Ukraine war and Western system's fatal flaw
[Originally published on Alex Krainer's Substack]
We can see from the increasingly incoherent statements by western officials that they are outright panicked about Ukraine’s imminent capitulation to Russia: it is the surprise they did not expect. How important a piece was Ukraine on Western powers’ geopolitical chessboard? Last April, Poland’s President Mateusz Morawiecki gave away the mindset in a TV address when he said that, “If we lose Ukraine, we will lose the world for decades. Defeat of Ukraine could be the beginning of the end of the golden age of the West.”
Incidentally, his statement has subsequently been airbrushed in most media making it seem that he said “… we will lose peace for decades.” In some Slavic languages the word “Mir” means both world and peace, but Morawiecki was not talking about losing peace, but about the end of the West’s primacy in world affairs. From Western oligarchy’s point of view, the stakes could hardly be any higher in Ukraine. Being so very powerful and sophisticated, they should be winning that fight, right? Well…
We’ve got two days’ worth of dry powder…
After two years of Russia's Special Military Operation, it is now clear that Russia is winning and that Ukraine is now well and truly broken. This is all in spite of the nuclear, all-out trade sanctions against Russia and the full support for Ukraine from her western allies, both in terms of financial, humanitarian and military aid. NATO has practically disarmed itself to provide weapons and ammunition to Ukraine.
Last November, the deputy of Germany's Christian Democratic Union (CDU) Johann Wadephul stated to the media that the combat capacity of German Armed Forces has been seriously weakened by the shortages caused by the continuous supply of material and ammunitions to Kiev: "Crucial troop units can only last a maximum of two days in a battle. And that is a catastrophic find overall." Other NATO countries are likely in no better shape regardless of the ongoing juvenile trash-talk about how Ukraine destroyed 50% of Russia’s military power, took back 50% of the territory held by Russia, all for cents on the dollar of West’s defence budgets, etc.
West can outspend Russia 10 to 1? It had better…
One of the talking points that has been making rounds among the West’s true believers, is that we can outspend Russia by a factor of 10 in military expenditures. That may well be true, but what those expenditures can actually buy is a different matter. In fact, we would need to outspend Russia ten-fold just to keep up - barely. One of the great shortcomings of the Western militaries is their ammunitions procurement.
As the New York Times reported last September, Russia is producing at least seven times more ammunition than the US and its Western allies combined, and she is producing it at about 1/10th of the cost of western manufacturers. For example, while the cost per round for a Russian 152 mm round is about $600, NATO must budget between $6,000 and $8,000 per each 155 mm round.
Not only is Russia vastly ahead in terms of sheer production volumes of military materiels but also in terms of innovation, quality and their overall effectiveness. Her arsenal spans a very large array of weaponry from ultra-sophisticated hypersonic precision-guided missiles, world's most effective air-defense complexes and cheap but deadly drones, to the basic stuff like field artillery and ample ammunition to keep it firing 24/7 for months on end. At the same time, the United States and NATO still rely on legacy weapons systems that were state-of-the art in the 1990s, but are in large part obsolete today.
Purpose-driven vs. profit-driven systems: it’s no match
In a superb and important piece of analysis referencing the recent US Department of Defense National Defense Industrial Strategy (NDIS), former Marine and military affairs analyst Brian Berletic dissected many of the reasons why the combined West is now clearly losing the arms race, not only against Russia but also against China. He points out the key differentiator: while Russia's defense industry is purpose-driven, that of the West is profit-driven.
Western military-industrial complex is entirely structured around profit objectives which created a perverse system of incentives that rendered its output ineffective in more than one way. To begin with, West's private weapons contractors have aggressively pursued profits, leading them to eliminate stockpiling necessary materials and reserving production capacities beyond the ordinary procurement requirements. As a result, they have no surge capacity to rapidly escalate production in response to exigent “national security” needs.
In bed with the “enemies”
Profit motives have also incentivized western 'defense' industries to outsource a lot of their critical components production to nations where labor cost is lower. In many cases, those nations happen to be the strategic adversaries of the United States. In other words, the US has made its “national security” dependent on its designated enemies. Last year, Raytheon's CEO Greg Hayes admitted that Raytheon relies on several thousand suppliers in China.
For example, its engines subsidiary Pratt & Whitney, and the aviation systems specialist Collins Aerospace have some 2,000 direct employees in China. Hayes conceded that, “if we had to pull out of China, it would take us many, many years to re-establish that capability either domestically or in other friendly countries.” Most importantly perhaps, Western weapons manufacturers have trimmed down their workforce and curtailed investment in their training and education.
The undiagnosed malignancy
Again, these are not small, marginal issues: the stakes could hardly be any higher! Even as it endeavors to maintain a dominant geostrategic position in the world, Western powers have cannibalized their own capability to enforce and defend that position. The inescapable conclusion is that there is a deep, systemic flaw in the Western model of governance.
For generations, we'd all been educated to worship at the altar of private capital's unrestrained pursuit of profit for the greatest benefit of its shareholders. This has been promoted in the academia by many of our most exalted economists like Murray Rothbard, Von Mises, or Milton Friedman, who argued the case in his 1970 essay entitled “The Social Responsibility of Business is to Increase its Profits” (PDF). It has also been glorified in Hollywood films like in the character of Tony Stark, a.k.a. the Iron Man.
Profit motive must shape the development of production and distribution of goods and services in our economies to the exclusion of any other considerations, else someone will shriek, SOCIALISM! What's worse, we’ve even allowed ourselves to become convinced that individuals’ unrestrained pursuit of their own interests somehow automagically leads to the best possible outcome for the whole society.
As it turns out, those ideas were the owner class’s self-serving delusions that incubated the fatal flaw within their system, rendering it fragile and weak. The flaw has festered as an undiagnosed malignancy because it enabled the interests who own our Military Industrial Complex and other key industries (the big banks, big tech, big ag, and big pharma) to become extremely wealthy. They also became deeply entrenched in society’s power networks. As such they’ve grown and wholly resistant to any curtailment of their extraordinary privileges, even when it becomes clear that they are driving their nations to destruction.
They no longer have choices…
In his book, "Time to Start Thinking," Edward Luce referred to a 2011 strategy session held at the National Defense University by 16 high-ranking US military officers. They concluded as follows:
The window on America's hegemony is closing. We are at a point right now where we still have choices. By 2021, we will no longer have choices. ... The US is way too dependent on its military and should sharply reduce its 'global footprint' by winding up all wars, notably in Afghanistan, and by closing peacetime military bases in Germany, South Korea, the UK and elsewhere... All this is a means to an end, which is to restore America's economic vitality. ... Our #1 goal should be to restore America's prosperity. As such, we recommend the Pentagon shrink its budget by at least 20% ... most of the savings would be spent on civilian priorities such as the infrastructure, education and foreign aid. ... Nobody here thinks the politics in this town are going to change overnight; all we're saying is that we're in trouble if they don't. This isn't about ideology; it is about understanding where we are as a country.
Indeed, that was in 2011, more than 12 years ago. Of course, the warning was ignored and no course correction was allowed. The malignancy consumed America’s prosperity to pursue self-destructive military misadventures around the world. In nature, these types of malignancies deplete and kill their own hosts. It is now becoming clear to an increasing number of people in the West that this is our societies’ trajectory and that our owner classes only know one way to tackle complex challenges: by pressing ever harder on the accelerator pedal.
…but we do (have choices)!!!
For the rest of us, we really are going to have to build back better from the ruins they leave behind. Only, we must do it in a very different way from the one they planned for us. This must be the dawn for thinking, creativity and coming together in love and faith in ourselves. I’d leave it at this, but the question often crops up: what can we do?
Learn the truth and speak it - openly and boldly. Reject fear and the lies they are lobbing our way. Refuse to entertain any idea that we have to go and fight some external enemy in order to set our world straight, that the Russians or the Chinese are our enemies. It’s as Napoleon Bonaparte put it: wars happen when your government tells you who the enemy is. Revolutions happen when you figure it out for yourself.
Alex Krainer – @NakedHedgie is the creator of I-System Trend Following and publisher of daily TrendCompass investor reports which cover over 200 financial and commodities markets. One-month test drive is always free of charge, no jumping through hoops to cancel. To start your trial subscription, drop us an email at TrendCompass@ISystem-TF.com
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