as every individual was empowered to be a publisher, photographer, and communicator. The internet promised greater openness, transparency, knowledge and freedom from government control, all of which would continue to ensure the triumph of free market democratic societies.

Third, the global spread of education would insulate people against being drawn into populist frenzies and extreme ideological movements.   Rational discourse and practical reason, rather than a parade of “isms”, would henceforth guide politics and international relations.

Yet all of these reasons turned out to be false illusions that misled us and left us unprepared for the world we now face.

In practice, the “knowledge economy” was less beneficial to most people than expected.  Since the late 1980s, average incomes have stagnated in the rich countries of the West, while inequality within countries, and across the countries of Europe, has increased.  It turns out that the fruits of the knowledge economy were not automatically widely shared.  Instead, exceptional rewards went to technical, financial, and executive elites while ordinary workers went from secure and high-paying manufacturing jobs to lower-paid service jobs. Even within Europe, countries with leads in high-tech industries, such as Britain, Germany and the Netherlands, pulled away from countries that still depended more on agriculture, construction, and basic manufacturing and services, such as Portugal, Greece, and Spain. Yet at the same time, non-western countries found there was still lots of mileage in the manufacturing economy, and emerging market nations made rapid progress by focusing on manufacturing for export and meeting a booming demand for commodities.  Countries like Russia and China enjoyed fast-growing economies in the early 2000s without becoming democratic free market societies.  Combining oligarchic or state-ownership of key banking, media and commodity enterprises with private markets for manufacturing and retail operations, all under authoritarian political control, they enjoyed much faster economic growth than Europe or the U.S.  That growth was used to finance increased military strength.

Initially, the internet, smart phones and personal computers did empower individuals.  Just like printing, radio, and television – the earlier revolutions in communications – the first wave favored individuals over governments, who were slow to learn how to manage and control the new technology for their own ends.  Yet just as with other technologies, governments gradually learned to bring the new communication apparatus under their control.  Whether by limiting access, or managing content, or using electronic communications to track individuals’ activities, government has learned to turn these tools to their advantage.  Nor are they the only ones.  Private companies who control these technologies and the information they generate have vastly expanded their market power at the expense of individuals, again increasing inequality.  And the internet has proved surprisingly powerful as a tool for spreading extremist ideas and recruiting people to extremist movements across local and national boundaries.

For education, despite its rapid expansion across the globe, did not provide a shield against radical and extremist beliefs.  Quite the opposite, in fact.  Across the Arab world, as secondary and college education took off, idealistic students who learned the history of their colonial exploitation and economic lags compared to Western countries were more easily drawn to radical movements.  In Russia and China, education and modern communications facilitated the spread of the government-spun story of historical humiliations of their great nations and the need to reassert national strength.  Two “old” ideologies – Islamic jihad and aggressive nationalism – thus enjoyed powerful revivals.  Even within Europe, universal secondary and widespread tertiary education has not held back old and new nationalisms, as in Hungary, Scotland, Catalonia, Serbia and elsewhere, which have undermined the effort to build a united and multi-national European entity and even threatened to break apart individual European states.  And with rising inequality and economic frustration, other old isms, including right-wing extremism and anti-Semitism, have revived as well.

Can the West regain its advantage?   In one sense, no – for we have learned that the very notion that the West’s economic and political system is superior and something to be installed around the world by Western intervention is anathema and self-defeating, provoking the very anti-Western nationalisms and extremisms we had hoped to leave behind.  Yet the West can regain a position of global inspiration and leadership by altering our approach.

First, we must find a way to make the knowledge economy provide more inclusive prosperity.  By some combination of changes to the tax system, the welfare system, or access to technical skills and opportunities, the trend of the last thirty years – where rising productivity failed to produce a broad rise in incomes but rather enormously enriched a very few – must be reversed.  Otherwise there will be little desire for people around the world to emulate the economic system that brings such inequality.

Second, the privacy and security of the information economy must be increased, and the reach of government restricted, such that individuals can be secure and free in their sharing of information.  Only then can the internet be an effective means of individual empowerment and securing freedom.  The idea that if only the government knows everything about every individual they can spot terrorists before they act is a dangerous myth.  In fact, for example, governments knew that Ayoub El Khazzani had “ties to known hard line Islamist groups” and he was already under surveillance.  Yet it took the fortunate actions of American soldiers who acted from immediate observation to prevent a massacre.  Broad-brush information gathering generally yields far too many suspects and too much data to provide immediately actionable intelligence.  Traditional police work, including searches by warrant and police surveillance, are more effective tools against terror than automatic government access to all internet and cell phone traffic.

Third, we must recognize that the antidote to radical extremism is neither education nor economic progress, but dignity.  Giving other civilizations and individuals respect and treatment as human beings deserving of all international rights – treating others as we would want to be treated ourselves—is the best way to produce rational and peaceful relationships.  From the punitive post-war sanctions and reparations imposed on Germany after WWI, to the colonial boundaries and arbitrary regimes imposed on developing countries after WWII, to the support for corrupt regimes and failures to provide adequate post-conflict reconstruction assistance, Western leaders have rarely asked – “would we want our society to be treated this way?” – instead invoking the rights of the victor to impose their will on others.

Europe and America will face many tests in the years to come:  how to reduce economic inequality, how to respond to refugee crises and waves of immigrants, how to reinvigorate economic growth, how to protect and sustain a livable environment, how to subdue radical terrorist movements, and how to manage in an increasingly multi-polar world.  To succeed in these tests and restore a leading role, Western nations will have to avoid self-defeating myths that seem to offer easy answers to difficult problems.  Instead, the West will have to work hard to create inclusive economic growth; ensure that privacy and personal security are maintained; and treat other peoples and regions with the dignity they demand and deserve.

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Can Iran be a Normal Country?

Efforts are underway to discredit the nuclear deal signed by Iran and the P5+1 nations (U.S., France, Britain, Germany, Russia, and China).  The deal imposes a strict inspection regime, reduces the number of centrifuges that Iran can operate, and should delay Iran’s ability to build a working nuclear weapon by at least ten years.

One would think a deal that won the acceptance of such diverse nations would have to be a pretty good deal.  But those who oppose it believe that any deal agreed to by Russia and China MUST be bad for the United States, and that our European allies are simply going along and not showing sufficient regard for the interests of the U.S. and other allies (especially Israel).

Yet I believe the deal can help deliver us from two major threats.  First is the risk of a nuclear arms race between Iran and Saudi Arabia, with both seeking to have operable nuclear weapons to match the other.  With wars already ongoing in Yemen, Syria, and Iraq that pit Saudi allies against those of Iran, the risk of escalation to nuclear conflict could not be ruled out if both nations raced ahead to build nuclear weapons.  A deal that delays Iran’s ability to build working nuclear weapons for a decade helps keep that risk at bay during a period of extreme instability and conflict in the region.

Second is the risk posed by the expanding empire of the self-proclaimed Islamic State (IS).  The only hope of rolling back and disarming IS, and ending the reign of terror it has imposed, is for Iran and Saudi Arabia and Turkey to join forces against the common threat.  Yet that has not been possible as long as ideological opposition among these countries prevents any cooperation.

Fortunately, the nuclear deal offers hope that Iran could become a more ‘normal’ country, acting on its rational interests instead of being driven by ideological extremism.  A successful deal that restores economic progress could help Iran’s President Rouhani gain leverage over the more extremist elements in Iran.  In particular, Rouhani needs the support of the Revolutionary Guards to mount a successful campaign against IS.  If a nuclear weapon is off the table for some years, the Guards may look for other ways for Iran to maximize its military strength and influence in the region, and leading the fight against IS may be their best option.

The history of revolutionary regimes gives some hope for this outcome.  It is common for revolutions to undergo a “second radical phase” a decade or more after they start.  The second radical phase does not seek to overturn the government, but to steer it in a more radical direction, to recover the ideological fire of the early revolutionary period.  The Stalinist purges and collectivization campaigns of the 1930s form a second radical phase in the Russian Revolution of 1917; the cultural revolution of the 1960s marked a second radical phase in the Chinese Communist Revolution of 1949; and the Cardenas nationalization and social welfare reforms of the 1930s were a second radical phase in the Mexican Revolution of 1910.   In Iran, the presidency of Ahmadinejad was also such a second radical phase, marked by ideological extremism both domestically and internationally.

But that phase may now be coming to an end.  In other revolutions, the second radical phase usually led to economic disruption and isolation, provoking a reaction in favor of more rational economic and political policies.  The result was new governments that acted more on the basis of rational self-interest, less on the basis of ideological fervor.  Thus by the 1940s Stalin was willing to ally with the capitalist regimes against Hitler; and  in the 1970s China resumed diplomatic relations with the United States.  The Rouhani regime seem bent on moving forward to reduce Iran’s isolation and improve its economy.

Iran will not become a secular or pro-western state, any more than the Soviet Union did under Brezhnev or China did under Deng Xiaoping.  However, Iran may well become a rational state with which we can deal, and obtain cooperation against common enemies.

If the nuclear deal helps promote the transformation of Iran from a radical phase of international and domestic extremism to a more rational phase of economic and political self-interest, it will provide greater benefits than simply slowing Iran’s progress toward nuclear weapons, important as that is.   At a time when the fabric of the Middle East is being torn asunder from Syria to Yemen, and an ideologically extreme force in the form of the Islamic State is spreading, having a rational Iran with whom we can negotiate and manage common interests will be a boon.  For that reason, Congress should support the deal, and we should hope it wins approval in Iran as well.

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Deals are Good!

After endless, and sometimes seemingly hopeless, negotiations, diplomats have produced two new multi-national deals:  one to keep Greece in the Euro, and the second on nuclear development in Iran.

Despite enormous criticism and hand-wringing, both deals are good news for the  world.  The deal on Greece was vital.  The European Union remains the best hope for showing the world that nationalism can be overcome and that diverse peoples can coordinate their political and economic policies.  If there is ever to be global integration and government, the EU has to lead the way.  So showing that even when facing a crisis the EU can function to preserve unity is enormously valuable in itself.  What lesson would have been sent to Ukraine or Moldova, or to Turkey or even China, about dealing with the EU if the Union would turn on one of its own and expel them for failing to live up to certain economic standards?   The EU has always moved forward by accepting countries that did NOT meet its desired standards for democracy or economic stability (going back to Spain and Portugal) and urging them forward and helping them reach higher.

Moreover, as the US government found with Lehman Brothers, the consequences of allowing even a small piece of a deeply interconnected financial structure to fail can be enormous and much greater than expected.  Who knows for sure how the global financial system would have fared if Greek bankruptcy also brought down several German banks or caused a run on emerging market assets?  Better to preserve the system than risk a sudden change that, even if small, could be the proverbial straw that break’s the camel’s back.

Will the deal be ideal?  Of course not.  A sensible deal would include explicit debt relief and a plan to return Greece to economic growth that would restore prosperity.  It would include — as the current deal does to some degree — external oversight of Greek’s taxing and spending, which have been riddled with corruption, fraud, and waste.  And it would include continued engagement and flexibility to ensure a path to financial health is maintained.  In short it would work very much like US Chapter 11 bankruptcy plans, whose goal is not to punish companies that run into financial trouble and cannot meet their obligations, but to make the best use of remaining assets while lifting the burden of unpayable debts, and putting the company on a new path to growth.

The actual deal on Greece is not quite that sound.  It has no explicit debt relief (although creditors say they don’t expect to be fully repaid); the external oversight is concentrated on sales of states assets; and there is still a tendency to want to punish Greece for its financial sins, rather than prioritizing easing the suffering of the Greek people.  It will be up to the Greek leaders and European leaders to try to nudge the deal in this direction as it is implemented.  The U.S can play a role here, educating Europeans about its very successful and flexible bankruptcy programs, explaining why such programs are a good idea and how they work, and suggesting them as an alternative model to “punitive” actions for Greece.

The Iran nuclear deal is also good for the world, and even — despite the rhetoric of Israeli PM Benyamin Netanyahu — good for Israel.  Today, the world has an angry, isolated, and very nearly nuclear-armed Iran.  That Iran has been dangerous and untrustworthy and therefore was put under strong sanctions by the UN and US.  That is not a situation that can be maintained indefinitely.  Under the status quo, Iran will eventually get nuclear capabilities, and will be ever more angry and isolated when it does.  That is NOT a good outcome for Israel or the region or the world.

Under the new deal — although not all details are released yet — Iran will become less isolated as sanctions are ended.  In return, Iran will be forced to earn trust by limiting its stockpile of nuclear bomb-capable materials and opening its nuclear program to international inspections. The deal will change the  status quo by making Iran less isolated AND less likely to achieve nuclear weapons capability within the next decade.  That is a better outcome than the status quo.

Of course, the deal could still go badly wrong.  One of the first things needed immediately afterwards is to start negotiating Iran/Saudi cooperation against the Islamic State.  The Iran-Saudi enmity must be managed and reduced to limit hostilities in the region.  If the Shi’a-Sunni split continues to polarize the region, Iran will want to accelerate its conventional arms programs and its nuclear research so that when the deal lapses Iran can leap to become a nuclear power.  So it is vital that the next 10 years have conventional arms agreements and peacemaking to reduce Iran’s perceived security needs for nuclear arms.

Iran will not abandon its desire to be an influential great power.  But that can be useful as a counter-balance to Russia in the Middle East (one of America’s original reasons to ally with the  Shah of Iran decades ago).   And since the goal of sanctions relief is to rebuild Iran’s economy, and a major war will return it to isolation and undermine that economy, we can hope that Iran can be induced to undertake a peace-maker’s role in the region, rather than a trouble-maker’s role, once the deal is concluded.

Again, continued work by diplomats on implementing the deal, to ensure it meets its goals, is vital.  We cannot pat ourselves and our colleagues on the back and walk away.  The deal is a starting point for improving security and peace in the Middle East, just a starting point, and needs vigorous follow-through.  Yet it is a vital starting point and improves the odds for better outcomes in the next few years.

Both these deals are far better than no deals would have been.  And they give hope at a time when the world needs so many  additional deals — for peace among nations in the South China sea; for cooperation on global climate change; for refugees and asylum-seekers in Europe; on Cyprus; on South Sudan;  on Afghanistan to name just a few.

The diplomats and leaders have now taken the first step in doing their jobs.  Let us hope they follow through to make sure that the  potential benefits of these deals, so hard-won, are realized.

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China + Russia = Anxiety?

I have spent the last few weeks in the UK, Russia, and Hong Kong.   The UK was very standard British — gloomy grey skies and damp  air, wretched coffee (for the most part, better to stick with tea), and a wonderful hodge-podge of people and ideas.  The place is clearly open to the world for migration, business, scholarship, and fun.  And the people are enjoying it.  They gave an unexpectedly solid vote of confidence to Tory leader David Cameron, whose party won a clear majority in Britain’s parliament.

In Russia, skies were also mostly grey and gloomy.  St. Petersburg is a beautiful city, and it was clean and inordinately patrolled by security for President Putin’s St. Petersburg International Economic Forum.  But the mood was a bit gloomy as well.  Putin gave a bravura performance when interviewed by American TV host Charlie Rose.  “Why is Russia being so aggressive,” Rose asked?   “Who, us?”  replied Putin.   “NATO has expanded into the Baltic States, Eastern Europe, and southeast Europe, and you say we are being aggressive? ”

“Doesn’t Russia have an obsession with being respected?” Rose asked.   “Can you show me a large historic nation that does not want to be respected?”  was the reply.   “Do you think we or any nation should want to be humiliated?”   And one last question:  “Are Russia and China working together to form an alliance against the West?”  “That is a silly question,” replied Putin.  “China and Russia are working together to further their own internal goals of economic growth and development.  We have common interests.  There is no alliance against anyone; we are cooperation for ourselves.”

In his prepared remarks, President Putin gave a detailed accounting of Russia’s economic progress despite falling oil prices and international sanctions, down to the pounds of chicken produced by Russia’s farms.  Things are not nearly so bad as feared, and next year will be better.  No mention of any war or conflict on Russia’s borders, or of any need for economic reforms.

Yet the parade of foreign leaders on display hinted that something was amiss.  It was kind of a rogues’ party of regimes on the outs with the west: leaders from China, Myanmar, and Greece joined Putin on the main stage.  No signs that Russia was open to the world, or open to change.  It seems “Stay calm and carry on,” that slogan posted on mugs and walls all over the UK, should in fact be on display in Russia instead.

Hong Kong, as usual, is buzzing with life.  For a few days, it was clouded by rain, but then the blue skies appeared, the sun shone, and the beauty of the city soared above our heads once more.  Dizzying skyscrapers in amazing abundance, brilliant green mountain peaks, and ships, cars, beaches, and people all side by side.   The air was exceptionally clear (as measured by the Hong Kong University of Technology pollution spotter as well as the wonderful visibility) and the temperatures balmy.

Things heated up in the HK Legislative Council as well.  The Democratic Alliance for the Betterment and Progress of Hong Kong — which is the pro-Beijing party in the legislature — and the rest of the establishment bungled their effort to stop the pan-democrats from blocking Beijing’s voting plan from being accepted.  The pan-democrats wanted to block the plan because it gave Beijing and its supporters the ability to restrict who could be a candidate for chief executive, even though all candidates would have to face a popular election to contest for the office.  The pan-democrats, although a minority, still had the votes to block the plan, which required a two-thirds majority to pass.  But the vote was 28-8 against the plan, because several dozen pro-Beijing legislators mistakenly walked out just before the vote believing they had called a recess.  Oops!  The vote went on without them, and the measure was voted down by a quorum to a clear defeat.

This comedy of errors has left everyone wondering what comes next; but the streets remain calm and it is the pro-Beijing legislators who look the fools.

In China, however, they are not laughing.  The mood is gloomy there, I am told, with ever-greater restrictions on internet access, on international travel, and research.  Is this a temporary consequence of anxiety about the government’s crackdown on corruption, which has left everyone uneasy?  Or a permanent shift toward fear and paranoia about all foreign influences?

It is too early to tell.  But at the moment, both Russia and China are becoming more closed societies.  If they are so confident in their systems, and so optimistic about their future, why this extreme fear of foreign influences?  I fear that Russia, which sees only enemies to its West, and China, which is seeing mainly enemies to its East (Japan and the U.S.), are reinforcing each other’s anxieties.

Let us hope the Sino-American dialogue can at least calm some of China’s fears, and that the Pacific trade agreement and the Chinese infrastructure bank can overcome those anxieties and emphasize cooperation among nations.  Something needs to tilt the balance in that direction; otherwise the gloom will get deeper still.

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Russia’s Future — China or Europe?

I am back in Russia this week, and enjoying it.  Yet while the weather is beautiful, the people equally so, and the ruble holding steady, there is a sense of malaise in the air.  The conflict in Ukraine is clearly on hold, not solved, and this week another new law was passed aiming to stop Russians from cooperating with any foreign-supported organization that might threaten the Russian government’s stranglehold on information and political organization.

New figures also indicate a decline in fertility and increase in mortality, confirming–as my research team wrote in the Appendix to its report on Russia’s demographic future — that the hopeful situation for Russia’s population that appeared just in the last few years has now faded away, returning Russia to a long-term fate of sharp population decline.

How will Russia escape these problems?  There is talk of Russia turning East, and relying on deals with China to strengthen its hand.  Yet I do not believe that will work.

Rejecting Western notions of multi-party democracy and separation of powers, both Russian and China have leaders who believe that strong individual leadership and centralized authority, with no role for an active organized opposition, is essential to preserving stability and reaching their goals.  So it seems natural that China and Russia should become close partners.  With similar visions, couldn’t each help the other achieve their goals?  The recent deal between China and Russia for long-term supply of natural gas to China seemed to mark a new era of cooperation between the two nations.  With visions of a new trans-Siberian high-speed cargo line that would allow Russia to serve as a major transit line between China and Europe, the opening up of Arctic sea lanes that would provide another global east-west link, and cooperation on a host of international issues, from containing Iran’s nuclear ambitions to fighting Islamic terrorism, Russia-Chinese cooperation would seem to have entered its strongest phase since the Sino-Soviet split.

Yet in fact, these appearances are deceiving.  The cooperation between Russia and China is extremely one-sided, benefitting China but offering little to Russia in return.  All the leverage is on China’s side, and indeed China looks set to get stronger while Russia grows weaker.  For Russia to place its bets on a Chinese alliance is extremely ill-advised, for helping China to achieve its dreams may produce nightmares for Russia.

Unequal starting positions

Russia would like to return to its days of being a superpower, or at least being a major power in a multi-polar world, regarded as an equal of Europe, China, and the United States.   No doubt Russia is their equal in its contributions to world music, science, and literature.  But if one looks at demographic and economic relationships, it appears that Russia is out of its league.

Russia today has returned to population growth, driven by improvements in fertility and mortality.  It’s population today, including that of Crimea, is almost 145 million.  Yet this good fortune likely will not last.  Fertility was boosted by prosperity and generous government programs; with oil prices depressed and Western sanctions limiting economic growth, fertility is likely to stabilize or decline.  Given that the women now coming into their prime child-bearing years are those of the exceptionally small cohort born in the post-Soviet crises years of the early 1990s, birth rates are certain to fall.  At the same time, economic distress and looser rules on sales of alcohol will likely see mortality rise again.  The fall in value of the ruble has also made working in Russia less attractive to labor migrants.  Putting all of these trends together, Russia’s population is likely to decline again in the coming decades, falling to perhaps 130 million by 2030.

To the west of this modest sized Russia (about the same in population as Mexico or Japan today) would be a European Union with 465 million inhabitants, and to the east, China with 1.4 billion people.   Thus the European Union and China will likely, by mid-century, have fourteen times the population of Russia.   In terms of their economic output, according to the International Monetary Fund the Gross National Product of the EU today is $18.5 trillion dollars, adjusting for purchasing power (PPP).  That of China is $17.6 trillion.  Together, they have economic output of $36.1 trillion, or ten times the economic output of the Russian Federation ($3.56 trillion).  Since China, even if its growth slows to 5% per year from its present 7%, is likely to continue to growth more rapidly than Russia, by 2030 it seem likely that the combined economic output of the EU and China will also be twelve to fourteen times as large as that of Russia.

In short, Russia is facing overwhelming odds in trying to position itself as a third ‘polar power’ in Eurasia between Europe and China.    It is as if Japan tried to be a third major co-equal power in the Pacific between China and the U.S.   It is simply unsustainable.  More likely Russia will be squeezed between the much larger and economically mightier regions of the European Union and China.

Different conditions, different approaches

One can see the difference in strategic positions in the differences between the approaches being taken by China and Russia on the world stage.  China is firm in expressing its territorial ambitions, especially in the South China Sea, but has so far avoided any overt conflicts.  Instead, it has tried to win influence over its neighbors by offering investments, trade agreements, and institutions.  It has embarked on a massive campaign against government corruption, and signed an important agreement on climate-change gases with the United States.

By contrast, Russia has found itself engaged in wars across its borders, first in Georgia and now in Ukraine, that have cost it international goodwill and millions of rubles but have brought few benefits.  Russia has little in the way of investments to offer other nations; instead it is struggling to limit capital flight to save investment capital at home.   Instead of agreements to broaden its trade, it has responded to Western sanctions by further restricting imports.  Instead of cracking down on corruption and supporting international efforts on climate change, Russian business and government corruption remains largely immune to requirements for transparency and probity.  And while the U.S. and China area assuming leading roles dealing with global climate change, Russia sits on the sidelines, its government and economy still heavily dependent on the sales of fossil fuels to countries that are in fact doing all they can to cut back on their use.

These differences reflect a simple truth:  China is able to approach its dealings with the world from a position of strength; while Russia is dealing from a position of weakness.

Where does Russia’s future strength lie?

The Russian Federation will not be able to act independently as a third major power on the Eurasian continent – its population and economy are far too small, and its dependence on natural resource sales and unchecked corruption render it more and more like an under-developed nation, rather than a modern scientific and industrial one.  If Russia becomes mainly a natural resource supplier and transit hub for China’s massive economy, Russia will be ever more dependent on the ups and downs of China, and the whims of its leadership.  Down this path lies loss, rather than gain, of Russia’s autonomy and security.

So where can Russia turn to restore its strength?  Oddly enough, the logical answer is to Europe.   Together, Europe and Russia would be a reasonable counter-weight to China in both population and economic might.  Europe and Russia working together would span the entire Eurasian continent, and like the United States would be both an Atlantic and Pacific power.  Russian are, despite their proud and independent culture, mainly Europeans – Russian art, culture, literature, and religion are solidly within the European family, respected and admired for their contributions to Europe as a whole.

Yet instead of taking its natural place as one of the leading powers within Europe, Russia has essentially gone to war with Europe over the issue of allegiance and influence in Ukraine.  This conflict over a small and economically modest nation (Ukraine’s economy is smaller than that of Peru or Romania, at $370 billion PPP-adjusted) has moved Russia further away from full engagement with the $18 trillion dollar economy on its doorstep, that of the European Union.  Of course, Russia’s long association with Ukraine and feelings of kinship have led to Russia’s military engagement there.  But in the long run, this conflict, like that in Georgia, simply moves Russia further away from the logical position in which it would have its greatest economic and political strength, and that is through closer engagement with Europe, not conflict and separation.

If Russia is to win the respect and admiration of the world, it needs to return its economy to growth, reduce its dependence on natural resource exports, limit corruption and open its economy to greater competition.   Selling ever more raw materials to an ever-more-dominant Chinese economy will not achieve those goals.  Instead, internal reforms, making peace in troubled regions, and seeking to take advantage of opening and further engaging with Europe are the ways that Russia can restore its strength.

The world has changed, and the Russian Federation will never play as dominant a role in global affairs as did the Soviet Union in the 1950s and 1960s.  Yet at the same time, the Russian people should never again suffer from conflicts as they did in the Second World War.  Moreover, with the advance of Russian technology and skills, the Russian people have every reason to expect that even in a smaller Russian state, they will achieve new heights of prosperity and security.   France and Britain are no longer superpowers, and Switzerland never was one (except in watches), but the quality of life their people enjoy today is something that Russians would gladly enjoy as well.

Russia’s strongest future is not to be an isolated nation, but to enjoy its status as one of the largest and most powerful countries within Europe.  To fully realize that future, however, Russia will have to shift back to a course of engagement and friendship with Europe.  The sooner that takes place, the better for Russia and its people.



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Here we go again, slower slower and sloooowwww

One month ago, I took time out from commenting on foreign affairs to note that the world economy, and the U.S. in particular, was in the doldrums and not showing signs of the roar-back growth everyone seemed to be expecting, with anticipations that the U.S Federal Reserve would soon start raising interest rates.

No one gives me any prizes for being right (just as well, wouldn’t want to pay the penalties for when I’m wrong). But when the data came in for the first-quarter GDP growth in America, it was a lot worse than most folks expected.

Growth in Q1 was at an almost non-existent 0.2 percent annual rate.   Business spending on investment is down, inventories were up, and consumer spending slumped.

The good news is that the Fed is unlikely to raise interest rates soon in light of this performance.  The bad news is that after 8 years of “recovery,” the U.S. economy has yet to put together three or four solid quarters of strong growth.  We’re still waiting….

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