"The world could face the worst famine since the Second World War, with millions of victims", Germany's Minister for Economic Development and Cooperation, Svenja Schulz, said in early May. Two years of the pandemic, a war in Europe, and now the looming famine. Isn't it astounding that a financial crisis has not yet hit us?
This should come as no surprise at all if only one reminds oneself of the fact that the balance sheets of the world's four leading central banks (the FRS, the ECB, the Bank of Japan and the Bank of England) have grown by more than $20 trillion since 2009, including by over $10 trillion since 2020. For quite some time now, the West has been able to successfully address its economic challenges by putting out the fire with more cash. However, this strategy has its limits, and it seems that they have been reached.
The current wave of inflation is afflicting developed countries in exactly the same way as it is affecting everyone else. It is no longer possible to disregard the West’s chronic problem with overconsumption as its competitiveness continues to dwindle. Many experts in the West apparently hoped that inflationary pressures would be contained and counteracted by the collapse of Russia's government. They assumed that this would inject a new stream of dirt-cheap commodities into the market, just as it did after the collapse of the Soviet Union, while fundamentally strengthening the position of the US in its confrontation with a lone China. This scenario, however, was not meant to materialize.
Unable to avert the crisis, the US and its closest allies will exploit the mounting economic problems of various countries throughout the globe to topple regimes that are standing in their way of setting up an effective blockade of Russia and China. But mainly China because Russia is already feeling the brunt of the unprecedented economic sanctions introduced against it. As a result, the West has been forced to work out a new approach to exerting additional pressure on the "continental bloc".
This represents a clash of two different approaches. The thrust of the first approach is for the West to engage in staging some "world revolution," a revolution on a global scale, whilst relying on what is left of its civilizational clout. By setting such a revolution in motion, the West will be able to rotate and replace other countries’ elites to its advantage. The second approach implies that the East, being better prepared for a more confrontation, is likely to be more willing to play by the rules requiring conventional military force.
For as long as the West continues to succeed in leveraging global economic problems to destabilize entire countries that are loyal to its rivals, some semblance of equilibrium is likely to be preserved. But should this balance be upset, it would carry a very significant risk of leading to a direct military confrontation.
A counteroffensive in the far-off regions
At this juncture, every single country has been afflicted one way or another by severe economic challenges. And yet, only three of them, Pakistan, Sri Lanka and Myanmar, have seen their economic problems escalate into violent internal strife and clashes. By some odd coincidence, all three happen to be unmistakably within China's zone of military and economic interests. And in all three of these, the China-leaning players have come under attack, whether as a result of the coup in Pakistan or following widespread civil unrest bordering on the civil war in Sri Lanka and Myanmar.
Although the events in Pakistan and Myanmar are unlikely to result in a complete disruption or even major deterioration of these two nations’ relations with China (or in a rise of openly pro-Western actors), one thing is clear. One should not expect these countries’ favourable attitudes to expanding China's presence will resurface any time soon.
In the meantime, the aftereffects of the recent events in Pakistan are already quite discernible. The situation in Afghanistan has recently deteriorated dramatically.
For obvious reasons, the developments in Pakistan and Myanmar have directly affected Russia's interests, too. The leaders of the two countries supported Russia's military operation in Ukraine. In a show of defiance, Imran Khan, the now ousted former Prime Minister of Pakistan, pointedly held his meeting with Vladimir Putin on February 24, the day the operation began. In contrast, General Zaw Min Tun, the official spokesman for Myanmar's military, openly supported Russia's operation by calling it necessary.
However, China is the primary target of these interventions. The onslaught on China's positions in South Asia comes amid the conflict over China's plans to establish its military base in the Solomon Islands. This would be a genuinely catastrophic development for the US and its allies in the region, particularly Australia. During his visit to the islands, US Assistant Secretary of State for East Asian and Pacific Affairs Daniel Kreitenbrink made it clear that the US would not rule out military action if China established a base in the Solomon Islands.
Overall, U.S. foreign policy is increasingly focused on containing China's growing ambitions. Therefore, it can be expected that as the global crisis worsens, the West will become increasingly eager to exploit the economic problems of the countries that are friendly to China.
Imperial diplomacy in the age of decline
In early May, the Financial Times published a tell-tale feature introducing the views of Henry Kissinger, a US foreign policy veteran. Two points, in particular, stand out in his remarks:
- US hostility should avoid going so far as to drive Russia and China toward each other
- The US may feel compelled to seek regime change in autocratic countries
Kissinger still refuses to believe that the bond between Russia and China is intrinsically permanent, believing it to be a spur-of-the-moment response to US domination. And yet, he is so worried about this tactical alliance that he went as far as to suggest that, following the end of the Ukraine crisis, NATO might have to revise its policy toward Russia out of fear of pushing it further in China’s orbit.
With the persistence worthy of a better cause, Kissinger is attempting to breathe new life into his old scheme that once led to the rupture of the Sino-Soviet alliance while failing to realize how fundamentally different the current situation is.
In his famous book Diplomacy, Kissinger explains why the Soviet Union failed to forge stable international alliances with strong players, particularly in the Middle East. In his own words, the Soviet Union’s high capacity to raise tensions by far exceeded its ability to bring crises to a conclusion. And this is precisely the position the US is finding itself in today.
This can be illustrated by two of the most striking recent examples. The first one is the outright refusal of various oil-producing countries to consider increasing production to fill the void left by the West's weaning itself off Russia's oil. The second is the threat by Mexico, Brazil and a few other countries to boycott the 2022 Americas Summit if the US goes through with its intention not to include Cuba, Nicaragua, and Venezuela.
Both examples indicate how weary the world has grown of unconstructive US leadership, to put it mildly.
The explanation for this is relatively straightforward. The United States of the Cold War era had a tremendous economic potential that enabled it to involve countries of the most diverse regions globally in its various schemes. The US of today no longer has this wealth or this ability. Instead, the only thing it is concerned with these days is safeguarding its ability to buy raw materials and goods with the dollars it no longer borrows but instead just prints at will.
The US is no longer in a position to offer a constructive economic policy even to its closest allies in Europe, sacrificing their prosperity and industrial capacity to engage them in a confrontation with Russia.
The only strategy that can give the West a glimmer of a fighting chance in its standoff with Russia and China is that of using growing economic volatility as an opportunity to change regimes. The only alternative to this strategy would be a direct military confrontation.