The blog provides a left-wing non-partisan perspective on socio-economic issues in Russia and throughout the world. The focus is on qualitative development of national economic systems and ensuring flexibility in economic policies to meet the challenges of the 21st century. Email:


“It’s the rich men’s world”, sang the Swedish quartet ABBA in 1976. And they were quite right about it. As the world struggles to find a way to boost global consumption, only the lazy did say nothing about the rich getting richer and the poor getting even poorer. The globalization viewed by some as an economic model able to solve numerous economic problems started cracking in the early 2000’s and finally burst in 2007-2008. The big business, closely connected with governments throughout the world, formed a long line of bailout recipients while the rest had to tighten their belts. Those calling for the government to get off their backs in the 1980's were now running head over heels for public funds. How ironic!

So the global economic system, like any national one, is not as expandable as modern economics thought. Again, the first element of the system that got at odds with the expansionary sentiments was consumption. There are many ways to boost supply, but ways to boost solvent demand are quite few. As a result, US citizens ended up shouldering the “heavy burden” of excessive consumption stimulated by cheap credit. The military-political system, which still supports the US dollar after the collapse of the Bretton Woods arrangements, made American consumption a rather unique resource to trade on the global market. Like a trump card pulled out of a sleeve during a game, it became an undisputable argument in political talks. Those controlling it could decide fates of entire nations.

Some have even claimed that the world was experiencing a new era of economic development with open markets and globalization leading entrepreneurs throughout the world to new successes without a need to look back on their national economies as those were no longer relevant for further growth. What an arrogant opinion! Considering the current architecture of the world economy, how can anybody honestly say that national economies were no longer relevant?

In fact, globalization is possible because there are national economies to expand into. As long as local economies’ production costs remain higher than the worldwide average, outsourcing is never going out of fashion. As long as there are national economies unable to process their own raw materials into cheap and high-quality consumer products, those capable of doing it will continue making a good buck making the former economies pay through the nose for the work and their own resources they had extracted.

Globalization seems to take no notice of certain economic and social processes leaving them for local economies to worry about. This does not only include environmental issues, but also things like rising costs of living, cultural shifts, the influence of media on youth, crimes, education, reproduction of labor force, etc. In other words, globalization is only viable if local economies are willing to solve local problems. On the global scale, there is nobody else to do that. International organizations claim to be involved, but their involvement is rather limited.

As long as there are ways to externalize costs by pushing them onto the local economies, globalization works like clockwork. The primary source of what most people need (i.e. food, shelter, healthcare, education, jobs, incomes, etc.) is national economies. Those whose needs are completely covered by the global economy (if such exist at all) are in the minority and most likely belong to the super-rich. The majority of us still depends on local economic conditions, and it would be foolish to believe that the global economy is independent of them. On local markets, transnational corporations seek for what can only be obtained locally – capital, natural resources, labor, investments, etc. Although my readers may argue that some of those economic factors can come from international markets, no-one will dispute the fact that certain factors (e.g. labor) simply cannot be found anywhere else but on local markets. Even offshore companies offering various international services are all based in some local economies, whose leadership decided decades ago to turn a blind eye to their non-residents' international business activities. International business dances around local economies, figuratively speaking. In fact, is the world economy anything else but a combination of local economies working as a single mechanism? The world economy cannot isolated from local economies. In this interconnected world of ours, local economic problems sooner or later trigger global economic catastrophes.

In other words, globalization cannot be viewed outside the framework of national economies because it is in national economies that global corporations make their profits. Local economies generate the global growth, and, without it, globalization is nothing. In fact, globalization is a method of profit-extraction employed by a group of local economies at the expense of all other local economies. This goes against the popular talk of the multi-vector globalization bringing prosperity to all. In fact, its vector has a very clear direction – from the economic periphery to the economic centers. This centripetal direction is the very essence of globalization.
Boris Anisimov



A Future Anglo-German War Will Become an Armed Conflict between Two Groups of Powers

The central factor of the period of world history through which we are now passing is the rivalry between England and Germany. This rivalry must inevitably lead to an armed struggle between them, the issue of which will, in all probability, prove fatal to the vanquished side. The interests of these two powers are far too incompatible, and their simultaneous existence as world powers will sooner or later prove impossible. On the one hand, there is an insular State, whose world importance rests upon its domination of the sea, its world trade, and its innumerable colonies. On the other, there is a powerful continental empire, whose limited territory is insufficient for an increased population. It has therefore openly and candidly declared that its future is on the seas. It has, with fabulous speed, developed an enormous world commerce, built for its protection a formidable navy, and, with its famous trademark, "Made in Germany," created a mortal danger to the industrial and economic prosperity of its rival. Naturally, England cannot yield without a fight, and between her and Germany a struggle for life or death is inevitable.

The armed conflict impending as a result of this rivalry cannot be confined to a duel between England and Germany alone. Their resources are far too unequal, and, at the same time, they are not sufficiently vulnerable to each other. Germany could provoke rebellion in India, in South Africa, and, especially, a dangerous rebellion in Ireland, and paralyze English sea trade by means of privateering and, perhaps, submarine warfare, thereby creating for Great Britain difficulties in her food supply; but, in spite of all the daring of the German military leaders, they would scarcely risk landing in England, unless a fortunate accident helped them to destroy or appreciably to weaken the English navy. As for England, she will find Germany absolutely invulnerable. All that she may achieve is to seize the German colonies, stop German sea trade, and, in the most favorable event, annihilate the German navy, but nothing more. This, however, would not force the enemy to sue for peace. There is no doubt, therefore, that England will attempt the means she has more than once used with success, and will risk armed action only after securing participation in the war, on her own side, of powers stronger in a strategical sense. But since Germany, for her own part, will not be found isolated, the future Anglo-German war will undoubtedly be transformed into an armed conflict between two groups of powers, one with a German, the other with an English orientation.

It Is Hard to Discover Any Real Advantages to Russia in Rapprochement with England

Until the Russo-Japanese War, Russian policy has neither orientation. From the time of the reign of Emperor Alexander 111, Russia had a defensive alliance with France, so firm as to assure common action by both powers in the event of attack upon either, but, at the same time, not so close as to obligate either to support unfailingly, with armed force, all political actions and claims of the ally. At the same time, the Russian Court maintained the traditional friendly relations, based upon ties of blood, with the Court of Berlin. Owing precisely to this conjuncture, peace among the great powers was not disturbed in the course of a great many years, in spite of the presence of abundant combustible material in Europe. France, by her alliance with Russia, was guaranteed against attack by Germany; the latter was safe, thanks to the tried pacifism and friendship of Russia, from revanche ambitions on the part of France; and Russia was secured, thanks to Germany's need of maintaining amicable relations with her, against excessive intrigues by Austria-Hungary in the Balkan peninsula. Lastly, England, isolated and held in check by her rivalry with Russia in Persia, by her diplomats' traditional fear of our advance on India, and by strained relations with France, especially notable at the time of the well-known Fashoda incident, viewed with alarm the increase of Germany's naval power, without, however, risking an active step.

The Russo-Japanese War radically changed the relations among the great powers and brought England out of her isolation. As we know, all through the Russo-Japanese War, England and America observed benevolent neutrality toward Japan, while we enjoyed a similar benevolent neutrality from France and Germany. Here, it would seem, should have been the inception of the most natural political combination for us. But after the war, our diplomacy faced abruptly about and definitely entered upon the road toward rapprochement with England. France was drawn into the orbit of British policy; there was formed a group of powers of the Triple Entente, with England playing the dominant part; and a clash, sooner or later, with the powers grouping themselves around Germany became inevitable.

Now, what advantages did the renunciation of our traditional policy of distrust of England and the rupture of neighborly, if not friendly, relations with Germany promise us then and at present?

Considering with any degree of care the events which have taken place since the Treaty of Portsmouth, we find it difficult to perceive any practical advantages gained by us in rapprochement with England. The only benefit-improved relations with Japan-is scarcely a result of the Russo-English rapprochement. There is no reason why Russia and Japan should not live in peace; there seems to be nothing over which they need quarrel. All Russia's objectives in the Far East, if correctly understood, are entirely compatible with Japan's interests. These objectives, in their essentials, are very modest. The too broad sweep of the imagination of overzealous executive officials, without basis in genuine national interests, on the one hand, and the excessive nervousness and impressionability of Japan, on the other, which erroneously regarded these dreams as a consistently executed policy-these were the things that provoked a clash which a more capable diplomacy would have managed to avoid.

Russia needs neither Korea nor even Port Arthur. An outlet to the open sea is undoubtedly useful, but the sea in itself is, after all, not a market, but merely a road to a more advantageous delivery of goods at the consuming markets. As a matter of fact, we do not possess, and shall not for a long time possess any goods in the Far East that promise any considerable profits in exportation abroad. Nor are there any markets for the export of our products. We cannot expect a great supply of our export commodities to go to industrially and agriculturally developed America, to poor, but likewise industrial, Japan, or even to the maritime sections of China and remoter markets, where our exports would inevitably meet the competition of goods from the industrially stronger rival powers. There remains the interior of China, with which our trade is carried on, chiefly overland. Consequently, an open port would aid the import of foreign merchandise more than the export of our own products.

Japan, on her part, no matter what is said, has no desire for our Far Eastern possessions. The Japanese are by nature a southern people, and the harsh environment of our Far Eastern borderland cannot attract them. We know that even within Japan itself northern Yezo is sparsely populated, while apparently Japanese colonization is making little headway even in the southern part of Sakhalin Island, ceded to Japan under the Treaty of Portsmouth. After taking possession of Korea and Formosa, Japan will hardly go farther north, and her ambitions, it may be assumed, will turn rather in the direction of the Philippine Islands, Indo-China, Java, Sumatra, and Borneo. The most she might desire would be the acquisition, for purely commercial reasons, of a few more sections of the Manchurian railway.

In a word, peaceable coexistence, nay, more, a close rapprochement, between Russia and Japan in the Far East is perfectly natural, regardless of any mediation by England. The grounds for agreement are self-evident. Japan is not a rich country, and the simultaneous upkeep of a strong army and a powerful navy is hard for her. Her insular situation drives her to strengthen her naval power, and alliance with Russia would allow her to devote all her attention to her navy, especially vital in view of her imminent rivalry with America, leaving the protection of her interests on the continent to Russia. On our part, we, having the Japanese navy to protect our Pacific coast, could give up once for all the dream, impossible to us, of creating a navy in the Far East.

Thus, so far as our relations with Japan are concerned, the rapprochement with England has yielded us no real advantage. And it has gained us nothing in the sense of strengthening our position in Manchuria, Mongolia, or even the Ulianghai territory, where the uncertainty of our position bears witness that the agreement with England has certainly not freed the hands of our diplomats. On the contrary, our attempt to establish relations with Tibet met with sharp opposition from England.

In Persia, also, our position has been no better since the conclusion of this agreement. Every one recalls our predominant influence in that country under the Shah Nasr-Eddin, that is, exactly at a time when our relations with England were most strained. From the moment of our accord with the latter, we have found ourselves drawn into a number of strange attempts to impose upon the Persian people an entirely needless constitution, with the result that we ourselves contributed to the overthrow, for the benefit of our inveterate enemies, of a monarch who was devoted to Russia. That is, not only have we gained nothing, but we have suffered a loss all along the line, ruining our prestige and wasting many millions of rubles, even the precious blood of Russian soldiers, who were treacherously slain and, to please England, not even avenged.
The worst results, however, of the accord with England--and of the consequent discord with Germany--have been felt in the Near East. As we know, it was Bismarck who coined that winged phrase about the Balkan problem not being worth to Germany the bones of a single Pomeranian grenadier. Later the Balkan complications began to attract much more attention from German diplomacy, which had taken the "Sick Man" under its protection, but even then Germany, for a long time, failed to show any inclination to endanger relations with Russia in the interests of Balkan affairs. The proofs are patent. During the period of the Russo-Japanese War and the ensuing turmoil in our country, it would have been very easy for Austria to realize her cherished ambitions in the Balkan peninsula. But at that time Russia had not yet linked her destinies with England, and Austria-Hungary was forced to lose an opportunity most auspicious for her purposes.

No sooner had we taken the road to closer accord with England, however, than there immediately followed the annexation of Bosnia and Herzegovina, a step which might have been taken so easily and painlessly in 1905 or 1906. Next came the Albanian question and the combination with the Prince of Wied. Russian diplomacy attempted to answer Austrian intrigue by forming a Balkan league, but this combination, as might have been expected, proved to be quite unworkable. Intended to be directed against Austria, it immediately turned on Turkey and fell apart in the process of dividing the spoils taken from the latter. The final result was merely the definite attachment of Turkey to Germany, in whom, not without good reason, she sees her sole protector. In short, the Russo-British rapprochement evidently seems to Turkey as tantamount to England's renouncing her traditional policy of closing the Dardanelles to us, while the creation of the Balkan league, under the auspices of Russia, appeared as a direct threat to the continued existence of Turkey as a European power.

To sum up, the Anglo-Russian accord has brought us nothing of practical value up to this time, while for the future, it threatens us with an inevitable armed clash with Germany.

Fundamental Alignments in the Coming War

Under what conditions will this clash occur and what will be its probable consequences? The fundamental groupings in a future war are self-evident: Russia, France, and England, on the one side, with Germany, Austria, and Turkey, on the other. It is more than likely that other powers, too, will participate in that war, depending upon circumstances as they may exist at the war's outbreak. But, whether the immediate cause for the war is furnished by another clash of conflicting interests in the Balkans, or by a colonial incident, such as that of Algeciras, the fundamental alignment will remain unchanged.

Italy, if she has any conception of her real interests, will not join the German side. For political as well as economic reasons, she undoubtedly hopes to expand her present territory. Such an expansion may be achieved only at the expense of Austria, on one hand, and Turkey, on the other. It is, therefore, natural for Italy not to join that party which would safeguard the territorial integrity of the countries at whose expense she hopes to realize her aspirations. Furthermore, it is not out of the question that Italy would join the anti-German coalition, if the scales of war should incline in its favor, in order to secure for herself the most favorable conditions in sharing the subsequent division of spoils.

In this respect, the position of Italy is similar to the probable position of Rumania, which, it may be assumed, will remain neutral until the scales of fortune favor one or another side. Then, animated by normal political self-interest, she will attach herself to the victors, to be rewarded at the expense of either Russia or Austria. Of the other Balkan States, Serbia and Montenegro will unquestionably join the side opposing Austria, while Bulgaria and Albania (if by that time they have not yet formed at least the embryo of a State) will take their stand against the Serbian side. Greece will in all probability remain neutral or make common cause with the side opposing Turkey, but that only after the issue has been more or less determined. The participation of other powers will be incidental, and Sweden ought to be feared, of course, in the ranks of our foes.

Under such circumstances, a struggle with Germany presents to us enormous difficulties, and will require countless sacrifices. War will not find the enemy unprepared, and the degree of his preparedness will probably exceed our most exaggerated calculations. It should not be thought that this readiness is due to Germany's own desire for war. She needs no war, so long as she can attain her object-the end of exclusive domination of the seas. But, once this vital object is opposed by the coalition, Germany will not shrink from war, and, of course, will even try to provoke it, choosing the most auspicious moment.

The Main Burden of the War Will Fall on Russia

The main burden of the war will undoubtedly fall on us, since England is hardly capable of taking a considerable part in a continental war, while France, poor in man power, will probably adhere to strictly defensive tactics, in view of the enormous losses by which war will be attended under present conditions of military technique. The part of a battering-ram, making a breach in the very thick of the German defense, will be ours, with many factors against us to which we shall have to devote great effort and attention.

From the sum of these unfavorable factors we should deduct the Far East. Both America and Japan--the former fundamentally, and the latter by virtue of her present political orientation--are hostile to Germany, and there is no reason to expect them to act on the German side. Furthermore, the war, regardless of its issue, will weaken Russia and divert her attention to the West, a fact which, of course, serves both Japanese and American interests. Thus, our rear will be sufficiently secure in the Far East, and the most that can happen there will be the extortion from us of some concessions of an economic nature in return for benevolent neutrality. Indeed, it is possible that America or Japan may join the anti-German side, but, of course, merely as usurpers of one or the other of the unprotected German colonies.

There can be no doubt, however, as to an outburst of hatred for us in Persia, and a probable unrest among the Moslems of the Caucasus and Turkestan; it is possible that Afghanistan, as a result of that unrest, may act against us; and, finally, we must foresee very unpleasant complications in Poland and Finland. In the latter, a rebellion will undoubtedly break out if Sweden is found in the ranks of our enemies. As for Poland, it is not to be expected that we can hold her against our enemy during the war. And after she is in his power, he will undoubtedly endeavor to provoke an insurrection which, while not in reality very dangerous, must be considered, nevertheless, as one of the factors unfavorable to us, especially since the influence of our allies may induce us to take such measures in our relations with Poland as will prove more dangerous to us than any open revolt.

Are we prepared for so stubborn a war as the future war of the European nations will undoubtedly become? This question we must answer, without evasion, in the negative. That much has been done for our defense since the Japanese war, I am the last person to deny, but even so, it is quite inadequate considering the unprecedented scale on which a future war will inevitably be fought. The fault lies, in a considerable measure, in our young legislative institutions, which have taken a dilettante interest in our defenses, but are far from grasping the seriousness of the political situation arising from the new orientation which, with the sympathy of the public, has been followed in recent years by our Ministry of Foreign Affairs.

The enormous number of still unconsidered legislative bills of the war and navy departments may serve as proof of this: for example, the plan of the organization of our national defense proposed to the Duma as early as the days of Secretary of State Stolypin. It cannot be denied that, in the matter of military instruction, according to the reports of specialists, we have achieved substantial improvements, as compared with the time before the Japanese War. According to the same specialists, our field artillery leaves nothing to be desired; the gun is entirely satisfactory, and the equipment convenient and practical. Yet, it must be admitted that there are substantial shortcomings in the organization of our defenses.

In this regard we must note, first of all, the insufficiency of our war supplies, which, certainly, cannot be blamed upon the war department, since the supply schedules are still far from being executed, owing to the low productivity of our factories. This insufficiency of munitions is the more significant since, in the embryonic condition of our industries, we shall, during the war, have no opportunity to make up the revealed shortage by our own efforts, and the closing of the Baltic as well as the Black Sea will prevent the importation from abroad of the defense materials which we lack.

Another circumstance unfavorable to our defense is its far too great dependence, generally speaking, upon foreign industry, a fact which, in connection with the above noted interruption of more or less convenient communications with abroad, will create a series of obstacles difficult to overcome. The quantity of our heavy artillery, the importance of which was demonstrated in the Japanese War, is far too inadequate, and there are few machine guns. The organization of our fortress defenses has scarcely been started, and even the fortress of Reval, which is to defend the road to the capital, is not yet finished.

The network of strategic railways is inadequate. The railways possess a rolling stock sufficient, perhaps, for normal traffic, but not commensurate with the colossal demands which will be made upon them in the event of a European war. Lastly, it should not be forgotten that the impending war will be fought among the most civilized and technically most advanced nations. Every previous war has invariably been followed by something new in the realm of military technique, but the technical backwardness of our industries does not create favorable conditions for our adoption of the new inventions.

The Vital Interests of Germany and Russia Do Not Conflict

All these factors are hardly given proper thought by our diplomats, whose behavior toward Germany is, in some respects, even aggressive, and may unduly hasten the moment of armed conflict, a moment which, of course, is really inevitable in view of our British orientation.
The question is whether this orientation is correct, and whether even a favorable issue of the war promises us such advantages as would compensate us for all the hardships and sacrifices which must attend a war unparalleled in its probable strain.

The vital interests of Russia and Germany do not conflict. There are fundamental grounds for a peaceable existence of these two States. Germany's future lies on the sea, that is, in a realm where Russia, essentially the most continental of the great powers, has no interests whatever. We have no overseas colonies, and shall probably never have them, and communication between the various parts of our empire is easier overland than by water. No surplus population demanding territorial expansion is visible, but, even from the viewpoint of new conquests, what can we gain from a victory over Germany? Posen, or East Prussia? But why do we need these regions, densely populated as they are by Poles, when we find it difficult enough to manage our own Russian Poles? Why encourage centripetal tendencies, that have not ceased even to this day in the Vistula territory, by incorporating in the Russian State the restless Posnanian and East Prussian Poles, whose national demands even the German Government, which is more firm than the Russian, cannot stifle?

Exactly the same thing applies to Galicia. It is obviously disadvantageous to us to annex, in the interests of national sentimentalism, a territory that has lost every vital connection with our fatherland. For, together with a negligible handful of Galicians, Russian in spirit, how many Poles, Jews, and Ukrainian Uniates we would receive! The so-called Ukrainian, or Mazeppist, movement is not a menace to us at present, but we should not enable it to expand by increasing the number of turbulent Ukrainian elements, for in this movement there undoubtedly lies the seed of an extremely dangerous Little Russian separatism which, under favorable conditions, may assume quite unexpected proportions. The obvious aim of our diplomacy in the rapprochement with England has been to open the Straits. But a war with Germany seems hardly necessary for the attainment of this object, for it was England, and not Germany at all, that closed our outlet from the Black Sea. Was it not because we made sure of the cooperation of the later power, that we freed ourselves in 1871 from the humiliating restrictions imposed upon us by England under the Treaty of Paris?

Also, there is reason to believe that the Germans would agree sooner than the English to let us have the Straits, in which they have only a slight interest, and at the price of which they would gladly purchase our alliance.

Moreover, we should not cherish any exaggerated hopes from our occupation of the Straits. Their acquisition would be advantageous to us only as they served to close the Black Sea to others, making it an inland sea for us, safe from enemy attack.

The Straits would not give us an outlet to the open sea, however, since on the other side of them there lies a sea consisting almost wholly of territorial waters, a sea dotted with numerous islands where the British navy, for instance, would have no trouble whatever in closing to us every inlet and outlet, irrespective of the Straits. Therefore, Russia might safely welcome an arrangement which, while not turning the Straits over to our direct control, would safeguard us against a penetration of the Black Sea by an enemy fleet. Such an arrangement, attainable under favorable circumstances without any war, has the additional advantage that it would not violate the interests of the Balkan States, which would not regard our seizure of the Straits without alarm and quite natural jealousy.

In Trans-Caucasia we could, as a result of war, expand territorially only at the expense of regions inhabited by Armenians, a move which is hardly desirable in view of the revolutionary character of present Armenian sentiment, and of its dream of a greater Armenia; and in this region, Germany, were we allied to her, would certainly place even fewer obstacles in our way than England. Those territorial and economic acquisitions which might really prove useful to us are available only in places where our ambitions may meet opposition from England, but by no means from Germany. Persia, the Pamir, Kuldja, Kashgar, Dzungaria, Mongolia, the Ulianghai territory-all these are regions where the interests of Russia and Germany do not conflict, whereas the interests of Russia and England have clashed there repeatedly.

And Germany is in exactly the same situation with respect to Russia. She could seize from us, in case of a successful war, only such territories as would be of slight value to her, and because of their population, would prove of little use for colonization; the Vistula territory, with a Polish-Lithuanian population, and the Baltic provinces, with a Lettish-Estonian population, are all equally turbulent and anti-German.

Russia's Economic Advantages and Needs Do Not Conflict with Germany's

It may be argued, however, that, under modern conditions in the various nations, territorial acquisitions are of secondary importance, while economic interests take first rank. But in this field, again, Russia's advantages and needs do not conflict with Germany's as much as is believed. It is, of course, undeniable that the existing Russo-German trade agreements are disadvantageous to our agriculture and advantageous to Germany's, but it would be hardly fair to ascribe this circumstance to the treachery and unfriendliness of Germany.

It should not be forgotten that these agreements are in many of their sections advantageous to us. The Russian delegates who concluded these agreements were confirmed protagonists of a development of Russian industry at any cost, and they undoubtedly made a deliberate sacrifice, at least to some extent, of the interests of Russian agriculture to the interests of Russian industry. Furthermore, we ought not to forget that Germany is far from being the direct consumer of the greater share of our agricultural exports abroad. For the greater share of our agricultural produce, Germany acts merely as middleman, and so it is for us and the consuming markets to establish direct relations and thus avoid the expensive German mediation. Lastly, we should keep in mind that the commercial relations of States depend on their political understandings, for no country finds advantage in the economic weakening of an ally but, conversely, profits by the ruin of a political foe. In short, even though it be obvious that the existing Russo-German commercial treaties are not to our advantage, and that Germany, in concluding them, availed herself of a situation that happened to be in her favor-in other words, forced us to the wall-this action should have been expected from Germany and thought of. It should not, however, be looked upon as a mark of hostility toward us, but rather as an expression of healthy national self-interest, worthy of our emulation. Aside from that, we observe, in the case of Austria-Hungary, an agricultural country that is in a far greater economic dependence upon Germany than ours, but nevertheless, is not prevented from attaining an agricultural development such as we may only dream of.

In view of what has been said, it would seem that the conclusion of a commercial treaty with Germany, entirely acceptable to Russia, by no means requires that Germany first be crushed. It will be quite sufficient to maintain neighborly relations with her, to make a careful estimate of our real interests in the various branches of national economy, and to engage in long, insistent bargaining with German delegates, who may be expected to protect the interests of their own fatherland and not ours.

But I would go still further and say that the ruin of Germany, from the viewpoint of our trade with her, would be disadvantageous to us. Her defeat would unquestionably end in a peace dictated from the viewpoint of England's economic interests. The latter will exploit to the farthest limit any success that falls to her lot, and we will only lose, in a ruined Germany without sea routes, a market which, after all, is valuable to us for our otherwise unmarketable products.
In respect to Germany's economic future, the interests of Russia and England are diametrically opposed. For England, it is profitable to kill Germany's maritime trade and industry, turning her into a poor and, if possible, agricultural country. For us, it is of advantage for Germany to develop her sea-going commerce and the industry which serves it, so as to supply the remotest world markets, and at the same time open her domestic market to our agricultural products, to supply her large working population.

But, aside from the commercial treaties, it has been customary to point out the oppressive character of German domination in Russian economic life, and the systematic penetration of German colonization into our country, as representing a manifest peril to the Russian State. We believe, however, that fears on these grounds are considerably exaggerated. The famous "Drang nach Osten" was in its own time natural and understandable, since Germany's land could not accommodate her increased population, and the surplus was driven in the direction of the least resistance, i.e., into a less densely populated neighboring country. The German Government was compelled to recognize the inevitability of this movement, but could hardly look upon it as to its own interests. For, after all, it was Germans who were being lost to the influence of the German State, thus reducing the man power of their own country. Indeed, the German Government made such strenuous efforts to preserve the connection between its emigrants and their old fatherland that it adopted even the unusual method of tolerating dual citizenship. It is certain, however, that a considerable proportion of German emigrants definitely and irrevocably settled in their new homes, and slowly broke their ties with the old country. This fact, obviously incompatible with Germany's State interests, seems to have been one of the incentives which started her upon a colonial policy and maritime commerce, previously so alien to her. And at present, as the German colonies increase and there is an attendant growth of German industry and naval commerce, the German colonization movement decreases, in a measure, and the day is not remote when the "Drang nach Osten" will become nothing more than a subject for history.
In any case, the German colonization, which undoubtedly conflicts with our State interests, must be stopped, and here, again, friendly relations with Germany cannot harm us. To express a preference for a German orientation does not imply the advocacy of Russian vassalage to Germany, and, while maintaining friendly and neighborly intercourse with her, we must not sacrifice our State interests to this object. But Germany herself will not object to measures against the continued flow of German colonists into Russia. To her, it is of greater benefit to turn the wave of emigration toward her own colonies. Moreover, even before Germany had colonies, when her industry was not yet sufficiently developed to employ the entire population, the German Government did not feel justified in protesting against the restrictive measures that were adopted against foreign colonization during the reign of Alexander III.

As regards the German domination in the field of our economic life, this phenomenon hardly justifies the complaints usually voiced against it. Russia is far too poor, both in capital and in industrial enterprise, to get along without a large import of foreign capital. A certain amount of dependence upon some kind of foreign capital is, therefore, unavoidable, until such time as the industrial enterprise and material resources of our population develop to a point where we may entirely forego the services of foreign investors and their money. But as long as we do require them, German capital is more advantageous to us than any other.

First and foremost, this capital is cheaper than any other, being satisfied with the lowest margin of profit. This, to a large extent, explains the relative cheapness of German products, and their gradual displacement of British products in the markets of the world. The lower demands of German capital, as regards returns, have for their consequence Germany's readiness to invest in enterprises which, because of their relatively small returns, are shunned by other foreign investor;. Also, as a result of that relative cheapness of German capital, its influx into Russia is attended by a smaller outflow of investors' profits from Russia, as compared with French and English investments, and so a larger amount of rubles remain in Russia. Moreover, a considerable proportion of the profits made on German investments in Russian industry do not leave our country at all, but are spent in Russia.

Unlike the English or French, the German capitalists, in most cases, come to stay in Russia, themselves, with their money. It is this very German characteristic which explains in a considerable degree the amazing number of German industrialists, manufacturers, and mill owners in our midst, as compared with the British and French.

The latter live in their own countries, removing from Russia the profits produced by their enterprises, down to the last kopek. The German investors, on the contrary, live in Russia for long periods, and not infrequently settle down permanently. Whatever may be said to the contrary, the fact is that the Germans, unlike other foreigners, soon feel at home in Russia and rapidly become Russianized. Who has not seen Frenchmen and Englishmen, for example, who have spent almost their whole lives in Russia and yet do not speak a word of Russian? On the other hand, are there many Germans here who cannot make themselves understood in Russian, even though it be with a strong accent and in broken speech? Nay, more-who has not seen genuine Russians, orthodox, loyal with all their hearts dedicated to the principles of the Russian State, and yet only one or two generations removed from their German emigrant ancestry? Lastly, we must not forget that Germany herself is, to a certain extent, interested in our economic well-being. In this regard, Germany differs, to our advantage, from other countries, which are interested exclusively in obtaining the largest possible returns from capital invested in Russia, even at the cost of the economic ruin of this country. Germany, however, in her capacity of permanent-although, of course, not unselfish-middleman for our foreign trade, has an interest in preserving the productive resources of our country, as a source of profitable intermediary operations for her.

Even a Victory over Germany Promises Russia an Exceedingly Unfavorable Prospect

In any case, even if we were to admit the necessity for eradicating German domination in the field of our economic life, even at the price of a total banishment of German capital from Russian industry, appropriate measures could be taken. it would seem, without war against Germany. Such a war will demand such enormous expenditures that they will many times exceed the more than doubtful advantages to us in the abolition of the German [economic] domination. More than that, the result of such a war will be an economic situation compared with which the yoke of German capital will seem easy.

For there can be no doubt that the war will necessitate expenditures which are beyond Russia's limited financial means. We shall have to obtain credit from allied and neutral countries, but this will not be granted gratuitously. As to what will happen if the war should end disastrously for us, I do not wish to discuss now. The financial and economic consequences of defeat can be neither calculated nor fore-seen, and will undoubtedly spell the total ruin of our entire national economy.
But even victory promises us extremely unfavorable financial prospects; a totally ruined Germany will not be in a position to compensate us for the cost involved. Dictated in the interest of England, the peace treaty will not afford Germany opportunity for sufficient economic recuperation to cover our war expenditures, even at a distant time. The little which we may perhaps succeed in extorting from her will have to be shared with our allies, and to our share there will fall but negligible crumbs, compared with the war cost. Meantime, we shall have to pay our war loans, not without pressure by the allies. For, after the destruction of German power, we shall no longer be necessary to them. Nay, more, our political might, enhanced by our victory, will induce them to weaken us, at least economically. And so it is inevitable that, even after a victorious conclusion of the war, we shall fall into the same sort of financial and economic dependence upon our creditors, compared with which our present dependence upon German capital will seem ideal.

However, no matter how sad may be the. economic prospects which face us as a result of union with England, and, by that token, of war with Germany, they are still of secondary importance when we think of the political consequences of this fundamentally unnatural alliance.

A Struggle Between Russia and Germany Is Profoundly Undesirable to Both Sides, as It Amounts to a Weakening of the Monarchist Principle

It should not be forgotten that Russia and Germany are the representatives of the conservative principle in the civilized world, as opposed to the democratic principle, incarnated in England and, to an infinitely lesser degree, in France. Strange as it may seem, England, monarchistic and conservative to the marrow at home, has in her foreign relations always acted as the protector of the most demagogical tendencies, invariably encouraging all popular movements aiming at the weakening of the monarchical principle.

From this point of view, a struggle between Germany and Russia, regardless of its issue, is profoundly undesirable to both sides, as undoubtedly involving the weakening of the conservative principle in the world of which the above-named two great powers are the only reliable bulwarks. More than that, one must realize that under the exceptional conditions which exist, a general European war is mortally dangerous both for Russia and Germany, no matter who wins. It is our firm conviction, based upon a long and careful study of all contemporary subversive tendencies, that there must inevitably break out in the defeated country a social revolution which, by the very nature of things, will spread to the country of the victor.

During the many years of peaceable neighborly existence, the two countries have become united by many ties, and a social upheaval in one is bound to affect the other. That these troubles will be of a social, and not a political, nature cannot be doubted, and this will hold true, not only as regards Russia, but for Germany as well. An especially favorable soil for social upheavals is found in Russia, where the masses undoubtedly profess, unconsciously, the principles of Socialism. In spite of the spirit of antagonism to the Government in Russian society, as unconscious as the Socialism of the broad masses of the people, a political revolution is not possible in Russia, and any revolutionary movement inevitably must degenerate into a Socialist movement. The opponents of the government have no popular support. The people see no difference between a government official and an intellectual. The Russian masses, whether workmen or peasants, are not looking for political rights, which they neither want nor comprehend.

The peasant dreams of obtaining a gratuitous share of somebody else's land; the workman, of getting hold of the entire capital and profits of the manufacturer. Beyond this, they have no aspirations. If these slogans are scattered far and wide among the populace, and the Government permits agitation along these lines, Russia will be flung into anarchy, such as she suffered in the ever-memorable period of troubles in 1905-1906. War with Germany would create exceptionally favorable conditions for such agitation. As already stated, this war is pregnant with enormous difficulties for us, and cannot turn out to be a mere triumphal march to Berlin. Both military disaster,-partial ones, let us hope-and all kinds of shortcomings in our supply are inevitable. In the excessive nervousness and spirit of opposition of our society, these events will be given an exaggerated importance, and all the blame will be laid on the Government.

It will be well if the Government does not yield, but declares directly that in time of war no criticism of the governmental authority is to be tolerated, and resolutely suppresses all opposition. In the absence of any really strong hold on the people by the opposition, this would settle the affair. The people did not heed the writers of the Wiborg Manifesto, in its time, and they will not follow them now.

But a worse thing may happen: the government authority may make concessions, may try to come to an agreement with the opposition, and thereby weaken itself just when the Socialist elements are ready for action. Even though it may sound like a paradox, the fact is that agreement with the opposition in Russia positively weakens the Government. The trouble is that our opposition refuses to reckon with the fact that it represents no real force. The Russian opposition is intellectual throughout, and this is its weakness, because between the intelligentsia and the people there is a profound gulf of mutual misunderstanding and distrust. We need an artificial election law, indeed, we require the direct influence of the governmental authority, to assure the election to the State Duma of even the most zealous champions of popular rights. Let the Government refuse to support the elections, leaving them to their natural course, and the legislative institutions would not see within their walls a single intellectual, outside of a few demagogic agitators. However insistent the members of our legislative institutions may be that the people confide in them, the peasant would rather believe the landless government official than the Octobrist landlord in the Duma, while the workingman treats the wage-earning factory inspector with more confidence than the legislating manufacturer, even though the latter professes every principle of the Cadet party.

It is more than strange, under these circumstances, that the governmental authority should be asked to reckon seriously with the opposition, that it should for this purpose renounce the role of impartial regulator of social relationships, and come out before the broad masses of the people as the obedient organ of the class aspirations of the intellectual and propertied minority of the population. The opposition demands that the Government should be responsible to it, representative of a class, and should obey the parliament which it artificially created. (Let us recall that famous expression of V. Nabokov: "Let the executive power submit to the legislative power!" In other words, the opposition demands that the Government should adopt the psychology of a savage, and worship the idol which he himself made.

Russia Will be Flung into Hopeless Anarchy, the Issue of Which Will be Hard to Foresee
If the war ends in victory, the putting down of the Socialist movement will not offer any insurmountable obstacles. There will be agrarian troubles, as a result of agitation for compensating the soldiers with additional land allotments; there will be labor troubles during the transition from the probably increased wages of war time to normal schedules; and this, it is to be hoped, will be all, so long as the wave of the German social revolution has not reached us. But in the event of defeat, the possibility of which in a struggle with a foe like Germany cannot be overlooked, social revolution in its most extreme form is inevitable.

As has already been said, the trouble will start with the blaming of the Government for all disasters. In the legislative institutions a bitter campaign against the Government will begin, followed by revolutionary agitations throughout the country, with Socialist slogans, capable of arousing and rallying the masses, beginning with the division of the land and succeeded by a division of all valuables and property. The defeated army, having lost its most dependable men, and carried away by the tide of primitive peasant desire for land, will find itself too demoralized to serve as a bulwark of law and order. The legislative institutions and the intellectual opposition parties, lacking real authority in the eyes of the people, will be powerless to stem the popular tide, aroused by themselves, and Russia will be flung into hopeless anarchy, the issue of which cannot be foreseen.

Germany, in Case of Defeat, is Destined to Suffer Social Upheavals No Less than those of Russia
No matter how strange it may appear at first sight, considering the extraordinary poise of the German character, Germany, likewise, is destined to suffer, in case o defeat, no lesser social upheavals. The effect of a disastrous war upon the population will be too severe not to bring to the surface destructive tendencies, now deeply hidden. The peculiar social order of modern Germany rests upon the actually predominant influence of the agrarians, Prussian Junkerdom and propertied peasants.

These elements are the bulwark of the profoundly conservative German regime headed by Prussia. The vital interests of these classes demand a protective economic policy towards agriculture, import duties on grain, and consequently, high price for all farm products. But Germany, with her limited territory and increasing population, has long ago turned from an agricultural into an industrial State, so that protection of agriculture is, in effect, a matter of taxing the larger part of the population for the benefit of the smaller. To this majority, there is a compensation in the extensive development of the export of German industrial products to the most distant markets, so that the advantages derived thereby enable the industrialists and working people to pay the higher prices for the farm products consumed at home.

Defeated, Germany will lose her world markets and maritime commerce, for the aim of the war-on the part of its real instigator, England-will be the destruction of German competition. After this has been achieved, the laboring masses, deprived not only of higher but of any and all wages, having suffered greatly during the war, and being, naturally, embittered, will offer fertile soil for anti-agrarian and later anti-social propaganda by the Socialist parties.

These parties, in turn, making use of the outraged patriotic sentiment among the people, owing to the loss of the war, their exasperation at the militarists and the feudal burgher regime that betrayed them, will abandon the road of peaceable evolution which they have thus far been following so steadily, and take a purely revolutionary path. Some part will also be played, especially in the event of agrarian troubles in neighboring Russia, by the class of landless farmhands, which is quite numerous in Germany. Apart from this, there will be a revival of the hitherto concealed separatist tendencies in southern Germany, and the hidden antagonism of Bavaria to domination by Prussia will emerge in all its intensity. In short, a situation will be created which (in gravity) will be little better than that in Russia.

Peace Among the Civilized Nations is Imperiled Chiefly by the Desire of England to Retain Her Vanishing Domination of the Seas

A summary of all that has been stated above must lead to the conclusion that a rapprochement with England does not promise us any benefits, and that the English orientation of our diplomacy is essentially wrong. We do not travel the same road as England; she should be left to go her own way, and we must not quarrel on her account with Germany.

The Triple Entente is an artificial combination, without a basis of real interest. It has nothing to look forward to. The future belongs to a close and incomparably more vital rapprochement of Russia, Germany, France (reconciled with Germany), and Japan (allied to Russia by a strictly defensive union). A political combination like this, lacking all aggressiveness toward other States, would safeguard for many years the peace of the civilized nations, threatened, not by the militant intentions of Germany, as English diplomacy is trying to show, but solely by the perfectly natural striving of England to retain at all costs her vanishing domination of the seas. In this direction, and not in the fruitless search of a basis for an accord with England, which is in its very nature contrary to our national plans and aims, should all the efforts of our diplomacy be concentrated.

It goes without saying that Germany, on her part, must meet our desire to restore our well-tested relations and friendly alliance with her, and to elaborate, in closest agreement with us, such terms of our neighborly existence as to afford no basis for anti-German agitation on the part of our constitutional-liberal parties, which, by their very nature, are forced to adhere, not to a Conservative German, but to a liberal English orientation.

February, 1914
P. N. Durnovo


So much for the fast recovery then, huh? The statistics on US employment recently released shows that the recovery “has been losing momentum”, as the Wall Street Journal has eloquently put it. The entire global business community is vexed by whether the economy is going to slide down again. Since the collapse of markets in 2007-2008 mainstream economists have been looking into their magical crystal balls and seeing a full-fledged recovery just around the corner. Obviously, clever economic theories have been mentioned that allegedly prove that a “jobless” recovery is absolutely normal.

In this modern era of economic fantasies, there are two notions that I find difficult to accept: a notion that economic growth precedes the reduction of unemployment and a notion that that growth makes wealth trickle down to the masses. A superficial glance at the recent development may convince some that these two dogmas do reflect the current economic reality. Let us take unemployment as an example. While it is obviously true that an increase in investments creates new jobs, consumption as the final stage of any economic process seems to remain ignored. If investors do not see the American consumers’ restored willingness to spend like crazy and take out new loans, I am afraid the investment bonanza in job-creating businesses will have to wait for a while. The same logic is keeping credit out of reach for most businesses as banks are still jittery about the outcome of their investments. Obviously, the enormous inflow of government-injected liquidity finds its way to financial and commodity markets, which have been very prone to speculations these last couple of decades.

So the ability to increase consumption is a prerequisite to a rise in job-creating investments and, as a result, economic growth. Is it right then that economic growth is determined solely by how much is produced without any consideration for how much of what is produced is going to be consumed? In case of sharp drop in consumption, all the boastful talk of production capabilities sounds rather silly. One can brag all day about how much them, but they all are not worth a rotten egg if consumers are not willing to pull out their wallets. Thus, we can probably speak of consumption capabilities being just as important as the production ones. Recently, the matter of exorbitant debt accumulated in the spheres of production and consumption has become the talk of the town. As you can see, debt is believed to be driving economic growth because it can artificially boost short-term consumption. Businesses gladly assume this position as profit-seeking dictates them to take what comes their way now rather than later. So, obviously, the long-term consumption potential of the economy is left unnoticed. But this is exactly what the ever-increasing reliance on credit undermines – long-term consumption and long-term profits.

This allows a conclusion that the existing measurements of economic growth – GDP and GNP – hardly represent all the processes occurring in an economic system. It is the final consumer that pays for the cost of inputs and the added value contained in the product. Leaving the consumer out of the equation will be detrimental to the entire economic system. Isn’t it time to consider new approaches to measuring economic growth? In connection with this, I must mention that the sustainable development theory, which is another alternative approach, points out rather convincingly that often impressive economic growth is made possible by a ruthless abuse of nature. This logically indicates that future generations will have to assume greater costs in order to simply preserve the existing pace of economic development and resources extraction. Again, a short-term outcome of an economic activity is viewed more preferable for obvious reasons as long as it is possible to push certain costs into the future. The same is true for an economic system’s social “capabilities” in the process of economic development.

As for the trickle-down fantasy, statistics cannot possibly confirm it. First, it is obviously foolish to assume that an economy (a structured system rather than a chaotic cluster) that has grown by x per cent will equally increase everybody’s wealth by that exact number. This assumption will be akin to a belief that the more gas you pour down into the tank of a car, the faster the car will go. So we can speak of only a portion of that increase potentially trickling down to the bottom of the society. Politicians and mainstream economists worry these days about creating new incentives for producers (which is the essence of the supply-side economics dominating our neoliberal economic thinking for several decades after the collapse of the Keynesian demand-side economics with a focus on boosting artificial government-generated demand), the final consumption remains on the sidelines again. If it is the final consumer that ultimately pays for products and services, we will have to admit that there is hardly ever any trickle-down effect as eventually his or her wealth ends up being redistributed back to the top of the economic ladder of the society.

Second, constant economic growth is viewed as a solution to poverty and misfortune. But it is pretty clear that a system cannot expand forever without running the risk of collapsing or being restructured into a different system with entirely new wealth-distribution channels. Again, the expansion brings back the question of consumption capabilities, which entail a question of finding new markets.

A simple formula can explain this: a capital owner pays consumers for producing goods (and services) that they themselves will consume in the future. To boost profits, they must spend more, but their spending is limited by their salaries and wages coming from the capital owner. So this economic mechanism is not self-sustainable in a closed system. Should the system allow any outlets in the form of new markets for selling existing goods, hiring cheaper workers, taking cheaper loans, etc., only then the mechanism functions effectively and makes further economic development possible.

The sad thing is that when the new markets remain unavailable for too long, the elite at the helm of an economic system will be prepared to go any length to change the status quo since it threatens their political power and economic might.

Boris Anisimov