It appears there is a resurgence in cold war strategy that is apparent in Georgia. Russia had always preferred bullying in the old "East Bloc" and "Soviet Union". These were not necessarily voluntary unions but ones that were enforced from time to time. The US tended to use money handles to get "client states" on side, and eventually, this proved to be the key to the breakdown of the soviet empire. Communism was an inferior economic model, and its lack of democracy meant it could not adjust appropriately through succession of leaders and failing economies. Thus it appears that although the borders have changed dramatically, the upgraded economics and transformed country altogether have allowed Russia to actively assert its geopolicy of old, which seems to only require a strong military, and complete control over its media. The only tactic that is plausibly optimal for the US is also the Cold war tactics of old - ie. money and military support for client states. There was a nash equilibrium for a long time throughout the cold war with the stalemate perpetuated by Mutually Assured Destruction (MAD). The stalemate only ended when the USSR no longer had enough money to continue its strategies. Russia may yet again be vulnerable from say, a commodities bust economically, or a leadership succession issue politically, but these really cannot be counted on in the short term. Thus I foresee a solidification of the front line of the cold war in the Caucauses, and veiled threats of Great escalation as a way to manipulate policy in the future - virtually a return to MAD, in fact. China may well join the fray in imperialism of its own with its front lines of Taiwan etc.
What does Marconomics say about who is to blame for the war in Georgia?Marconomics states that that is the wrong way to think (see principle 6). Blame in this case implies that there exists an impartial international court that can *both* judge and enforce its findings. Attempting to come to conclusions based on evidence as to who is to blame is putting the cart before the horse. The rules of the game in this case have as the highest court the UN security council. Thus if any of the veto-wielding members are part of the conflict, they cannot be effectively policed, except via threats by one of the other veto-wielding countries.
How did Russia "Win" There are several strategic masterstrokes that Russia has made in the leadup to this conflict. Of course, in the long run, by the mere dint of the fact that they were "surprise" tactics which humiliated "the west" this will hurt Russia dearly (eventually).
One masterstroke was to give Russian citizenship to South Ossettians who wanted it. I have often thought that giving US citizenship easily to Iraqis (or Bosnians, Kosovars...)under occupation etc. could be easily turned to the US's strategic advantage.
Another smart move was to use the media cleverly to demonise Georgias leadership. As a "nominal" democracy, it is clear that the Russian population is right behind Putin, and think that the Georgian leader (Saakashvili) should be crushed like a bug because they believe him to be a tyrant. It wouldn't surprise me if in ten years, Russians rue the fact that they didn't go all the way and finish the job, much as the US rue the fact that Saddam Hussein wasn't brought down back in Gulf War I.
The tactical masterstroke was to predict Saakashvili's moves, and swiftly orchestrate counter-moves which included extensive propaganda. Staged and prepared propaganda from media fully under your control will always play better than even "nominally" fair and free western style press. Nobody believes the media to be impartial anyway, so it is better to go the whole hog and be as brazenly biased as people can believe.
Given that "true" democracies with "free" press have such a strategic liability over a system like Russia's, does this mean that the political/media systems in Russia (and China) are better than the west's?
No. The long term adaptability of true democracies and the truth-seeking nature of private, free media are decisive in the long run, even given their short term strategic liabilities.