Political Economy of Confrontation — Valdai Club


Today we can talk about two groups of “currencies”. Let’s conditionally call them hard and soft. Hard “currencies” are the traditional set of the era of imperialism: military power, territory, resources, infrastructure, industrial and technological potential. Soft “currencies” are more characteristic of the era of globalisation: human capital, attractiveness of ideas and lifestyles, information management, science intensity of the economy, including in such dimensions as the environment and climate, etc.

Modern powers have a different set of existing “currencies” and different aspirations to maximise them. Two superpowers stand out, whose baskets are highly diversified. The US “currency basket” is the most balanced. Washington possesses practically all of the aforementioned assets. Global resource flows associated with these “currencies” are also tied to the United States. China is catching up fast. It made a phenomenal breakthrough in the segment of hard currencies and retains high potential in the segment of soft currencies. China has its own ideology, its own way of life, its own information environment, and growing human capital. There are certainly differences between the two powers. For example, the United States does not seek formal territorial expansion. It is quite successfully solving this task with military presence on the territory of allied countries. In general, China does not seek such expansion either. But the latter is faced with the task of resolving the Taiwan issue, and the developments in the South China Sea give rise to suspicions among neighbours.

Against the background of the United States and China, two other players stand out, whose “currency baskets” are more asymmetric. The European Union has a whole range of soft currencies. But in the segment of hard assets, the situation is contradictory. The EU has a powerful economy, infrastructure and industrial base in its hands. The union includes at least one power that possesses all types of modern weapons, albeit on a much smaller scale than the United States and China. But the EU is not seeking open expansion. The power of standards in the economy and social organisation already attracts colossal economic and human resources, making expansion simply unnecessary. The EU is a postmodern democratic “empire” that effectively achieves its goals through the economy and soft power, without resorting to military might.

In Russia, the situation looks different. Moscow’s attributes include its serious military potential, vast territory and natural resources. Industry, meanwhile, has shrunk in comparison to the Soviet era. But it still keeps sufficient power to maintain its defence potential. The infrastructure requires development, but for defence purposes it is also sufficient for the time being. In the segment of soft currencies, the situation is worse. The country is experiencing a demographic crisis and a staff drain. Its ideology is indistinct. The attractiveness of lifestyles on offer and the effectiveness of its institutions are far from obvious. The economy suffers from backwardness in a number of sectors. At the same time, Russia is in a state of degrading relations with the West; it considers the growth of military threats from its side inevitable and strives to balance the perceived threats with all available means.

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