Weakening Russia – Then & Now

SCANALYZER Continuity
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Austin of Kabul has revealed the strategy our Betters are pursuing is to use the proxy war in the Ukraine to “weaken Russia”. This invites comparison to the successful weakening of the USSR undertaken in the Reagan/Bush years, leading to its (fortunately peaceful) collapse in 1991.

One of the stories floated about the collapse of the USSR was that President Reagan’s push for the very expensive Strategic Defense Initiative (dismissed by the Usual Suspects as “Star Wars”) had set up a technological challenge beyond the USSR’s ability to compete. But this seems to have been a tangential issue.

Peter Schweizer presented a more plausible explanation in his 1994 book “Victory: the Reagan Administration’s secret strategy that hastened the collapse of the Soviet Union”, ISBN 978-0871135674. The USSR in the mid-1980s was highly dependent on revenues from oil exports. In 1985, President Reagan did a deal with the King of Saudi Arabia under which the Saudis flooded the oil market and drove down the oil price. The drop in oil export revenues weakened the USSR and led to its collapse.

The late Yegor Gaidar, who was acting prime minister of Russia after the collapse of the USSR, provided a more complete picture in his article “The Soviet Collapse: Grain and Oil” published in 2007: 09-21440 OTI Gaidar.qxd (aei.org)

Soviet agriculture was very inefficient, such that the USSR in the 1980s had to import large amounts of grain to feed its population. As long as the price of oil was high, the USSR’s strong earnings from oil exports easily covered the costs of those essential grain imports. When the price of oil dropped due to the Saudi action, the USSR developed an unsustainable Trade Deficit and ran through its financial reserves paying for imported grain in only a few years. The USSR tried to borrow money from international lenders in 1989 to cover the grain imports, but this effort failed. By 1991, the USSR was bankrupt – collapse followed.

There is a lot of ruin in a nation, as Adam Smith observed. It took about 5 years of low oil prices on top of decades of Soviet agricultural malpractice to bring down the USSR. We are all very lucky that the USSR did not turn to military adventurism when it was pushed against the wall. It is worth noting that President Reagan’s victory over the USSR was not costless: the low oil prices also caused substantial collateral economic damage to oil producers in the US, Canada, the North Sea, and several countries in Africa and South America – not that anyone cares about oil producers or their shareholders, workers, & suppliers.

Can Austin of Kabul’s attempt to weaken Russia work in a similar way to President Reagan’s weakening of the USSR?

There are obvious differences in the situations. Russia is now a grain exporter, able to feed its population. Russia is unencumbered by the former Soviet Republics, which are now a burden on the US/EU side. Saudi Arabia is working with Russia this time, benefitting from the sanctions-induced high price of oil, which is also driving up Russia’s positive Trade Balance. Despite Western economic sanctions, the possibility of a Russian economic collapse in the foreseeable future seems rather remote.

Today, it seems the US economic position may be more perilous. The US National Debt now stands at about 125% of GNP – proportionately about three times larger than in the mid-1980s. The US has a giant & increasingly unsustainable Trade Deficit, now approaching $1 Trillion per year. Persian Gulf countries are starting to sell oil in Yuan as well as Dollars. At some point, foreign lenders might decide that the US is no longer a good place to park their funds. European nations which mostly benefitted from low oil prices in the later 1980s are now suffering from high oil prices and even higher gas prices – with the fear that sufficient gas may not be available at any price next winter if they continue to support the US proxy war in the Ukraine.

An interesting speculation: could the Russians be gambling that, this time around, the US might be the one to find itself on the wrong end of the economic push & pull?

As the proxy war grinds slowly on towards next winter, the US may find some of the Europeans breaking away and seeking a negotiated peace, while Russia continues to get quiet support from China, India, Brazil and much of the rest of the world. A US pull back from the Ukraine proxy war would put the future of NATO in doubt (accomplishing a key Russian objective) and make it plain to Taiwan that they should not count on assistance from the US (providing a major win to China).

It certainly is high stakes poker – providing “Our Guys” don’t foolishly trigger a nuclear war in the meantime.

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The only problem I see with your analysis is that the proxie war in Ukraine is causing gas prices to be high. THAT could be destroyed in a heartbeat by reverting to Trump energy policy. Of course that would irritate the greenies, but they’re about as rational as communists, if just as single-minded.

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Gas prices are high in the West. If the Kremlin were really going slow in the Ukraine to wear down the US economically, that would sound like a positive for them.

The US could certainly do things to mitigate the blowback impact of US/EU sanctions on Russia – Keystone Pipeline, anyone? The difficulty is that most energy projects take years to construct & bring on line, such as the EU building LNG Regasification plants, or the US building new refineries – and those years would become decades if the Greenies & their lawyers get their way. In the meantime, Russia would be winning the economic war.

One other wrinkle that must be in the minds of any CEO thinking about investing $Billions in a new energy-related facility which would take years to build and many more years to pay back its investment cost – What happens if a new US Congress in 6 months time says Hell No!, we cannot afford to keep sending $Billions to the Ukraine; the proxy war winds down; and Russian oil & gas is back on the market? It would be a very risky investment for any US/EU company to make.

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This is the key problem: sovereign risk. Many things which are worth doing take much longer than an election cycle, especially when the process of doing them is slowed down by sclerotic permitting and regulation. When your pipeline, drilling programme, power plant construction, or energy import/export terminal project can be wiped out after years of work and huge sunk costs because the Other Guys have won an election, there is a huge deterrent to undertaking such large projects at all.

This is not so much a problem of consensual government but rather the reach of the administrative state. A limited government that strictly respected contracts and was bound by its prior rulings would not be so much of a problem. But what we have in the “liberal democracies” is an utterly capricious regime where any long-term project is in the lap of the gods in the imperial capital and vulnerable to whatever whims the guys who won (or stole) 51% of the votes desire to impose.

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Regarding U.S.A. “foreign adventures”, Deep State is in a bubble that most Americans are shocked by. We can’t make enough Starships to relocate Deep Staters to Mars, so perhaps a Woke Mind Virus Initiative (WMVI) can relocate these people to Ivy league schools where they’ll meet like minded people, and do the least damage to the universe.

Also, can anyone in Biden admin understand (or even pronounce) the word subsidiarity ???

According to Cambridge English dictionary subsidiarity is the principle that decisions should always be taken at the lowest possible level or closest to where they will have their effect, for example in a local area rather than for a whole country.

My opinion is the U.S.A. last followed a principle resembling this prior to the civil war in 1860!

Swiss are smart enough to codify subsidiarity in Federal Constitution – but I don’t know of any nation on Earth that truly practices this wise principle now in 2022 … but it is not too late to start!

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As practiced in the EU, “subsidiarity” means that the Beautiful People at the center may occasionally deign to allow the peons on the periphery to have some local control – as long as they remember that the center can pull back that control at any time for any reason or no reason at all.

What we want is good old fashioned US “Federalism” as expressed in the 10th Amendment. The delegation of power goes from the people and the States to the Federal level, and not the other way around. “Subsidiarity” is the snake in the Garden of Eden.

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The European Union has corrupted everything it touched, especially the language. “Subsidiarity”, properly defined, and for centuries part of Roman Catholic doctrine and canon law, simply says that every decision should be made as close to the people it affects as possible. The Fourmilab formulation of this is “The laws you live under should be made by the people you live with.”

Federalism is a weak and fragile instantiation of this. For one thing, it doesn’t scale. The largest U.S states are bigger than most countries, and there is no explicit reservation of power to county and municipal governments, and the principle of federal (or, more precisely stated, national) supremacy over state law is long-established.

Any compact which does not admit the right for parties to dissolve it is ultimately tyranny. This is why, while I wish the Free State Project people in New Hampshire the best, I believe they’re delusional to believe they can achieve liberty while part of a railroad-era, continental-scale empire.

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The 10th Amendment was quite explicit: “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people”. Sadly – but perhaps to be expected – Swamp Creatures have long ignored this simple language, without suffering any consequences.

After the Discontinuity, when survivors get a chance to rebuild, it might be better to adopt a structure closer to the original Articles of Confederation. The way to control the likes of Swamp Creatures (who will always be with us) is to control the money. Pay tax only to the “people you live with” – with each higher level of government empowered to tax only the level of government immediately below it. A federal government could tax the states, which could tax the cities & counties, which could tax their populations. But it has to be admitted that this kind of neo-Confederation would have its own set of problems.

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Taxation in Switzerland works something like this, and in general works quite well. The cantons set their own tax policy and administer assessment and collection of taxes. Individual communes set their own tax rates (which vary substantially) and inform the canton of the rate, which is collected as part of the “Impôt Cantonal et Communal” and then paid by the cantonal tax authority to the commune in which the taxpayer resides. The canton determines each taxpayer’s income and wealth according to its own rules (which vary substantially from canton to canton, with some cantons offering attractive tax deals to those who invest or bring businesses to the canton and wealthy individuals with income sources outside the country who will benefit the local economy by their spending there). The federal tax (Impôt fédéral direct ) is assessed at a fixed rate based upon the canton’s assessment of income (there is no federal wealth tax), collected by the canton, and paid to the federal treasury. There is no federal tax department. A typical Swiss taxpayer will pay most of their tax to the canton and commune; the highest marginal federal tax bracket is 11%. The church tax (Contribution ecclésiastique) is collected by the canton and paid to the established church(es) designated by the taxpayer.

This system creates active competition among communes and cantons which provides them an incentive to hold down their tax rates because if they jack them up too high they will begin to leak population and taxpayers to their neighbours. There are regular attempts by the federal government to “harmonise” taxes among the cantons (who could be against “harmony”) to get rid of some of the attractive tax deals, but the cantons have a strong incentive to push back against this, and for the most part are successful.

Whether this would scale to a railroad-era continental scale empire populated by grifters and layabouts I have no idea.

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The HUUUGE cultural difference between the grifters and layabouts in the US and the Swiss can be seen by a simple thought experiment: what would be the result of using the Swiss ‘honor system’ prevalent for fare-paying for most all the local public transportation systems - if such a system were adopted in the US? The answer to that thought experiment accounts for the difference between the ethos of the IRS (a terrorist organization, regularly threatening ruin/imprisonment) and Swiss cantonal tax collection authorities, which treat taxpaying as a civil, not a criminal matter and negotiate payment schedules for arrearages).

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