Chechnya and the Evil Empire Jude Wanniski January 9, 1995

How sad it is to see civil war in the Russian Federation, to hear of the Russian army directed by President Boris Yeltsin shelling the rebel capital at Grozny, forced to put down secession. What choice do we have but to support Yeltsin? After all, this is not Latvia or Lithuania or the Ukraine, each of which could make the argument that they were forced into union and have a right to secede. To understand Chechnya, which produces 2 million tons of petroleum per year and has 25% of the refinery capacity of the federation, we should think of it as we do Texas. Chechnya is the richest of all the Russian states, and it wants out because it is being forced by the union to share more of its wealth with the rest of the country than it feels like sharing. Civil wars invariably occur for such reasons, with one segment of a nation wishing to peel away from another, not wishing to share its wealth or advantage. In the civil war we know best, the Confederate States of America did not want to give up their human chattel. Abraham Lincoln is revered for preserving the union, for if it were so easy for a state to pledge allegiance to a union, then announce secession when the going got tough, democracy would never work. Losing minorities would ask for divorce and over time the whole world would Balkanize. At the level of the family unit, secession is the equivalent of a father who leaves his wife and children in the middle of the night, to enjoy his freedom in another place. This is Chechnya.

This was also Croatia and Slovenia, when the Yugoslav federation fractured. These were the richest provinces in the union and when the national economy contracted under the colossal monetary and fiscal errors of the Belgrade government, they wanted out. Where did these colossal errors come from? From the remaining Evil Empire. From the International Monetary Fund and the World Bank. Where else? As we reported two years ago, [citation] the fragmentation of Yugoslavia was the direct result of the destructive economic policies of an IMF/World Bank program that began with a devaluation of the currency, a series of mindless increases in the prices of state-owned petroleum, and higher taxes to balance the budget. Shock therapy. The prosperous Croats and Slovenes prevailed on Germany, their old trading partner and cultural ally, to persuade the Bush administration to permit them to secede. The Bosnian Muslims made a similar claim for independence from Belgrade, although there is no record of Bosnia having independent nationhood, and the American political establishment lined up behind them. As we reported early last year [citation], the British and French have worried about the West throwing its political and military weight behind the unsupportable political assertions of the Bosnian Muslims, and the Russians are behind the Serbs, who have essentially won the civil war and are just about in a position to dictate terms of peace. Former President Jimmy Carter is working to arrange this, but those in the United States who do not wish any success for the Russian-backed Serbs are furious with Carter for his interventions. 

The intellectual forces in the United States who sold the political establishment on backing the Muslims are, after all, one and the same with those who are bent on smashing Moscow. William Safire of The New York Times, the most ardent and open spokesman for these old Cold Warriors, is quite explicit in stating his objective: To put the Russian Bear out of commission for at least another generation. On Meet the Press Sunday, Safire spoke of the opportunities for the west in the difficulties Boris Yeltsin is facing in Chechnya: It is in our interests, he said, to make Russia smaller. What he did not say, but those he represents believe, is that it is in our interests to foment secession movements throughout the Russian Federation. He may well have said, “It is in our interests to encourage civil war in Russia.” 

I have fought on the other side of this argument since it opened up as early as 1989, when it was becoming clear the Cold War was coming to an end. On the assumption that it would be in our interests to have the Soviet Union make a peaceful conversion to democratic capitalism, I spent the next three years traveling back and forth to Moscow. At their invitation (and my expense), I advised first the Gorbachev government and then the Yeltsin government on how to fix the ruble, as the necessary first step in building a market economy. Throughout, my chief adversary was the Evil Empire of the IMF/World Bank, who thrust upon Moscow the same shock therapy approach that had been sold to the Yugoslav government in Belgrade. If I had to personify the opposition, it would be my old ally and mentor in the fight against the Evil Empire of the USSR, Albert Wohlstetter, the Rand Corp. genius who, more than any other American I know of, conceptualized the strategic offense in defeating Moscow . Now in his 70s, Wohlstetter is as active and alert as ever, trying to keep alive the spirit of the Cold War. He and his protégé, Richard Perle, were built to play war games. It is what they do best. 

Perhaps they are right. Insofar as they may be correct in wishing to bust the Russian Federation into little pieces, I can’t of course classify them as “evil,” however much I might disagree with their analysis. I do note, though, that they are shrewd enough to employ the mindless, i.e., evil, forces of the IMF/World Bank on their behalf. Besides Safire, their allies in this quest include Lady Margaret Thatcher, Editor Robert L. Bartley of The Wall Street Journal, and, from time to time, Senate Majority Leader Bob Dole. On his recent visit to Europe, in which he attempted to force Europe into a more aggressive posture in favor of the Bosnian Muslims, Dole met with Lady Margaret in London in a meeting arranged by Wohlstetter and Perle. Last week, Dole introduced legislation that would unilaterally lift the western arms embargo in the region, a move seen as aggravating the situation on the ground in Bosnia, which is trying to make Jimmy Carter’s ceasefire hold. In North Korea, Wohlstetter, Perle & Co. were similarly confounded by the former President as they tried to generate a Cold War confrontation with Pyongyang over a nuclear threat that I believe is fictitious (a view I share with Colin Powell.) Why is Wohlstetter behind this move? He is a global chessplayer. North Korea is a chess piece. 

Whether I am right, or Wohlstetter is, it is useful to understand what all this is about if we are to make sense of the unfolding world political economy. Chechnya is just the latest skirmish on a planet trying to adjust to the end of a war that could have extinguished all life if it had turned out differently. This makes it all the more difficult to oppose a man and his team that I credit with much of the success of that historic endeavor. If I am right in continuing to argue that we should want a healthy, unified Russian Federation, my allies now are in the Clinton Administration, especially the President himself. This is not the case because the President or his advisors know what’s going on, but because he is naturally struggling to find diplomatic solutions to regional conflicts. The Democratic political weakness lies in its innocent belief that the IMF/World Bank is an agent of good, when it is actually at the heart of the Evil Empire. There is no Republican leader at the moment who is on top of these stratagems, although Jack Kemp comes close. Newt Gingrich is totally consumed with domestic matters. Colin Powell doesn’t understand the economics, but is dead-on in understanding the diplomacy. Fred Ikle, another big-dome counterforce strategist who once was a Wohlstetter ally, is the most important defector from the Wohlstetter ranks. 

In Friday’s New York Times, we note a P.3 story on the latest “victory” of the IMF/World Bank, in persuading Moscow to “liberalize” its oil prices, in exchange for a big bag of money. This is another victory for the forces who wish to destroy the Russian Federation, for it can only lead to more secession movements. For the Russian people to find their way to prosperity through capitalism, they have to find their way to capital. For the Russian state oil monopoly to raise prices for individuals and state enterprise is a huge tax increase on a political economy already fracturing under the pressures of IMF demons. It is of course not an Evil Empire of individuals at work around the world, but the evil idea that currency devaluations and tax increases are the road to prosperity. For those who know of its destructiveness, but are willing to use it to achieve their political objectives, is like playing with fire. If it can be used to burn Moscow, it can also be used to burn Mexico. 

I’m sometimes accused of a stretch, but I suggest this stretch in connecting Cechnya and Chiapas. On the same day we hear of the IMF victory in Moscow, we hear of the IMF agreement to send a team to Mexico City, to help a beleaguered President Ernesto Zedillo grapple with his peso problem. We have already identified the new Mexican finance minister, Guillermo Ortiz, as the prime suspect in pressing for peso devaluation in Zedillo’s cabinet. Ortiz spent the first four years of the Salinas administration in Washington, D.C., as Mexico’s man at the IMF. The cancer is metastasizing. Lawrence Kudlow, economics editor of National Review, has been forceful in pinning the collapse of Mexico’s financial markets on the advice of MIT’s Stanley Fischer, now chief IMF economist, and Rudiger Dornbusch, the MIT economist who has been agitating for a peso devaluation for the last six years. Through their alliance with Treasury Undersecretary Lawrence Summers, they prodded Ortiz into the peso devaluation that now, somehow, requires the first aid of an IMF team to fix. Fischer and Summers have now done more damage to the world economy than any combination of Marxist economists in the last generation. They were the two men who designed the shock therapy schemes that blew apart Yugoslavia and fractured the Soviet Union. 

Is there any way to halt this runaway evil locomotive? It can only happen in the United States, where the problem is nurtured through infusions of intellectual and financial capital. Bob Bartley of The WSJ has called the IMF/World Bank devaluation program the most dangerous on earth, but there are long, dry stretches on the Journal’s editorial page where we hear not a word about this most dangerous idea. It is my hunch that this kind of monumental change can only occur through a power change at the White House as profound as the change we saw last week in the Congress. Unless we get a presidential candidate in the GOP, or much less likely the Democratic Party, to challenge the Evil Empire, we are going to have more Chechnyas and Chiapas’s. Chiapas? But isn’t it the poorest of all the Mexican states, and isn’t Chechnya the most prosperous? Isn’t there a contradiction here? Not exactly. In conversations with people I take seriously in Mexico City these last several weeks, I’ve heard a few times that Chiapas isn’t really part of Mexico’s culture, that it’s really more of an Indian nation that belongs in Central America. You see how easy it is to rationalize conflict in a marriage? You see why the political leadership in Chiapas is in revolt? It takes two to tango, only one to ask for divorce.

How tragic it is to see civil war in the Russian Federation. But what else can we expect?