Never attribute to malice, we’re told, that which can be adequately explained by stupidity. Nobody seems to be sure exactly who said it first, and although most commonly linked to a Robert A. Hanlon, many believe it originated with controversial and influential American science-fiction author Robert A. Heinlein. Whatever you believe, you’ll probably go through life with fewer stress-related health problems if you simply assume that people who are wrong are just stupid, and that they meant well.
Pretty much defining that genre is Dmitry Travin’s apocalyptic “Kudrin’s Warning“, for Open Democracy. The one tickle of uncertainty is that Travin is a modernizer and reformer, anointed for his commitment to making Russia more like a liberal western democracy with broad private ownership of resources and infrastructure. So maybe he writes as he does out of malice. All I can say is, it certainly reads like stupidity. Well, let’s go through it together – see what you think.
What I think is that this is the beginning of the canonization of Kudrin. Never ones to pass up an opportunity to point at Russia and shout, “My God!! Can you believe how stupid that was??” the western media seems poised to once again shape the narrative. Take a memo, world – Alexei Kudrin was not only the most brilliant economist and financial wizard Russia has ever had, his forced resignation due to the shortsighted ideology of his political masters – thrice ungrateful considering Kudrin was the architect of Russia’s present prosperity – will surely result in disaster. Russia, in short, is playing Russian Roulette with its future.
We’re treated early to an example of Travin’s wit (speaking of Russian Roulette) in his description of the legendary exercise. It springs, according to Travin, from Russian romantic legend of Tsarist times. If so, it springs from a romantic legend that is heavy on romance and light on basic knowledge of firearms. Again according to Travin, one “twirls the barrel round several times, and puts the gun to one’s head”. Presumably, this will confuse the bullet, or it might if you could twirl the barrel on a revolver, but in fact you spin the cylinder so that the hammer does not fall on the chamber in which you just loaded the bullet, which comes out the barrel. The barrel is fixed in place, and does not twirl or rotate, or anything that could be so described. You could, theoretically, “twirl” the entire revolver if you inserted your finger in the trigger guard – but it would be difficult to imagine how that might introduce an element of chance into shooting yourself.
Mr. Travin goes on to blithely inform us that although no historical sources confirm the origins of any such game in Russia, it is likely to be true because it dovetails so neatly with “traditional ideas of Russia as a place where things were always so bad that people were happy to lose their lives”.
Makes you wonder why German Army Group North ran up against a brick wall in the siege of Leningrad, doesn’t it? People who allegedly were happy to lose their lives held out against a superb army for better than 870 days; one of the longest sieges in history. Odd behaviour for people with a death wish, I’d have thought; you’d expect them to throw the gates wide and shout, “Hey! You fucking sausage-eating kraut squarehead duraks, come in and kill us!! I can’t wait!!!” Similarly, when the forces of Alexander occupied Paris in 1814 after snapping at Napoleon’s heels throughout his retreat – which reduced the Grand Armée to less than a quarter its original strength – it was presumably owing to a fit of pique at the Emperor for failing to grant them the peace of death. Fast-forwarding to today, Travin himself tells us Kudrin’s departure had its roots in his disagreement with Medvedev over “a programme of increasing social and military expenditure”. What does a country of eager suicides need with a bigger military to defend it? Try not to be stupider than nature intended.
In fact, the earliest recorded mention of the term “Russian Roulette” was in a short story of the same name published in January 1937 – in English – by an American magazine, Collier’s Weekly, which went out of business in 1957. No historical record at all suggests Russians were so miserable at that or any other time that an opportunity to snuff it was welcomed with relief. The last Tsar was executed in 1918, nearly 20 years before the Collier’s story was published.
Anyway, I spent much longer on that than I intended; we want to talk about Kudrin. But that little vignette, I think, establishes early in the game what Travin’s views are and what they are based on – a willingness to say anything about Russia that is unfavourable regardless its provenance, and a bad case of capitalist/corporatist envy.
So, without further ado, on to The Brilliance Of Kudrin. I don’t mean to sound sarcastic, because Kudrin did in fact see Russia through a lengthy period of prosperity. But in the end, he’s a Russian economist whose skills are rated highly by the west; rather more highly since he departed from service in the Russian government and started to criticize it. Are we acquainted with other Russian economists who are admired by the west and who trot out jukebox rants against the Russian government whenever somebody says, “Say -that guy looks like a western journalist”? Sure we are. Vladimir Mau, crown prince of fiscal folly, for one. Yevgeny Yasin, for another, who predicted in 2003 that Khodorkovsky’s arrest would cast a pall of darkness over Russian investment; that long-term prospects were certain to deteriorate. That didn’t happen, of course. Oh, and one of my favourite boobs that isn’t attached to Keira Knightley – Yevsei Gurvich. Mr. Gurvich predicted in 2007 that oil (Urals Crude, to be specific) would be down to $50.00 per barrel by 2010; those high prices just couldn’t continue. As a consumer of gasoline myself, I wish he was right, but he was off by about $30.00 per barrel on average. I daresay we will catch Mr. Kudrin in a few…inconsistencies. Not to mention Mr. Travin, a fellow economist.
But first, let’s hold a finger to the winds of western hype. What does the west say about Kudrin’s “resignation”? (that’s how they say it when you were ordered to resign, which some people have difficulty in distinguishing from being fired, and I would be among them) Well, the Wall Street Journal – a somewhat….conservative source – says Kudrin was fired, and that he was “dressed down before state-run television for taking a stance against [the President’s] policies”. They go on to say that Mr. Kudrin’s departure will “likely worry foreign investors in Russia, who had regarded Mr. Kudrin as a guardian of Russia’s fiscal responsibility for more than a decade.” Would that be the same guardian of fiscal responsibility who presided over alleged capital flight of $21 Billion in the first quarter of 2011, owing to political concerns that spooked investors, and over increased use by companies of domestic debt to repay foreign borrowing? Because that’s how the Wall Street Journal characterized the situation in Russia only last April. In fact, slobbering about Russian corruption, thievery and all-round bottom-of-the-barrel badness rises to the level of popularity in the Wall Street Journal, and did so unabated while Kudrin was Finance Minister – until his resignation. Then, since he could be cast as a lonely but defiant resister against the bloody juggernaut of state power, he was fitted for a halo. Have a look back through the Wall Street Journal for the last decade, and see how many articles you can find praising Kudrin for his fiscal genius, pre-resignation. How about this one? Oh, nope, sorry; it says Russia “must overcome a reputation for widespread corruption, poor infrastructure and a murky legal system. And that will mean implementing institutional reforms and improving the business environment — measures the government has long discussed but never carried out.” What? the landscape-altering Kudrin failed to improve the business environment? Well, can the Wall Street Journal point to any successes at all under Kudrin? Apparently not. If you google any combination of “Wall Street Journal” and “Russia” and “Kudrin” and “Success”, you get a flurry of recent articles referring to Kudrin’s firing (or resignation, if you like that better) and a lot of vicarious gnashing of teeth about how this spells big problems for Russia. My own country’s “National Post“, usually only slightly less hysterical than the Wall Street Journal and sometimes more so, emphatically agrees Kudrin was the real jewel in the Kremlin crown, and dishes the gory details under the lurid headline, “Russian Finance Chief Revolts Over Putin Presidency Plot“. I particularly liked the delicate way they handled the issue of Putin/Medvedev’s popularity; “Although opinion polls show they are both much more popular than any other Russian politicians, and Putin is all but certain to win a six-year term in March, many Russians show signs of impatience with the lack of progress on democracy. ‘How much more can you take? Yet again there will be nothing, everything will stay the same. We only get empty promises,’ said retired factory worker Nikolai, in the village of Titov northeast of Moscow.” Got that? A solid majority of Russians view the return of either Putin or Medvedev to leadership positively, but that doesn’t matter because in a real democracy, the opinion of a malcontent minority that feels ill-used is the deciding factor in presidential elections.
Welcome to Spinland, where the guy who really didn’t do much at all to improve Russia’s financial state over the last decade – really, they just lucked out on the price of oil, a child could have done it – suddenly more or less invented fiscal responsibility, and now that he’s gone, disaster bursts into the enormous vacuum created by his leaving. Any truth to it? Let’s see.
Going back to the heart of the Global Financial Crisis – arguably Kudrin’s greatest test – it’s hard to say. There can be little argument that Russia was better prepared than most for the crisis and weathered it better than most, bouncing back to profitability quickly. How much of that was due to Kudrin’s stewardship? Some, certainly. But Kudrin couldn’t make policy on his own, and his recommendations would have to be passed or rejected by first Putin, and later Medvedev. Is the person who approves a sound policy as wise as its author? That, also, is difficult to say, although examples abound of governments that did not listen to good advice, and came to grief as a result. Travin includes an interesting example – Boris Fyodorov’s resignation in 1994, over policy differences with Yeltsin, who wanted to simply print more money.
Any fool knows that printing more money is not the answer to a financial crisis; the Germans tried that, and ended up with a Mark so devalued that it took a barrowload to buy a sack of flour. But for me, the interesting thing was the reversal of roles on the part of the west. Although the Finance Minister took a principled stand and resigned when pressured to do something stupid, who from that period is remembered as the Savior of Russia, the progressive genius who took Russia to the brink of a functioning democracy? Fyodorov? Hardly. We could do a name-recognition poll using the names “Fyodorov” and “Yeltsin”. But I think we’re agreed there wouldn’t be a lot of point to such an exercise. Who’s remembered as the great reformer who pulled Russia from the collapsing ruin of the Soviet Union? That’s right: Boris Yeltsin.
Let’s just be sure we have that straight. Finance Minister takes principled stand, President ignores his advice, country falls apart. President who plunged ahead on his own and handed a nation on the ropes to his successor is remembered as a “great, if flawed” leader who made mistakes, but whose love for Russia could never be doubted. Much like the introduction hinted at – short on malice, long on stupidity. Oh, except for the stupidity; don’t put that in. Fast-forward again to today. Finance Minister takes principled stand. President disagrees, Finance Minister is sacked. This time, though, the President is a fool, and the Finance Minister is the glue that shakily held the country together. Now, it must disintegrate.
I don’t know why such a simple formula is so difficult to grasp – western approbation for the accomplishments of a Russian usually indicates his/her degree of usefulness as a propaganda instrument, or signals an achievement by him/her which damaged Russia. It doesn’t hold true in every case – the west is quite fond of Maria Sharapova, for example, although her press tends to highlight the opinion that she got nothing of her athletic ability from Russia, having learned tennis in the United States – but it’s accurate often enough to show a pattern.
Which brings us back to Alexei Kudrin. In 2005, Kudrin locked horns with Prime Minister Mikhail Fradkov, saying “the government is making stupid mistakes” (heard that somewhere, recently?). Fradkov wanted to put more money into pensions and public sector pay. Kudrin argued that it would “stoke inflation”. Was he right? I’d have to say not even close; the historic inflation rate looks pretty flat to me. In fact, it tumbled right after Kudrin’s tantrum, falling steadily until the onset of the Global Financial Crisis (graph defaults to 2008; you’ll have to set the beginning date back to 2005). But as recently as this past June, Kudrin championed investment in pensions and forcing companies to contribute to social insurance savings, announcing that “this is the government demonstrating it can correct its mistakes”. Confused? Me, too. I thought it was Kudrin who argued against putting more money into pensions, probably because it was Kudrin who argued against putting more money into pensions. Review of Travin’s article reveals that Medvedev wanted to increase teachers’ salaries to a par with the commercial sector, and increase pensions. Kudrin disagreed. Remember what happened the last time? Kudrin was wrong, in the sense that he was all the way across town from right. He thought Russia should be putting money away for a rainy day, because those high oil prices just couldn’t last – when Russia already had the third-highest cash reserves in the world – and the old people could just suck it up. Now he’s singing the same song again, perhaps forgetting he extolled the benefit of pension reform as recently as last June. Maybe it’s just me, but he’s starting to sound like Mitt Romney. Maybe you noticed that quote from the angry factory worker in Titov, who snarled that Russians would get nothing and there would be no change. He perhaps didn’t notice that the minimum wage more than doubled during Putin’s tenure, as did pensions. And Kudrin fought those increases tooth and nail. Then cited them as example of the government demonstrating it could correct its mistakes. Which it actually didn’t make, although such a mistake was Kudrin’s recommendation.
If you read a little further down in the article from the last link, you’ll get a better idea why the west has a heart-on for Kudrin. He’s a tireless advocate for privatization, private investment and….wait for it….selling of controlling stakes in state companies.
There are two kinds of private investment in Russia that might be interested in controlling stakes in Russian state companies. One is very wealthy Russians who could afford it. The western press calls them oligarchs, and generally rates them as robber barons and pirates unless they live in England or are named “Khodorkovsky”. I can just see the press releases if the Russian government sold GAZPROM to a Russian oligarch: “MORE MONEY FOR PUTIN’S RETIREMENT FUND: PUTIN STEERS SWEETHEART DEAL TO BILLIONAIRE BUDDY!!!” The other possibility is western interests. Remember Bill Browder, and his formula for making money in Russia? Keep in mind that the west approved and approves of Browder’s conduct and continues to back him against Russia with the Sergei Magnitsky Law. Would it be smart, do you think, to sell controlling interests in major state industries to westerners? With a view to such a transaction supporting Russian national interests?
If you do, maybe we ought to take a look at why state control of industry is so bad in the first place. As an example, let’s look at the scare the lending industry gave the USA in 2008, when deregulation and unscrupulous lending practices led to the collapse of the housing bubble and precipitated the Global Financial Crisis. Two of the worst offenders were mortgage giants Fannie Mae and Freddie Mac. What did the government do to stop the free-fall that threatened to drag the whole country into the abyss? Sold them to Russian private investors, of course. No, I was kidding; the government nationalized them. Assumed state control. Although both Fannie Mae and Freddie Mac were GSE’s (Government Sponsored Enterprises), both were publicly-traded companies since the late 1960’s.
In order for oil prices to ruin Russia, they would have to go down to less than $70.00 a barrel and stay there for nearly two years. Do you think that’s going to happen? Really? I’ll tell you when you can start getting ready to dance on Russia’s grave because of low oil prices – when you can convince Conoco-Phillips and Chevron-Texaco and Exxon-Mobil that rock-bottom oil prices for that long are worth it. Good luck with that. When you see signs that the world is ready to switch to green energy from petroleum, start tolling the bell for Russia. Until then, canonizing Kudrin is simply another attempt to turn public opinion in Russia against Putin and United Russia. And if Russians paid any attention to western attempts to influence their behaviour and voting preferences, it might work.