Chapter 10: States and Markets in the World Economy


Reject both offers
The risks of dependency on communist Russia outweigh the short-term benefits of economic assistance.


Remember, as a pure economic liberalist, your infant domestic industries are fully open to both domestic and international competition, but the Chechen economy will also enjoy absolute gains and access to markets and resources. Your decision to reject both Russian offers means you will not be able to artificially increase the speed of economic development for your infant domestic industries. However, you will also not be economically dependent upon your greatest potential adversary. 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 collecting and redirecting some of your resources to expand your military or continuing to develop your economy unimpeded. 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 economyGiven that your industries are all relatively new, there is a lot to be gained from developing them as quickly as possible 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.