It’s Hard to Argue with Prosperity

Uncle Volodya says, "I heard the new corporate slogan at McDonalds is 'Can you afford fries with that?""

Is the Ferrari F450 faster than the new Lamborghini Murcielago? What wine is the best pairing with blue-rare beefsteak? If you put Bill O’Reilly, Rupert Murdoch and Alan Greenspan in the ring, each with a tack hammer, which one would kill the other two? Any of these questions could easily inspire spirited debate, and perhaps even argument. In fact, even flowers have been known to generate a disagreement in which a woman bit off her neighbour’s finger. It’s hard to say what will get people worked up.

By way of contrast, it’s not hard at all to say what will make people’s eyes glaze over, as they put their thumbs in their mouths and start to rock rhythmically. Economics. Yes, economics is a boring topic – so numbingly boring that economists sometimes have to take out special insurance policies against wilfull damage caused to their persons or property for the crime of boring people past their Personal Fury Threshold (PFT).

But today, we’re going to talk a little about economics. I’m not an economist (I have friends), but I’m going to rely on the words of those who are. Normally I avoid the subject altogether, but I had to dig into it a little as a result of this piece, by The Democratist. Some of you might recall The Democratist getting a shellacking recently on Leos Tomicek’s blog, when his addled musings attracted Leos’s bitter Czech contempt. For a little while after, his postings appeared fairly muted; almost sensible – but it didn’t last. Now he’s once again blathering the gospel of the reformers.

All right, then, let’s take a look at it. According to his/their view, conceptual must-haves put forward in the Strategy 2020 blueprint for Russian economic strategy are now causing open mutiny among the widely-respected economists who drafted those requirements. These economists, we’re told, “advised the government to cut social expenses and concentrate on reduction of the budget deficit“.

We need to pause for just a second here, because I can’t help noting the parallels between these economists’ recommendations in the sentence above, and those of the U.S. Republican party – which seems currently bent on crippling the American economic recovery. Show of hands, please: is concentrating on reduction of the budget deficit rather than increasing social spending a sound strategy in an economic downturn? NO!!!! Jesus H. Christ, NO!! Who says it isn’t? Every economist who correctly predicted the American economic collapse well in advance of the event, and there were a few. Significantly, the Chairman of the Federal Reserve was not among them. According to the Economic Policy Institute (EPI), the economic stimulus domestic spending package introduced by the Obama government “clearly has been effective at providing the economic support for spurring output and employment that was promised by its architects”.

Prior to the implementation of the Act, EPI says, “the private economy was contracting at an annualized rate of 6% and posted monthly job losses at 750,000“. In the following quarter, private job losses fell by nearly half and the economy witnessed a growth of 5% on an annual basis. “Investment in the nation’s transportation and energy infrastructure creates jobs and promotes the sustainability and global competitiveness of the economy” says EPI – are you listening, you three mutinous numpties?

You might say, fairly, that what works in one set of circumstances may not work in others, and you’d be right. But the economists who correctly forecasted disaster have, in my book, a credibility that the lemmings who parroted, “the economy is just fine, and if it’s not, we need more deregulation” cannot match. But the second part of my question is, what deficit? The Mau/Gurvich/Yasin Triad of Tools says the government must focus on reduction of the deficit. Why? According to this economic report, prepared for BMO Nesbitt Burns, Russia has the lowest deficit in the G-20, and the third-highest current account balance in the world after Saudi Arabia and China. The national section says, for Russia, “Russia’s FX reserves have been climbing steadily since early 2009, and are at a 2-year high of $490 Billion as of September (2010). The current account surplus has been among the largest in the G-20, although it narrowed to 3.8% of GDP in 2009, the smallest share since 1997“.  Russia’s budget deficit is down to less than 2% of GDP as of end of last month, and Russia plans to cut back on its borrowing this year.  Just to put that in perspective, the USA’s deficit is 10.9% of GDP, and it has the largest economy in the world. Jeez, who hired you guys?

A Dangerous Display of Independent Thought and Common Sense, says The Democratist. Is it? Let’s take a closer look. Let’s start with Vladimir Mau. “It was the authorities, and not the market at all” says Mau confidently, in The Global Crisis as Seen from Russia, “that began to make decisions on who should be guillotined or pardoned. The situation…does not stand interpretation in market terms. The government simply decided to sort out relations with one corporation and to help the other, as happens in a centrally planned economy. And of course all of this was wrapped up in the appropriate rhetoric“.

Sounds pretty edgy, right? Oh, Vova; you crazy economist, you. Crystal clear, Vladimir (Hey, that rhymed: I could so do hip-hop). Except he’s not talking about Russia. He’s talking about the United States, circa 2008, when Bear Stearns ended its 85-year run with

"Know what AIG stands for? And It's Gone!!! Hahahaha!!! Stick around, I've got a million of 'em!!"

an embarrassing faceplant, and the Federal Reserve generously backed J.P. Morgan in its takeover of the former independent securities firm for $236 Million – just about 1% of the firm’s value as represented by its record close just 14 months before. Remind you of Russia in the 1990’s, a little? For those interested in dollars and cents perspectives, Bear Stearns closed on December 14th, 2006 at $159.96 a share. J.P. Morgan picked them out of the gutter on March 16th, 2008 for $2.00 a share. Good times. Did I say economics was boring? What was I thinking?

Hey, remember Yegor Gaidar? He died just before Christmas, 2009. Many remember him as the architect of an unprecedented financial disaster in Russia – the New York Times describes its effects thus: “Racketeers and bandits created a multiheaded mafia that remains potent and ubiquitous. Privatization led to the transfer of vast wealth to a handful of oligarchs and to rampant corruption.” It goes on to mention offhandedly that Vladimir Putin is taking back the controls Gaidar and his fellow reformers tried to release, as if the state described in quotes was somehow the desirable one.

Did you know Gaidar had an Institute of Economic Policy named after him? Yes, indeed; he created it and served as its permanent director from 1992 until his death. The Institute is a non-profit that studies – unsurprisingly – economics, policy and politics. It enjoys active cooperation with several institutions in the United States, including MIT, UCLA, the John F. Kennedy School of Government at Harvard, and Duke University, where Boris Nemtsov is a frequent guest speaker. Vladimir Mau is a Director. So is Khodorkovsky chum and privatizations architect Anatoly Chubais, described by the BBC as having “organised the “loans-for-shares” privatisations a decade ago which made two dozen Kremlin-connected businessmen – known as “oligarchs” – enormously wealthy while most of the nation was gripped by poverty.” According to Robert V. Daniels in “The End of the Yeltsin Era”, under Gaidar, “…price controls were removed, inflation soared, and state-owned assets were indiscriminately privatized, all to the advantage of former Soviet managers and the banking conglomerates that quickly sprang up.”

They say one of the first rules of directed instruction is “Isolate the slow learners”. Umm…Mr. Mau… could I…ah… talk to you outside for a minute?

All right. Enough about Vladimir Mau. Let’s talk about fellow mutineer and economic rising star Yevsei Gurvich. I honestly don’t see what Mr. Gurvich’s problem is with the economy; in 2008, in the initial stages of the global financial crisis (which he apparently didn’t see coming – surprising, since it was already in progress), he was positively bubbly. “Capital inflow into Russia is expected to be higher than projected by Russia’s monetary authorities“, he said in May 2008. He and the IMF figured capital inflow to Russia could hit $70 Billion in 2009. By September, the IMF at least had lifted a finger to test the winds – they revised their forecast to “between zero and $15 Billion“. What actually happened – anyone remember? Yes, that’s right: the worst global recession since the 1930’s, with severe implications for the Russian economy, immediately manifested in a sharp reversal of capital inflow. It bounced back so hard in the second half that it had to have limiting controls placed on it to curtail runaway inflation.

But let’s be fair; economic forecasting is an inexact science, right? Nobody could really have seen it coming.

Whoops, I’m afraid that’s incorrect. Economic forecasting, although it tries to look at cyclical fluctuations and crash models and that sort of thing, seems to boil down to saying, “This is what I predict will happen if everything to do with the economy stays more or less as it is right now“.

A reasonably math-aware ninth grader could do that. And yes, people did see it coming. Paul Krugman, for one; the New York Times columnist and Professor of Economics at Princeton University saw it coming 2 years before it started to topple. Dean Baker, co-director of the Center for Economic and Policy Research, saw it coming even earlier. Yevsei Gurvich? Apparently, not so much.

If you’d like another example of Gurvich foresight, here’s one. The rapid growth in world commodity prices, he tells us in early 2007, is expected to be replaced by their decline. “The Urals oil prices, after growing by more than 2.5 times in the last three years, are expected to go down to US$50 per barrel in 2010“.

Do tell. Well, I’m looking at the figures for 2010 (and so are you), and only once did the price dip below $70.00 per barrel; the last week of May. I’m much too lazy to work out an average for the year – somebody who likes economics can do that – but the price appeared to stay pretty much in the high 70’s to mid-80’s, and Urals 32 closed out 2010 at just over $90.00 per barrel, clearly trending up. Today, it’s $104.69.

Now, if you can put on your economist hat for a minute, you can see where he went wrong. If you look at 2007, prices for Urals 32 were quite volatile – all over the place – but $50.00 per barrel was pretty close. But again, if you can’t predict how world events are going to affect the price of commodities based on their availability or even the perception of their availability, what is the point of forecasting out that far? Anybody who can read can tell you what oil prices were like last month. Anybody who reads the news and understands most of it can tell you what they’re likely to be next month. Predicting what they will be a couple of years away is like asking a meteorologist to tell you if it’s going to be sunny on April 14th two years from now, because you want to get married that day.

Surprisingly, governments fall for economic projections over and over again. Of course everyone in politics wants to be able to see the future, and the higher you are in the organization, the more you want to know. But after so many examples of economists not knowing if their assholes are bored or punched, what kind of gullible boob would you have to be to keep listening? Look at this, for example. The projections were plainly based on Gurvich’s research, since the penultimate paragraph quotes him word for word. The projected budget surplus for 2010 is zero, zip, nichevo. What was it, for real – around $10 Billion? Is it hard to see why the russophobes scurry around squealing that Russia’s economy is collapsing, every couple of months? Not from where I’m sitting.

I don’t want to spend too much time on Yevgeny Yasin, the third mutineer, because this is getting longer than I’d planned. However, it wouldn’t be fair to deny him his turn in the barrel altogether. I’ll just have my Rubenesque Ukrainian secretary, Daryana, get his file. Darya!! Bring me the Yasin file, will you? Ah..thanks. Hey – why are there chocolate smudges all over it? Never mind; I’ll deal with you later.

Sorry you had to hear that. Anyway, back in 2001, Yasin didn’t have a problem with Putin running the show. Thought he was quite the genius, in fact – he referred to the new President’s economic presence as that of “…a stealthy reformer yearning for consensus“. It’s worth mentioning here that the Strategy 2020 mutineers are calling for serious reforms: who better to carry them out than a reformer, an “undercover liberal”, as Yasin also describes Putin, who “…listens to different opinions and lets emotions cool“?

Of course, Yasin was and is being paid as an economist, not as a judge of character. But it turns out he’s not very good at economics, either. On the occasion of Mikhail Khodorkovsky’s arrest, he sorrowfully predicted “…capital flight will increase substantiallylong-term prospects are certain to deteriorate“. And he wasn’t alone, he hastened to add: “Russian economic experts are unanimous in sharing this grim conclusion. Only people linked to the regime appear to differ“.

Well, that’s too bad – because, unfortunately for Russian economic experts, “people linked to the regime” guessed right. Capital flight reversed in 2006, and Russia posted a capital inflow of $41 Billion. The economy grew steadily, and Russia posted budget surpluses from 2001 straight through to the wordwide economic crash inspired by the U.S. subprime meltdown. The Russian economy bounced back quickly, and had begun a modest recovery by late 2009. In spring 2010 Russian officials announced an end to anti-crisis bank support, and the World Bank reported “…a systemic banking crisis had been averted…and depositor confidence restored“.

Well, let’s wrap this up. Look – nobody’s arguing there is no need for reforms in Russia. There is. Modernization must take place if the government is serious in its intent to attract more foreign investment, because foreign investors just won’t do business in places that are often observed to have antiquated – frequently contradictory – regulations and a business climate that often appears mistrustful of or outright hostile to foreign businessmen. But it’s fair to say that when Russians see examples like Bill Browder of Hermitage Capital Management (HCM), with his open boasting of investing in undervalued Russian companies, ruining them with whisper campaigns and then reaping obscene profits when the state moved in to clean things up, anyone in their right mind would be resentful and suspicious.

In a climate that has the west shouting angrily that Russia is too dependent on its energy economy and must reform – while pouring cold water on Russian attempts to join international organizations and mocking attempts to reform anything – Russia has in fact done very well. Although the developed world is currently gaga over Brazil and its exploding potential, recent analysis by Business News Europe showed Brazil outperforming Russia among the BRIC countries in only a single category – GINI coefficient. This, for the non-economically inclined, is a figure that relates to equality of income distribution; Russia was second. Russia leads all the BRICs in GDP per capita, percentage of population in the middle class, years of schooling, debt-to-GDP ratio, is lowest for population below the poverty line, and is highest in per capita income and on the UN Development Index.

Would it have achieved those accomplishments if the government paid attention to chinless economists who dropped the ball under Yeltsin, appear eager to drop it again in exactly the same manner, and evidently couldn’t predict yesterday’s trends today? Well, what do you think?

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313 Responses to It’s Hard to Argue with Prosperity

  1. sinotibetan says:

    @Newman
    “The same things that prevent Russia from ever achieving its potential: corruption, greed, and bureaucracy.”
    There is SOME truth in those as contributing factors. Hey, China has all three also, in just as great amounts, but at the current moment not doing too bad , yet(I hope never!). What led to China’s current ‘success’ and Russia’s decline in the 1990s despite high levels of corruption? I think China’s leaders realised a few crucial things that Russian liberals, when they were in power in 1990s, lacked insight:-
    1. One cannot have economic and societal improvements with political chaos. The Government must be in control. Yeltsin and his cronies were just inefficient in governance. Period.
    2. The West attained their current high social and economic developments after centuries and at the expense of other nations(via colonization). They had a head-start. For any non-Western country to attain such levels, one must allow TIME. Non-Western nations do not have that luxury(of time) but we cannot expect to attain such levels overnight/too fast without chaos ensuing. Hence, the tempo of change , the timing – is crucial. Russian liberals, like the current civiliki, want it presto instead of moderato. Wrong timing. It’s like playing a piano with the left hand in largo(society) and the right hand(‘reforms’) in presto. Chaos.
    3. Individualism and dissidence(especially political ones) can be allowed more voice when political stability has been attained/state institutions are strong enough and there is high level of social and economic development. And during the 1990s, Russia was just out of the disintegration of the USSR. Allowing too much of these BEFORE the maturity of the state/society/economy lead to political chaos which spin viscious cycles. The Tianenmen incident was a cruel but necessary thing to prevent national disintegration when society/economy has not attained ‘Western standards’. Moreover, the West were NOT democracies overnight. Their mature democracies took centuries. In fact, they had a lot of authoritharian but ruthless and far-sighted rulers(including monarchs and other statesmen) which led them to become powerful nations BEFORE they became ‘mature democracies’ of today. I believe China, Russia etc. are at this phase. Cannot expect them to be ala America of today.
    4.One cannot naively trust Western politicians. In fact , ANY politicians. I think our Chinese leaders at least love their nation. I am not so sure about Russian liberals who worship the West. These accepted every political and economic prescriptions ‘ordered’ by Washington and Brussels. That’s foolish and a sign of political immaturity. It is not in the interest of Western political elites to see China or Russia prosper because these are potential rivals, unless Chinese or Russian leaders kowtow to their ways/demands. Maybe the Russians never had the experience of being colonized or reduced to vassalage by the West like we in Asia did and ‘fell’ for ‘Western goodwill’? We don’t trust them completely – and that is a ‘healthy’ lack-of-trust. There are never permanent ‘friends’ in international politics – the USA is NOT a ‘friend’ – it will be a ‘friend’ when we are powerful enough but surely will take advantage of us when we are weak.
    5. The Russians unfortunately had Yeltsin and Russian ‘liberals’ in the 1990s.
    Certainly all these(i.e. corruption; excessive bureaucracy) occur in Russia currently. However, greed is a universal human trait – you can’t be serious that Westerners are NOT greedy? I think history has proven that Westerners are amongst the most rapacious and greedy with their colonization of other nations. Sorry, I cannot accept this ‘holier-than-thou’ statement like as if Russia is unique in having this trinity of sins and Western nations are immaculate! Such a broad-brushed generalization of any nation is too vague to provide a meaningful REASON for the nation’s predicament and more importantly ways to resolve it. Putin’s Russia is not the best but I posit that it IS better than Yeltsin’s Russia and certainly he had so far shown to be a more capable leader than Russian ‘liberals’. The issue for Russia is two-fold : how to maintain political stability yet at the same time reduce corruption, improve on the bureaucracy,(sorry you cannot ‘reduce’/’eliminate’ human greed – that depends on individuals to try to rein on their own lusts[which had been a failure] and better laws to punish those who ‘exhibit’ too much greed[nobody can produce a perfect law on how to do so]), societal improvements, economic improvements etc. The ‘head’ is political stability and the ‘body’ is the latter. Russian liberals could have contributed positively if only they stop hating their own country , be humble to accept that their theories may not ALWAYS apply to Russia and with that try not to ‘severe’ the political stability ‘head’. Russia probably needs decades to fully ‘recover’ from the 1990s terror(in which Russian liberals were guilty of) – there is no quick fix or one rigid solution to the problems she face. I think that corruption is less under Putin/Medvedev than Yeltsin – well at least society was not as chaotic as those wild 1990s!
    Do you think that Russia taken over by the likes of “Russian liberals” and so-called ‘Russian democrats’ such as Kasyanov, Nemtsov, Kasparov, Mithrokin etc. will improve Russia for the better? Kasyanov and Nemtsov had their chances in the past. They blew it with their rigid application of ‘free market’ ideas. During those times when they were ‘somebody’ in the Government, and all that time, Russia was reduced to a third-rate country and thanks to the ‘free market’, business oligarchs ran the country and the Western nations raped the wealth of that country via these ‘oligarchs’.
    1. Corruption, greed and bureaucracy will INCREASE rather than decrease under them – especially corruption. Kasyanov and Nemtsov had their chances when they were in position of power – and Russia had those infamous oligarchs: epitomes of corruption and greed. Perhaps ‘bureaucracy’ may ‘decrease’ under their favourite so-called ‘reforms’ in exchange for a country dominated by greedy business oligarchs who may style themselves ‘democrats’. Yeltsin was to be ultimately responsible for Russia’s decline but the likes of Kasyanov and Nemtsov were responsible for the decline as well.
    2. Political instability rather than political stability. Russia has not completely recovered from the shocks of ‘free market’ experiments in the 1990s. Russian liberals had proven themselves as unfit as leaders to ensure political stability – which is needed for any country to improve other aspects – societal and economic. Their tendency to be too individualistic(perhaps that trait is needed to be a Russian liberal?) and divisive amongst themselves, their tendency to swallow any Western idea while having a type of disdain for their own motherland(I sometimes think whether they are traitors in their hearts ?) are reasons for their lack of fitness to rule a country and ensuring political stability.
    In my opinion, Russia cannot afford another experiment with ‘ideas’ by Russian liberals. Those ideas failed. It’s that simple. The next generation of leaders will have to come up with pragmatic strategies to revive their nation. I hope, unless Russian liberals quit their nefarious ideas and fixation/obsession of ‘Americanizing’ Russia, they should not be given any chance to be powerful figures in the Russian government. Hopefully, the Russians are wiser now after the 1990s ‘experience’.

    sinotibetan

  2. Tim Newman says:

    The West attained their current high social and economic developments after centuries and at the expense of other nations(via colonization).

    That’ll come as something of a surprise to the richest nation in the world, who are under the mistaken impression they threw off the yoke of colonialism from around their own necks in 1776.

    • Yalensis says:

      @newman: “That’ll come as something of a surprise to the richest nation in the world, who are under the mistaken impression they threw off the yoke of colonialism from around their own necks in 1776.”

      Come on, man, now you’re just being silly. If native Americans had tossed all Europeans out, now THAT would have been throwing off yoke of colonialism…

      • Tim Newman says:

        Yes, a poor choice of words on my part. Still, no less silly than the notion that the west got rich from colonialism.

        • marknesop says:

          Or, if an opinion from the author of “The Clash of Civilizations and the Remaking of World Order” carries any weight; “The West won the world not by the superiority of its ideas or values or religion, but rather by its superiority in applying organized violence. Westerners often forget this fact – non-westerners never do.”

          • Tim Newman says:

            Huntington is not talking about what made the west wealthy, though. He is talking about how the west gained control, and I am 100% sure he does not equate the two anywhere in his book.

            • marknesop says:

              True. But it stands to reason the most powerful nations will be the wealthiest. If a weaker country outperforms them, they need only conquer it and take its wealth. I don’t think he needs to spell out, “Control equals wealth”, does he? China is a good example – rising power, rising wealth. There are many reasons for it, granted, but there is definitely a proportional relationship between the two. Any nation that is disproportionately wealthy for the relative power it can exercise usually has an arrangement with a considerably more powerful country.

              Huntington isn’t talking about now, he’s talking about the years when the west came to power; it’s been an established power for generations. Simply smacking the shit out of a weaker country and taking control of its wealth isn’t the done thing now, but it was once fairly popular.

              • Tim Newman says:

                But it stands to reason the most powerful nations will be the wealthiest. If a weaker country outperforms them, they need only conquer it and take its wealth. I don’t think he needs to spell out, “Control equals wealth”, does he?

                Well, yes he does. Any decent historian, and Huntington is one, will never leave the reader to assume that when he talks of the west’s imperial conquests he is also talking about the reasons for their wealth. If he meant that he would say so, and you have no grounds for assuming he does. In fact, I am quite sure he is definitely not saying that.

                There are many reasons for it, granted, but there is definitely a proportional relationship between the two. ,/em>

                Yes, because wealth brings power. But as the USSR found, power does not bring wealth.

                Simply smacking the shit out of a weaker country and taking control of its wealth isn’t the done thing now, but it was once fairly popular.

                Does Huntington actually make that argument? I am very sure he does not. The idea that the countries were wealthy when the imperial powers arrived is certainly an odd one.

                • marknesop says:

                  Is it, then, your position that no direct relationship exists between the exercise of national power (ie: the application of organized violence) and profit? I find that difficult to believe, not least because there exists such an abundance of examples substantiating exactly that relationship.

                  In the 1670’s Britain was the foremost European nation engaged in the slave trade, taking captured slaves from its Carribean colonies (which were established through the application of organized violence) to the Americas. Between 1750 and 1780, better than 70% of the British government’s total income (AKA profit) was realized through taxes on goods from its colonies. Voyages by slavers frequently resulted in profits of 50% for their owners, typically influential British gentlemen who were pillars of society and not uncommonly government figures themselves. I’m not sure how much you know about the slave trade, but early experiments consisting of sailing into lagoons and shouting through one of those cool leather megaphones that any black person who wished to volunteer for a sea voyage below decks – culminating in a regimen of hard and thankless labour which might well result in premature death – should muster directly on the beach and size off by height were distinguished by their lack of success. Much better results were achieved by chasing attractive prospects through the brush and capturing them against their will, or hiring unsympathetic tribes to do it on your behalf – bringing us back to the application of organized violence, which clearly resulted in a direct and significant profit.

                  Similarly, the 1953 coup against Mossadegh in Iran was sponsored by British Intelligence and carried out by the CIA. The British-led oil boycott, shared by the USA, “created the conditions necessary for success” (Mohammed Mossadeq and the 1953 Coup in Iran, Mark Gasiorowski and Malcolm Byrne). Mossadegh had directed the nationalization of the British-owned Anglo-Iranian Oil company (AIOC), which represented Britain’s single largest overseas investment and single most valuable foreign asset. Again, a direct relationship between the application of power through organized violence, and profit.

                  The country under discussion need not have been wealthy per se when the imperial powers arrived, although this was occasionally the case – frequently enough that there is nothing odd about it. Rather, there was more often something about the country that could be used to generate significant weath for Empire which the indigenous population would not willingly surrender. Enter, the application of organized violence.

  3. cartman says:

    I think the example of TEPCO (the largest utility in Asia) shows that private ownership of a company does not affect the corporation’s transparency or management. It is all due to corporate culture.

    “That’ll come as something of a surprise to the richest nation in the world, who are under the mistaken impression they threw off the yoke of colonialism from around their own necks in 1776.”

    The term “banana republic” comes from the countries in Latin America whose governments are wholly-owned by US firms. GB used to monopolize colonial markets in exactly the same way. There is plenty of room in this world for irony, isn’t there?

  4. Tim Newman says:

    There is plenty of room in this world for irony, isn’t there?

    Plenty of room for counterfactual history, too.

  5. sinotibetan says:

    @Newman
    “That’ll come as something of a surprise to the richest nation in the world, who are under the mistaken impression they threw off the yoke of colonialism from around their own necks in 1776.”
    1.) My original statement about ‘the West’ meant more for Western European colonialists such as the British, the Dutch, the French, the Spanish and the Portugese-especially the British, Dutch and French. Whole cultures and languages have been decimated by their colonialism. Not to mention Western Europe became rich with all the riches they stole from their colonies.
    2.) yalensis hit the nail right on regarding the USA! The Americans were colonialists who rebelled against their ‘mother nation’ in the British Isles. And the USA was a third rate Western nation until the two world wars brought many talented Europeans to the USA and reduced the hegemony of Western Europe relative to the USA – not to forget many Nazi scientists later went over to the USA and contributed to American technological and scientific advancement. America is such a juvenile nation(compared to other nations in the ‘Old World’) which material success has gotten into the heads of their leaders leading to arrogance and conceit.

    sinotibetan

  6. Tim Newman says:

    <emNot to mention Western Europe became rich with all the riches they stole from their colonies.

    That’ll come as a surprise to the Germans.

  7. Tim Newman says:

    Is it, then, your position that no direct relationship exists between the exercise of national power (ie: the application of organized violence) and profit?

    No, as I’ve already said, wealth brings power. But as the USSR found, power does not necessarily bring wealth.

    And I’m not denying that Britain’s application of force put it in a position where it could get wealthy, but it was not a case of mrely applying force and reaping the rewards. What made them wealthy was trade, not turning up somewhere and plundering the local “wealth”. Eventually we figured out we can wind back the force and increase the trade and get wealthier still, and post WWII we abandoned force completely, concentrated on trade, and became far wealthier than we’d ever been before. By then other countries had figured out that you don’t need to go about invading countries and oppressing populations in order to get wealthy, you can merely trade instead. Whereas some countries, like Russia, thought applying force and not bothering to trade would lead them to some promised land, and we all know what happened there. So no, it was not Britain’s invading places which made it rich, it was its ability to trade once it had done so. Making lazy statements that Britain is only rich because it invaded places and ripped off the locals isn’t going to further anyone’s understanding of what makes nations wealthy.

    • marknesop says:

      I don’t recall saying Britain was only rich because it invaded places and ripped off the locals – that’s an extrapolation on your part. I never said Britain was rich only because of ever doing so, although the bulk of the nation’s income during a lengthy period was demonstrably a direct result of conquest by force. Modern Britain bears little resemblance to the empire-builder of old, and there is no disputing the construction of alliances and cultivation of trade ties has allowed it to become wealthy without the need to seize property from others.

      Likewise, modern Russia bears little resemblance to the Soviet Union and its forceful annexations. The difference is not as dramatic as that between Britain and her bloody past, but in recent history former Soviet satellites that demand independence have been allowed to proveed without a fight. The Russian government shows significant interest in diversifying away from an energy-dominated economy and in an increased reliance on trade.

      The difference is that Russia receives far more mockery than encouragement. Old enemies Germany and Japan are welcome trading partners and cozy friends whose judgment and ideas are respected and welcomed. Not so Russia, which gets neither support or encouragement for reform.

    • Igor says:

      @Tim “But as the USSR found, power does not necessarily bring wealth.”

      USSR never sought to become rich by applying its power. The power was needed to protect it against the “friendly” businessmen from the West. (if you are thinking about Caribbean crisis, don’t forget to think about deployed Thor & Jupiter in your beloved country & in Turkey & Italy )

      @Tim “some countries, like Russia, thought applying force and not bothering to trade would lead them to some promised land, and we all know what happened there. “

      ..and then someone talks about “counterfactual history” … Besides, it seems, you believe that USSR was “poor”. Are you sure it is not a counter-factual history too ?

      I agree about the trade being the method to become rich, though, Trade does not produce anything material – it is, in a sense, stealing (or extortion or robbery). At least the way it is normally practiced. Of course, one who steals will be richer than his victim.

  8. Pingback: White Sun of the Desert » Some Shit They Supposed To Do

  9. sinotibetan says:

    >>That’ll come as a surprise to the Germans.<<
    My mistake. I meant the Dutch and British mostly. Wow….you enjoy splitting hairs, don't you? Golly….

    sinotibetan

  10. Nils says:

    Hi Mark!
    I would like to suggest another article for your next post by Leon Aron: http://www.aei.org/outlook/101042 I think this quote says enough: `Medvedev’s credibility as a defender of the rule of law may have been irreparably undermined by the Khodorkovsky trial and the arrest of Boris Nemtsov.` Also note his pessimism regarding the 4% budget deficit… yes that must be a TOTAL disaster! Third one is his comparison between Portugal and Russia. First of all, average incomes have grown by 60% during the Putin era whilst I imagine that incomes in Portugal have grown a lot slower. Next, whilst Russia´s GDP per capita is idd only 15000 dollar compared to Portugals 23000 Aron should not forget that because of the crisis and social cuts Portugal´s GDP (and GDP per capita) will actually shrink whilst Russia´s will only increase. Putin promised that Russia would be as rich as Portugal in 2015.. I would say that it will be sooner: maybe in 2014 already.

  11. Pingback: The American Enterprise Institute – Clueless on Russia, Brilliant at Projection | The Kremlin Stooge

  12. Pingback: Rolling in on the Wheels of Inevitability – It’s Good to be King | The Kremlin Stooge

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