Uncle Volodya says, "The harder the conflict, the more glorious the triumph."
It’s good to be king, if just for a while
To be there in velvet, yeah, to give ’em a smile
It’s good to get high, and never come down
It’s good to be king of your own little town
Tom Petty, from “It’s Good To Be King”; from the album Wildflowers
The internet is abuzz; the press rushes to warn of disaster soon to come – bloggers and journalists alike shout it from every rooftop. Vladimir Putin will stand once more for election to his nation’s highest office!! Everyone has an opinion, from poets to schoolteachers, from dreamers to cynics and from the hovels of the humble to the mansions of the mighty. The vast majority of English-speaking analysis adjudges this decision a calamity for Russia that will make Stalin’s purges look like mud-wrestling for octogenarians. Can pestilence and plagues of boils be far behind? Apparently not.
Joining the Massed Prophets Of Doom (thanks to Foppe for the link), is Yevgeny Yasin, Russian economist and former Minister of the Economy from 1994 to 1997. Economic changes will entail political risks and unpopular decisions that will stop Putin, says Yasin. The guy hasn’t even been elected yet, and already he’s a failure as a leader. Boy; tough crowd.
Yevgeny Yasin…..why does that name sound so familiar? Oh, yeah – I remember. Together with fellow numpty triplets Vladimir Mau and Yevsei Gurvich, he helped round out what I described as the Triad Of Tools, back in March of this year. On that occasion we discovered that Yasin, like his fellow numpties, appeared to be roughly as accomplished at economics as he is at extreme skateboarding. Well, perhaps that isn’t entirely fair – he’s hopeless at economic forecasting, although his economic education is enviable. But still, I ask you: what good is an economist who is reliably wrong in predictions of future economic trends? Anyone can predict economic events that have already happened – Jeeze, I could do that, and I stayed out of retail because I was afraid I wouldn’t be able to make correct change. More to the point, why should anyone believe your economy-related predictions when you’re less accurate than flipping a coin?
Among the clangers dropped by Yasin during his stint as psychic visionary, “…If investment stalls, President Putin will have no hope of doubling the size of the economy within a decade, as he has promised. My longstanding skepticism about this promise has now hardened into certainty: the Yukos affair will make it impossible to sustain the growth rate required to achieve this goal because the arrest of Mikhail Khodorkovsky and the seizure of his assets has dealt a devastating blow to business confidence.”
Forecasts that stand the test of time, by the Chocolate School of Economics
Is that so? According to the CIA World Factbook, growth in Russia remained remarkably stable between the time of Yasin’s prediction (2003) and 2008 – when worldwide markets took a shitkicking that had nothing whatever to do with Khodorkovsky – and never dipped below double the best it had been under Yeltsin. GDP growth for the USA during the same period started at a measly 3.1% in 2003 (less than half that of Russia for its worst year during the period measured) and had sunk to 2% by 2007.
Did Russia somehow manage to sustain growth unassisted by FDI while investors fled for the hills, terrified at Khodorkovsky’s outrageous treatment? Doesn’t look like it: Foreign Direct Investment climbed exuberantly between 2003 and 2006. Yasin probably felt he was on solid ground, since FDI in 2003 was pitiful – less than $1 Billion. However, unfortunately – for Yasin’s forecasting – it was $15 Billion in 2004. Three years after Yasin’s Doomsday warning, it was better than $27 Billion and trending sharply upward. So much for the sobering effect imposed by Khodorkovsky’s conviction. FDI tumbled later in response to the global financial crisis, but imagining the global financial crisis as a collective expression of sympathy for Khodorkovsky (sentenced 5 years before it’s onset) would be, if you’ll forgive me, a bit of a stretch. Yasin was correct that Putin failed to double the economy in a decade, but that seems to me a bit unrealistic to expect from any leader, and Putin certainly had it going in the right direction while vastly increasing investment rather than stalling it. Also, he never actually “promised” anything of the sort – it was phrased as a goal in his State of the Union speech to both houses. Besides, it’s just annoying when economists predict, “such-and-such will happen in this many years if everything stays exactly as it is now”. A pastry chef who understands simple multiplication could do that, and everyone knows the economy barely stays the same all day, never mind over a decade.
More? Sure. Here’s NostradYasin again, still steadfastly unrepentant in 2004: “The current account balance is to drop to $15 billion in 2004 and $5 billion in 2010.” Still steadfastly wrong, too; his prediction didn’t even get the direction of the trend right. The current account balance was actually more than $46 Billion in 2004, the same year Yasin predicted it would fall to $15 Billion, and it had recovered to nearly $69 Billion in 2010, following a massive worldwide economic crisis and down from a high of $105 Billion in a year it was supposed – according to Yasin – to be heading for $5 Billion. He was only off by….$64 Billion. That’s well within the margin of error for prediction by someone whose profession is economics, surely? Not.
Anyway, as much fun as it is mocking Yasin’s portentuous peccadilloes – and God knows, there’s no shortage of material – we’re going to have to let it go for now, because it’s getting a little repetitious. Also, given Yasin’s penchant for getting the future ass-backwards, there’s probably no more auspicious forecast he could make than that economic changes will ruin Putin – history and Yasin’s track record suggest exactly the opposite is likely to occur.
Besides, Yasin wasn’t the only former Russian government official to weigh in with silly unsubstantiated predictions – just opening your mouth and going for it seems to be all the rage these days. Mikhail Kasyanov, for example, predicts Russia may see its cash reserves dry up as it struggles against the falling price of crude oil, its main asset. Moreover, intones Kasyanov, Russia could record a 5% budget deficit, if crude price falls by a third.
Well, for what it’s worth, Brent Crude is up right now by .46%, at $107.14 per barrel. But I think everyone will agree that hardly constitutes a trend. Time to see, then, if Kasyanov knows something the pros who ride oil prices for a living don’t.
Unsurprisingly, no; he doesn’t. According to Oil-Price.Net, world oil supplies will likely tighten significantly for 2012. Writing for oil-price.net, Steve Austin reports the International Energy Agency (IEA) released strategic oil reserves to the market through July and August; a measure customarily reserved for desperate times such as a major war. This is only the third time since the IEA was established in 1974 that it has taken such action. Hmmm…interesting. Mr. Austin also passes along the conclusion of a Goldman Sachs Group economic report that predicts oil supplies will become “critically tight” in 2012. And the IEA’s expended reserves will have to be replaced.
A very interesting analysis of Saudi Arabian capability to make up any shortfall is careful to point out the Saudis have always kept the extent of their reserves a closely-guarded state secret, and that they are likely to be considerably less than many believe. Also, Saudi Arabia is plagued with growing civil unrest; a less desirable (from a western viewpoint) corollary of the vaunted”Arab Spring”. Simply put, the Saudi government unilaterally increased production by 530,000 barrels per day in June – despite OPEC’s decision not to increase production – because it needs the money for massive domestic spending to head off revolt and to prevent the price of imported grain from climbing due to transportation cost increases, due in their turn to higher oil prices. This, according to the report, is unsustainable and will accelerate well depletion. It also has much to do with depressing the current price of oil. What’s going to happen when they stop pumping the extra? Hey – you’re good at this.
According to the UN, the world population will hit 7 Billion this year, and double by 2100 if left unchecked. Increasing affluence among the former poor and middle classes in the BRIC countries results in increasing motor vehicle ownership, and greater demand for fuel supplies. The IMF predicts a growth rate of 7.8% for India and 9.2% for China in 2012; this, the report offers, “will have a lever effect: less oil production capacity while the demand skyrockets”.
If increased demand and decreased production come together to result in crude prices that fall by a third, I’ll eat one of Kasyanov’s shoes. In more bad news for the Putin’s Election Will Spell R.U.I.N club, global economic recovery is predicted to accelerate later this year, increasing demand further.
Similar reports agree that stopping civil unrest from reaching Saudi Arabia is of paramount importance. If tumult roils the Kingdom, the go-to strategic source for the world’s energy will be its largest producer…Russia. Russia currently supplies almost 65% of the European Union’s energy needs, and views of its reliability as a producer “have undergone a paradigm shift…[owing to] steps taken by its Prime Minister”. Is that new confidence likely to be shaken by that official’s move from Prime Minister to President? I’m going to go out on a limb and say No. With the opening up of GAZPROM’s European pipelines to competitors such as Surgutneftegaz and Rosneft, “the Russian oil industry will continue its upward trend….The booming Russian oil industry will prove to be divine succor for all European nations as they no longer want to depend on the unstable and hostile mini-Iran countries for their fuel needs.”
Consider, also, that the Global Slowdown Will Crush Putin theory presupposes that – in the event of a Putin victory – the world will deliberately put itself into recession for at least 6 years just to spite Putin, by keeping oil prices artificially low. And that oil companies would joyously sing from the same song sheet, forswearing the tempting profits offered by a tight market. And that western electorates would reelect the same leaders who skipped recovery in order to put a thumb in Putin’s eye. This is analysis?? Come on.
Last and decidedly least on the list of Self-Important Discontented Russians (the only variety the west is interested in hearing from) – fluttering the heartbeats of Russophobe chicks the world over while inspiring the gag reflex in nearly everyone else – the Sochi Centerfold weighs in: Boris “Boilerplate” Nemtsov offers his opinion in an attempt to remain relevant. That’s always puzzled me – the west can’t be bothered to quote anything Putin or Medvedev says unless they disagree – offering the hope of a fight between them – or say something that might be construed as a threat against the west or one of its friends. Yet it can’t get enough of maudlin political rhetoric from its pet dissidents, who command no respect and barely any attention from the electorate in the country they aspire to lead. It’d be like the Russian press flocking around Joe Lieberman in 2004 to get his take on the election.
Anyway, Nemtsov – predictably – suggests capital flight (a concept he manifestly does not understand or is deliberately misinterpreting) could rise to $100 Billion this year (the entire Russian GDP for 2012 is only forecast to be a little over $2 Trillion), educated Russians will likely stream over the borders like fleas leaving a dead body, and the dullards who remain will surge into the streets in rage when they realize they can’t “replace the government through elections”. Sure they will, Boris. Nemtsov’s protests have never drawn more than a couple of hundred people in a nation of better than 140 million, and when he tried to co-opt an ongoing car and motorcycle show last summer and turn it into a political demonstration, he got arrested. The police didn’t get all his followers, however; they melted into the crowd – of about 200 people. Since it’s hard for a big group to disappear into a smaller one, it seems safe to assume the protesters were fewer than 200 or so.
Let me…ummm….go on record here as predicting none of the things Nemtsov warns of is going to actually happen. But it’s his political philosophy that makes me laugh – the government must be replaced every election cycle, regardless if it’s doing a good job and regardless the spotty qualifications of contenders to replace it, or the will of the people is being ignored. Is there really an electorate like that, anywhere, that simply chucks out the ruling party every election in favour of something new? If so, Nemtsov ought to think about moving there.
But the negative invective was not restricted to select Russians who believe they know more about governance than the government: oh, no. As I mentioned earlier, the western press tumbled over itself in a rush to condemn United Russia’s choice. Exemplary of the coverage is Forbes’ “Oh No, Another Twelve Years of Vladimir Putin“. Paul Gregory’s Russia coverage is uniformly pretty negative, and accompanying political articles in his sidebar suggest his empathy for the hardcore conservative Republican spectrum. Those who follow U.S. politics with any interest will know that demographic despises Russia, and would love to get a liberal narcissist like Nemtsov installed as leader. Still, the article has some standout comedy moments. For instance, Mr. Gregory describes Yury Luzhkov as “Moscow’s popular mayor“, fired by the Tandem “in preparation for the elections“. In fact, the final popularity poll on Luzhkov showed only 36% of Muscovites approved of him – hardly popular – and he was both a founding member of and reliable vote-getter for United Russia. Firing party stalwarts who are adept at generating votes to keep you in power might be solid electoral strategy for the Republicans in the USA, although I can’t say I’ve ever seen them do it, but in Russia politicians certainly know better. One of Luzhkov’s most vocal critics was none other than Boris Nemtsov.
Similarly – very much in the conservative Republican mold – Mikhail Prokhorov is portrayed as “just folks”; a down-to-earth, Regular Joe who made the mistake of openly criticizing the Kremlin (which, originally, cynics suggested would be his exact role in order to make Russians feel sorry for Medvedev or Putin, and elect whoever United Russia pushed into the ring) and was subsequently fired. Gregory’s analysis is that his party was forced by the Kremlin to fire him (which is certainly a refreshing spin on what actually happened), but that now at least he was free to “return to New Jersey to live the good life, far from Kremlin politics”.
In fact, far from being a Regular Joe, Mikhail Prokhorov is Russia’s second-richest man. Without casting undue aspersions on the residential benefits of New Jersey, Mikhail Prokhorov is about as likely to set up housekeeping there as he is to throw his entire fortune into a brussels sprouts and garbanzo beans restaurant chain. His official residence (in terms of where he pays his residential taxes) is in Siberia, birthplace of fellow Russian Maria Sharapova, although he also maintains a luxurious home in Moscow. While American media was kind enough to scout local properties for him (Regular Joe-type modest accomodations like a 7000 square foot penthouse apartment priced at an affordable $25 Million, or a 30,000 square foot stone mansion for the giveaway price of only $68 Million), he has thus far resisted the undeniable attraction of the New Jersey good life. The world’s most expensive home was more Prokhorov’s style, although that deal fell through and a spat between he and owner Lily Safra – widow of deceased multibillionaire and William Browder patron Edmond Safra – resulted in Prokhorov losing his $55 million deposit. Perhaps New Jersey is on the Prokhorov radar after all – who knows, you might run into him at the donut shop. As if.
In fact, the previous presidential term served by Putin saw the economy grow for 9 straight years – resulting in a 72% increase in Purchasing Power Parity for ordinary Russians, the halving of poverty, an eightfold increase in real household income and a return to stability. This simultaneously explains his popularity in Russia and his unpopularity in the west, home to strong influences which hunger for Russia’s economic collapse and political reapportioning.
Taking us out, some words of wisdom from another inspirational leader, and the author of the passage which inspired half of my title for this post – Dr. Martin Luther King Jr.;
“Change does not roll in on the wheels of inevitability, but comes through continuous struggle. And so we must straighten our backs and work for our freedom. A man can’t ride you unless your back is bent.”
Rock on, Mr. Putin; fair winds and following seas.
The Kremlin Stooge 
“Hardcore conservative Republicans” have their “pro-Russian” dissenters, like Larison at The American Conservative and Pat Buchanan. Yes, I realize-not near the current power Elite.
Yes, that’s quite true, although I find Pat Buchanan extremely nutty on quite a few other issues, which kind of casts his judgment in an uneasy light. Daniel Larison I hadn’t heard of, although I do (infrequently) read The American Conservative; I’ll have to have a look at a sample of his work.
Generally speaking, though, while there are standout exceptions in both parties, the Democrats are more pragmatic about foreign policy and more amenable to associations based on global realities rather than party ideology. The current Republican power elite seems to me quite a bit to the right of barking mad, and in active competition to see who can take the most extremist stand. But if they weren’t encouraged by the response, they’d trend a bit more moderate, so they must like what they’re hearing.
He has his own blog there, separate from the general TAC blog. I’m certain you will like it.
I respectfully disagree with the statement: “the Democrats are more pragmatic about foreign policy and more amenable to associations based on global realities rather than party ideology. ”
My impression is the difference between two parties in foreign policy is pretty superficial. It is one pretty unified foreign policy that does not depends on which party is in power (and they are just two wings of the same party in any case). Policy dictated dictated by the same major non-goverment players.
The major difference is just faces on the scene. If only actions are taken into account, then Bush II and Obama looks like twins in most areas and Obama foreign policy is a continuation of Bush foreign policy in all major areas. Rhetorics might be different, some tricks that help to provide temporary anesthesia for the other side to the same kicks might be played (like “reset”) but actions are not. But even rhetorics can easily be mistaken if you compare. say, Biden vs. McCain 😉
It’s certainly true that some say there’s not a dime’s worth of difference between the parties. But WTO membership for Russia is possible under a Democratic administration, whereas it wouldn’t stand a chance under the Republicans – a President Perry would kill any hope of it immediately and publicly just to make his bones with his pickup-driving, gun-rack sporting crowd of hair-trigger good ole boy supporters. Republicans are latent cold warriors, and approach international relationships from the viewpoint that if you’re not hated, you’re not feared and if you’re not feared you’re not respected. Any country that hates you is just jealous of your freedoms, and the more they hate you, well – the more freedom you must have.
Nobody cares what the parties actually feel deep down, just as long as the party in power is willing to enact legislation that broadens trade and access to markets rather than playing favourites and using western markets as a bargaining chip to extract concessions. Russia has been there before, and the price demanded is just too high. John McCain was proud of his Russophobic credentials, although he sometimes seemed confused about who kept him a prisoner of war and thought it entitled him to rip on anyone he didn’t like. As president, his policy toward Russia would have been straightforward and bleak – grovel to us on bended knee, and we’ll see what crumbs we can spare from the table. Perry has already made a few typical-Texan noises about Obama caving to the Russkies on the “New START” treaty, and likes to sound off about how the USA got nothing because those tricky Russians pulled a fast one on Obama that certainly wouldn’t happen if there was a REAL American in the big chair. It’s not hard to see what he’d do to please his core supporters.
Biden is a bit of an anomaly for the Democrats, and much less a pragmatist than his campaigning suggested he’d be. I was frankly surprised by his open support for Georgia – although I had expected it from Clinton, who is always trying to show off her balls and playing the hawk. But in the end, Obama is much more likely to make and stick to a decision based on analysis rather than emotion, while every Republican candidate signals his or her eagerness to use exactly the opposite decision-making process.
I have to agree with @kievite on this one. There is no substantial difference whatsoever in Republican/Democrat foreign policy. If anything, Obama is way more of a hawk than even George W. Bush. President O’Bombsky has continued Bush’s “war on terror” with a vengeance, ramping up Afghanistan, bombing Pakistan, using drones for purposes of remote assassinations, etc. I give him a pass on bin Laden, but the recent assassination of Anwar Al-awlaki crossed a line, even for Americans. As foul a jihadist piece of shit who ever lived, Al-awlaki was nonetheless an AMERICAN CITIZEN. Plus, Al-awlaki never actually killed anyone himself, just egged others on to jihad. According to Americans’ own constitution, this may well constitute Freedom of Speech considered THE fundamental freedom celebrated by Normal Rockwell and enshrined in American Bill of Rights.
Oh, sure, you could make a case that first amendment rights do not cover THIS type of speech, and you might be right, and I would probably even agree with you. But Al-awlaki’s lawyer could have made an equally compelling counter-argument in his speech in front of a jury, IF THERE HAD BEEN A TRIAL. Assassinating one’s own citizens without a trial? That is a slippery slope, indeed, even for Americans, Rulers of the Galaxy. Who is next? With this precedent in place, America’s next President, say Rick Perry, could order assassinations of various other American citizens whose views and speech are unpleasing to them. And not necessarily jihadists, either. Could be trade unionists or civil rights advocates. Could be anybody.
I might agree with you had he actually been assassinated in the United States, and I’d go so far as to say his capture, return to the United States, trial and subsequent execution might have been a better way to go provided he could have been captured without seriously endangering American lives. But short of that, I’m with the U.S. government on this one. Maybe it’s time for Americans to realize that being an American doesn’t protect you from everything under American control. I’d submit that might act as a more powerful deterrent than anything else, considering most assume he would have just gotten the top-drawer civil rights lawyer of the day and probably been locked up forever, during which time his message would have been repeated over and over and over in the course of endless and breathless reporting on his case. Instead, he’s snuffed. “Where Are They Now?” follow-ups a couple of years later on dead jihadists are rare, at least in the west, for obvious reasons.
Americans living in the USA who might harbor secret desires to assist radical fundamentalists with the overthrow of the U.S. government should be comforted by the knowledge that their assasssination would be the very last recourse, and that their capture would be both preferred and much easier to execute.
I’d be interested to see how the Republicans are spinning “Obama the hardnosed, steely-eyed killer” considering they spent most of the first year of his presidency cracking wise about what a sissy-boy he is and how effeminate he looks.
Again, I shed not one single tear for Al-Awlaki, and I am personally glad that putrid jihadist chunk-of-shit is dead. But once again, think about the legal precedent: Suppose left-wing American intellectual Noam Chomsky were living abroad, say in Ramalah, Palestine, writing his usual diatribes against American imperialism and Zionism, etc. (which everybody should read, by the way, because Chomsky is a brilliant dissident). What would stop a President Sarah Palin from ordering a drone attack to wipe Chomsky out, under the flimsy pretext that he is inciting Third Worlders to kill Americans? There is a reason why American Civil Liberties Union (ACLU) defends speech rights even of neo-Nazis. It’s not ‘cause they love Nazis, it’s ‘cause they’re worrying about their own asses under a future regime that hates THEM.
I add that different countries have different laws. Russia has very strong laws against any kind of ethnic/religious incitement, and al-Awlaki’s speeches would clearly be illegal in a Russian context. American law is more ambiguous and (supposedly) allows a much broader range of speech, even hate speech. By the gods, Sarah Palin herself belongs to some weirdo right-wing militia group that routinely calls for white Americans to arm themselves and overthrow the federal government by force!
A good case could be made (by any shyster worth his salt) that al-Awlaki did NOT break a single law of the United States. If American government felt that he did break a law, they should have put out a warrant for his arrest, captured him, tried him, stripped him of his citizenship, THEN executed him. Instead, Obama’s unmanned drone acted like judge-jury-executioner, all in one.
I’m pretty sure that in order to qualify as hate speech, it has to specifically incite to violence or murder or destruction of personal property. Chomsky is a pillar of passive resistance, and I’d find it hard to imagine him whipping up support for killing in reprisal. That’s not to say a President Palin (I can hardly bear to look at those words together) wouldn’t do it, and probably when he was having herbal tea with Michael Mooore if it could possibly be arranged. But Republicans make their own rules anyway, and a precedent set by Obama is hardly going to make a difference there – after all, they reflexively oppose everything he does. Besides, Al-Awlaki was already directly connected – as a motivator, and therefore an accessory – in the Fort Hood shootings by Major Nidal Hassan which killed 13 people. A trial would certainly have been preferable, but that would be extremely difficult to arrange considering he lived outside the USA and would not likely have responded positively to an invitation. Apparently Obama solicited legal opinion in writing prior to the operation’s taking place, and was assured by all contributors that the action was completely legal.
Personally, I would have said I was trying to kill some other guy who was a known fundamentalist nutcase, and was completely unaware that Al-Awlaki was visiting. There’s also a good deal of latitude in what legally constitutes “assassination” and how it is different from a “targeted killing”, which implies self-defence.
A much shorter way to resolve the dissent would be to shout that anyone who questions Al-Awlaki’s death is sympathetic to terrorists. Republicans did not hesitate to use that tactic when Bush was disgracing America in Iraq and elsewhere, and it’s time Democrats wised up.
All paleocons are like that. That is their thing. They are the people who were actually sincere when they said they were fighting the Cold War because of their anti-Communism (rather than Russophobia, or a personal interest in boosting the military-industrial complex) and thus see no reason why the US and Russia now that Communism is gone shouldn’t be buddies.
And note how few, and powerless, they are
That’s an interesting observation. As the generations go by, there are always “hard-liners” who get left behind, fighting the last war. The paleo-paleo-cons are still fighting the Cold War, but now there is a more recent generation of paleo-neo-cons who are still fighting against “Islamo-fascism”, and these are the ones who are bewildered by Libya war (supported by both mainstream Democrats and Republicans), because in Libya it is precisely the “Islamo-fascists” (NTC) who are now the good guys. If you want to be an imperialist supporter, then you must possess a very nimble brain and be able to switch sides on a dime.
In fact, the previous 12-year presidential term served by Putin… Ehm, it was just an 8-year presidential term.
Re. Yasin, I have to say that his record at forecasting isn’t different from that of the economy expert you can read and hear in the MSM. They never get it right, with some notable exception that is then projected to stardom, like Roubini. And I would not exclude these exception are just due to some stroke of luck.
Oops! I must have dozed off on that “Another Twelve Years of Vladimir Putin” headline, because I really meant to put eight. My proofreading needs work. Thanks for the correction, I’ve fixed it.
I think I should step in and defend fellow economists. The problem with their predictions (at least public ones) is that they are often skewed by political stance or affiliation with certain businesses. So they often have more to do with politics, not economics. For instance, Yasin is a well-known opponent of Putin, and I guess he would rather catch plague than eat crow and give any positive projection for the Russian economy. Besides, he provides a nice platform for other opposition figures to quote, giving them academic credibility.
It seems a tad weird to defend the profession by saying that “economic forecasting is more ideology than science”, though.
We have the best economists money can buy. We know, because We own them. They have greatly facilitated Our pursuit of Our timeless principle, and Our most important method of achieving it:
– All for Ourselves and nothing for other people.
— In a depression, assets return to their rightful owners. (That is, Us.)
And We boil with fury that Putin prevents Us operating in Russia.
Putin doesn’t prevent large multinationals from operating in Russia. He simply limits their power, so they can’t acquire a controlling interest in major companies – especially those directly related to state security, such as the energy industry. Foreign Direct Investment is encouraged, and took a quantum leap under Putin; there’s still plenty of opportunity to make money, but foreign companies are not given the opportunity to take control of a sector, where they might use endless labour disputes or infrastructure breakdowns to curtail national development or objectives. This is perfectly reasonable. You wouldn’t see the USA sell control of Exxon-Mobil to France, for example, and when China’s CNOOC explored acquisition of a relatively small California energy company some years back, politicians treated it as if it were the thin edge of an invading wedge. As it might have been: who knows? Today’s bedfellows are often tomorrow’s bitter enemies, and there are no true international friendships – only alliances.
Putin understands business very well, including the absolute necessity of trade for the health of the nation. Where Russia falls down is the reams of local inspections and permits that must be dealt with before a foreign company can begin operations – each of them an opportunity for graft and bribery and extortion; Tim Newman used to expand on this theme here at length, although we don’t see much of him any more, and he’s had considerable in-person experience dealing with archaic and excessively bureaucratic Russian business practices. You can find him at White Sun of the Desert (in my blogroll on the Home Page). Russian business codes, both domestic and international, are in serious need of overhaul. But foreigners could not be trusted to do that, and even the native authority would have to be very carefully chosen because it offers too much opportunity to write in advantages and there would doubtless be many business interests anxious to play a part, whether openly or behind the scenes. I have no idea who would be a good candidate for that.
You fail to understand Our timeless principle: All for Ourselves and nothing for other people.
And We mean it.
US US GNP is at For instance, in the United States, where legislators of both parties, and our assiduous servant Barack, do Our bidding, every single bit of the considerable gains in productivity since 2008 have accrued to Capital. Wages have declined, and the wage share of the US GNP is at an 80 year low.
Which is precisely the way We like it.
Putin wastes Our money on wages and pensions. And We boil with fury at that.
There sure is a lot of boiling going on over there. Doesn’t anything make you happy, or are you pretty much always boiling?
It’s funny you should mention that, because during the term that Putin was cutting the number under the poverty line in half, that demographic rose steadily in the USA.
It’d be a mistake to portray Putin as an altruistic, anti-business hippie throwback who just wants to give the state’s wealth to those too lazy to earn a living – and job creation could use a lot of work – but there’s no escaping the fact that his leadership was good for Russia, and there’s no reason so far to believe it will not be again.
“There sure is a lot of boiling going on over there. Doesn’t anything make you happy, or are you pretty much always boiling?”
We are very happy about developments in Europe and the United States.
“It’s funny you should mention that, because during the term that Putin was cutting the number under the poverty line in half, that demographic rose steadily in the USA.”
And We are delighted at this. You see, in a depression, assets return to their rightful owners. That is why We engineer them.
“but there’s no escaping the fact that his leadership was good for Russia, and there’s no reason so far to believe it will not be again.”
Irrelevant. We desire control of Russia’s natural resource rents. Our assiduous servant Boris had Russia well along on the road to debt bondage to us. Russia’s level of foreign debt approached that of present-day Latvia. Some of Russia’s most important energy assets were in the hands of Our junior colleague Mikhail Kh., and he was looking for a buyer…
Then that vile Putin tore Russia’s energy revenues from Us, cowed other oligarchs into paying their taxes, paid off Russia’s debts, and deprived Us of the levers by which We could control Russia.
We are still furious, which is why Our media and Our politicians direct a steady stream of vituperation at Russia and Putin.
Good stuff, @a, you are channeling Russian version of John Galt. Let’s call him Ivan Randovich Galtsky! 🙂
No, you misunderstood me. Economic forecasting is science, though not as exact as math. But Yasin wasn’t making economic forecasts, he was playing at politics.
Myes. Luckily for him, newspapers cannot tell which role he is playing.. Wouldn’t it be wise for economists with more intellectual integrity to cast him out from their midst, though?
Have you been lucky enough to find many economists with intellectual integrity? Or journalists, for that matter? 🙂
The problem is that too many academics think they are economists when they are not, and mainstream media sources are perfectly happy to quote them as if they are. As I’ve mentioned more times than I can remember, I loathe economics and the science of numbers, but I’m certain there are individual disciplines within economics just as you would not call a biologist simply a “scientist”. Those who study economic trends in order to devise prediction models doubtless are skilled in the field beyond simple accounting.
In any case, there is nothing like numbers for backtracking and pointing out mistakes. Although there’s no accounting for the effect input to the economy by an outstanding individual in a position of power (or a particularly inept one, although that’d be a negative effect), economic trends do not spring up out of nowhere and die overnight. Every time Yasin pulled a prediction out of his ass, it’s possible to go back to the beginning of a trend that highlighted his error and say, “Huh. I wonder how he missed that”.
For example, it is difficult to imagine the basis for Yasin’s prediction that the current account balance would shrink by 2010 when it was already surging in 2004. By then Putin’s business plan must have been well-known, and his policies for saving assets realized rather than spending them were a matter of record. Yasin simply made that up, and should have been sent downtown to buy oranges wearing a scuba mask and flippers, or whatever economists do to punish those among them who break ranks for political gain.
Real economics is ruthlessly non-partisan.
Ah, how handy, this about sums it up. Steve Keen:
“Anything the vast majority of economists believe is likely to be wrong.”
And We pay them very well for this, for We can see since Our “free market” propaganda, referred to here as “economics”, began to have an effect in the US starting in the 1970s, We have garnered just about all of the income gains from productivity growth since then. Much the same is true of the UK.
And Our model is moving to the Continent!
Still, how hard could it have been to predict the current account balance would rise, given the leader had indicated a preference for fiscal prudence and foreign direct investment was increasing rapidly? Economics is simply the observation of things that are happening that might affect the inflow and outflow of money; these change regularly and randomly, and I agree long-term forecasts are probably a waste of time because there are so many things that can affect the outcome.
Paul Krugman seems to have a pretty good success rate; he forecast the collapse of the U.S. housing bubble better than 2 years before it happened, although the government economists and the bankers continued to insist everything was rosy. Everybody should have known that was unsustainable, but a depressing proportion of people are halfwits who believe the last opinion they heard.
You speak English amazingly well for a Dutchman.
You did see I was quoting Keen there, right? 😉 He’s pretty good (for an Ozzie).
As for the rest, it is simply a consequence of practice.
Anyway, I wouldn’t put too much stock in Krugman, 10 years before the crisis he was still happily cheer-leading globalization, and writing that job loss in the US is no problem at all.. So either he only realized his mistake after 30 years of practice (which strikes me as a case of willful blindness), or he’s one of those things that blow in whichever direction the wind is blowing. He isn’t bad for an establishmentarian, but he’s hardly a critical thinker.
As to your first point, though: economics decidedly is not simply about observing things that are happening; it is primarily about promulgating certain views that are advantages to one’s nation (or social class or corporate sponsors). And the ones whose ‘predictions’ track the preferences of their masters most reliably are the ones who get the most airtime, sadly.
@Foppe: You are Dutch? I had not realized that. Back in previous blog when we were debating about Wagner, I should have appealed to your Germanic soul! 🙂
Anyhow, I am curious to know what is your opinion of Keynes economics (e.g., stimulus packages)? There is big debate going on among capitalists, best way to save the system, some say “austerity”, others say “stimulus”. I have no opinion myself, but I also believe capitalist system is doomed anyhow, so why bother? (I have negative attitude.) But still interested to hear your opinion.
Perhaps because I so thoroughly despise economics, I guess I never really saw it that way. It seems incredible to me that a professional (in terms of education) in a discipline so easily verifiable as economics can deliberately tell people black is white and up is down, and suffer no consequences. Of course it happens all the time in politics – the leader says, “I really thought he had weapons of mass destruction: hell, everybody thought he had ’em” and a majority give him the benefit of the doubt. He’s a politician, right? He’s not supposed to know anything. By that I don’t necessarily mean he’s supposed to be ignorant, but people don’t expect him to be an expert in every field, and accept that his decisions are often made based on the advice of those who are supposed to be. They don’t blame him.
However, when somebody tells you – through the media, not one-on-one – that a particular situation such as the U.S. mortgage bubble is doing just great and might well go on for another 10 years (knowing full well that the bottom is about to fall out because the present situation is unsustainable), and you make a financial commitment based on that advice and it wipes you out, that economist should be out of a job and grateful to escape with his life. Instead there they are, a year or two later, pontificating about some new concept, and people are listening.
Still, as that revelation applies to this post, all the more reason Yasin’s bibble-babble should be given no consideration whatever in the analysis of whether a second Putin presidency would be good or bad for Russia, because it’s based more on his desire to influence public opinion than any economic factors.
There is an entire chapter in the book I’m currently writing about the future on the uselessness of economists (at predicting anything) and the general fraud that cloaks itself under the “expert” mantle.
I admit I know nothing about the academic life of economists, after all I referred to what you get as economic analysis from the MSM.
Talking about economy (of Russia, of course) I have the impression that Putin’s return to the Kremlin and Kudrin’s dismissal herald a paradigm shift in the development model. Energy windfall will be no longer “sterilised” putting them in reserves (actually, in western government bonds), but rather invested in Russia. Putin mentioned the armed forces (BTW, did he say something about a professional army to replace the conscript one?) and the military industries in his speech. Also, government spending will make it easier to get a 6-7% annual GDP growth instead of the current 4%.
Another shift in economic policy is a growing interest in Eastern (China, S. Korea, Japan) energy markets.
I would like to know if you agree or disagree with this.
It’s hard to tell yet. Looking at Putin’s initiatives, such conclusions are justified but all this can turn out to be just empty words. There’s a whole number of problems associated with spending energy windfalls in Russia and I think the state should be very careful in pursuing such a strategy. Suffice it to say that growing a GDP with government spending alone is not the brightest idea.
Regarding the reorientation on the Asian energy market, it’s only natural. For all the wailing we hear about Europe’s dependence on Russia’s gas, it’s easy to forget that Russia equally depends on Europe as a buyer. And seeking alternatives is a good strategy, both for Russia, and Europe (Nabucco, liquefied gas).
A professional (voluntary rather than conscripted) military is a longstanding dream of the Russian government, not to mention of the military itself. An excellent reference for that is Dmitry Gorenburg at Russian Military Reform. But the pay would have to be a hell of a lot better, because professional military recruiters compete directly with the private sector. Also, there are advantages for the state in mandatory national service that would have to be given up, such as citizens’ fitness and the imputation of basic disciplinary values (although those are secondary effects and you have to strictly enforce standards or they are of little value) as well as a culture of national pride.
It’d be a great subject for a future post if the right trigger came up – perhaps together we can solve their problem for them.
Russia has no shortage of land – and some of it is in areas along the EU border which are losing population – so compensation with homesteads would make a military career more lucrative. They could also maintain jobs with the military and stimulate the economies of these places. (Compare this with the Southern United States, which owed its economic boom to the presence of military bases.)
Thing is, a lot of those small towns in far-flung regions are dying out because of the global population shift to cities. Few military members are likely to be tempted by the opportunity to live in some “Soldier Town” a bazillion miles from a decent city where you can shop for furniture, a car, appliances, all the modern conveniences. U.S. military bases are often near major cities, and those that are not are “hardship postings” that nobody wants. You can stimulate the economy of small towns all you like, but moving to concentrated population centres is a worldwide trend that’s only accelerating. There seems to be little attraction in the rural life any more for most.
I once thought high-speed rail would arrest that trend and make it possible for small towns to remain viable, if they were connected to cities by a rapid, cheap transport link. But Streetwise Professor convinced me high-speed rail has enjoyed its best successes in Europe, where everything is close and the introduction of high-speed rail cut airline ridership by nearly 50% in the first 6 months it was introduced (because the train was nearly as fast, much more comfortable and much cheaper) It’s not well-suited to large unpopulated areas, in the sense that it doesn’t make people want to settle everywhere the train stops. Good jobs and thriving population centres do that, and that situation is hard to grow from nothing. Besides, the military has to live near its weapons and equipment so that forces can be rapidly deployed without waiting for Ivan and Pyotr to fly in from Novosinowhere. Keeping a military base secure in the middle of the wilderness is harder, because the forces there are difficult to augment in a hurry if you need to.
It would be a terrible disaster for Russia to limit itself to one megacity. Spreading out is the key to its future – especially if you can lay new infrastructure before people arrive. Moscow is expensive and hopelessly overcrowded, and the biggest reason for Russia’s lower birthrates.
I never mentioned high-speed rail, but the rail network is already there. Road network is not adequate. If rural Russia had better roads, it would harvest a lot of grain that is otherwise left in the field each year.
Probably that’s what the Russophobes mean when they smugly tell each other, “In (insert number of months or years), all that will be left of Russia will be Moscow”. Presumably the Caucasian Emirate will have taken possession of the rest.
Nobody wants to live isolated out in the country any more – they want to be where the work is. Once upon a time, everyone lived more or less the same (except for the wealthy townspeople), and you could make a reasonably good living as a farmer. Not any more. Getting your goods to market would kill you. Russia is a big country, but it has a small population, and I can’t see them spreading out much until there are a few more of them.
Take the town my wife came from, for example – Dalnegorsk. It’s about 550 km northeast of Vladivostok. Lot of mining, and once they were a major source of Boron (in an odd quirk, the guy who did most of the early geological work and made a lot of the discoveries was the father of Yul Brynner, the 60’s movie star most famous for the role of the King of Siam in the stage and film versions of “The King and I”. Most people don’t even know he was Russian, but he was born in Vladivostok); I don’t know what it’s used for, but I think it forms part of an alloy, and it’s apparently still quite sought-after. Anyway, under the Soviet Union, the state supplied the trucking to get the ore to the railhead for shipping; the nearest railhead is about 200 km away, and Dalnegorsk has no port although it’s on the sea. The state also supplied a regular stipend for town upkeep, maintenance and beautification. When the Soviet Union fell apart, that all changed. No more stipend, and the sidewalks began to crumble without repairs. No more trucking, so sending the ore by for-pay trucking companies made it less profitable, and people began to leave to find jobs elsewhere. It’s still a fair-sized town, and BOR (the mining company) is still the biggest employer (forest products, too; they do a good business with the Chinese), but the writing is on the wall. Unless some major new employer moves in or something incredibly valuable – to make the town worthy of Moscow’s notice and the benefactor of its favour – is discovered, it’ll be gone in 20 years.
I brought up high-speed rail because it’s often touted as the magic wand that will cure all development problems. But there’s little use in building terminals that connect cities with places nobody wants to go – like other modes of transportation, its profitability depends on filling seats.
The road network does need a lot of work, especially in rural areas. And yes, there’ll always be a role for farmers. But if you look at what agriculture is like in the west, you’ll have a preview of what it will be like in Russia in about 10 years; large cooperatives with huge tracts of land and modern equipment, growing crops and raising stock with efficiency and monopoly in mind, and fewer and fewer small farmers every year. Again, if Russia’s population were to explode, there might be more interest in spreading out, but I don’t see that happening. It’s just the way the world is going.
I often compare Russia with Canada, because both are large countries with small populations. Same thing in Canada – there are 3 major cities (Vancouver/Montreal/Toronto) that receive by far the majority of Canada’s immigrants. That’s where they look for jobs, and that’s where they usually stay. Populations in minor cities are relatively stable for now, because Canadians are still fairly spread out, but the recent generations often head for the city to look for work instead of falling into fishing or aspiring to take over the family farm. The Maritimes (East coast, where I grew up) are still stubbornly rural, but the move to more built-up areas is far more pronounced than attempts to get new communities going in remote areas.
I was using Western Russia which is losing population – especially to Moscow – as an example. Moscow is simply too big and really deleterious to development and population growth (that is why birth rates are low, despite its large youth population). The US manages with large suburbs, and France maintains positive growth through its provincialism. Without a permanent population spread out to places that are great locations (for example Pskov – clean environment, easy travel, historical, but has suffered the largest population loss) the state relies on troops and border guards which is expensive and unsustainable. Plus, large cities choke themselves with traffic and pollution. The fires last year were a good warning not to have so many of your people in harms way.
I do not think large agribusiness will completely take over. They rely on big subsidies wherever they are located, which makes them inefficient. Besides Russians are trying to buy food from producers they have lots of information about.
I guess I didn’t think about subsidies, but I imagine the state would be glad to furnish those if food production could be streamlined and made more efficient. As we agreed; big country, small population – lots of land for agriculture, and I daresay the Chinese would be interested in some sort of partnership if a portion of the crop went to China, although China is quite a big country itself and is not land-poor yet – is, in fact, a net exporter of food.
I wouldn’t go so far as to say the move to cities is a good thing, but it’s what’s happening. I could see large suburbs, though. And Pskov was actually the exact region I was thinking of, as I did a post on it some time ago in response to another gloating schadenfreude article by Miriam Elder.
Another argument against the move to cities is that the infrastructure was often not conceived with a view to bearing such a load, and Moscow is one example of infrastructure that is creaking under the strain. But still more people come. Think what a nightmare it would be, for example, to have to replace the water system in Moscow and simultaneously double its capacity.
Sadly, a professional army is necessary to survive in the modern world. Conscipt army simply cannot compete any more with NATO and highly technical private armies such as Blackwater, etc. I would hope, however, that Russian government would continue to supplement professional army with all-national patriotic entities such as youth fitness organizations and amateur clubs (skydiving, biathlon, etc.). They may not be important any more in the scheme of things, but at least will make private citizens feel more involved in their own defense.
That might be true if conscript armies were comprised entirely of conscripts, but they aren’t and never were. There’s always been a core of military professionals, the leaders and the trainers, who are in it for a career. The lower ranks are mostly or entirely conscripts, but if you have large numbers of them they can be quite effective, assuming they’re properly armed and led. The Red Army was feared a great deal more when it was a conscript service with huge numbers than it is now as it tries to transition, and countries that boasted all-volunteer military forces were not anxious to take it on. Conscripts who showed promise – in leadership, technical skills, navigation or any of many other disciplines were always offered the chance to stay past their obligatory service and make the military a career. However, the pay was not particularly good and the work was hard, with two fresh intakes of untrained youths every year.
The drawbacks to a conscript military are you take everybody, including the fat and lazy, those too dimwitted to ever be anything, the criminals and the drug addicts. The first step to a professional military is screening, to weed out the thuds you don’t want because it would be easier to make a soldier out of a bumper jack. Another is the relative simplicity and ruggedness of weapons systems; this is necessary in a conscript military because they’re not in long enough to learn sophisticated systems and they handle it roughly because they don’t care. But money is the great equalizer there. Decent pay is a start, and modern systems make substantial use of computer technology that does much of the thinking for you. If BMW can make wipers that turn on when the windshield is wet, the automation of defence contains enormous potential for the country that can pay for it. If you spend $50 million on an air defense emplacement that takes out a $300 million plane, it’s money well spent, isn’t it?
Absent the free clothes and the chance to get violently killed, the military is a job like any other. If the employer pays well, is generous with vacation time and offers the opportunity to move up rapidly for those especially talented or determined, there will be those who will put up with quite a lot.
Good points. In any case, Russian army is badly in need of reform, and I hope VVP takes this on. One area of concern is the barbaric practice of дедовщина (which includes violent hazing, sexual harrassment, even murder, etc., as you can imagine). I believe this destructive practice is more prevalent in conscript armies, because it is believed to be a way of separating out the “duds” from the “survivors”. Not as prevalent in professional armies, where even newbies are treated with more respect. Although I have read stories of terrible things happening even in American professional army.
The profession of arms is barbaric by nature; that said, such incidents in the American or other western forces are rare, and generally turn out to have been motivated by individual cruelty rather than a cultural aberration. The U.S. Armed Forces in general are extremely professional, and even in incidents where outrages have happened such as in Iraq, it is rarely found they were committed by line troops in the field – prison guards are soldiers only in the loosest sense.
I agree the practice of hazing is horrible, because young men entering military service are disoriented and apprehensive enough without having to be afraid of their own contemporaries. Those responsible for such incidents should receive the most severe and public punishment, extending to those who are supposed to be supervising new trainees.
I know I’ve said I was going to do a blog post on it, so sorry about that, but still… why? Why does Russia needs conscripts?
Low level wars like with Georgia or in Central Asia need mobile and well-trained units, i.e. preferably professionals. Wars with NATO or China need nukes. And bunkers and canned food.
In which scenarios will a conscript army still be useful?
“Wars with NATO or China need nukes.”
And anti-air defense. When writing your article, please do not forget about the crucial importance of anti-air defense. If there is one single lesson to be drawn from the Libya war, that is it. Lessons from the Libya debacle should be seared into the consciousness of every Russian military expert. Without being able to shoot down NATO bombers/drones, a nation at war is toast. Even nukes cannot help, if all comand-control has been bombed to ashes and there is no one left to push the button.
As to whether or not there should be conscripts, I have no opinion, but I must hammer in my mantra a few more times:
ПВО ПВО ПВО
You shouldn’t worry, as Russia’s ПВО system is the most (relatively) technologically advanced segment of its military.
A conscript military is a useful vehicle for building nationalism and loyalty in its members, which they will then presumably take with them to their other duties. Except it shouldn’t be called “conscription”, which too closely echoes the hated press gangs of the Royal Navy’s long-ago. It should be called “National Service” which is what Israel calls it. The Israeli military is nothing if not professional. What could be objectionable about spending a couple of years of your life in uniform, serving your country and promoting its security for your fellow citizens, especially if you know everyone else will have to do it – no deferments for lazy rich kids, although the usual sensible rules for exemptions should apply. I’m in favour of voluntary military service as a career because believe it results in a more professional and skilled force, but I don’t think mandatory service is an imposition.
To the often-pointed-at Russia and the much-admired Israel, add Turkey, Singapore, Norway, Denmark, South Korea, Brazil, Switzerland, Greece, Finland and Austria on the list of countries that subscribe to mandatory military service. Say, isn’t Brazil supposed to be the Next Big Thing according to the western powers? Don’t hear much about their conscript military, though, do you?
It’s good in theory, perhaps, but in practice the impression I get from conversations from people who actually did “national service” (and certainly not only Russians!) is one of “Why do I have to waste my time with this nonsense”?
The vast majority of time is spent doing useless and repetitive work, e.g. drills and marching, or various construction, cleaning, logistics, etc. tasks that would be done much more effectively by private companies.
One guy who was in the Austrian army for a year only got to fire a gun once in that entire period. Fine soldier he would make. Another in Sweden made coffee and mastered the PlayStation in between. One person who had been a conscript in Russia had the task of chauffeuring a general and was otherwise free.
In certain contexts a conscript army does make sense, such as when there is a constant threat of a big war, or when the country faces lower-level threats but is just too poor to afford a professional military. But in the richer and more secure nations the conscription institution where it survives seems to have become one of corruption and imbecility.
All true, and the time for the conscript military in Russia is past – it is bound on course for a market economy, and the military must compete with the private sector for the demographic it seeks. But in the situation that prevailed in the Soviet Union, a conscript military made sense, and in another way, a conscript – or large – military still makes sense in Russia. The small, professional militaries of many European countries are not meant to throw back an invading horde, but only to hold it off from overrunning the country until aid can arrive from neighbours and allies, bound by treaties and traditional alliances. That can typically be expected to come swiftly. Who could Russia call upon in such a situation?
A good argument might be made that China would not allow any other power to dispossess it of the energy supply on which its continued advancement depends – certainly not a fellow superpower like the USA. However, dependent on the circumstances, China would not likely proceed under an open declaration of war, either, but would offer covert support as necessary to prevent Russia from being taken. In view of how little support it could probably call upon, a big, well-equipped and well-trained military is necessary for national security.
The point was made earlier that not a lot of Russian military equipment is particularly sophisticated, save for the air defense sectors and what remains of the Strategic Rocket Forces. True, but a lot of Russian military equipment was fabricated for operation by a conscript military with the minimum of training. The AK-47 stood as a perfect example – not particularly accurate, it didn’t need to be, because most soldiers are not sharpshooters and most ground battle situations are so chaotic and overwhelming that fighting with small arms calls for the doctrine known as “spray and pray”. In these circumstances, a weapon that hardly ever fails is vastly preferable to one with a laser night-sight and an iPod built into the stock. The AK-47 would keep firing as long as it had ammunition, no matter what you did to it, and had a minimum of moving parts so it was easy to understand, load, fire and maintain. Ditto a lot of the trucks and other vehicles used by the Red Army; simple to operate and rugged.
Air Defence and fighter aircraft are the exceptions – those have to be technically advanced, and traditionally Russian Air Defence systems have relied heavily on raw power. That’s why they’re usually bigger than western systems – an attack to suppress Air Defence is usually preceded by jamming aircraft, and rather than build in frequency-hopping and lots of other super-tech features to ensure a clear channel for sector search (although some Russian systems are quite sophisticated), Russia went for brute power to burn through the jamming and remain a threat.
Anyway, to address your original point, it is indeed foolish to conscript a large military if you don’t have anything for it to do. Toward the end of the Soviet Union when things were getting flaky, there was little money for training and often soldiers lacked ammunition and the basics they needed to practice realistically. Training costs big money, but you have to be prepared to spend what it takes if you’re going to take it seriously. Training is probably the biggest part of any military’s planning and probably second only to acquisitions of new equipment in the budget. You have to practice against every realistic threat, too, and low-tech such as roadside bombs and what the Army calls the “three block war” need regular emphasis.
There is a phrase attributed to Napoleon, that you always have to feed an army, but you can choose between feeding your army or the army of another country. At that time, the army of another country meant an occupying army. Today, you can feed someone’s else army by buying foreign state bonds. Which is what Russia, China and any country with reserves have done and continue to do. Until a few years ago, US or German bonds looked to be a safe investment, but the picture is changing. If there isn’t anymore a safe place for reserves, then the BRICs should search for a different way to invest their earnings. To me Kudrin looks like someone that is still living in the past. On the same day he was fired, he proposed to buy EFSF bonds. Perhaps it was just a provocation, perhaps he really meant it, but the idea is crazy.
And the award for the decade’s worst forecast by an economist goes to… Dr. Vladimir V. Putin.
13 september 2008 (!), interview to Le Figaro: “Russia is developing at a rapid pace. In 2003 I said that doubling our gross domestic product was our medium-term goal. And we are moving towards that goal: the goal will be achieved in late 2009 or, according to some other estimates, in the first quarter of 2010.”
peter, I think they’re now capable of curing an obsession with Putin; you should really seek professional help. And since when Putin is an economist? Besides his Ph.D. in economics, that is.
That’s a very unkind comment to make on a blog where every post starts with a photo of Uncle Volodya. And you haven’t seen Mark’s other blog yet!
I have to confess I am guilty of misjudgment. I would have been prepared to swear you have no sense of humour at all, but I will say here on record that you are one of the funniest people I know. I may spontaneously laugh throughout the weekend now because of that – excellent.
I have to confess: even I laughed.
Why is that the world’s worst forecast? Putin is not an economist; he may well have received some education in economics, but if he initially received training as a medical doctor in university and never practiced it for more than 10 years afterward, going instead into a totally different profession, would you laugh your head off if he botched your tonsillectomy? You can see he is quoting economists – would he say “according to some other estimates” if he was arguing with himself?
As I said, he never promised to double the GDP; he said it was a goal. “Russia is developing at a rapid pace” was certainly true. I doubt rapidly enough to double GDP, although FDI doubled and then doubled again in the year between Yasin’s announcement that the current account balance would go down. GDP did not double, but it was accelerating rapidly before the crash, and funds spent to drag the country back from collapse were recouped in less than 2 years. If he even managed to get GDP going in the right direction, he was doing far better than Yasin, who has been an economist all his life.
Because, as I already emphasized, it was made on September 13, 2008. Crisis? What crisis? “You have it… We do not have it… the Russian economy is a “haven” for foreign capital…”
He is, sort of.
“Crisis? What crisis?”
I can see the date is of abiding significance for you. All right, let’s take a look at it.
September 13th was a Saturday in 2008. In September of 2008, the U.S. government was still working assiduously to conceal the extent of the problem in hopes they could somehow avert the crisis without inspiring a panic. Most analysts agree the tipping point, after which the magnitude of the disaster could no longer be covered up, was the collapse of Lehman Brothers. According to a timeline of events, Lehman Brothers imploded on Monday the 15th, and right up until the day before Putin’s interview with Figaro, efforts were still underway to save it. The market remained relatively unmoved by the nationalization of Fannie Mae and Freddie Mac, and tanked when the collapse of Lehman Brothers was announced. Although the timeline suggests the credit crisis was no surprise, in fact it was, since the Fed Chairman together with a majority of the economists (there’s that word again) suggested everything was just fine, nothing to see here, the government has things well in hand.
If you mean it was the world’s worst forecast in terms of how bad everything got after Putin announced it was not a problem for Russia, I suppose you’re right in a tragicomedic sort of way – but if you’re implying Putin should have known what was coming and was making his prediction based on his education as an economist – nonsense. He was absolutely right that Russia need not concern itself with a mortgage crisis, since it did not have a great deal of the state’s money tied up in mortgages and was not unduly exposed to a liquid assets volatility problem. When he suggested Russia could be a “haven for investment”, where was he wrong? Money managers agree that cash and physical assets such as property and oil are safer than gold, which is valuable but prone to selloffs as the desperate liquidate their holdings in an attempt to forestall bankruptcy; Russia lacked for neither cash or oil. Others push the acquisition of emerging markets bonds, as these economies often boast low debt burdens. This was certainly the case with Russia, a powerful emerging market.
Judging purely from the facts on the ground at the time, although Putin made a mistake in suggesting GDP would double by 2009 or early 2010, Russia’s economy was doing extremely well, and had the situation continued might have done even better (but not to double GDP). I maintain his judgment is remarkable compared with that of Yasin, who forecast steadily slipping revenues in a year they more than doubled. I think we agree that going long is a fool’s game, but a practicing economist with a lifetime of experience ought to be able to read a business newspaper or otherwise notice what is going on around him.
“Putin is an economist, sort of.”
Sure – in precisely the same context that Eddie Money is a police officer. Oddly enough, nobody ever interrupts one of his concerts to ask, “Why didn’t you see that crime coming?”
Mark, waste the typing on Petey. He lives to twist and distort, as you show in this case. Truly a waste of bandwidth.
Normally we are in complete agreement, but not on this. I welcome Peter’s commentary; if everyone said, “Oh, you’re so wise, I couldn’t agree more”….well, blogging wouldn’t be much fun, I’d never learn anything, and it might end up sounding quite a bit like La Russophobe, from the opposite viewpoint.
Most of what’s on here is opinion, and everyone has a right to their opinion so far as they can defend it. I agree Peter is a bit of a stickler on the subject of proof, and proof is hard to come by in matters of opinion; but again, when we can’t prove something because there is no proof, we can use history or precedent or probability to lend weight to our opinion. If Peter provides the better argument for his opinion, chances are he’s right. I can take being wrong.
Personally, I don’t think he’s made a case for Putin being an economic dummocks because he didn’t see the American credit crisis coming – the government was at great pains to hide it, and many world economists lent weight to the deception by nodding and smiling and floating a load of marshmallow twaddle about American exceptionalism and Too Big To Fail. Even if he were briefed in on the inside track, as world leaders often are – while the rest of us have to rely on alarmist blogs because the mainstream media is a pack of liars and toadies – he was right to suggest that Russia’s exposure to a credit crisis was negligible compared to that of the west because Russia did not have an economy dominated by borrowing and was rich in cash and solid assets. But that’s my opinion, although I’m satisfied I have defended it as well as I can.
You’re always welcome, Peter; pull up a chair and grab a beer. Why not take this opportunity to tell us who among the current candidate’s list would make a better leader than Putin, and why? While you’re at it, tell us a bit about yourself – are you a Russian expat? Your Russian certainly seems excellent, although I don’t speak it well enough myself to be a competent judge.
Hey, Mark, please check your mail.
Will do.
“Personally, I don’t think he’s made a case for Putin being an economic dummocks because he didn’t see the American credit crisis coming.”
Petey never feels the need to substantiate, just snark.
Waste of bandwidth, just like SWP.
I can help to fill in some of the backstory of troll peter’s biography: As I mentioned previously on Anatoly’s blog, peter’s past includes a stint as a Hollywood actor, where he played the role of the abusive husband in the Julia Roberts movie Sleeping With the Enemy. In addition to his infamous “labels on the tin” soliloquy, this lovable troll honed his future debating skills in his other big scene, this one involving towels on racks:
Peter: Julia, darling, do you remember what I told you about putting the towels back on the rack?
Julia (nervously): Er… I think so…
Peter: Let me refresh your memory. First, a couple of questions. How many towels do we keep in our bathroom?
Julia (eager to please): Two!
Peter (approvingly): Correct. One for me, and one for you. And how many towel racks do we put them on?
Julia (nervous again): One… I think…
Peter: Correct again.
Julia (somewhat relieved): Thanks, honey!
Peter (more ominously): But what have I told you in the past about the order in which the towels get placed on the rack.
Julia (squeaky voice): What do you mean?
Peter (starting to get angry): What I mean, dummy, is WHICH TOWEL GOES ON THE RIGHT, AND WHICH TOWEL GOES ON THE LEFT!
Julia (hysterically): I don’t remember!
Peter (punching her in the face): MY towel goes on the right, and YOUR towel goes on the left. Why do you always get it wrong, you stupid bitch?
Julia (hysterically): I’ll get it right next time, I promise! I’m sorry, so sorry, honey! Please don’t hit me again!
Peter (calming down): Just remember next time. I am SO tired of having this same debate with you… (brightly): Now, what’s for dinner, SWEETHEART!
Come on, Peter.
It’s not as if Putin was exceptionally wrong. He certainly didn’t lack for company.
PS. Anything to say about Kudrin’s April 2009 prediction that Russia wouldn’t recover for 50 years? Or Edward Lucas’ predictions back in 2000 that the ruble would no longer exist and Russia will have multiple currencies on its territory?
It was a close call, but there can only be one winner.
By the way, you keep saying you were “75% wrong on Russia’s future President”, but, just to be sure, how exactly do you define the degree of wrongness?
But again, why Putin? Even if his prediction was the most egregiously wrong (and I don’t see on what grounds you make that claim – what are YOUR criteria?), he is not a professional economist. Surely we should expect higher standards from the “experts” who actually study the economy for a living?
I say I’m 75% wrong because I gave the following probabilities: DAM 70%; Putin 25%; Other 5%.
Oh, take it easy, I just wanted to piss kovane off.
And so, by your logic, when the blonde from this joke says that the chances to meet a dinosaur on the street are fifty-fifty, she is only half wrong? This can’t be right, can it?
peter, I’m loath to disappoint you, but even if you managed to rape Putin in some dark alley, I think I would be able to cope with grief. Let alone calling him a bad economist.
“Oh, take it easy, I just wanted to piss kovane off.”
Mark, make that “self-identified waste of bandwidth.”
I submit the candidature of Bernanke as the worst economic forecaster, for this one All that said, given the fundamental factors in place that should support the demand for housing, we believe the effect of the troubles in the subprime sector on the broader housing market will likely be limited, and we do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system. Made at a speech held on May 17, 2007. I know, there are many other “brilliant” candidates, so it is not easy to decide. IMO, Putin has no chances to win the contest.
Yes. He never made such a prediction.
Oh, my. It appears Peter is right. From the St Petersburg Times:
“Kudrin said at a recent meeting that external conditions, such as oil prices, have been extremely favorable for the Russian economy but would not be the same in the next 10 to 50 years. But
some news outlets misquoted him as saying that Russia wouldn’t recover from the crisis for 50 years, prompting Putin to retort at a separate meeting that the finance minister was “stressed” when he had said that.”
You win this time, Peter – but we’ll be back. Mwa hah hah…
So Kudrin never actually said Russia would not recover from the crisis for 50 years, but the prediction he did make should mandate his entry in the “Worst Economic Prediction Ever” sweepstakes. Russia recovered with startling speed. However, on this point, victory to Peter.
Old Russian proverb: “Even a broken clock tells correct time twice per day.”
Mark, I think you you accepted Peter’s link too readily. It doesn’t prove anything. Why believe that the St.Petersburg Times is giving the right information and that the other news outlet are misquoting? Why not the opposite?
Anyway, to dispel any doubt, let’s quote the man himself: Kudrin:
“В ближайшие 10-20-50 лет мы не будем иметь таких благоприятных условий, которые были в период с 2000 по 2004 год”, Глава Минфина напомнил, что экономика США падает уже несколько месяцев подряд, и сравнил ситуацию с рецессией американской экономики 90-х годов, когда спад продолжался 8 месяцев, а восстановление – 92 месяца.”Сейчас будем иметь спад не менее 16-18 месяцев для экономики США. Это означает, что выход из кризиса, возможно, продлится несколько лет”,
So:
1) He drew a parallel with the recession in the 90’s in the US, when 8 months of recession needed 92 months (almost 8 years) for recovery, then said: Now the US have a decrease of AT LEAST 16-18 months. So, extrapolating, it will need AT LEAST 20 years to recover.
2) In the next 10-20-50 years,conditions won’t be as favorable for Russia as it has been from 2000 to 2004.
From this, he concluded:”Это означает, что выход из кризиса, возможно, продлится несколько лет”, I think it’s safe to assume he meant “несколько лет” to be between 20 and 50 years.
Over to you, Peter: what say you?
Чушь.
That seems a bit thin in the way of substantiation, if you’ll forgive the criticism. Believe me, it’s done out of love.
Okay, if I wasn’t clear enough, here’s the long answer:
Чушь. As should be clear to anyone with adequate Russian comprehension skills, Kudrin said nothing that could possibly be interpreted as a “prediction that Russia wouldn’t recover for 50 years.” Just ask kovane.
Mmmmm – no flinching. Sam? Anatoly? Kovane? Yalensis? Nuance in Russian is beyond me, I’m afraid.
I’m finding it hard to track down the long, unredacted version of what Kudrin said. However it appears that peter is right if the following sentence is what the 50 years comment was all about:
“В ближайшие 10 – 20 и даже 50 лет мы не будем иметь таких благоприятных условий, которые были в период с 2000 по 2004 год” – In the next 10-20 years and even 50 years we will no longer enjoy the good [economic] conditions that prevailed from 2000 to 2004.
I don’t know how exactly he defined good economic conditions. That said, making concrete projections over such a long period is clearly useless and unbecoming of a person in his official position.
Blonde statistics:
There is only 50/50 % probability that peter is right. He is either right, or he is wrong, hence 50%.
Brunette statistics:
There is 100% probability that peter is irritating troll who has no friends, because nobody can bear to converse with him for more than 2 minutes.
AK,
I guess that’s as close as a Russophile can get to admitting being plain wrong, so thank you for the effort.
I’d also appreciate it if you answered this comment above (thanks, yalensis, for the reminder).
Hopefully it will not be lost in the victory dancing in the end zone that, while you appear to be substantially correct in proposing Kudrin did not say recovery for Russia would be the work of 50 years, what he did say was irresponsible, unsupported by data readily available at the time, and so wrong in view of the course of events that his face might be used as a dictionary illustration of the word “wrong”. The “good economic conditions that prevailed between 2000 and 2004” returned – for Russia – almost immediately, and the gloomy forecasts that Russia could suffer enormous deficits, foolish to rely on oil for the economy, crude oil price could fall by a third, mumble mumble blah blah blah, are all nonsense, too. Oil is a finite resource, several extraordinary events that are unlikely to prevail for long are influencing the depression of prices, shale gas is not going to ride to the rescue like the Seventh Cavalry, and there are to date no serious efforts by oil’s largest consumers to wean themselves off of a petroleum-based economy. To the contrary – every time the government has its hand out for money to support the development of “green” technology, Big Oil announces a new discovery or a new source or a new exploration project with new partners which buoys up confidence that, while oil certainly won’t last forever, it’s going to be the backbone of energy supplies for the forseeable future.
The amusing irony, if you’re fond of it, is that the western economic landscape is dominated and heavily influenced by the oil giants, and while they loathe the political system in Russia and would dearly love to bring a squishy, malleable, vain liberal administration to power in Russia, they cannot negatively influence the profitability of crude for long without hurting their own bottom line. Therefore, what is in their own best interests, profit-wise, is inevitably also in Russia’s best interests.
Here is a clip of peter doing his “victory dance” at the endzone.
“Victory Dance, Yeah! Yeah!” This troll is so frackin’ adorable!
@yalensis: I am, yes. But I’m afraid that appealing to my German innards wouldn’t have worked. :p
The point to understand wrt Keynesian stimulus spending is first of all that Keynes only meant them to be applied in times of crisis (to offset demand drops), or after crises have ended, to spur economic growth (such as through the Marshall Plan). Once an economy is doing fine, the govt should stop applying them (which is not to say that there may not be state-owned companies; but just that the government shouldn’t deficit-spend much in normal times). So it is by nature (supposed to be) a transient effect. “Austerity” (as being done by Obama/GOP/David Cameron), on the other hand, is just propaganda by the neoliberals to further decrease their tax “burden”, in the hopes of further impoverishing normal people (for instance by raiding the pension funds), but it does nothing to actually resolve any of the problems the ‘West’ is facing. Those issues can only be addressed through some kind of economic development, which, in turn, can happen only through some kind of investment (so “stimulus”). (It is worthwhile to note here that most large companies are sitting on huge reserves that they are unwilling to invest because they don’t believe there’s a market for further growth, even while they’re lobbying to make people even poorer (which will lead to further decreases in aggregate demand, making their behavior rather self-destructive).)
In the case of the current crisis in Europe/US simple stimulus spending won’t really work to ‘solve’ the problem, though, because there are a number of systemic reasons (having to do with globalization) for the crisis that have nothing to do directly with the bank fraud/misbehavior, and that cannot easily be overcome, even if the banking crisis would be resolved. For instance, the way the Eurozone works creates huge problems for its member states because of the (low, German/Dutch-favored) single interest rate policy followed by the ECB, along with the fact that both Germany and Holland underpriced their currencies going into the Eurozone in order to make them even more competitive than they were already (they basically did to the other countries what China does to the world by pegging the Yuan to the US$). But so far nobody is willing to really confront them for their mercantilist behavior, even though fixing this is much more important for the future performance of the ‘south’ than simply fixing the insolvent banking system. But as a consequence, a lot of employment has disappeared from the southern European states, which will be hard to recreate even if these issues were addressed.
More broadly, it all depends on how stimuli are put to use. If they are used to somehow improve the economies of the countries involved (think infrastructure, tech developments), they can be very helpful, but if they money is simply spent on building more housing, it is of rather less use (unless you do that to drive down the costs of living somehow, so that people can spend more of their incomes otherwise). But all of that is very difficult now because intellectual property rights make it almost impossible to really innovate, while most industries have become highly oligarchical, buying up all of their prospective competition..
I knew it!!! You’re an economist, one of them!!! That’s it – now I don’t believe a word you say; if you say your name is Foppe, I shall ask you for identification.:)
:p
Nah, I’m just an amateur social scientist who doesn’t much care for disciplinary boundaries, or for the formal-mathematical approach that economists think gives cachet to their discipline, but which in reality rests on a whole set of assumptions that range from quirky to idiotic. (Their most brilliant assumption of all being the idea that economies are stable over time, and that they cannot develop in ways that promote instability, and that similarly large-scale fraud is impossible, since ‘the market knows all’).
I was reading something about the Extractive Industries Transparency Initiative and I ran across this:
http://www.revenuewatch.org/rwindex2010/rwindex.html
Russia is third after Norway and Brazil for comprehensive information about revenue from its extractive industries. Why does Transparency International always give it such a low score?
> “Why does Transparency International always give it such a low score?”
Because they know well what their paymasters want to hear?
Acknowledged funding of Transparency International in the USA is largely received from Corporate interests. The Transparency International USA chapter acknowledges support from the Boeing Corporation, whose executive Darleen A. Druyun was imprisoned for corrupt activities, leading to the resignation of Boeing CEO Phil Condit, and from Pfizer, a company which has been found criminally liable and fined $1.3 billion for drug marketing “with the intent to defraud or mislead”. Douglas Lankler of Pfizer serves on the Board of Directors of Transparency International USA.
Interesting……. where’d that come from?
This list is also part of Transparency International, which makes it strange that they still perceive higher corruption (although this was the inaugural ranking). Also, the countries with the highest scores maintain state ownership of these extractive companies.
“Economics” as a ‘science’?
Hmmmm…..a very ‘imprecise’ one, I think!
I have to say I prefer certain types of numbers(or ‘lack of them’) such as calculus and number theory over ‘economics’. That said economists have greater influence on opinions than the ‘esoteric’ world of ‘pure mathematicians’. I am absolutely clueless on economics to comment on anything that’s been commented here except for this foolish comment. Good luck with the economic predictions!
sinotibetan
Hey, Sino-T!! It’s OK to be clueless on economics – it seems to be the only profession (with the possible exception of psychology) in which there are no wrong answers!!! You can be so wrong that you don’t even get the direction of the trend right, and people just dust themselves off and get back in their chairs to listen to you some more. Being an economist is like a license to print your own money! I wish I’d caught onto that early enough to be one myself.
Continuing above thread on conscript army: Mark makes a lot of good points about Russian situation being quite different from European. Having faced many land invasions in the past, Russia often saw its regular army hammered by superior armies (e.g., Napoleon) and had to fall back, at least partially, on irregular forces: partisans, guerrillas, etc. It helps greatly if these irregular forces have had at least some type of training involving camping, shooting, etc. Maybe a conscript army is not the solution, but there should certainly be more paramilitary types of activities, like scouting, target-shooting clubs, etc. And Mark also makes great point about keeping basic equipment (guns, tanks) as simple as possible, so easier for non-professionals to learn.
I would also add that American/NATO type professional armies nowadays seem to be more perfected for offensive wars (invasions, regime change, etc.) whereas Russian (and I would add Chinese) armies seem more geared to defense against land invasions.
Holding any shares in American Airlines? Uh-Oh. Looks like the parent company might be circling the bowl.
Sorry for the sometimes-only-peripherally-related comments, but I keep running across interesting economic snippets (but I still hate economics, I swear). Over at Emerging Markets, there’s an interesting popular-vote poll for Kudrin’s replacement. Options are Igor Suvalov, German Gref, Elvira Nabiullina and Arkady Dvorkovich. Any bets?
The same page reports that the UK – after intense lobbying by its adopted son William Browder – will join the visa ban on the ridiculous list of people who supposedly banded together to kill Sergei Magnitsky. Their spouses and children, too, don’t forget. Britain/Russia relations are allegedly at an all-time low, but I predict there’s a lower threshold, and that’s where they’re heading.
Hi Mark,
to me it’s just fine if you keep an eye on economic snippets and report them, because I too follow economy news, and it seems there is some difference between European and American reporting. I didn’t know about American Airlines troubles, just read about Dexia looming downgrade. Dexia is a Belgian-French bank with a balance sheed equal to 180% of Belgian GDP, packed with Greek bonds. Not to mention that Belgium has a public debt above 100% of GDP and is without a government since last year.
Re. bets about Kudrin’s successor, to my limited knowledge Nabiullina and Gref are economists by education and belong to the liberal (in the economic sense) side, Dvorkovich and Shuvalov look more like state apparatchik, the former close to Medvedev, the latter close to Putin. It seems to me that Putin is going to change the economic development model away from the liberal one, so my guess is Shuvalov.
The Magnitsky list ban news has been denied by the Home Office according to RIA Novosti, and by the UK embassy in Moscow according to Bloomberg.
HAMLET
Thrift, thrift, Horatio! the funeral baked meats
Did coldly furnish forth the marriage tables.
Libya civil war isn’t nearly over yet, and there are still thousands of rotting bodies to bury; but the global oil companies are already rushing in, eager to privatize Libya’s state-owned oil assets.
Here is an article about Heritage Oil, a British-owned company which also operates holdings in Russia and Iraq, and now seeks to branch out to Libya..
The new NATO-installed puppet government of Libya has granted this company licenses to invest in formerly state-owned oil assets. Thus, the privatization begins, and we see the real reason for NATO’s aggressive war against this formerly wealthy African nation.
The group, which reported a 9.6 million US dollar (£6.2 million) pre-tax loss in the six months to June 30, compared with a 12.3 million US dollar (£7.9 million) loss the previous year, said it would use the Sahara Oil acquisition as a starting point for access other opportunities in Libya.
Why….I’m shocked. Shocked!!!
Rick: How can you close me up? On what grounds?
Captain Renault: I’m shocked, shocked to find that gambling is going on in here!
[a croupier hands Renault a pile of money]
Croupier: Your winnings, sir.
Captain Renault: [sotto voce] Oh, thank you very much.
[aloud]
Captain Renault: Everybody out at once!
(Casablanca, of course) 😉
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Oooooo….Baby, what I say.
http://www.thestar.com/business/article/1064787–tsx-jumps-amid-rising-oil-prices?bn=1