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UNCORKED

When has there ever been certainty?

by | Jun 5, 2023

The Economist

When has there ever been certainty?

by | Jun 5, 2023

None can deny whose strong arms made the winning difference in World War II. The same fingerprints can be found on the remnants of the Berlin Wall, and on the Iron Curtain not merely thrown open but torn off its rails in so doing lightening up many hundreds of millions of lives. The same hands too which acted so foremostly in Desert Storm and dextrously orchestrated the Oslo Accords and Good Friday Agreement. They were applied again in the tense liberation of Kosovo.

The reality is that from late 1941 all the way up to the late 1990s, the US seemed democracy’s peerless “policeman.” In fact, entering the new Millennium, few could have begrudged Washington considering itself something positively unique as the “unfailing” captain of Team Democracy. And yet, as we so sadly and shockingly discovered on 9/11, there were those who viewed the US unfavourably. True, there had been warning strikes, but nothing on the scale of what was inflicted on that fateful day, so shamelessly reminiscent of what had struck Pearl Harbour well over a half century before.

Events during that dramatic day in 2001 altered all our lives and, most significantly, changed US foreign policy for good (sic). For rather than be allowed to pursue his desired policy of “retiring” or reshoring the US from international competition, Bush Jnr was stopped from pulling US boots out of foreign ground to putting them down even harder. 9/11 (and before it, December 7th 1941) propelled the US into what would prove lengthy overseas engagements, a scale arguably not seen since it exited Vietnam just over 25 years earlier. The latter was, of course, one of the many direct or proxy conflicts so common during an overarching Cold War, which saw the US the key player in Team NATO and alliances across Asia, contending against a Soviet Union and Red China playing attacking roles on separate continental wings. And yet, by 2001, there was no Soviet Union, but instead a largely compliant and insolvent Russia. There was also a recoloured China; its hue changed by its near-death experience in Tiananmen Square. A new China embracing a self-defined “socialist market economy.”

In short, by the close of 2001, much had changed on the global playing field. So much in fact, a slimmed down and by then compliant Russia had been inducted to the G7 League which, briefly from 1997, was rebranded G8. Russia had, in effect, formally crossed the “sectarian divide” in a way few if any could have anticipated whilst the Cold War raged.

Let’s focus on late summer 2001. For those who may have forgotten, when 9/11 struck, Putin was the first world leader to phone condolences to the POTUS and the American people. We also mustn’t forget that Russia cooperated in the “democratic” WAR ON TERROR. For its part, China had by the close of 2001 been promoted into the World Trade Organisation; joining just in time for its exporters to capitalise on the monetary and fiscal injections made widely across the west in response to the despicable events of 9/11. With each passing season, China performed even more impressively, building up in the process ever greater financial reserves and an ever-growing global following. It, after all, used its increasing economic size and wealth to make transfer targets of nations which had been largely overlooked by Western teams; or if drafted into them, felt poorly treated having to exist, as it were, in their “reserves.” This brings us back to Russia.

The dissolution of the Warsaw Pact in which Moscow had dominated, not only meant the break-up of The Soviet team, but made free-agents of a wide array of Warsaw Pact players from the Baltic to the Black Sea and beyond. The EU and NATO fully capitalised on these easy signings. As they did, Russia felt ever more ill at ease and hemmed in. Such indeed was this disenchantment, that its behaviour became ever more “erratically unteam-like.” Not only did Russia break ranks by playing in Syria with the long-banned Iran, but in 2014, it performed a shocking professional tackle on one of its old teammates, taking our Crimea and a slice of Donbass. For its part, China became ever more vocal on drafting Taiwan back into its ranks. All very chilling and making for a potentially extremely nasty match. Yet it never needed to be as such.

At the dissolution of the Soviet Union in the early 1990s so by “association” came, as already noted, the effective end of the Warsaw Pact. With arguably its fiercest united opposition disbanded, Washington was given clear guidance couched in a warning, from the very man who could rightly claim to have been instrumental in forcing through the formation of NATO.

In a Washington Post op-ed published in 1998, the then 94-year-old George Keenan, wrote a “new long telegram.” This was a follow-up to the one he had sent over fifty years earlier, imploring something like NATO be forged to counter the expansionary threat coming from Moscow. In his update, the peerlessly experienced diplomat Keenan cautioned that NATO expansion would cause Russia to “react quite adversely” and would prove “a tragic mistake.” Seldom have diplomatic words been more prescient. For each time a former player from Team Warsaw Pact or USSR made clear its wish to take the colours of the EU and NATO, Moscow’s ire was raised even more. And yet, pursue them Brussels/Strasbourg and Washington, relentlessly and ominously, did. To be clear, I am in no way excusing Moscow’s actions in Ukraine, merely framing them in the context of the prophecy made by George Keenan.

As to what China has achieved since it joined the WTO in 2001, the answer is simply immense. China has come to a point where it has not merely once again made the world bipolar, it has become such an immense economic/geo-political rival to the US, that some fear the latter is trying to draw it into the Thucydides Trap; using Taiwan as the bait. I am conscious that one cannot rule out the error of China being prompted into something that could only harm its overall growth ambitions. This said I have confidence Beijing will avoid falling into such a trap, which would make us all descend into what would prove a devasting conflagration. Make no mistake, were Taiwan to become a lightning rod for US-Chinese military confrontation, we would all be confronted by economic Armageddon.

Regardless of whether one thinks matters should never have been allowed to return to such a Cold War chill, the cold, hard fact is, they have; but with one Very, Very Big Difference. Where during the Old Cold War China was practically an autarky, NOW it is economically imperious. And where before the US was up against a Soviet Union with a patently flawed economic model always destined to undermine it, Russia is now being financially underwritten by a China which has no need to militarily act when it can so readily continue to wield its considerable monetary might.

So, to those concerned we face an “uncertain” future I merely ask, when on earth has there ever been certainty? And second, where on earth has there ever been an economic behemoth anything quite like China?

About Savvas Savouri

About Savvas Savouri

Savvas has evenly divided his 33 year career in commercial finance between the Sell and Buy sides; the last 16 years as a Partner and Chief Economist at Toscafund. In the three years ahead of joining Tosca, Sav ran QuantMetriks, an independent advisory business he founded, utilising the global quant economics modelled launched in 1996. QM had been developed across a number of investment banks: from Credit Lyonnais, through Commerzbank & Lazard. Prior to entering ‘The City’ Sav earned Batchelor,  Masters and Doctoral degrees from the LSE, where he subsequently taught. He lectured over 1989-90 at The Institute of Statistics & Economics, University of Oxford, & was a visiting lecturer at Greenwich University 1990 & Moscow University, 1998. His work has been published in peer reviewed journals, including Economic Policy (1990), the Scottish Journal (1992) of Political Economy and Economic Journal (1992) as well as contributing chapters to a number of books covering empirical economics and econometrics. 

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