Home > Archives (2006 on) > 2011 > Geo-Politics of The Present-Day International Economic Crisis

[On April 16, 2011, “World Economy Splutters: Dark Clouds on the Horizon”, a piece by Kobad Ghandy, the Maoist leader, written from Tihar Jail No. 3 (where he is lodged), was published in Mainstream. It was written quite sometime back but reached us late. It was then stated that he had promised to write a sequel to it. That he has now written on July 23, 2011 and sent it to us for publication. It is quite a comprehensive piece bearing testimony to the Maoist leader’s capacity for a detailed Marxist analysis of the unfolding events in the global sphere. It is being published here for the benefit of our readers. —Editor]

Economic conditions today bear a strong resemblance to those of 1936-37... What we are experiencing may not be a full replay of the Great Depression, but that’s little consolation for the millions of American families suffering from a slump that just goes on and on.

Paul Krugman (June 4, 2011)

When we look at the geo-politics of the world today, we find three major factors: first there are the most aggressive axis powers led by the US. Then there is the growing bloc evolving around Russia-China as the centre. Neither of these two main blocs is fully consolidated. And the third important geo-political factor is the oppressed peoples and nations of the world. It is these three inter-twining factors that are being played out in the world today in a situation of growing economic crisis.

Though the US-Britain-Israel axis and the Russia-China centre are developing as two poles, unlike in the pre-World War II situation, there are many overlapping economic interests. That is why we see compromise on various diplomatic issues at the UN and other international fora. Besides, the latter is an evolving powerhouse and has not even a small fraction of the US’ military strength. Yet, Russia’s military prowess and China’s gigantic economic growth can make a lethal combination. Europe today is no longer a homogenous bloc and with the debt crisis it has been much weakened.

Though most countries tend to fall into one or the other bloc there is a greater assertion of some countries, particularly from US domination. This can particularly be seen in a number of countries in Latin America, West Asia, Africa and also some countries in Asia. Of course some countries have been devastated because of this assertion, like Iraq, Afghanistan and now Libya.

But in all this crisis and wars the worst sufferers are the people. While the numbers of billionaires continue to grow, the impoverished are facing a holocaust-like situation. Their lands are being seized, their jobs are being taken, and even their food is being snatched from their mouths. In the last few years, 80 million hectares of farming land have been seized by foreign corporations (50 per cent in Africa); the ILO says unemploy-ment has reached record levels (at 210 million) and real wages have plunged four per cent below the 2008 low; and the FAO (Food and Agricultural Organisation) says cereal prices are predicted to rise a further 20 per cent, after rising costs have already pushed an additional 44 million into poverty in the last year.

In this article we shall first look at the situation of the US/Axis and its allies; then at the China-Russia pole, and finally picture the growing geo-political situation in the world and India’s place in it.

I The Axis and Allies

THE three Axis powers, though totally dominated by the US, have one thing in common: extremely sophisticated intelligence apparatuses—CIA/FBI, MI 5/MI 6 and Mossad. Though till today there is no country that can match the US’ power, its economy is in serious trouble.

In this section we shall first look at the US economy, then Europe and Japan; finally we shall assess the military might of the US.

US Economy in Terminal Decline

In mid-June 2011, just prior to his retirement, US Defence Secretary Robert Gates made an astounding disclosure. He said that throughout his long political career he has been proud to work for a superpower; but now he cannot see the US maintaining that status, and would rather opt out.

That was said in the context of the worst debt crisis the US has ever faced. The government debt (99 per cent of the GDP) has reached its ceiling of $ 14.3 trillion, triggering a series of extraordinary measures. Yet, the two parties are squabbling over the grounds on which to raise the debt. On July 1 Paul Krugman warned that there would be dire consequences if this limit is not raised, the final date for which was August 2, 2011.

But this debt is only the tip of the iceberg. More than hundred US cities/states could go bust next year as the debt crisis threatens an urban catastrophe. American cities and states have debts totalling $ 2 trillion—with municipal bonds likely to face a spate of defaults.

The stagnation in the economy has continued unabated in spite of huge stimulus packages (fuelling the debt) and record low interest rates–at 0.25 per cent. Unemployment is at 17 per cent of the labour force—the worst long-term unemployment since the Great Depression of the 1930s. The June figures on employment created a shock when it was announced that only 18,000 jobs were created. In addition, the housing slump continues to haunt the economy—in January 2011 the number of properties in foreclosure hit a record 2.2 million; and in February 2011 sales of new single-family houses recorded its highest fall since records began in 1963—of 17 per cent.

Yet, in spite of financialisation of the economy being a cause of the crisis, even amidst this crisis Silicon Valley is facing yet another internet bubble—the Facebooks’ market value at $ 76 billion is more than that of the Boeing and Ford. The anarchy of the economy could not be more glaring.

But, over and above this, the fragility of the other major economies and the stiff competition from China is further impacting the US and its chance for revival. For example, Obama recently said “a Greek default would be disastrous for us”.

The sceptre of August 2008 haunts the world economy. The Federal Reserve Chairman, Ben Bernanke, described a possible US default as a “financial calamity”.

Eurozone Debt Crisis Deepens; Japan in Doldrums

In mid-July the Eurozone’s third largest economy became embroiled in the European sovereign debt crisis. Italy’s Finance Minister likened it to the Titanic, where “not even first class passengers can save themselves”.

In the 1980s the debt crisis only hit the Third World countries; one could not even dream of it hitting the main centres of global capital. The debt crisis is spreading from Greece/Ireland/Portugal, which have already been given bail-outs, to Spain and Italy. Spain has a debt of $ 928 billion and Italy $ 2.6 trillion (133 per cent of the GDP).

The tragedy is that the bailouts have not helped—those have merely postponed the day of disaster. The austerity measures, demanded by the IMF/ECB donors, have only deepened the recession by sapping the people’s purchasing power. In Greece the austerity measures have brought havoc to the lives of the people, resulting in lakhs coming out on to the streets. The economy contracted four per cent last year; cement production is down 60 per cent since 2006; steel dropped 80 per cent in two years; 2.5 lakh jobs were lost in the private sector and there is a fear of a run on the banks with £ 40 billion deposits having been withdrawn last year. The Greek Government owes $ 435 billion—the first bailout of $ 160 billion did not help; it is now seeking another $ 145 billion to prevent a default.

While drastic austerity measures are deepening recession in most of Europe, Germany (the largest country in Europe) has come out relatively unscathed. While the rest of the Eurozone witnessed a mere one per cent growth, in Germany it was 3.7 per cent, exports grew by 21.7 per cent in 2010 and there has been an actual drop in unemployment levels.

The Financial Times has predicted “Another leg of the economic crisis which started in 2007”—only this time, with the governments deep in debt, no country has the ability for stimulus packages to bail them out.

Even Japan, the third important centre of global capital, is in doldrums. It has the highest debt in the world, at 205 per cent of the GDP; and the economy began to contract well before the earthquake/tsunami hit—about one per cent in the last quarter of 2010 and 0.9 per cent in January-March 2011. Interest rates continue to hover around zero per cent. After the earthquake/tsunami and the nuclear fallout, the situation has further deteriorated.

The key problem remains: how will the indebted countries reduce their debt burdens without faster economic growth; and how can economic growth be sustained with the huge cuts in the purchasing power through unpopular austerity measures!!!

US: Merchants of Death

In such recessionary conditions the race for markets and sources of raw materials (parti-cularly energy) is bound to intensify. One big market is military equipment. It is tragic to see countries like India, Indonesia etc., with lakhs dying of hunger, spending thousands of crores on military imports. The squabble between the US and EU for India’s gigantic $ 10 billion fighter jet deal is an indication of this desperate scramble.

Today, America’s defence budget at $ 700 billion (including war expenses) is as big as the world’s next twenty highest military spenders combined (for example, China’s is $ 92 billion). Last year’s US defence spending exceeded the average spent during the Cold War years by 50 per cent (after adjusting for inflation). In the past decade it has grown 67 per cent. The US maintains a total of 700 military bases in 130 countries.

The wars in Iraq and Afghanistan have cost the US a gigantic $ 4 trillion—more than three times the sum authorised by the Congress in the decade since 9/11. Just last year the US spent $ 120 billion on the Afghan war. This has resulted in a huge burden on the US economy with the federal budget deficit running at $ 1.5 trillion.

These wars have killed 2.5 lakh people and created eight million refugees. Later we shall see the extent of devastation from these wars.

II Enter The Dragon

CHINA is fast growing to become the world’s largest economy. In 2010, its GDP surpassed Japan’s (in absolute terms) to become the second largest economy in the world. In fact it is already number one, if taken in terms of purchasing power parity—it is $ 14.8 trillion to the US’ $ 14.6 trillion [India: $ 4.4 trillion in PPP]. According to a study, China has become the world’s largest manufacturing country in 2011—accounting for 19.8 per cent of that production, compared to the US’ 19.4 per cent. The US had led for the last hundred years.

In 2009 China accounted for 46 per cent of the global coal, zinc and aluminium consumption. It consumed more crude steel than the US, EU and Japan combined—in 2010: China 627 mt; Japan 110 mt; US 81 mt; Germany 44 mt. China bought more cars and TV sets than the US last year and this year looks set to buy more mobile phones than the rest of the world put together. It is number two in the purchase of PCs. China accounts for 97 per cent of the world’s supply of rare-earths—minerals that play an essential role in most high tech products, including in the military.

China is also rising to the top in other spheres like education, R&D and sports. China has built the largest higher education sector in the world in just the last decade. According to an OECD report (2007), China’s gross spending on R&D grew at 18 per cent per year since 1995-96 reaching $ 26 billion in 2009. It is expected to surpass the US by 2020. The number of research papers published in international journals increased from 20,000 in 1998 to 1,12,000 in 2008. In sports we have seen how China raced ahead in both the Asian Games and Olympics—not just in its traditional sports of table-tennis and badminton.

China’s growing economic clout is getting reflected in its aggressive foreign trade and investment, as also its assertive diplomacy, particularly in its neighbourhood.

Chinese Investment/Trade Sweeps the World

In the year 2010 Chinese companies accounted for one-tenth of cross-border deals, bidding for everything from American gas, Brazilian electricity grids, Peru’s copper mines, farmland in Tanzania, aluminium smelter in Australia to the Swedish car company, Volvo. In the last two years (2009, 2010), China lent more money to other countries than the World Bank, and on better terms. In these two years it gave $ 110 billion compared to the World Bank’s $ 100 billion.

Earlier the focus was on Asia, Africa and Latin America; now, it has shifted even to the developed countries. In 2009 Chinese FDI (Foreign Direct Investment) increased in Europe by 68 per cent over the previous year; in North America by 42 per cent; in Asia by 41 per cent; in Africa by 19 per cent; and dropped by five per cent in Latin America. Besides purchasing Volvo in 2010, Chinese firms have large shareholdings in a French entertainment company and an Italian construction-equipment company.

Now, let us take a look at Chinese economic activities in the various backward regions of the world.

(i) South-East Asia

This is China’s backyard over which it is very sensitive. As per the ADB, China’s share in East and South-East Asian trade increased from 20 per cent in 2000 to 40 per cent in 2009. Beijing and Tokyo are now each other’s largest trading partners (replacing the US) with bilateral trade of $ 300 billion. In January 2011 China inaugurated the China-ASEAN Free Trade Area, which is the biggest in the world in population size and the third largest in turnover. Also, to weaken IMF influence in the region, in mid-2011 China enlarged the Chiang Mai Initiative (CMI) to encompass the ASEAN+3 (China, Japan and South Korea). The CMI is basically a currency pool involving these countries. Exports to China accounted for about 14 per cent of Taiwan’s GDP and 10 per cent of South Korea’s; and now it is the biggest export market for Brazil (12.5 per cent of its exports in 2009), Japan (18.9 per cent) and Australian (21.8 per cent).

(ii) Africa

In the African continent Chinese trade shot up from $ 10 billion in 2000 to $ 107 billion in 2008. Currently China imports 20 per cent of its oil from Africa. Over 1600 Chinese companies have a presence in Africa and the Chinese diaspora is estimated at one million. China has set up seven SEZs in five countries. China exports manufactured goods and imports minerals, crude oil, etc. Sino-African relations have been institutionalised in the past decade through the FOCAC (Forum of China-Africa Cooperation) which held three ministerial-level conferences in 2000, 2003 and 2009. The climax was reached in the conference in 2006 which was followed by their first summit in Beijing which was attended by leaders of 48 African countries. China made its first entry through Sudan and is today in stiff competition with Europe and the US. China in fact had major deals with Libya in the energy sector. The bifurcation of South Sudan and aggression on Libya is to basically seize the huge oil reserves in these two areas which were increasingly coming under Chinese influence.

(iii) Central Asia

Though much of Central Asia has been wrested back by Russia—from the US inroads in Russia’s backyard—it is China that has made big inroads to tap the large oil and gas reserves in the region. While the US is busy countering Russian influence by sponsoring coloured revolutions and building military bases, it is China that has struck mammoth economic deals. In June 2009, China lent Turkmenistan $ 4 billion to develop its largest gasfield (near the Afghan border). It has lent $ 10 billion to Kazakhstan in return for 50 per cent interest in its largest oil and gas company. In December 2009, Chinese President Hu Jintao and leaders of three Central Asian countries gathered at the Saman-Depe gasfield in Lebap province in East Turkmenistan to inaugurate a 1833 km gas pipeline running through Uzbekistan and Kazakhstan into China’s Xinjiang province. In addition China has lent $ 10 billion to the SCO (Shanghai Cooperation Organisation) to shore up the member-countries’ economies.

(iv) South Asia

In South Asia China’s inroads are not only economic but also geo-strategic. Though this is also the case in South-East Asia (see next section), China fears that Indian rulers may be provoked by the US against it. Yet, today China is India’s largest trading partner having outstripped the US. China has made major inroads into Myanmar, Pakistan and Sri Lanka and has, of late, been entering Nepal, Bangladesh and Afghanistan.

Myanmar is fully tied to China economically and politically. It has built strategic ports and rail/roadlines to China which, if necessary, can help it bypass the Straits of Malacca.

The total Chinese involvement in Pakistan in heavy engineering, power, mining, telecommuni-cations, seaports and infrastructure will cross $ 15 billion (Rs 75,000 crores) by 2015. Apart from that, $ 3 billion worth of defence and $ 6.2 billion credit for defence projects have been given. Some 30 military delegations from Pakistan visited China since January 2008. With the development of the Gwadar naval port (together with a road from the port to China)—180 nautical miles from the Straits of Hormuz through which 40 per cent of all globally traded oil is shipped—China gets direct access to the Arabian Sea.

China has been developing extensive links with Sri Lanka ever since it was the main foreign force assisting the Sri Lankan Govern-ment’s genocide of Tamils. For this purpose it has supplied huge amounts of military equipment. It has also invested heavily in IT, maritime ports, economic and technical cooperation and in transport. It has given $ 200 million to Colombo for the second phase of the Hambantota port—an important stop on the sea lanes transporting oil from Africa/Iran to China.

Late last year there was a flurry of activity with Bangladesh with agreements signed for a road-rail link connecting Chittagong port with Yunan (via Myanmar) and the construction of a deep-sea port at Cox’s Bazaar. In September 2010 there was a 21-member delegation to Nepal, which was the twentieth such delegation since May 2008, when the latter was declared a Republic. Simultaneously another 46-member delegation came to promote trade and business. There have also been regular military links with the two governments as also big aid packages. In Afghanistan, China has invested a huge $ 3 billion in a copper mine at Aynak.

So we find in all these backward countries of the world China has made major inroads. It has also invested heavily in West Asia (particularly Iran) and also Latin America (it has invested $ 37 billion in Brazil). The speed of its economic drive was stepped up since the 2008 economic crisis in the West.

Diplomatic and Military Assertion

China adopts a three-pronged strategy on its way to become a global power. First, its effort to consolidate alliances—diplomatic, economic and military—with member countries of the SCO (Shanghai Cooperation Organisation) as also with countries like North Korea, Myanmar, etc. Second, it has begun adopting an aggressive posture in its neighbourhood to defend its interests against US provocations, particularly in the Pacific Ocean and also the Indian Ocean. And lastly, for the rest of the world, it adopts soft diplomacy, focusing more on building trade and investment relations and using these as levers for assertion of its foreign policy interests.

First, the SCO is not only consolidating its five-member bloc diplomatically, but also militarily. It is also seeking its expansion by giving full membership to those that have observer status—Mongolia, Iran, Afghanistan, Pakistan and India. But, while all other countries send their heads of state to these summits, India normally sends a low-key Minister.

On the second point, in dealing with its neighbourhood China has been flexing both its diplomatic and military muscle. With its rear secure (due to the presence of the SCO countries) in its north and west, it is focusing attention on its east and south.

In the East China Sea, China has disputes with Japan over islands, fisheries and offshore hydrocarbon reserves. In September last year China brought Japan to its knees when the latter refused to release the captain of a Chinese ship.

But it is in the South China Sea that it has been adopting a tougher stand on the oil-rich disputed islands (Paracel and Spratley Islands), telling Vietnam, the Philippines and Indonesia that the islands are a “core national interest”. It is also claiming vast swathes of the ocean stretching deep into South-East Asia. The US has declared these as international waters and has been encouraging Vietnam’s claims over the Islands. Of late China has had serious rows with Vietnam, Taiwan and Japan in these oceans and has supported North Korea in its conflict with South Korea over the sinking of the latter’s vessel. China has been focusing on developing its naval forces not only because of the conflicts in these oceans but because it has to maintain its sea lanes through which 40-50 per cent of its oil is imported and through which its huge exports are carried.

In May 2011, China announced plans for a significant expansion of its Maritime Surveillance Force (MSF), a law enforcement agency that polices its coastal waters. The MSF is only one of the five agencies that monitor the waters that China claims. It is also monitoring its massive fishing fleet to contribute to maritime security. In recent years Chinese fishing boats have played a crucial role in harassing US naval vessels in both the seas. In addition, China has recently launched its first ultra-modern aircraft carrier. It is also developing a new super weapon “carrier killer”—the airship ballistic missile—which will be used to counter US naval supremacy in the Pacific. It has also moved elements of its second Artillery Corps (which is said to hold its nuclear assets) to Guangzhou province, closer to the South China Sea.

And in its counter to India, besides the so-called ‘string of pearls’ (ports) in neighbouring countries, China is developing huge projects in Pakistan’s north and has also transported heavy-duty war material to Tibet. In addition it has been blowing hot and cold in its diplomatic relations with India.

In the last two years one sees China adopting more aggressive policies in its neighbourhood to safeguard its interests (including foreign trade) against increasing US (and its Asian allies’) hostility. But, as far as the rest of the world is concerned, while generally opposing US dadagiri, it also compromises and adjusts.

In the third aspect of its policy approach in other areas of the world, it is more cautious, partly because many of its economic interests overlap with those of the West.

Firstly, the dollar continues to be the main currency for its trade. Though China is seeking to undermine this, its attempt to make the yuan a currency for trade has just begun, particularly with its closer allies. Next, the interlinking dependence is to be seen in its huge foreign exchange reserves which reached a gigantic $ 3 trillion by March 2011—though it has been reducing its investments in US debt, a good one-third of this—$ 1.15 trillion—is invested in US treasury bonds. In fact China is the single largest holder of US debt. China utilises these huge funds to leverage political influence through loans, aid, etc. Of late, for example, it has shown interest to invest in weaker Eurozone states.

The interlinking of interests is more particularly to be seen in China’s dependence on FIEs (Foreign Invested Enterprises). Large numbers of TNCs have shifted base from South Korea and other countries to China, in order to produce goods utilising Chinese cheap labour and high productivity. Today FIEs account for over 50 per cent of China’s exports and 30 per cent of the country’s industrial output. It is such economic interdependence that makes for China’s caution in international diplomacy.

Overall we find that China has been adopting this three-pronged approach. It is unlikely to be drawn into immediate direct conflict at distant places, but in its neighbourhood it will continue to flex its muscle against US hegemony. Meanwhile it will also seek to consolidate the SCO, particularly strengthening ties with Russia.

The Bear’s Hug

Russia’s new assertion came with the windfall profits it gained from the high prices of oil and gas. Though its economy was also hit by the 2008 crisis, it continues to assert itself particularly in its backyard. In fact, in July this year its fifth largest bank collapsed—Bank of Moscow—and had to be bailed out through the infusion of $ 14.2 billion.

Russia, while seeking to consolidate the alliance within the SCO, continues its assertion in Central Asia and West Asia. It has also deepened its economic ties with Germany and strengthened its energy dominance in Europe by signing a series of deals on the South Stream Pipeline which delivers gas directly to Bulgaria and Central Europe.

In West Asia, while continuing its deep links with Iran and Syria, it seeks to further extend its influence. Russia and Iran hold 20 per cent of the global oil reserves and 42 per cent of its natural gas. While it has buckled under US pressure on Iran, it blocked a Security Council resolution on Syria and also continued to sell it supersonic anti-ship missiles ($ 300 million) even after strong objection from the US. It has also been playing a mediatory role in Palestine and Libya and developing ties with a more assertive Turkey.

Besides consolidating its relations in Central Asia, Russia has been extending its influence to the Af-Pak region. In the August 2010 Sochi summit, it institutionalised the quadripartite of Russia, Afghanistan, Pakistan and Tajikistan as a permanent body independent of the SCO. The quartet announced that the Foreign and Economic Ministers of the four countries would also hold regular meetings. In Sochi, Russia offered to rebuild 140 industrial and infrastructural projects in Afghanistan (which the erstwhile Soviet Union had set up) and two major infrastructural projects—a road and railway from Tajikistan to Pakistan across the north-east of Afghanistan and also the export of electricity from Kyrgyzstan and Tajikistan to Afghanistan and Pakistan.

While Russia continues its assertion in these regions, it too has many interlinking economic interests with the West which often result in its bending to US pressure, so, for example, Russia has signed deals for its participation in the design and production of the new Airbus 350; a deal with Deutsche Bahn and Siemens to develop a high speed railway; and a project to open factories to assemble Volkswagen, Daimlers and BMWs in Russia; and also the Nord Sea Gas Pipeline to Germany under the Baltic Sea. In addition, Russian oligarchs have signed major joint ventures with the oil giant, British Petroleum (BP). Russia accounts for about one-third of the the BP’s total global output.

So, today we find that both China and Russia have, jointly and independently, been asserting themselves challenging Western geo-political domination and US hegemony, and have been insisting that the world is no longer unipolar but multipolar. Given the severe crisis the US and European economies face, this assertion is likely to intensify in the coming days.

III Geopolitics of Crisis and India

THE crude, blatant and unilateral aggression on Libya, not even utilising any fig-leaf of excuse (as the WMD in Iraq or Al-Qaeda in Afghanistan) is an indication of the desperation of the West, led by the US. Of late, Gaddafi had been championing an African Union that would not be influenced by either Europe or Washington. Gaddafi was the strongest proponent of a separate currency for the continent that would replace the dollar and euro. He was disillusioned with the ‘opening out’ initiated eight years earlier and China was emerging as Libya’s key energy partner. The surgical operation cut short this process.

The US and NATO do not seem to have learnt any lessons—they have left Iraq devastated, divided and in a total mess (of course, the US now control 60 per cent of Iraq’s oil), while they are all set to flee Afghanistan. In fact these wars have drained the economy of the US, which is also being pushed to take austerity measures to reduce the spiralling public debt.

Today, the superpower, in spite of its military might, is in shambles and in terminal decline. More and more countries are asserting their independence from US domination.

In Latin America, at the initiative of Chavez and Castro, greater regional cooperation and anti-US policies have come up—like the UNASOR (Union of South American Nations) and ALBA (Bolivarian Alternative for the Americas). Even Lula’s Brazil has been relatively more assertive and now even Peru; the pro-Lula candidate defeated a US puppet in the recently held elections there.

In West Asia too the massive peoples’ upsurges against pro-US dictators have threatened to destabilise the cosy US-Israeli nexus in the region. Though the US is desperately trying damage-control, the upsurges in Egypt and the armed resistance in Yemen refuse to accept cosmetic change. With Iran-Saudi tensions already reflecting US and anti-US positions in the region, the rise of a relatively independent Turkey, under Erdogen’s AKP party, has further disturbed the US-Israeli influence in the region. Erdogen’s close relations with Iran (now slightly disturbed due to the conflict in Syria) and also with the Muslim Brotherhood in Egypt are all acting to change the prevailing geopolitics in the Middle East. As a last resort the US has pumped gigantic amounts of arms into Saudi Arabia (the largest importer of arms in the world) and has organised the reactionary monarchs of Saudi, Bahrain, Qatar, Kuwait, Oman and UAE into the GCC (Gulf Cooperation Council). An added deterrent to the US-Israel factor is that since 2006 Iran and Syria have provided the Hezbollah 50,000 missiles and rockets. In addition, the unification of Hamas and Fatah in Palestine has further disturbed the US. All is not well for the Axis in West Asia.

In Asia, the Af-Pak region continues to be the most unstable in the world. If Pakistan is pushed into a corner by the US, it has not only deepened its ties with its long-time friend China, but also built close bridges with its one time foe, Russia. In South-East Asia and the Pacific, the US is building its military alliances with countries like Vietnam, the Philippines, South Korea, etc., arming Taiwan and increasing its military involvement with Japan—in order to encircle China and contain its growing influence. It has also moved its fleets into the Pacific Ocean.

In South Asia, unfortunately only India seems to have tied itself to the sinking ship of the US. But the more it ties itself, the more it will be pulled under as the US has its own interest only in mind and all deals—whether nuclear, economic and even military—will be geared to serve only its interests, not India’s. Unlike small countries like Ethiopia, Vietnam, South Korea etc., who are tied to the US, India is a large country with huge wealth and could easily assert itself. Today, we see this assertion of many major countries around the world—not only Chavez’s Venezuela, or Iran, but even of countries more tied to the US than India, like Turkey, Brazil, Bolivia and many more. All these countries have risen from the ashes after weakening such ties.

For example, in Latin America, from Ecuador to Brazil, Bolivia to Argentina, elected leaders have turned away from the IMF and US, taken back resources from corporate control, boosted regional integration and carried out independent (of the US) alliances around the world. In Venezuela Chavez has cut poverty rates by half, tripled social spending and rapidly expanded health care and education. India has much to learn from these countries as we are laggards in all these social indicators and top in wasteful arms purchases and concessions to the corporate world. India need not waste donations to pro-US countries like Vietnam, Ethiopia, Afghanistan etc., but use these for the welfare of its own people who are in much more need of it. The five principles of peaceful co-existence, first worked out by India, should be the basis of international relations without falling into the US trap.

Internationally, the situation is fraught with increasing dangers due to the worsening economic crisis. Once it hits again, this time with greater intensity, no country will be spared—certainly not India, that is so dependent on the US. The impact of this crisis has already made most international fora defunct, with each country (or group of countries) asserting their own interests. The G-8 has turned into a squabbling shop on how to face the crisis with no solution. The WTO has now been defunct for years without any ability to reach a solution even in the tenth year of the Doha Round. Kyoto and Cancun are lying in tatters with no real agreement on environment and global warming. The World Bank and IMF are reduced in importance with much of Latin America and China bypassing it. Even the UN is a mere talking-shop with the US and others bypassing it and acting unilaterally —the latest example being Libya.

So, while all international fora are in shambles, it is the economic, political, military groupings that are becoming the actual functioning bodies. Today even the EU is weakened with its main promoters—France and Germany—pulling in different directions, and building their independent alliances.

In this international scenario where the crisis is bound to increase, as the debt-ridden countries no longer have any more money for stimulus packages, we will find the desperation of the US bloc growing by the day. Its inability to compete with China in the sphere of the economy will push it towards more Libya-like reckless adventures worsening the situation even further. The growing fear of Chinese assertion was reflected in Hillary Clinton’s recent visit to India, where she provoked India to assert by resorting to strong actions in this region.

Discord and discontent will increase through-out the world. In such a situation, it is best for backward countries like India not to get drawn into the games of the big powers, but focus instead on the building of the country. The people are the best resources and assets to face any adversity. A pro-people government should divert huge sums of money for the real welfare of the people rather than for war games of the big powers. Indians were used as cannon fodder by the British in World War I to fight its wars; let this not be repeated again. The US should fight its own battles, or better still, stop its ambitions worldwide, scrap all its military bases on others’ soil, and seek to rebuild its own economy. If not, there could be wars and devastation on scales not earlier imagined.

(July 23, 2011)