Whether you’re a fan, or as a result of philosophical disagreement between that site and this one, you’re probably at least peripherally familiar with the democracy quote that is Democratist’s battle cry – “No one pretends that democracy is perfect or all-wise. Indeed, it has been said that democracy is the worst form of government except for all those others that have been tried from time to time”.
Personally, I always found Churchill a bit smug. And indeed, quite a few people do pretend democracy is all-wise, if not perfect, in the sense they are so sure you want it that they don’t ask you before making you take it. Anybody who’d do that with a system acknowledged to have serious flaws certainly means you no good when they march in to democratize you at gunpoint. But if any quality made Sir Winston the merry rake he unquestionably could be in spite of his smile-free physiognomy, it was inconsistency. Having seemed to hold up democracy as the standard to which all but the foolish should aspire, he promptly put his boot in its goolies when he said, “The best argument against democracy is a five-minute conversation with the average voter“. Ha, ha – Winston, you cutup; you’re right, them people be’s stupid. Oscar Wilde appeared to agree with him, saying, “Democracy means simply the bludgeoning of the people by the people for the people“. And how about that old anarchist in the woodpile, Thomas Jefferson? “Democracy is nothing more than mob rule“, said he, “where fifty-one percent of the people may take away the rights of the other forty-nine“. Word, Mist’ Jefferson – testify.
Anyway, demockery of democracy aside, Democratist and I are uneasy allies when it comes to the democratic system – one man, one vote, and everyone gets a chance to speak his/her mind at the ballot box. However, democracy has come a long way since the 4th century, and what you see today is not the democracy of Cleisthenes. Where we appear to diverge on the concept is that I believe democracies have a duty to set an example of how great it works first; to not slip clandestine funds to the opposition in an attempt to hedge their bets, and to make it clear the choice is the peoples’. Perhaps it’s just me, but I have to say I think the west has kind of sucked a little bit in the last couple of decades where setting the example is concerned. Slipping money to the opposition – and sometimes even kind of creating the opposition out of very little more than a pretty face and a silver tongue – is almost de rigueur. And as we’ve seen to varying extents with the balmy “Arab Spring” the world is currently enjoying, at least some of the reason the west is insistent on higher rates of internet penetration is to enable “twitter revolutions” and Facebook chain reactions that will bring down the government before it knows it’s under attack. Sometimes, that’s just what the people want. Roll on, say I. But sometimes, the people are too confused to know what they want, and making up their minds for them is a little bit like stealing money out of a blind street musician’s violin case. That’s the kind of thing a real upholder of democracy should feel ashamed of, if it was done deliberately, don’t you think?
Well, never mind that: once again, I’ve gotten distracted, and democracy wasn’t at all what I wanted to talk about. What I wanted to talk about, may God forgive me, is FDI.
Foreign Direct Investment. Jesus Q. Johnnycake on a silver surfboard – does nobody understand this concept? Why, WHY do we have to keep going around and around and around with capital flight and FDI? Demon economists from beyond the grave? An epidemic fact allergy? Bullshit in the gasoline?
All right – let’s take a look at it. Right off the bat, I have to say I don’t care for the title. “Beyond the polls”? What’s that supposed to mean? Who gets polled in Russia? Potential voters. This appears to suggest Democratist knows something the Russian voters don’t, since what the polls say obviously is either incorrect, or doesn’t tell the whole story. Let’s presume the latter – prepare to be enlightened.
In the beginning, I have no real disagreement. Well, except for terminology: the “nomenklatura-dominated corporatist politico-economic system”? In the words of Napoleon Dynamite – who is evidently every bit the political analyst Democratist is – what are you even talking about? Anyway, yes, it looks extremely likely the United Russia candidate, whether it be Medvedev or Putin, will win. Does that mean the vote is rigged in advance? If you mean very few voters in Russia are interested in voting for someone else – gee, I guess so. Sorry if that inspires a grand mal seizure of spite. However, I’d just ask one more time: if advance polls predict 70% of voters will vote for President Medvedev and he gets within 2 percentage points of exactly that (which is just about exactly what happened last time), where does all the caterwauling about the vote being rigged come from? You, uh…had a preview of what was going to happen; that’s why they call them advance polls.
Well, let’s move on. Yes, yes; here we go. A “lack of FDI”, which cites another Democratist post as a reference.
Before we get any further into this, let’s stipulate that you will be able to find references that use terms like falls, plunges, plummets, drops, whatever your favorite might be, as applied to FDI in Russia. Note, however, that they refer to 2009 or 2010, when the country was still coming out of the global financial crisis. Note further that since, by definition, foreign direct investment is funding from outside Russia, how does this reflect badly on Russia that foreigners have no money to spend because they’re struggling to keep from going under? It’s certainly OK to cite statistics from 2009 and 2010 to make your case, but the trend should actually be going in the right direction.
In the Democratist post Democratist referenced, he announced that it “seemed very unlikely that the much hoped-for Western FDI flows into Russia will recover any time soon”. Now looks as good a time as any to see what kind of prophet he is.
Oh, my. It appears he was wrong – but we shouldn’t be too hard on him, since the rest of the yahoos who said FDI fell off a cliff were not exactly telling the truth, either. That’s unless Ernst & Young, Professional Financial Services (Russia Division) with 8 offices in Russia and in business there since 1989, is full of shit. Oh, there are different ways of measuring FDI, and you can skew the statistics to make it support your viewpoint in many cases. Therefore, I leave it up to you – measured by investment projects (page 7), FDI in Russia only slowed in 2009/2010, and was “always positive”. We also see that in 2010, Russia was the 4th largest recipient of FDI in Europe (page 6), an increase of 18% on 2009.
Since we’ve come this far on a subject I have good reason to believe we’re all tired of hearing about, perhaps some kind of definition of FDI would help us nail it down. It looks like it’d be effort wisely spent, since even Kudrin doesn’t appear to understand it all that well; his figures and projections are all over the place. Therefore, according to Professor Kornecki (Professor of Economics, Embry-Riddle University, Florida) in “Trends and Recent Development in Foreign Direct Investment in Russia“, FDI is, “an investment made to acquire lasting interest in an enterprise operating outside the economy of the investor. The purpose of the investor is to gain an ownership and, therefore, an effective voice in the management of the enterprise.”
Let’s pause a moment to reflect on that, because it is a pivotal statement that explains a lot. Although the definition of FDI is as flexible as the means of measuring it, and there are any number of benign investments in which the foreign principals expect to realize a profit but basically are content with a hands-off approach – this definition suggests the aim of the investor is achievement of a controlling interest in the venture or company.
Would it be wise to permit such a thing to happen, do you think, in the case of the commodity that is the backbone of your economy? This goes far toward explaining why Russia craves FDI in the oil industry (mostly to benefit from technology transfer, much as the military seeks to do), but is extremely wary of any sign that an investor is making a grab for control. In the context of how the west more or less constantly maneuvers to place Russia at a disadvantage – including but not limited to overthrowing its political leadership – this seems less and less like paranoia and more and more like prudence.
At this point, those who disagree with the direction we’re going in usually point out that the USA is the world’s largest FDI market, and it actually permits a staggering degree of foreign ownership. That’s true – but look carefully at who the investors are and what they’re allowed to own. The United Kingdom. Japan. The Netherlands. Canada. Germany, and France. Except for France – and under Sarko the American, all is forgiven – loyal, trusted allies all. While you’re there, have a look at Figure 1, page 4. Look at what happened to investment in the USA by foreigners in 2008 and 2009 (as far out as this report goes). Now look at what happened to money spent by Americans in foreign investment in other countries. See that sharp downward trend in both? So much for the “anomalous performance” seen in Russia.
But the larger point I wanted you to take away is that the USA never – never – allows a controlling interest to be achieved in a strategic asset by a foreign country with whom it visualizes itself to be in opposition on any field of battle: business, ideology, military, global influence. Consider what happened when Chinese national oil company CNOOC attempted to acquire UNOCAL, a California-based energy company, in 2005. The sale was blocked on fears of China controlling a strategic asset which might potentially be used to threaten U.S. interests.
They didn’t try again for another 5 years, when they succeeded in buying a 33% share in a shale gas recovery project in exchange for picking up 75% of the costs. In this instance the USA possibly hopes for new technological approaches to evolve, in which it will claim a proprietary interest – since the current system, known as “fracking”, or fracturing, is inefficient and produces terribly toxic wastes. Also, shale gas is presently a low EROEI (Energy Returned On Energy Invested) recovery method that is only “potentially profitable” rather than a license to steal, like oil is.
They’re right to be wary, because China blew past Japan in 2010 and is now the world’s second-largest economy. It is forecast to overtake the USA within 20 years, but that forecast is offered by those trepidatious grannies at CNN Money. Edgier sources predict it could happen as early as 2014.
FDI is sought by all countries for a variety of reasons; it provides a healthy cash flow which – properly managed – helps control inflation; it permits sometimes very rapid growth in Research and Development of emerging technologies. It acts as an expression of confidence in the recipient’s future, which is good for credit should that country need it. Last, but by no means least, it creates jobs in the recipient country.
Look at this breakdown of unemployment figures, offered by the CIA World Factbook, and quite recently. Yes, that’s right, that’s the United States sitting down there at number 106, right below the European Union. The lower your position, the higher your unemployment. A soupçon of sweet irony, if you are fond of it, is provided in the twinning of the USA’s unemployment figures with those of Egypt: anyone remember the jubilation that rippled through U.S. neoconservative social engineers when the Egyptian government was overthrown earlier this year for – among other things – failing to provide its citizens with an adequate standard of living?
Anyone see Russia? Oh; there it is – at number 82, much better than the world average, and higher than Canada, the United Kingdom, Italy and France. A lot of factors influence those placements, but the importance of FDI as an employment driver cannot be ignored. Who, just off the top of your head, does not appear to have an FDI problem?
In fact, the global trend in FDI is away from developed economies, and toward developing and emerging economies.
The remainder of the referenced Democratist post mostly consists of “predictions” that are more or less in the order of, “it will be dark tonight after the sun goes down, but it will begin to brighten a little toward morning” – economic stagnation, blah, blah. I’m not even going to address the twaddle about the Russian economy “going into deficit”. The economy would have to fall like Yeltsin from the top of Ostankino TV tower with his mother’s pirozhki recipe book in his pocket to match the deficits of the western countries that are looking down their noses and passing judgment, and Russia currently has the lowest deficit in the G20 by a considerable margin.
But, say – if you’re one of those people who gets a warm little glow around his heart when you think about Russia scrabbling desperately at the greasy sides of a pit with the fires of hell yawning at its bottom…this is probably depressing you. I know what will cheer you up – a contest!! Ready? This is a two-part question; (a) what leader said this, and (b) what actually happened?
“My plan reduces the national debt, and fast; so fast, in fact, that economists worry that we’re going to run out of debt to retire.”
I’ll buy a drink of choice for the first to answer correctly, when next we meet.