The Unz Review: An Alternative Media Selection
A Collection of Interesting, Important, and Controversial Perspectives Largely Excluded from the American Mainstream Media
 BlogviewEamonn Fingleton Archive
Three Reasons Why Putin Laughs At Impotent America
🔊 Listen RSS
Email This Page to Someone

 Remember My Information


Bookmark Toggle AllToCAdd to LibraryRemove from Library • BShow CommentNext New CommentNext New ReplyRead More
ReplyAgree/Disagree/Etc. More... This Commenter This Thread Hide Thread Display All Comments
These buttons register your public Agreement, Disagreement, Thanks, LOL, or Troll with the selected comment. They are ONLY available to recent, frequent commenters who have saved their Name+Email using the 'Remember My Information' checkbox, and may also ONLY be used three times during any eight hour period.
Ignore Commenter Follow Commenter
Search Text Case Sensitive  Exact Words  Include Comments
List of Bookmarks

Deliberations at the current NATO summit in Wales may or may not produce a reduction in tensions over Ukraine. But one thing is certain: irrespective of how the stand-off is eventually resolved, Vladimir Putin will emerge with his reputation powerfully enhanced. Basically Putin is the new Napoleon, and the Ukraine crisis is his diplomatic Austerlitz: he will keep Crimea and will considerably enhance the ability of Russian-speaking minorities in Ukraine’s eastern provinces to stand up to Kiev. (Even the Economist magazine, one of Putin’s fiercest critics, concedes as much. Click here for a commentary just posted at the Economist’s site.)

As for Barack Obama’s reputation, don’t ask. A Google search this morning for “Obama + wimp” produced more than a million hits. Nothing that he or his aides are likely to achieve in Wales will do much to improve his image.

Yet Obama’s critics are fundamentally wrong in blaming his impotence on personal failings. The problem is not Obama; it is America. Over the last sixty years, and in particular over the last thirty, America has thrown away almost all the once vast leverage it enjoyed to set the global diplomatic agenda. In doing so, it acted in the name of an idealistic cause, globalism, but at the end of the day its idealism has not been reciprocated. Even America’s ostensibly closest allies are now prepared more or less at will to flout America’s wishes (even if they often pay sincere-sounding lip service to American objectives). As I have pointed out previously, even such an ostensibly deferential ally as South Korea is not prepared to support Obama’s sanctions. Japan meanwhile has sounded at best only lukewarm – understandably so because before the crisis blew up it had come close to resolving a territorial dispute with Russia that had festered for nearly 70 years. (In February the Japanese and Russians announced they would hold a summit on the dispute in October or November and as recently as late August Tokyo did not demur when Russian Foreign Minister Sergei Lavrov announced the summit was still on.) Then there is China, which is openly making hay out of the crisis and can be expected to provide a sort of underground railroad in shipping vital Japanese and Korean producers’ goods to Russia.

Even in Europe, few American allies are prepared to do much heavy lifting for Obama. As John Bruton, a former Irish prime minister, has pointed out, Italy, Spain, Cyprus, Greece, and even Bulgaria are relatively sympathetic to Russia. Only Poland, Lithuania, Estonia, and Latvia are seriously alarmed by Putin. Most other European nations are in between and have their own reasons for withholding total support from Obama’s initiatives.

It requires just a moment’s reflection to remember why America’s diplomatic clout once loomed so large – and why that clout has now almost disappeared. Three reasons in particular explain the sea change:

  1. Production technology. Almost right across the industrial waterfront, the United States once led the world in production technology. This positioned it as a sort of industrial fairy godmother courted by countless other nations desperate to boost their productivity with transfers of America’s more efficient industrial knowhow. Things are different now. The problem is that if you don’t produce much, you don’t have much production technology. Any nation that seeks transfers of the most advanced production technology these days must go elsewhere, most notably to Japan and Germany (ironically these two nations owe their leadership in large part to their earlier skill in winkling world-beating technologies out of the United States).
  2. Finance. As by far the world’s largest exporter of capital in the early post-World War II era, the United States was once courted by any nation in need of external financing. That was a lot of nations. Unfortunately the United States has long since migrated from being, on net, a capital exporter to a capital importer. For decades now it has ranked among the ne’er-do-wells of modern diplomacy with a begging bowl constantly out for foreign capital inflows. Its net foreign liabilities are now in real terms the largest of any Great Power since the late-era Ottoman Empire. Ironically among the most publicized of the Obama administration’s sanctions on Russia is that many major Russian corporations are being denied access to American capital markets. As a slap on the wrist, this is about effective as denying a resident of the Amazon rainforest access to the water resources of the Sahara desert. The fact is that Russia exported a net $75 billion of capital last year and much of that was invested in U.S. Treasury bonds. Meanwhile America’s net capital imports totaled $361 billion. It is the United States that needs Russian capital, not the other way around. Of course, to some observers the key issue is that Russian corporations are now denied the “financial engineering skills” of the likes of Goldman Sachs, Morgan Stanley, and Citigroup. This might make sense if Putin respected Wall Street. In reality he likely regards American investment banks with about as much warmth as the Great Lakes power station industry regards the current infestation of zebra mussels. Basically the Obama administration is doing Putin’s work in getting the Wall Street pests out of Russia’s hair. If Putin were to sell Russia’s holdings of U.S. Treasuries he could put significant pressure on both the dollar and U.S. interest rates. His power to cause financial trouble is one reason the East Asians feel the need to placate him. Although he is not central to their effort to keep the dollar propped up, any move by him to exit the dollar would make it harder for the East Asians to keep their currencies from going through the roof.
  3. Trade. In days of yore when the United States protected its markets, its allies and other foreign nations vied with one another for privileged access to those markets. Not anymore. Now that the United States has bought into global free trade via its entry into the World Trade Organization, it has unilaterally signed away all the enormous leverage it once enjoyed in trade relations.

There was a time when U.S. Presidents spoke softly and carried a big stick. These days they bawl through a 50,000-watt sound system and carry a feather duster.

Eamonn Fingleton is the author of In Praise of Hard Industries: Why Manufacturing, Not the Information Economy, Is the Key To Future Prosperity (Boston: Houghton Mifflin, 1999).

(Republished from Forbes by permission of author or representative)
• Category: Economics • Tags: Russia 
Current Commenter

Leave a Reply - Comments on articles more than two weeks old will be judged much more strictly on quality and tone

 Remember My InformationWhy?
 Email Replies to my Comment
Submitted comments have been licensed to The Unz Review and may be republished elsewhere at the sole discretion of the latter
Subscribe to This Comment Thread via RSS Subscribe to All Eamonn Fingleton Comments via RSS
The unspoken statistical reality of urban crime over the last quarter century.
Our Reigning Political Puppets, Dancing to Invisible Strings