Chapter 9: Power, Politics, and the World Economy

Action:

Accept the offer for unconditional loans
Russian capital would allow the Chechen government to more easily invest in its economic or military development in the short term. This would also result in Chechen dependency upon Russia because the Russians could cut off financial assistance whenever they liked and/or demand immediate payment. If the Russians demanded immediate payment, Chechen economic growth would likely be disrupted, given the government's need to collect greater resources from domestic industries to pay off the Russians.

Outcome:

Remember, as a pure economic nationalist, your infant domestic industries will be carefully developed and are not open to international competition. Due to your protectionist policies, the Chechen economy will not enjoy absolute gains nor access to markets and resources. Your decision to accept the Russian offer for capital will enable you to either develop your economy further or invest in your military. In the long run, economic growth and development is your goal as the Minister of Finance. In the short term, you have to decide between expanding your military or investing in your economy. You should keep in mind that the Russian threat is still real but the US bloc may come to your aid if Russia invaded.

What do you do now?



Strengthen the military in the short termYour military will be able to produce more tanks, weapons, fighter jets, and defense systems than it normally would have. If Russia were to invade, they would still be able to win a conflict because they have one of the best militaries in the world, but your military will be strong enough to both lengthen the war and raise the costs of war. Even if the communist bloc was weakened, the military buildup may deter the Russians from invading. This military buildup would come at the opportunity cost of investing in your developing domestic industries.
Further develop the economyThe capital could be used to artificially lower the costs of production for your domestic industries. The lower costs of production will allow for your domestic industries to invest in innovation and more easily compete in international markets. Given that your industries are all relatively new, there is a lot to be gained from rapidly developing them because the more developed an industry is, the more it stands to gain from global economic integration. That being said, your military capabilities will be no match for the Russians if they choose to invade. The US bloc's security guarantee is still uncertain at this point.