Wednesday, February 23, 2005

Out of the East 

Here are some developments in Eastern and Central Europe you might not have heard about, but which could have significant implications in the near future.

While you were sleeping: While the Western counter-intelligence services have increasingly shifted their emphasis towards counter-terrorism work, Russia has been quietly rebuilding its spy network across the United States and Europe. "Time" magazine reports that Russia is now running
at least as many agents in America as the old Soviet Union did (around 130, not counting the "illegals"). "Officials say the Russians are after secrets about American military technology and hardware, dual-use technology such as the latest lasers, and the Administration's plans and intentions regarding the former Soviet states, China, the Middle East and U.S. energy policy, among other matters. Russia also wants to learn as much as possible about its biggest strategic worry: the U.S.'s ramped-up commitment to missile defense, which could eventually threaten Moscow's nuclear deterrent." Germany, too, is finding itself on the receiving end of a Cold War-size Russian spying invasion, also seemingly directed at scientific and industrial targets.

Cold War KGB defector and an authority on espionage, Colonel
Oleg Gordievsky agrees that there has been an upsurge in Russian espionage in the West since Putin became president five years ago. Russian experts dispute such claims, decrying Western propaganda and provocation.

Why it matters: Because it might be yet another indication that Putin is not really a liberalizer but merely the latest in Russia's long line of modernizers. Intellectual heirs of Peter the Great, Russian modernizers reject the Western intellectual and ideological baggage (democracy, freedom, free market) in favor of practical imports, such as science, technology and management techniques. In doing so, they confuse the causes and consequences of the West's success and are thus bound to be disappointed, but not without a lot of heartache and disruption.

Starting the engines of growth: As the Old European economies
stagnate, the Eastern and Central Europe is adopting tax policies designed to spur growth. Many countries in the region, for example, have adopted flat taxes. Romania is the latest New European to restructure its tax system - the centerpiece is a flat-rate of 16 per cent, "replacing three income tax bands ranging between 18 and 40 per cent, and a corporate tax previously at 25 per cent." Taxes, particularly corporate taxes, throughout the Eastern Europe are already generally significantly lower than in the West. No wonder the Old Europe is hating the competition and trying to undermine the low tax push.

Why it matters: Because as
V. Arun, research analyst with Frost & Sullivan writes, "low tax rates coupled with cheap labor prevalent in the [Eastern European] countries can have a drastic impact on the employment, investment, and industrial production in the EU member states. As a result, the corporates in the west are bound to move eastward in the hope of benefiting from the tax advantage." Yes, it will take quite some time for the countries of the former Eastern Bloc, ravaged as they still are by decades of communist economic vandalism, to reach the levels of economic development and the standard of living of the Western Europe, but as the Western Europe refuses to face the economic and demographic challenges, it might happen sooner than we think.

Keeping the European Union in check: The Eurocrats must be starting to regret the admission of the new members to the EU. The uncouth newcomers are rather less well disposed towards statism and trendy leftyism than their Western betters and are already shaking the comfortable Brussels status quo. This from
the Czechs:
"In their first foreign-policy victory since joining the EU, Czech officials in Brussels have blocked a proposed ban on inviting Cuban dissidents to receptions at European embassies in Havana.

"The ban would have suspended a 2003 resolution that called on EU countries to support anti-Castro dissidents by inviting them to parties celebrating national holidays.

"Spain proposed the ban as part of a package of measures -- including the resumption of EU missions to Cuba -- designed to ease tensions with Havana. It became a sticking point when the Czechs threatened to use their veto in the 25-member Council of Foreign Ministers, where unanimity is required on policy decisions."
Another recent example comes from Poland, whose representatives were instrumental in alerting the public and then stopping the proposed EU directive on patents, which had it been passed would have devastated the development of open source and shareware software. In the best EU fashion, the directive was going to be pushed through the Agricultural and Fisheries Commission(!).

Why it matters: Because the Easterners are acting as a moderating, sensible influence on the rampant anti-American nouveau socialism of the EU elites. It is also a useful reminder for the EU critics in the US that Europe is not monolithic and not beyond salvaging.

Building the Balkan bulwark: No great power since the Roman Empire has succeeded in this enterprise; the Byzantine, Turkish, Austro-Hungarian, Russian and Soviet empires tried but failed - but the United States have been largely (though not yet completely) successful in generating a common foreign policy outlook throughout the Balkans.
Slovenia, Croatia, Bosnia, Macedonia, Bulgaria, Romania (set to continue after the recent election), Kosovo, Albania and even to some extent Serbia - countries otherwise much divided by ethnicity and religion - all currently have generally pro-Western and pro-American governments. The region's Muslims are the most pro-American of anywhere in the world bar the Kurds and the Kuwaitis.

As this long piece by
Joel E Starr suggests, the picture is not all rosy; for one, the region is mired in economic stagnation. The US might have been successful in imposing peace, but it was far less successful in imposing a decent economic order. As Starr notes, "up to 147 taxes could be levied on a single business in Sarajevo, many requiring collection every week." This is crazy and something needs to be done about it.

Why it matters: The United States has a once-in-a-few generations opportunity to create a moderate and friendly block in a region otherwise known for strife and instability. The US has already committed itself diplomatically through the
Adriatic Charter help some of the Balkan countries to integrate with NATO, but more needs to be done both politically and economically to assist the "soft underbelly of Europe". Just as with the northern Slavic countries of New Europe, it is in America's national interest to strenghten the continental counterweight to the less friendly Western Europe.


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