The modern imperialists

Russia has now been at war in Ukraine for almost two months. It has been heavily sanctioned by the US and its western allies for trade and business, commodity or finance. Russia holds over 600 billion USDs in FE Reserve and is the world’s least indebted nation at around ten percent debt-to- GDP encumbrance. The USA itself is more than 100 per cent indebted equivalent to its GDP in comparison. Pakistan’s total debt hovers at around 90-95 per cent of the GDP. Yet the ruble had lost almost forty per cent of its value at one time and inflation sits at record levels because of far greater demand than supply which the world isn’t trading any longer with Russia. Strongman Putin is fighting his hardest battle inside in somehow keeping his economy buoyant.

Russia is not only a military superpower, it is an oil, gas, wheat and fertiliser superpower too. Yet it must save in USD even when it retains the largest reserves in gold. Some 300 billion of Russia’s USD earnings are placed outside of Russia and lie frozen because of the sanctions. The 1944 Bretton Woods Agreement, post WWII, had ensured that the USD remained the key financial denominator of comparative economic strength among nations and the prime international trade currency. Initially it was pegged to the gold held as reserve by a country but in 1971 President Nixon delinked it from gold and converted it into the sole denominator of a nation’s financial and economic strength. The World Bank and the IMF were the creations of the same Bretton Woods Agreement and have virtually managed the international money market as the world’s central bank. China holds over three trillion dollars of its FE Reserves in USD of which at least one trillion goes into buying off American debt. In other words China has a trillion dollars invested in the USA and cannot afford to lose it if the American economy were to just gutter away. Not without reason the Chinese are the first ones to rush into the US to advise them to stem the slide if a recession or a depression threatens. They just can’t afford to lose their trillion plus.

Russia is a political-military competitor to the US and yet must hold its reserves in American currency. Conscious of its vulnerability however it has been smart to create interdependencies with American allies in Europe by being their main supplier for gas and oil — almost to the tune of 40-50 per cent of the energy needs of Europe are met by the Russians. Were Russia to turn the tap off, life, industry and business in Europe would simply freeze. America’s allies are thus Russia’s best insurance against American highhandedness against her in their global competition to expand their respective areas of influence. It is not a perfect check-mate from either side but works to temper impulse. The world is indeed a strange place. Imagine the predicament of any smaller nation entirely dependent on foreign sources of finance but without any or many interdependencies.

This makes a perfect case for labeling the USA as the modern day East India Company. Except that what the USA unleashed to control the world’s trade, business and finance ended up even deceiving its masters. Modern finance has no base, no nationality and no flag to bear. Just as an example both Google and Apple, and so many more, have moved their headquarters to Iceland and Ireland, or some such tax-haven, where their finances are addressed if not entirely placed. Off-shoring money is a bona fide parking option among many. When corporate(s) do so it is smart tax avoidance; when individuals resort to it, it is mostly tax evasion and hiding a crime unless the money is all legal. Industry too places itself at locations where labour and input costs are cheaper even if their origin belongs to one of the smarter and richer nations.

The 80s saw a lot of heavy American industry move into China, then the world’s newest sweatshop. As China has transformed it has found newer locales for placing its older but still productive industry; hence moving money, labour and technology and spreading the riches. The phenomenon introduces to the world unmatched prosperity. Technology is the new enabler for finance and capital to pervasively move and dominate the world. The market never sleeps and instantly shifts capital and trade. Fintech is the new buzz world and technology has its own currency with a value. Soon Artificial Intelligence will take borders out of equation other than enabling identity which too soon might transfer to embedded chips. That’s both the simplicity and the complexity of the new world quite far out of control of its initially conceived masters, the US and its western allies. They are hardly the new imperialists. Modern technology, finance and trade is. Most belong to the ether-world or even more pertinently the netherworld. The flag, the anthem and antiquated notions of sovereignty lost to the haze of the unknown and unseen. Fathom what freedom will mean then.

It has become impossible to live in this world and not be linked. When only some of these multiple links and (B)lock-chains are severed through sanctions for being a pariah, nations only sink deeper till they either lose their boundaries or their identity, or both. Libya is hardly recognisable. Iran is willing to return to the international system after its prolonged binning and will trade its freedom to pursue nuclear capability for sustaining its people and its economy instead, retaining its identity as a state and a nation with a proud history. It can live with those attributes forever only if it would totally delink from the international comity though that just might render her existence untenable. Between existence and freedom thus freedom becomes negotiable. Why is it that the great USA is unable to harness the Tech giants into being entirely home-based? States and nations negotiate their terms for what is now qualified sovereignty. Freedom is a qualified concept. Absolute freedom is non-existent and will remain non-existent when the world increasingly gets defined as the netherworld. There is no escape from this reality as long as we inhabit Earth and don’t migrate to another planet. For it too we shall need the means and the resource and some good terms with Mssrs Musk and Co. Every other notion, idealistic or poetic, is fodder.

There is thus only one way to keep out this unseen juggernaut in the interim that will take over dependent nations like Pakistan especially if they have failed to develop interdependencies and firewalls. One, of course we must remain linked to this conclave to benefit from returns which technology and linkages endow; else nations such as Venezuela and Iran come to mind — Turkey too initially sounded threats but kept its linkages in order. Two, we can leverage geography as a competing resource. It can physically link economies or when we fail to do that for idealistic reasons we have tended to rent it out. Beyond that there is little else to offer. In a linked world it becomes difficult to avoid the consequences, poetic imaginations aside.

Published in The Express Tribune, April 22^nd, 2022.

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