Blame Capitalism, Not Medvedev

Whenever a writer promises to "reveal the truth behind recent events," he usually digs up the latest conspiracy theory or divulges "inside information" that explains how key decisions were made. Unfortunately, I am not a big fan of conspiracy theories, nor am I privy to any secret negotiations between the Kremlin and the White House. Nevertheless, I am convinced that we should interpret the fundamental reasons behind the present U.S.-Russia confrontation much differently than the way the media have portrayed it.

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Yes, Russia clashed with Georgia. Yes, there are problems in South Ossetia and Abkhazia. And yes, there have been many points of contention between Moscow and Washington. But why has it all erupted into such a heightened confrontation right now? Most important, why have bilateral relations deteriorated so much, even when both sides are seeking compromises to limit the scale of the conflict?

In order to understand what is happening, we must take a step back from the situation in the Caucasus and even from current U.S.-Russian relations. We are now witnessing the crisis in the global economic system.

In response to events in South Ossetia, the West threatened to deny Russia membership in the World Trade Organization. But it had been clear long before the first shots were fired in the Caucasus that Russia had no hope or desire of joining the WTO anyway -- at least not without securing a whole series of concessions to Moscow's demands. And WTO states have been unable to overcome disagreements during trade negotiations on admitting Russia.

The Doha Round negotiations, the ongoing effort by WTO member states to achieve greater liberalization in global trade, broke down in July and are not expected to resume until 2009. East European states cannot reach trade agreements with West European countries, and Western Europe is at loggerheads with the United States over agricultural subsidies. Washington's plan to create a free trade zone in South America have been rejected, while Venezuelan President Hugo Chavez's Bolivian Alternative for the Americas is attracting the support of governments that have little in common with Chavez's radical policies.

What is happening?

As a rule, the global economy changes dramatically during times of heightened crises. Over the last few years, we have seen a shift from free trade among countries with "seamless" borders to a system dominated by fierce politicized competition and opposing economic blocs. In many ways, the situation today resembles Europe before the outbreak of World War I. This is not just another banal doomsday warning. The era of protectionism has arrived, and it has led to the political conflicts we are now witnessing.

True, Russia has no chance of joining the WTO now, but this has been the case for a long time. True, Moscow's stock market is falling, but stock prices started to drop long before the world had ever heard of South Ossetia. And true, this will hurt relations with the West, but were they so good before?

Most investors will invest in any country where they can make a nice profit, regardless of its political orientation. But as soon as investment returns take a dive, any sharp political crisis quickly becomes a compelling reason to pull out of the country.

As it turns out, President Dmitry Medvedev, who had the reputation of being a liberal before he took the presidential oath, is now leading Russia's serious confrontation with the West. But we shouldn't blame Medvedev for this, because the fundamental reasons for the global crisis can be found in the inherent confrontational nature of capitalism.

Boris Kagarlitsky is the director of the Institute of Globalization Studies.