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Class Stratifications in the Soviet Union

THE Soviet intelligentsia may be roughly divided into three groups: the small nucleus of top professional politicians who form the Presidium of the Central Committee of the Party; a much more numerous upper layer of the bureaucracy which is well paid and enjoys substantial privileges; and all other educated people, who occupy the lower posts of the Soviet apparatus. Nothing in the Soviet Union is decided by ballot, and the rank and file of citizens play no political role.
The term bureaucracy has a different meaning in the U.S.S.R. than in non-Communist countries. Every educated man in Russia is a bureaucrat. His daily bread depends upon the state, and he must take orders from the professional politicians who are its masters. Secretaries of the Party and of the Trade Unions, industrial and agricultural executives, the technological personnel, men of learning, writers, composers, artists–all are functionaries of the state, the sole employer and the sole source of income. A biologist or a physiologist must follow the theories of Michurin or Pavlov, for such is the will of the professional politicians. A composer must produce melodious music for the same reason. A university professor or a research worker must accept the conclusions suggested by the Party leaders before he even begins his research. Trade Unions are the tools of the Party, and their secretaries are expected to fulfill the orders of the employer–the state, whose voice, again, is that of the top few. The Party machine is of course their instrument. They have effective means of enforcing obedience–the drastic criminal codes, the powers of the Ministry of the Interior which can impose exile or confinement to a forced labor camp without judicial trial, censorship, discharge, demotion or refusal to promote.
Even so, the bureaucrats below the top rung are not completely helpless. They do, to some extent, share the power held by the professional politicians. The ten members of the Presidium of the Central Committee of the Party formulate the external and internal policies of the U.S.S.R., but the bureaucrats advise them and assure the correct implementation of those policies. If the bureaucrats ceased to transform the blueprints of the Presidium into governmental activities, the wheels of the Soviet apparatus would come to a standstill. Prolonged passive resistance by the bureaucrats–if that can be imagined–would bring the régime down.
Although Stalin brought about this situation by building a completely bureaucratized state, he also saw the danger. He once compared the Party to the mythological Antaeus, the son of the goddess Earth, who could be defeated only by being lifted up and severed from contact with his divine mother. Heracles, his antagonist, knew the secret and destroyed him. Stalin said that disaster could befall the Party if it lost contact with its mother– “the toiling masses.” But he was using the obsolete Communist verbiage, meaningless to everyone including himself; for the Party leaders the “toiling masses” are not a mother but a stepchild, or, more accurately, a herd of sheep. Beneath the feet of the rulers at the top there is only one earth–the bureaucracy. It has grown in strength by reason of the very fact that it is indispensable. Hundreds, no doubt thousands, could be demoted, dismissed, “liquidated,” but as a class they are the pivot of the régime. If ever they were estranged as a body, Antaeus would be strangled.
Stalin did his best to impress upon the bureaucrats that they had personal, vested interests in the régime. He abandoned the teachings of Marx and Lenin in this respect, but he was actually more realistic than they, for the nationalization of all the means of production and the concentration of power in the hands of a small group of leaders of one Party demanded the creation of such a class. In his pamphlet completed before the October Revolution, “The State and Revolution,” Lenin had written:
The following measures of the [Paris] Commune emphasized by Marx are particularly noteworthy: the abolition of all representation allowances, and of all monetary privileges in the case of officials, the reduction of the remuneration of all servants of the state to the level of “workmen’s wages.” . . . And it is precisely on this particularly striking point, perhaps the most important as far as the problem of the state is concerned, that the teachings of Marx have been most completely forgotten. In popular commentaries, the number of which is legion, this is not mentioned. It is “good form” to keep silent about it as if it were a piece of old-fashioned “naïveté,” just as the Christians, after their religion had been given the status of a state religion, “forgot” the “naïveté” of primitive Christianity with its democratic revolutionary spirit.
Lenin was addressing his sarcastic remarks to the Western Socialists, but his words are prophetic in their application to the state which he helped to found, in which Marxism is now the state religion. Stalin described his own policy clearly in an interview with Emil Ludwig in 1931: “Egalitarianism has for its source the peasant way of thinking, the mentality of sharing everything equally, the mentality of the primitive peasant ‘Communism.’ Egalitarianism has nothing in common with Marxist Socialism.” His policy produced a society with highly-diversified incomes, and with distinct upper and middle classes composed of the Soviet bureaucrats.
The eminent rôle played by the intelligentsia may be gauged by its proportionately high representation on the various soviets and congresses. At the last national congress of trade unions, held in 1949, 71 percent of the delegates had had secondary or higher education; at the previous congress, held in 1932, only 40 percent of the delegates had had an equivalent education. In the present Supreme Soviet, elected in 1950, 69 percent of the deputies have had higher or secondary education. Out of 1,192 delegates to the last Congress of the Party (October 1952) 1,016 had higher or secondary education. Out of some 73 speakers who were allowed to address the Congress, 63 were members and four alternate members of the Central Committee, two were members of the Party Central Auditing Commission, and four occupied high positions in the Party provincial organizations; none of them worked at a plant or a collective farm. The Soviet toiling masses are not permitted to be represented by genuine proletarians.
In the Soviet Union a citizen belongs to the bureaucratic class by virtue of his education, the precondition of higher income. The disparity of incomes is apparent from the meager Soviet data. The manager of an important factory in heavy industry may have a monthly income of 5,000 or 6,000 rubles or more, including basic salary and bonuses. This differs sharply from the earnings of city people, who had an average income of 500 rubles per month in the period 1946-1951. A recent Soviet handbook on the mechanical-engineering industries lists eight categories of workers whose basic wages vary from 291.20 rubles per month to 757.12. To earn these wages a worker must fulfill his monthly minimum norm of output. Skilled workers may earn more, because they work according to piece rates.
The principal of a trade school (Labor Reserve school) has a monthly salary of 950 to 1,500 rubles, excluding bonuses, while a night-watchman or a cloakroom attendant at the same school gets from 260 to 280 rubles, and the furnace man from 310 to 335. A highly-skilled worker fares much better than his unskilled fellow-proletarian, and this helps in breaking down the solidarity among the Soviet workers. The meaning of an income of 300 or 600 rubles monthly (assuming that the wife of an unskilled worker also earns her living) becomes fairly plain if one recalls the Soviet retail prices of the most essential commodities: for example, rye bread, 1.50 to 1.80 rubles per klg.; beef, 11 to 18 per klg.; sugar, 10.40 to 12.20 per klg.; men’s shoes, from 200 to 400; women’s shoes, from 150 to 500. Those prices were lowered by an average of 10 percent to 15 percent on March 31, 1953.
The disparity of incomes produces great variations in the standards of living. Housing conditions may serve as an illustration, especially in a country notorious for its housing shortages. The scale is very wide–from one room shared by several strangers or one apartment by several families to the private ownership of a five-room dwelling house and a summer cottage. A well-paid member of the intelligentsia does not need to worry about the inconvenience of sharing his quarters with strangers. Since 1948 Soviet citizens have been permitted to own private dwelling houses of five rooms, while leasing from the state the plot of land on which the house stands. The house is owned in perpetuity and may be inherited by the relatives of the deceased owner. It may be built by its owner, or bought from the local municipal soviet or from the enterprise which employs the buyer. The law forbids one family to own more than one house. But a Soviet housing specialist hurries to comment on this regulation: “The simultaneous personal ownership of a dwelling house in a town and of a cottage in a rural, summer vacation or health resort locality is not contrary to law . . . . The cottage serves by its very nature the purpose of rest or of a medical cure and promotes that type of the creative concentration of mental forces which is ensured by the atmosphere of a forest park or of a rural place far removed from the noise and traffic of the city.” These few sentences tell the whole truth about the social stratification in the Soviet Union. A dignitary who can afford to buy a dwelling house and a summer cottage needs relaxation for “the creative concentration of his mental forces;” a worker who shares an apartment with a few other families supposedly gets all the rest that he is entitled to, however.
If the citizen purchases his dwelling house, 20 percent of the price must be paid in cash and the remainder by monthly instalments within two or three years. The All-Union Central Council of Trade Unions explained on November 13, 1948: “. . . the sale of individual dwelling houses to workers, engineering-technical and other officials, will begin on January 1, 1949, as a rule for cash and in exceptional cases for credits granted by banks with the obligation of repayment within the period of two to three years and at an interest fixed by law.” Only a well-paid person can afford to buy a house on such stiff conditions.
The Soviet taxation system relies heavily on indirect taxes on goods and services. More than 50 percent of the total Soviet state revenue is provided by the turnover tax–which we would call a sales tax–charged on every product and included in the retail price of all commodities. This tax, not the cost of production, represents the major portion of the retail prices of consumer goods. This might not make a great difference to a dignitary who earns several thousand rubles monthly, but it creates a vital problem for a manual worker who pays from 48 to 62 percent tax on a pound of potatoes.
Direct taxes produce usually about 9 percent of the total state revenue. The personal income tax begins at the rate of 2 percent on any income above the minimum of 260 rubles per month; the highest rate is 13 percent, on incomes of 1,000 rubles or more. Thus a person with a salary of more than 1,000 rubles is treated more leniently than the people in the corresponding income brackets in capitalist countries. The Socialist state does not intend to cut down the salaries of its favored supporters indirectly by the imposition of a high income tax. Moreover, members of the armed forces including the troops of the Ministry of the Interior, heroes of the Soviet Union and of Socialist Labor, and holders of decorations are totally exempt from income tax payments on their salaries or wages. The Stalin prize-winners do not pay any income tax on the value of the prize, which may be as high as 100,000 rubles. It is worth while noting that the Soviet income-tax regulations include a table of rates applicable to writers and artists which exceed the usual maximum of 13 percent, providing for a 33 percent tax on incomes of 100,000 rubles per year and still higher rates for higher incomes. Evidently the incomes granted to the most successful and conformist writers and artists are high indeed. The Soviet Government reduces the purchasing power of all citizens by annual state loans, to which everyone must subscribe at a rate equal to three or four weeks’ earnings. But again, this bears far more heavily on the poor than on the rich.
The differentiation of incomes naturally produces its social effects. One may hardly expect a well-paid dignitary with higher education to invite to his home a manual worker with low wages, poorly dressed and having practically no topic of conversation in common with his host. The Soviet practice duly registers these social divisions. If one glances, for example, at the ticket prices of the Trade Union movie theaters, one finds out that there are six categories of prices ranging from six to two rubles. An unskilled worker earning some 300 rubles per month cannot be expected to buy a six-ruble ticket; even an average wage-earner could hardly spend six rubles to go to the movies. Thus the upper stratum of the intelligentsia is well protected against unpleasant promiscuity with ordinary proletarians.
The disparity of incomes also influences educational opportunities. All Soviet citizens are expected to acquire an elementary education within the program of four grades. Wherever the seven-grade junior high schools are available (mostly in cities), children can continue their education up to and including the seventh grade. Within the limits of these seven grades, education is free. The delegates to the last Party Congress claimed that the seven-grade education had become universal in urban and rural districts. This claim may be accepted with a grain of salt, because previous Soviet data of recent years indicated that education through the seventh grade was generally available only in cities and towns and that education to the fourth grade only was the prevailing rule in the villages. Moreover, a peasant child is compelled to begin work on the collective farm at the age of 12.
Elementary education begins at the age of seven and is supposed to end at the age of 14. One may legitimately wonder whether a peasant youngster who has to work at the age of 12 can simultaneously attend classes of the upper grades of the junior high school. The urban child has no such problem, because the junior high school would probably be available, and his labor duty begins only at the age of 16. Because of the meager earnings of his parents such a child might be compelled to start working for his livelihood at the age of 14, with the permission of the labor inspector; but this should not prevent his graduation from the junior high school which takes place usually at the age of 14. There is in fact discrimination against rural children.
The discrimination against poorer town youngsters begins with the eighth grade of the secondary school, where free education ends. Beginning with the eighth grade of the secondary school, through the ninth and the tenth and through the whole university, students must pay fees unless their scholastic records are high enough to win them a state scholarship. The annual fees for the eighth, ninth and tenth grades range from 150 to 200 rubles. But poorer parents who want their children to rise in the world must find the money, for the secondary school certificate is the precondition of admission to a university, and the university diploma is the key to careers.
The existence of three types of schools–“elementary,” “junior high school” and “secondary”–produces further discrimination. Each begins with the first grade, and theoretically the corresponding grades should offer equivalent programs; elementary schools have only four grades, but the fifth, sixth and seventh grades of the “junior high school” should be interchangeable with the corresponding grades of the “secondary” school. But pupils at the secondary schools are the favored ones. These are urban schools, and the teachers of the first four grades are quite certain to be better qualified than the rural teachers of the elementary schools. Moreover, a child lucky enough to be admitted to the first grade of a secondary school has a greater chance of passing through all the grades of the same school. A youngster graduated from the junior high school should be able to transfer to the eighth grade of the secondary school; but Soviet regulations allot only 15 percent of the vacant places at the eighth grades of the secondary schools for the boys and girls who have graduated from the junior high schools; 85 percent of places are reserved for students already enrolled in the secondary school. Moreover, the compulsory draft of boys and girls for the trade schools (Labor Reserve schools) does not extend to students of the upper grades of the secondary schools.
The problem of gaining access to the highest careers and the best incomes begins at the age of seven for a Russian child. Soviet sources do not explain how these lucky children who begin their education at the secondary school are selected, but one may be quite certain that the school authorities do not refuse to admit children of influential parents. Members of the intelligentsia enjoy hereditary opportunities–corrected to some extent, as in other countries, by scholarships granted to outstanding students of poor parents. The fees exacted at the universities or similar schools range from 300 to 500 rubles, depending on the location and type of school, and such schooling involves other expenditures, especially for attendance at a university away from home. Such tuition fees are high in proportion to Soviet incomes, save for those in the upper strata.
The régime does its best to enhance the prestige of its bureaucracy in other ways. Titles of rank are freely bestowed. The process of restoring titles began in the armed forces, where all the traditional Tsarist military ranks have been reëstablished, including those of major-general, lieutenant-general, colonel-general, general of the army, and two ranks of marshal. Several branches of the civil administration have been provided with uniforms, emblems of rank and titles. A recent Soviet textbook on administrative law acknowledges frankly the reasons for this return to the imperial tradition: “The introduction of personal titles and uniforms for the aforesaid categories of the state officials aims at a further intensification of service discipline and at increasing the prestige of those officials.” The Soviet diplomats not only wear embroidered uniforms but are adorned with all the traditional titles (Ambassador Extraordinary and Plenipotentiary, Envoy Extraordinary and Plenipotentiary, Counselor, etc.). The titles of the state procurators are topped by the terrific accolade of Actual State Counselor of Justice, which is bestowed upon the Procurator General of the U.S.S.R., and descend progressively through the State Counselors of Justice of three classes, the Counselors of Justice (also of three classes), down to the lowest ranks of Jurist (again three classes). The young man who begins his career in the procurators’ hierarchy has the title of a Junior Jurist; the Soviet regulations make it clear that his rank is equivalent to that of a second lieutenant in the army. Peter the Great would have been pleased because he was the first in Russia to establish the equivalence between military and civilian ranks.
The Party does not make any secret of its intention to reserve privileged treatment of the intelligentsia. For instance, on September 4, 1946, the Central Committee of the Party severely censored a film called “The Great Life,” which tried to depict the reconstruction of the Don basin, heavily damaged during the war. The authors of the film interpreted the events of the reconstruction in the romantic spirit of the early post-revolutionary years, showing several cases of ordinary manual workers being promoted to the commanding posts because of their unusual intelligence, vigor and initiative. The Central Committee did not like it. Promotion to higher positions nowadays requires a diploma of formal university education. The Central Committee expressed its displeasure in these indignant words:
The film–“The Great Life”–propagates reaction, lack of culture and ignorance. It is completely unfounded and incorrect to show, as the authors of the film have done, the mass promotion to the leading positions of technically illiterate workers with reactionary views and attitudes. The producer and the author of the libretto have not understood that we highly esteem and boldly promote in our country only cultured people who are modern and who know their profession well, that we never promote people who are reactionary and deficient in culture, and that the Soviet authority has produced its own intelligentsia.
In October 1952, G. M. Malenkov, the spokesman of the Central Committee, told the Party Congress: “Cultured people, experts on the problems with which they have to cope, must be placed at the helm in industries and agriculture, in the Party and state apparatus.” One of the aspects of this policy is now visible in agriculture. An ordinary peasant can no longer become the chairman of a collective farm; this highest managerial post is reserved for the agricultural specialists with secondary or higher education. The peasants are still conceded the innocent pleasure of “electing” (unanimously, by show of hands) an educated man who has been selected in advance by the Party or the Ministry of Agriculture and whom the peasants may never have seen before.
Soviet industries are run on the principle of one-man command, which simply means that the manager of the factory is the boss who directs operations without interference by the employees and takes the whole responsibility for the fulfillment, or over-fulfillment, of the plan of production. The workers must comply with orders which are contrary to the regulations, when the management insists that they are necessary to achieve greater production. For instance, the Criminal Division of the Supreme Court of the U.S.S.R., on April 1, 1943, convicted a worker who had not reported for work on a day of rest when told to do so, although the worker claimed, rightly, that the order was irregular, since it had not been concerted with the factory trade union committee. The Plenary Session of the same Court convicted another worker in similar circumstances on February 10, 1944, declaring that workers must report for work on an official day of rest when ordered to do so, even if the management has failed to substitute another day of rest as required by law. The Court acknowledged that such orders would be incorrect, but said that they were nevertheless binding on the employees, whose disobedience should be punished as wilful absence.
In short, the intelligentsia have developed their own esprit de corps. Of course the Soviet Government, like any other, would like to have at its disposal an honest, devoted and scrupulous bureaucracy, but it finds misappropriations, embezzlements and abuses of all sorts, especially in the provinces where control by the central authorities is least effective. The local administrators form cliques. The secretary of the Party, the manager of the factory, the chairman of the collective farm, the secretary of the district soviet and of the local trade union, the procurator, and so on, now have similar educational backgrounds and comparable incomes. They are friends, and they try to “take care” of each other. This infuriates the Party leaders, who endlessly investigate and denounce. Malenkov told the last Party Congress:
Some leaders recruit the personnel not according to political and professional qualifications, but according to such criteria as family relationship, personal friendship or origins in the same part of the country. Frequently honest and expert employees, who have assumed a severe and impatient attitude toward defects in work and who have caused thereby some uneasiness to their superiors, are squeezed out. . . . In consequence of such distortion of the Party line in regard to the recruitment and the selection of the personnel there are being formed at some institutions small “family” circles of people who support each other and are bound by a kind of mutual protection system; they place the interests of their own group above those of the Party and the state.
The privileged position of the bureaucracy in the Soviet system intensifies the shortcomings of human nature.
At the bottom of the social pyramid are the unskilled workers of the cities and the peasants–the forgotten men of the régime. The peasants are at the very bottom. Even an unskilled worker at least has the benefits of state social insurance and firm wages, which do not change according to the profits or losses of the plant or institution which employs him. But the peasants, or collective farmers, lack even these safeguards. They are excluded from the state scheme of social insurance. Each collective farm has its own assistance fund, whose assets are provided by annual contributions, limited by law to 2 percent, from the yearly income of the collective. These incomes vary according to many factors–the acreage of land placed at the disposal of the collective, the fertility of the soil, the kind of products harvested, the weather and all the natural factors affecting agriculture. But if the collective cannot provide for the sick and the aged out of its own fund, they are left to the charity of their families and neighbors. Moreover, the state refuses to underwrite farmers’ incomes as it does for industrial or office workers, and they vary as the fortune of each collective farm varies.
Because of the fluctuating and uncertain rewards, peasants could be tempted to abandon the collectives and try their luck at factories, and the state has established a system of passports to prevent this. Every resident of a town must possess a passport, and no man or woman who lacks one can be given employment or lodgings. Heavy penalties are inflicted on persons who attempt to live in a city without such an identifying document, on police officials who tolerate it, and on the house managers and owners who rent lodgings to these unfortunates.
The October Revolution was presumably made for the benefit of the workers and the peasants. The present Soviet Government has a different objective: to use every means to increase the economic power of the state, whatever the consequences. The Communist politicians are as fascinated by the idea of building a highly-industrialized state as the Pharaohs were by the idea of building pyramids. The cost to the laborers who pile stones on stones to produce the structure means nothing. And in the shadow of this industrial pyramid a comparable stratification has developed in the Communist society. It is crowned at its top by the ruling politicians and the upper layer of the bureaucracy; its middle stratum is the lower layers of the intelligentsia and skilled workers; it stands on a vast base formed by the neglected masses of unskilled workers and peasants. The professional politicians who form the Central Committee with its inner ring of the Presidium (formerly the Political Bureau) cannot come in touch with the lower strata of the pyramid without making their way through the upper layer of the high bureaucracy. They are, in fact, cut off from the masses in whose name they pretend to address the world. They have no choice in the matter. A totalitarian government must be composed of these two elements–the professional politicians who form its brain, and the bureaucrats who are the skeleton of the structure. Industrialization at such a pace requires cutting home consumption to the bone. But the bureaucrat cannot be neglected. He must enjoy better living conditions than the “toiler,” and he must be surrounded with prestige. Those are the conditions of his active support of the régime, and this is the inescapable logic of the régime.
Are there any cracks in this imposing bureaucratic structure? One possible source of dissatisfaction is insecurity, since anyone may be fired out of hand and the whole hierarchy is from time to time wracked by purges. The severity of the intellectual censorship may be another. In the prewar days censorship was mainly political, and did not prevent an educated Soviet man from enjoying atonal music, for example, modern painting, or a Western play or novel. In the postwar years the control of thought and taste of educated men has gone to absurd lengths. But we must not forget the offsetting factors. The bulk of the bureaucracy is composed of Russians whose nationalistic feelings have been greatly flattered by the constant praise of the talents and achievements of the Russian nation, of her pre-revolutionary past and her heroes like Ivan the Terrible, Peter the Great, General Suvorov and General Kutuzov, and the dominant rôle she enjoys among the Soviet nationalities. Many bureaucrats are, indeed, non-Russian and must avoid showing attachment to their native lands–the Ukraine, the Baltic States, the Central Asian or Caucasian republics; despite their high incomes and honors, the rabid nationalism of their Russian colleagues must affront them. Even so, the bulk of the Soviet bureaucrats, especially in the higher brackets, are Russian or Russianized. They live without freedom of thought, but are otherwise pampered; and they doubtless find a powerful consolation in seeing their country become one of the two greatest World Powers, its frontiers stretched beyond the imagination of Tsarist imperialists, in control of one-third of Europe and with great influence over the policy of one of the largest Asian nations. What would happen if their allegiance were tested by an open struggle among their bosses–the members of the Presidium of the Central Committee–no one knows.
Anti-Globalism, Counter-Revolution, Nationalism, Resistance, Russia

Not the Men We’d Like, Doing Things that Need Doing…

I am the furthest thing from a russophile. And, I have no illusions about Vlad being a nice guy or benevolent leader. He is, however, committed to his country’s success and survival.

I also don’t believe in the chan-esque mythology of Trump’s 4D chess prowess. Nor in Q-anon’s allusionary “plan”. What I know is that Trump is the nearest thing to a nationalist that we’ve elected in 40 years. And, that a nationalist perspective is what made the US a superpower and, that without it, we will become the EU (is it a coincidence that EU rhymes with “iiieeew”?).

I hate to break it to all you oneworlders out there but, the human race needs nativist nationalism. And borders. And clear identities. Some would call my thoughts on it tribal and jingoist. And, maybe they are. Whatevs.

Trump and Putin, for all their collective faults, are the only national CEOs keeping this thing we call “civilization” going.  And, we need them.  For now.

Per normal, text from the article is included below so you don’t have to click on the link if you choose not to.

Russia’s Real Endgame

Russia’s Putin has never taken his eye off the ball. His ambition is not global hegemony or European conquest. Putin seeks what Russia has always sought: regional hegemony and a set of buffer states in eastern Europe and central Asia that can add to Russia’s strategic depth.

In Syria, Russia has the warm water port of Tartus — which is important when you consider that most Russian ports are ice-bound for months of the year.

It is strategic depth — the capacity to suffer massive invasions and still survive due to an ability to retreat to a core position and stretch enemy supply lines — that enabled Russia to defeat both Napoleon and Hitler. Putin also wants the modicum of respect that would normally accompany that geostrategic goal.

Understanding Putin is not much more complicated than that.

In the twenty-first century, a Russian sphere of influence is not achieved by conquest or subordination in the old Imperial or Communist style. It is achieved by close financial ties, direct foreign investment, free trade zones, treaties, security alliances, and a network of associations that resemble earlier versions of the EU

Russian military intervention in Crimea and eastern Ukraine is best understood not as a Russian initiative, but as a Russian reaction. It was a response to U.S. and U.K. efforts to attack Russia by pushing aggressively and prematurely for Ukraine membership in NATO. This was done by deposing a Putin ally in Kiev in early 2014.

This is not to justify Russia’s actions, merely to put them in a proper context. The time to peel off Ukraine for NATO was 1999, not 2014.

The Russian-Ukraine situation is a subset of the broader U.S.-Russian relationship. Here, the opposition comes not just from domestic opponents but from the globalist elite.

Globalization emerged in the 1990s as a consequences of the end of the Cold War and the reunification of Germany. For the first time since 1914, Russia, China and their respective empires could join the U.S., Western Europe and their former colonies in Latin America and Africa in a single global market.

Globalization relied on open borders, free trade, telecommunications, global finance, extended supply chains, cheap labor and freedom of the seas. Globalization as it existed from 1990 to 2007 made steady progress under the Bush-Clinton duopoly of power in the U.S. and like-minded leaders elsewhere. The enemy of globalization was nationalism, but nationalism was nowhere in sight.

The financial crisis of 2007–2008, caused by the elites’ own greed and inability to grasp the statistical properties of risk, put an end to the easy gains from globalization.

Ironically, globalization gained in the short-run despite financial calamity. The same elites who created disaster were empowered to “fix” the situation under the auspices of the G20 Leaders’ Summit. This global rescue began with the first G20 summit hastily organized by George W. Bush and Nicolas Sarkozy, then the President of France, in November 2008.

Despite the financial bailouts and central bank easy money of the decade following the crisis, robust self-sustaining growth in line with pre-crisis trends has never really returned. Instead the world has suffered through a ten-year depression (defined as depressed below-trend growth), which continues to this day.

What little growth emerged was captured mostly by the wealthy, which led to the greatest income inequality levels seen in over 80 years.

Discontent was palpable in middle-class and working class populations in the world’s major developed economies. This discontent morphed into political action. The result was the U.K. decision to leave the EU, called “Brexit,” the election of Donald Trump, and the rise of politicians such as Geert Wilders in the Netherlands and Marine Le Pen in France, among others.

What unites these politicians and political movements is nationalism. This can be defined as a desire to put national interests ahead of globalization. Nationalism can mean closing borders, restricting free trade to help local employment, fighting back against cheap labor and dumping with tariffs and trade adjustment assistance, and rejecting multilateral trade deals in favor of bilateral negotiations.

This brings us to the crux of the U.S.-Russia relationship.

Simply put, Putin and Trump are the two most powerful nationalists in the world. Any rapprochement between Russia and the U.S. is an existential threat to the globalist agenda.

This explains the vitriolic, hysterical, and relentless attacks on Trump and Putin.

The globalists have to keep Trump and Putin separated in order to have any hope of reviving the globalist agenda.

Just as Trump and Putin are the champions of nationalism, President Xi Jinping of China and Chancellor Angela Merkel of Germany have emerged as the champions of the globalist camp.

Understanding this dynamic requires consideration of the paradoxical roles of Xi and Merkel.

Xi positions himself as the leading advocate of globalization. The truth is more complex.

President Xi is the most nationalist of all major leaders. He continually puts China’s long-term interests first without particular regard for the well-being of the rest of the world.

But, China’s relative military and economic weakness, and potential social instability, require it to cooperate with the rest of the world on trade, climate change, and supply-chain logistics in order to grow. Xi is in a paradoxical position of being nationalist to the core, yet wearing a globalist veneer in order to pursue the nationalist long game.

Angela Merkel, Chancellor of Germany is also in a paradoxical position — but the opposite of Xi’s role. Merkel knows Germany must embrace globalism both because of its unique historical burden of being the source of three major wars (Franco-Prussian, World War I, and World War II), and the necessity of German integration with the EU and Eurozone.

At the same time, Merkel has advanced her globalist agenda by promoting German interests through exports and cheap foreign labor.

For the globalists, the world breaks down into Manichean struggle between the nationalists, Trump and Putin, and the globalists, Xi and Merkel. Globalists may be playing a two-sided game of nationalists versus globalists, but they need to widen the lens to see that the world today is really a three-party game.

There are really only three superpowers in the world today — Russia, China and the U.S. All other nations are secondary or tertiary powers who may be aligned with a superpower, neutral or independent, but who otherwise lack the ability to impose their will on others.

Some analysts may be surprised to see Russia on the superpower list, but the facts are indisputable. Russia is the twelfth largest economy in the world, has the largest landmass, is one of the three largest energy producers in the world, has abundant natural resources other than oil, has advanced weapons and space technology, an educated workforce and, of course, has the largest arsenal of nuclear weapons of any country.

Russia has enormous problems including adverse demographics, limited access to oceans, harsh weather, and limited fertile soil. Yet, none of these problems negate Russia’s native strengths.

Notwithstanding the prospect of improved relations, Putin remains the geopolitical chess master he has always been.

His long game involves the accumulation of gold, development of alternative payments systems, and ultimate demise of the dollar as the dominant global reserve currency.


Jim Rickards
for The Daily Reckoning