Should Russia coordinate its policy with that of the US? (II)

Should Russia coordinate its policy with that of the US? (II)

First signs of the approaching global economic crisis, including rising oil and gold prices, appeared already in 2001-2002. They marked a period of slowdown in the fifth Kondratyev cycle and a looming technology decline. In 2007 a new wave of crisis hit the global economy caused by a mortgage crisis in the United States. It turned to have had an impact on many other countries and eventually resulted in an international problem. As of today, the world is standing on the threshold of large-scale geopolitical and technology changes.

''US will lose superpower status''

A full evolution cycle of the international system corresponds with two successive Kondratyev cycles, starting from the so-called 'turn of a century' cycle, which comprise four stages corresponding to two 'periods of growth' and to two 'periods of decline': technology revolution, a shock wave in global politics and economy, a period of global market revolution and a phase of structure crisis. Today we are living through a shock wave in the process of our evolution, which began in the 1980s and is predicted to be over by 2050.

Relying on the previous 'shock waves'  in 1813-1849 and in 1921-1945, we may conclude that such phase starts from a relatively deep crisis which undermines stability of the economic growth. Then the world faces a period of common instability which results in a huge economic crisis and thus marks a threshold to further political and economic reforms. A long-term business cycle covers 30-40 years and appears to be the deepest of its kind, stirring up social and political tensions.

Since it was the US where the current world economic crisis began, let us look at how the American economy developed in the early 21st century. In 2000 the US GDP growth was at 3.7%; in 2001- 0.8%; in 2002, 2003, 2004- 1.6%, 2.5%, 3.6% respectively; in 2005 the GDP growth rate was at 3.1%, while in 2006 and 2007 it was reported at 2.9% and 1.9% respectively. We see that having recovered from the 2001 global crisis, the US economy resumed growth before reaching a recession again in 2006. Then some experts, Professor Nouriel Roubini among them, predicted an imminent financial downturn, which happened on September 15, 2008, with Lehman Brothers declaring bankruptcy. Just ten days later, on September 25, Germany`s Finance Minister Peer Steinbrück predicted that ''the US would now be toppled as the superpower of international finance.'' (1) Almost immediately, the financial crisis in the US turned into a global one, causing recession in practically all developed countries. The crisis was compared to the Great Depression of the 1930s. The world has faced a sharp rise in unemployment, millions of people had their salaries cut, while goods prices went up. This all sparked mass social protests in some developed countries, while in the Middle East and in North Africa such protests led to changes in the political regimes.

The second wave of the current economic downturn (2009-2013) is noted for economic depression in the most developed countries and gradual switch to authoritarianism in less developed states. This is a time of intense social and political changes which determine further global development until the second phase is over. The year 2011 marks first signs of the second wave of the crisis which comes as a result of the broken 'golden bubble'. In other words, the weakening US dollar - a trend which Professor Nouriel Roubinihad predicted in 2004. The crisis has already affected the EU: Greece, Portugal, Spain and Italy. The second wave is going to affect most of the countries, making the G20 member states to take crucial steps to approving an international reserve currency which would replace the dollar; they will also have to offer more effective leverages of regulating financial markets, agree on terms of international trade that would be equal for everyone, and also introduce measures to maintain stability of food prices.

The crisis of 2011-2013 may serve as a prelude to dramatic geopolitical changes typical for the third stage (2014-2018) of the current economic downturn. In 2012-2017 the world will be witnessing very important geopolitical changes and social reforms.

Experts for the Russian Academy of Sciences say the current stage of the economic downturn will be over in 2017-2019 before a new, though weaker, wave of crisis marks the beginning of transition to a new technological approach to economy. This will a time when the fifthKondratyev cycle will be replaced by the sixth one. And chances are high for these changes to be accompanied with regional conflicts involving the world`s leading countries and some developing nations. As it usually happens during such transitions, we should expect in 2016-2020 the balance of powers to be revised, and this process always goes hand in hand with military conflicts.

The crisis will inevitably result in dramatic changes on the global political scene. The US will finally lose its superpower status which it had enjoyed for a century. The U.S. has failed to stand the ‘multipolarity test’ and had worn-out wars in the Middle East. Now they lack enough resources to maintain leadership. It is very likely that the collapse of the dollar and of the US financial pyramid will cause an outbreak of aggression from the US side, and a regional war with Iran and other countries of the ‘Greater Middle East’ will become a reality. But this all will just boost the Pax Americana collapse…

So, with the US hegemony coming to an end, we are approaching a multipolar world order, when major nations are looking for economic and political solutions by means of diplomacy.

Multipolar model requires transparent distribution of wealth and reforming of key international institutions – UN, IMF, World Bank, the latter two being the most outdated organizations of their kind. As of today, both the IMF and World Bank are mainly led by US and European bankers, and thus hardly meet the interests of countries with rapidly developing markets. During its recent traditional annual session, the IMF admitted that the so-called ‘Washington Consensus’ no longer existed; moreover, the IMF called for the creation of a less risky global economy, where finances should be regulated by a state while all revenues distributed transparently.

The fact that the center of global economic development switches from the West to Asia, is worth special attention. In view of this, China and India are going to experience a high level of competition. These are the world`s two most populated countries which are going to determine further global economic development. Nevertheless, a major fight for global leadership will be taking place between the US and China. The outcome of this battle will determine the economic model of the post-industrial world and a political system which will dominate the 21st century.

The 2014-2025 period is going to offer the most complicated geopolitical tasks for Russia, and we should begin to prepare for this today. It must be stressed that all attempts to modernize the Russian economy relying on the western initiatives have failed.

Is there any way in which Russia could benefit from modernizing its economy together with the US? Unlike in the 1930s, when the Soviet Union failed to take advantage of the global economic crisis and with the help of US experts build up a proper economic system, chances to succeed today are too low. The past 20 years of cooperation with the West prove that foreign investors do not want Russia to have high technology industry. The West wants Russia to remain its major source of energy resources and provide its domestic market for their goods, thus preventing Russia from integrating into the international market. That is why foreign companies prefer to invest more in oil and gas industry, beer and tobacco production, and the nonmaterial sector. And there is no sign that this situation might be changed.

It`s been for many years that Russian leaders have been talking about the need to overcome the country`s dependence on its energy resources and focus on innovations. Huge sums are spent on this. The intention is good but the implementation itself is insufficient. Our society lacks necessary environment to accept innovations, to follow this way of development. So, even if we do manage to produce some innovations, it is likely that they will be sold abroad, where the environment is comfortable for turning ideas into reality.

Russianeeds innovations not for the sake of innovations but as a tool to achieve well-conceived goals. Unprecedented projects are required to meet the people`s needs. This is why we should focus on technological development.

(to be continued)


Tags: G20   IMF  Middle East  Russia