Posted Mar 18, 2014 by Martin Armstrong
There is a serious issue at the core of the USA-Russian renewed Cold War. Both sides fail to understand how and why the Cold War ended. This is a profound problem that impacts both Russian and Western attitudes risking war in the future. This very common assumption that the West somehow succeeded in causing the collapse of the Soviet Union winning the Cold War is DEAD WRONG . The plain and simple fact is that the Cold War ended by its own accord not even by negotiation to the advantage of both sides, but because of sheer economics.
The reason I state that Marxism and Socialism are collapsing is because central planning simply fails to work. Only people in the front line of commerce see gaps and openings that present opportunities that inspires innovation and economic expansion. This is the true thrust behind Adam Smith’s Invisible Hand. This is why the Soviet Union collapsed. It was NOT some CIA plot and it is what is currently behind the fall and decline of Western Economics.
Back in December 1989 Malta summit that lined up precisely with our Economic Confidence Model and our forecast that Communism would then fall, was the Mikhail Gorbachev and President George H.W. Bush confirmed that the ideological basis for the war had evaporated into history. They acknowledged that the two nations no longer regarded each other as enemies – something Putin & Obama need to remember.
Over the next two years, The United States and the Soviets worked closely together in a new spirit that was even tighter than with even some of other allies. The USA and the Soviet Empire worked to actually halt the arms race and went on to ban chemical weapons while agreeing to drastically reduce nuclear weapons. The old Iron Curtain was being abandoned and this conference did more to solidify the collapse of Communism in Russia but also China. The liberation of Eastern Europe was at hand. While Putin had regarded the collapse of the Soviet Empire as the greatest tragedy of the 20th century, this is purely seen through biased eyes of power – not economics.
This was the voluntary abandonment of communism and its central planning ideology by the Soviet leader who some see as a traitor today in Russia – Mikhail Gorbachev. However, without the Arms Race consuming resources within the Soviet economy preventing economic expansion and the lifting of living standards in Russia, Gorbachev understood he could now make his country economically strong once freed from the Arms Race in a war that no longer made economic sense and that would allow him to then focus on internal reforms.
Gorbachev’s Perestroika (“restructuring”) (Russian: перестро́йка) was the political movement for both the reformation within the Communist Party of the Soviet Union and his glasnost (“openness”) policy reform. The interesting aspect is that Perestroika began with the major shift in the Economic Confidence Model in 1985 from PUBLIC to PRIVATE. Perestroika became a well-known term by 1986. This was Gorbachev’s goal – his economic rationalization that Perestroika was critical to the long-term survival of Russia. This was the restructuring of the Soviet political and economic system. The hard-liners blame Perestroika for the cause of the dissolution of the Soviet Union, the revolutions of 1989 in Eastern Europe, and the end of the Cold War. However, our model successfully targeted the beginning of Perestroika with the turn in 1985 and the collapse of Communism on the peak of the first wave – 1989.95.
The relaxing of the iron grip of Eastern Europe set in motion a cascade failure that resulted in the collapse of the Soviet Union in a rapid fashion traditionalists did not expect. Only our model saw the rapid demise for this was simply how all empire, nations, and city states collapse – in less than 3 years with the greatest pressure in the first year. The borders became porous south of Germany and this led to several weeks of civil unrest that forced the East German government to announce on November 9th, 1989 that all GDR citizens could visit West Germany and West Berlin. Crowds of East Germans crossed and climbed onto the wall, joined by West Germans on the other side in a celebratory atmosphere. Over the next few weeks, a euphoric public and souvenir hunters chipped away parts of the wall; the governments later used industrial equipment to remove most of the rest. The physical Wall itself was primarily destroyed in 1990. The fall of the Berlin Wall paved the way for German reunification, which was formally concluded on October 3rd, 1990.
This rapid demise of the Berlin Wall and the Soviet Union has confused those in Russia who see it as a CIA plot and Americans who just want to take political credit for ending the Cold War. Nevertheless, neither side deserves any such credit for this was simply an inevitable outcome of economics.
Moreover, the breakup of the Soviet Union into 15 separate countries was not something the America caused, could foresee, or even plot on a white board as a goal. It was expected that Gorbachev would create a type of voluntary union of Soviet republics that mimicked the United States – excluding of course the main three Baltic countries where they simply hated Russia for the persecution of Stalin.
President Bush actually expressed this American political expectation in August 1991 when he urged the non-Russian Soviet republics to adopt the union treaty Gorbachev had proposed and warned against “suicidal nationalism.” Clearly, the political goal was to keep the Soviet Union together and NOT to see it collapse for the great unknown would emerge – would there be nuclear weapons unaccountable? So to those who claim the collapse of the Soviet Union was plot crafted by the CIA, they are out of their minds for the greatest fear was who would then control the instruments of death. This is why Bush counseled AGAINST separatism.
Russians who regret the collapse of the Soviet Union should remember that it was not Gorbachev, but Boris Yeltsin who actually conspired with his Ukrainian and Belarusian counterparts to replace the U.S.S.R. with a loose and powerless “commonwealth” and Ukraine turned over all of its nuclear weapons. This was the REAL backdrop to why Ukraine is unarmed today.
Gorbachev maintained that “the end of the Cold War is our common victory.” Nevertheless, there were deep division within the political structure within the Soviet Union that did not approve of ending the Cold War and saw the USA still as the enemy. At the same time, there was rising political unrest in outer Soviet Republics. 1990 began with nationalist turmoil in January as the Azerbaijanis rioted and troops were sent in to restore order, Then many Moldovans demonstrated in favor of unification with post-Communist Romania. Lithuanian demonstrations also erupted a continued progressively. That same month, Armenia asserted its right to veto laws coming from the All-Union level, starting the dissolution process intensifying what became known as the “War of Laws” between republics and Moscow. This was the uprising against the central control of the Marxist state.
Then in 1991, there was the Soviet coup d’état attempt, also known as the August Putsch or August Coup (Russian: Августовский путч Avgustovsky Putch), that was organized by a group of members within the government to take control of the country from Mikhail Gorbachev. The coup leaders were indeed the hard-line members of the Communist Party who were opposed to Gorbachev’s reform program and the new union treaty that he had negotiated which decentralized much of the central government’s power to the republics. This political design was more or less similar to the structure of the United States with independent state rights, just a central federal power. The Soviet model was all power resided in the central government and that is what prevented Russia’s economic growth.
The coup leaders were opposed primarily within Moscow itself, by a rising tide of civil unrest among the people. The coup collapsed in only two days and Gorbachev returned to government. However. this event had the impact of destabilizing the Soviet Union and contributed to the demise of the of the communist party (CPSU) and then inspired the full dissolution of the Soviet Union. This was accomplished by the Russian people – not the CIA. The Baltic states then seceded in August 1991 starting the process.
Boris Yeltsin (1931–2007) was a Russian politician who stood on the tank during the civil unrest insisting the army not fire upon Russians. He then emerged as the first President of the Russian Federation, serving from 1991 to 1999. He had been a supporter of Mikhail Gorbachev initially, but he then emerged under the Perestroika reforms as one of Gorbachev’s most powerful political opponents. Yeltsin was elected on May 29, 1990 as chairman of the Russian Supreme Soviet. On June 12, 1991 he was then elected by popular vote to the newly created post of President of the Russian Soviet Federation Socialist Republic (SFSR). At this moment in time, this was composed of the 15 constituent republics of the Soviet Union. In the aftermath of the coup, his rival Yeltsin quickly worked to consolidate his hold on the Russian government as well as the remnants of the Soviet armed forces, paving the way for Gorbachev’s downfall.
Gorbachev had aimed to maintain the CPSU as a united party. He in his mind sought to create a Scandinavian-style social democracy. However, when the CPSU collapsed with the August ’91 coup, Gorbachev was left with no effective power base beyond the armed forces. The movement within the Republics for economic freedom was building. Then on December 12th, 1991 it was becoming apparent that the momentum towards dissolution could not be stopped by anyone. This is why Bush came out counseling against the break-up of the Soviet Union supporting Gorbachev.
It was at this time when Gorbachev began to hint that he was considering stepping down. Then on December 17th, Gorbachev accepted the fait accompli and reluctantly agreed with Yeltsin to dissolve the Soviet Union. Four days later, the leaders of 11 of the 12 remaining republics had ALL, with the exception of Georgia, signed the Alma-Ata Protocol which formally established the CIS. They also preemptively accepted Gorbachev’s resignation. When Gorbachev learned what had transpired, he told CBS that he would resign as soon as he saw that the CIS was indeed a reality.
On the night of December 25th, 1991, in a nationally televised speech, Gorbachev announced his resignation as president—as he put it, “I hereby discontinue my activities at the post of President of the Union of Soviet Socialist Republics”. The Soviet Union was formally dissolved the following day. Two days after Gorbachev left office, on 27 December, Yeltsin moved into Gorbachev’s old office.
Yeltsin remained in office as the President of the Russian Federation, the USSR’s successor state. Yeltsin was reelected in the 1996 election; in the second round he defeated Gennady Zyuganov from the revived Communist Party by a margin of 13%. However, Yeltsin never recovered his early popularity after a series of economic and political crises in Russia in the 1990s and corruption that was becoming obvious.
Yeltsin vowed to transform Russia’s socialist command economy into a free market economy and implemented economic shock therapy, price liberalization and privatization programs. However, the state-owned property merely went to political favorites in the privatization process and much of the national wealth fell into the hands of a small group of oligarchs rather than the public.
Much of the Yeltsin era was marked by widespread corruption, inflation, economic collapse and enormous political and social problems that affected Russia and the other former states of the USSR. Within the first few years of his presidency, many of Yeltsin’s political supporters turned against him and Vice President Alexander Rutskoy denounced the reforms as “economic genocide”.
Today, there remain elements within the United States who insisted upon treating Russia as the loser and that is now remembered by Putin. George Bush did not help matters when he sought to exploit the situation for domestic political gain. He stated at his 1992 State of the Union address; “By the grace of God, America won the Cold War.” The next three Presidents took those words to heart and treated Russia as a loser rather than understand it was economics and not the sheer power and might of the USA political establishment.
The US started to become more aggressive rather than wise. President Bill Clinton supported NATO’s bombing of Serbia without U.N. Security Council approval. He championed the expansion of NATO to include former Warsaw Pact countries moving right into the face of Russia. Such moves clearly violated the understanding that the United States would remain restrained and not take advantage of the Soviet Union’s contraction retreat from Eastern Europe. The effect on Russians’ trust in the United States was devastating. In 1991, polls indicated that about 80 percent of Russian citizens had a favorable view of the United States; in 1999, nearly the same percentage had an unfavorable view all because of the aggressiveness of US power.
In 1999, based upon information and belief, Edmond Safra, and his buddy Boris Abramovich Berezovsky schemed to takeover Russia and get their hands on its natural resources. Yeltsin had announced he would run for election in 2000. There was $7 billion stolen from the IMF loans that was directed to Switzerland to “refurbish” the Kremlin. As soon as the wire was delivered by Bank of New York, Safra’s Republic National Bank ran to the US Attorney informing them that Bank of New York just did a $7 billion money laundering scheme. They then black-mailed Yeltsin into not running and demanded he appoint Berezovsky as President or they would tell the world he just stole $7 billion from the IMF. Yeltsin realized he was set-up by Safra and this is when he turned to Putin. Safra mysteriously was killed on December 3rd, 1999, Berezovsky fled to London and Putin came to power.
The United States and Europe have lost and created in the process a resentful Russia that now confronts the world. Their mismanagement of the entire situation and the lack of understanding of the issues central to this crisis plagued our perspective of the future.