Putin vs. The Bankers

I’ve been thinking a lot about Russia’s slow-moving currency crisis.  It has taken the form of most financial crises: very slowly, then all at once.  The ruble began crashing in earnest in mid-December 2014, until Russia’s government and central bank began pulling out all the stops in order to arrest it.  Volume has been very low, and momentum manageable, over the New Year and Orthodox Christmas holidays, but as the year gets started in earnest it will be harder for Russia to keep a lid on the ruble’s value.  Capital controls may not be very far away.

One thing I think it has revealed is that modernity – and globalization – truly are something of a Faustian bargain for the ambitious nation-state.  Russia’s crisis stems in large part from the collapse in gas prices, and the energy market is of course the most primal arena of global finance.  But a large part of its unique difficulty is that it faces serious sanctions.  Its government and companies (and individuals!) need dollars to pay their debts and import goods, and with American/European sanctions it has a very hard time laying its hands on those dollars.  Normally the IMF already would have stepped in, but the IMF doesn’t bail out countries that are invading their neighbors.  By attempting to run a modern, globalized society that is also pursuing imperial dreams in its near abroad, Putin is trying to have his cake and eat it too.  It isn’t working very well, and this currency crisis is just a small hint of what can go wrong when global finance turns on a nation.

This argues that in some way, globalization is a force for peace in the world.  It is certainly not the case, as The Great Illusion so notoriously predicted in 1910, that globalization means war is a thing of the past.  Globalization and international finance can make a country much wealthier and stronger – as it has Russia.  But it carries with it costs, and opens up nations to serious harm when they stop playing by the rules.  An autarkic Russia might be able to invade Ukraine with far fewer consequences – but an autarkic Russia would likely be a far poorer place than Russia today, and less powerful in many ways.  Putin may face a choice between dominion over Ukraine and the benefits of modernity.

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