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Emulating the losers

For those who are inexplicably worried about Russia’s alleged ‘resurgence’ as a major world power now that it’s economy is about the size of Italy’s economy (albeit far less diversified), the following article should be unalloyed good news:

In the Russian Federation, a country where hundreds of companies are launched every year, the plans to create yet another one would not be particularly noteworthy. Except that Russian Technologies is to be very different from most of the rest. It will be no capitalist venture conceived by a profit-seeking entrepreneur, but a corporation established by a decree of the Russian Parliament. A giant conglomerate with the state apparatus behind it, its official mandate will be to ‘develop Russia’s heavy industry.’

The ‘money quote’ being “with the state apparatus behind it”…presumably because it was proven that “state apparatus” was the key to how the Soviets developed technology and business methods far superior to those in the capitalist west, became fabulously wealthy and as a result won the Cold War and… oh, hang on… In other words, the clowns who run the Kremlin are going to try an approach used in the West in the 1960s and 1970′s of creating large bureaucratic ‘national champions’. And that is because that worked soooo well for us, right?

So clearly those who feel “something must be done about resurgent Russia” can now relax and just let nature take its course. Putin and his entourage of economic ignoramuses are screwing Russia and crippling its ability to ever develop a dynamic market economy. This will weaken the nation far more effectively than anything anyone else could do to them. I just happen to think it is a pathetic waste of people’s talents and potential.

24 comments to Emulating the losers

  • James

    At the same time, though, does it not run the risk of frustration and desperation being vented through the diversionary tactics of things like nationalism and radical rhetoric, a la Ahmadinejad-stylee?

    Just seems a it of a double-edged sword.

  • RAB

    Quite indeed.
    But you are going to piss off 5 million indiginous
    who have been off work with bad backs since 1973
    arnt you?

  • nick g.

    Shame on you, Perry!
    You must have had a state-funded education!
    ‘Ignoramus’ is already plural, and means ‘we ignore’. I think ‘Ignorantus’, and the plural form,’ignoranti’, are the words you should use.

  • countingcats

    I just happen to think it is a pathetic waste of people’s talents and potential.

    Hear hear.

    I am not scared of a resurgent Russia, so long as it is a growing Russia.

    I am scared of a frustrated and ignorant Russia. Just as I am scared of an ignorant Iran and an ignorant anyone else.

    I would argue though, as Russians start getting individually wealthier, as they will with any increase of wealth in the country, there will be less and less to be scared of.

    Don’t forget, as was shown in the West, once the government takes control of “The Commanding Heights of the Economy”, as Putin has done with Big Energy, the next decades see a decline in their relevance. Russia will become wealthier regardless of these idiots policies, and the next generation will be that bit more savvy.

    Putin has left in place those oligarchs who don’t wish to threaten him, which is a long term mistake for his policies. They, and their economic descendant, will ultimately impose sensible policies. One day.

  • Plamus

    A little perspective on Russia, ladies and gentlemen.

    My mother spent 5 years in the Soviet Union in the late 60′ and early 70′s, and got to travel a good bit around. To relay some of her impressions (keep in mind, Slavic and Christian Orthodox background): “The Russians are not like us. You cannot understand them, unless you are Russian. You can meet brilliant, cultured, civilized people in Leningrad, Moscow, Kiev. Outside of the big cities, however, very little has changed since the 19th century. Yes, there’s electricity in many places (they mostly failed Lenin’s “Soviet power plus electrification of all of the country” call) and the odd Lada car or tractor. But your “average” Russian male is dumb as a doorknob, uneducated, and drunk 95% of the time outside work and over 50% of the time at work. Men go on several day drinking binges, and then they show up for work, and do not get fired, because the replacement would behave the same way, but would not know the machinery also. They (Russians) also have an amazing amount of inertia, almost nothing can get them out of their routine, which is why almost nothing ever changes.”
    Now, of course, this was 30+ years ago, but my mother keeps in touch (via snail mail) with quite a few fellow students there, and they seem to say nothing has really changed. My father also does some business with Ukraine, and agrees. His joke is that if it ever came to Russian against Western military standoff, the West would render the Russian army totally inefficient by dropping not huge bombs and missiles, but cases of Smirnoff vodka.
    These Russians I am not afraid of, really. Nor is Russian economic growth anything to worry about, it would only come from more oil and gas being sold to the West and to China. Now, Putins and the likes of him in the military can be scary.

  • JoseAngel

    I think the problem for Russia is precisely it own gas and oil because as a rule, when any government intervenes in the handling of these resources, the money coming from these revenues corrupts the leaders of these governments quickly, especially those governments that lack good practices such as auditing and accountability as I believe is the case of Russia, and as has been the case of many nations in the middle east and Latin America.
    These much valued minerals are like addicted and destructive drugs in the hands of nations whose leaders have no management skills.
    Entire countries depend on oil and gas today, and yet their citizens aren’t a bit richer. Hardly ever a mineral has made the citizens of a country poorer, but these two indeed have done precisely that.

    They serve as a splendid cash box for politicians in power to practice more populism and nationalism and buy more wills and create and give a false impression of economic wealth, independence and power, and quickly the oil money changes whatever good will or intentions there might have been, if there any ever, in these leaders that arrived to power promising the people that they will make the country rich with the oil revenues, that the oil will be theirs for the first time.
    Hugo Chavez is going around irresponsibly spending Venezuela’s oil money; he is destroying many private companies and spending huge amounts of dollars in a few Su-30MK2 fighters that I doubt will never take off in a conflict because they know for sure the Americans will easily and happily shoot them down, while at the same time his own poor citizens travel across Mexico to enter illegally to the United States. Venezuela’s economic ministry claims that the country has grown 10% but they have only learned old Marxist propaganda techniques similar to Cuba’s Regime, which has always claimed that the island has grown some 10% economically year after years too, which would make the island the richest in the world by now.
    Iranian leader, Ahmadinejad, is engaging his country in developing weapons that involves billions and billions of dollars and which I doubt Iran will never be capable of using. Russia wants to look powerful and important in the eyes of the world playing with a desperate country that is coming to them simply because they have no where else to go. “It is a tale … full of sound and fury; signifying nothing.” At the same time, the dollars and euros are not trickling down to the citizens of that poor country which, strangely now that the oil prices are at the highest in history, is having some economic problems, as always.

    In Mexico, the 70 years of the PRI regime, which also used the oil very efficiently to keep themselves in power but left millions of citizens in poverty, has left us with a huge government bureaucracy that is sucking almost entirely our oil revenues and leaving the whole economy dependent on oil. We had reforms in the past 15 years and now the country boasts a huge manufacturing and service sector by now but we still depend on oil revenues to cover for some government spending. Oil revenues amount now to only 17% of the Mexico’s exports. Mexicans leaders have become millionaires from the oil revenues, with huge bank accounts in Swiss and American banks, at the same time millions of poor and destitute Mexicans traveled north to the United States seeking better jobs and quality of life.
    I am happy to say that Mexico’s oil is going to finish in a decade and now, only now, the country is hurrying up to modernize the economy with fiscal, judicial, energy and education reforms that were long forgotten in the nightmare of Mexico’s oil boom. I am so glad it is getting over. I am just sorry for the Russians, Venezuelans, Iranians and else.

  • Otto

    Since the demise of the Soviet Union, I’ve never felt any real worry about Russia, because of the dismally low birth rate among ethnic Russians. If you are going to be tomorrow’s great power, it does help to have some people; Preferably, ones that are loyal to your state.

    Their oil geo-politics will pass. We shouldn’t forget what Sheikh Yamani said at the time OPEC started: “The stone age did not end, because people ran out of stones.”

    Perhaps, rather more worrying is what of their nuclear, biological and chemical weapons technology and equipment will leak to or be transferred to even more undesirable regimes.

  • whatever

    I don’t get it. Nigeria has a lot of oil. Angola has a lot of oil. Russia has a lot of oil. Price of oil goes up, Russian standard of living improves significantly. Nigeria and Angola not at all. Perhaps those primitives Russkies are doing something right after all?

  • Paul Marks

    The line that “the Russians are different……” depends on a rather selective version of Russian history.

    For example, one that leaves out the Cossacks (of the Don and other places), and leaves out the free peasants of the north, and leaves out….

    Even the main stream Russian peasants produced many (very many) good self reliant farmers after Stolypin ALLOWED them to own land.

    Marxism did not last because of some basic genetic or cultural problem with Russians, or because “public opinion” really supported it (fuck you David Hume), it lasted because the Marxists (many of them not Russian at all) took advantage of the First World War (with Imperial German help) and acted with great evil.

    No lie was too dishonourable for men who had (indeed boasted that they had) no honour. And no number of murders was too much for them.

    Tens of millions of Russians died under the rule of the Marxists, it is bad enough that the folk of the Russian (and Ukrainian and ….) villages and towns were defeated, humilated, shot or starved to death, without people saying that had it coming because they were natural slaves (or whatever).

    The Socialist regime did not last because people did not fight it, or because Russians are naturally cowards or slaves. It lasted because the Socialists were both well organized and utterly evil (they would say beyond good and evil – but that amounts to the same thing).

    As for modern times:

    The rise and fall of Boris Yeltsin is perhaps the most tragic story of modern history (and history is full of tragic stories).

    For a while most industry was private – yes it was sold cheap, but unless it had all been sold to people overseas how could it be otherwise?

    The oil and so on were sold to the highest RUSSIAN bidders – that many of these people turned out to be Jews did not really matter to Yeltsin (although, of course, Mr Putin has found it useful).

    “The industries should have been given to the workers” – some were, but the workers sold their shares.

    If the workers had not been ALLOWED to sell their shares in what way would these shares have truely belonged to them?

    As for the farms – Yeltsin was too slow in restoring the private ownership of land, but he moved in that direction.

    But it was not just the above.

    Russia had a free press (which, of course, depended on different private owners), different radio and television stations (ditto) trial by jury and free elections (for example every region of Russia could elect its Governor). Even conscription was to be abolished.

    It is all gone now – and people are already pretending it never happened.

    Much like they pretend that the trial by jury and newspapers of different points of view that existed before the First World War did not exist.

    As the Russian saying has it “first they smash your face in, and then they say you were always ugly”.

    The cunning and ruthlessness of Mr Putin would not have been enough on their own.

    He took advantage of the vast credit-money bubble banking collapse.

    And it was not the drinking of Boris Yeltsin that caused that – it was caused by following the advise of Westerners, advise that fiat money and fractional reserve banking (supported by a Central Bank) were the “modern” and “scientific” way to do things.

    As for the modern Russian economy:

    It is not socialist – there are still many private companies.

    But it is also not strong.

    It has the illusion of strength – based on vast natural resources sales (everything from gold to oil – and all other things, Russia being the “Treasure House of nations”).

    Putin nationalizes what he wishes to – in order to steal money to build up the vast military he wishes to have.

    And Putin allies with ANYONE who is an enemy of the West (really anyone who is an enemy of civilization – something he hates).

    That many of his allies (such as the radical Muslims and the Chinese) are really the sworn enemies of Russia (and have always been so) does not bother Mr Putin.

    He is cunning as well as ruthless – but the cunning of the fox or the pig is not wisdom.

    He thinks only of his own personal power and his own future. The long term fate of Russia does not interest him.

  • Paul Marks

    Almost needless to say the Putin regime has put in place “voluntary” price controls to help his party win the elections (not that there are any radio or television stations supporting the opposition of course).

    A similar trick has been played in Argentina.

    Spend lots of money, and create what money you can not get by natural resources sales.

    And put on price controls to hide the effects of the credit money creation.

    It may all be very “clever”, but it is also very stupid.

  • Alice

    Interesting observations on Russia from Paul Marks. Now, the EU is year-by-year growing ever more dependent on Russian oil & Russian gas. (Did you know that the EU imports almost as much oil as the US? — does not get talked about much, strangely). The EU is accelerating that growing dependence on Russia by such interesting actions as Germany’s plan to shut down its nuclear power plants.

    If Paul’s assessment of Russia under Putin is correct, where does that leave your average European?

  • whatever

    Oh I get it. Putin is Dr Evil. Fortunately he is incompetent – doesn’t understand basic economics. And that’s why good will eventully prevail over evil, as always.

  • Whatever, who was saying ‘good will triumph over evil’? I was just suggesting that Russia will decline into irrelevance, so those who seem to be obsessing about “doing something” about a resurgent Russia will not have to worry for very long.

    And please offer some evidence to the contrary that Putin is not an economic ignoramus. Russia’s economic growth has more to do with the accident of high oil prices rather than structural improvements in the Russian economy.

    In what way is Putin’s introduction of top-down state corporatism going to make Russia competitive with the more dynamic Western and Asian economies?

  • whatever

    Corporatism worked for a long time for South Korea and Japan. The burden of proof is on those making claims (not me in this case). How is Putin an economic ignoramus? How do you define an economic non-ignoramus? Does it really matter anyway, since politicians are by default expected to be political animals and talking heads, but morons in every other way? If the Russians are so stupid and totally reliant on oil, why are they not as successful as Nigeria, Angola, Mexico, etc.? Why do they stash money in a “stabilisation fund” instead of spending it like the good socialists you think they are?

  • Perry, maybe I am misunderstanding your point, but wasn’t the Soviet economy even less robust than Russia’s current state (not only no economic growth whatsoever, but a steady economic decline), and wasn’t the SU a major threat to world peace nonetheless?

  • whatever

    The SU was a grain importer since early 60s. It’s now a grain exporter. (Was one also in the 30s, but we all now know at what cost.)

  • Corporatism worked for a long time for South Korea and Japan

    Myth.

    Why do they stash money in a “stabilisation fund” instead of spending it like the good socialists you think they are?

    They are not socialists, they are rather more akin to fascists now. Moreover Russia was making very obvious progress and saw huge improvements across the board in the years following the collapse of communism… which is why seeing the Russian state moving rapidly to reimpose political control of the economy now is clear evidence of ignorance of, or at least indifference to, rational economic principles. Snatching defeat from the jaws of victory.

  • Perry, maybe I am misunderstanding your point, but wasn’t the Soviet economy even less robust than Russia’s current state

    Socialist command economics works in the short and even medium term. All the combattant nations adopted ‘war socialism’ in WW2, even the USA.

    The Soviets built up a formidable military machine of broadly comparable technological sophistication during and post WW2… but because the west (more or less) ended ‘war socialism’ after the war ended and the Soviets did not, the USSR greatly out produced the west in military hardware during the 1950,60 & 70s… but at the same time fell behind both technologically and in their ability to adopt new business methods (because under socialism there really is only one business method).

    Thus the Soviets were a great threat for a while… and then collapsed economically. One would think this lesson was fairly clear. All the tanks and guns in the world will not save you if your economy reaches the point you cannot sustain not just new development but even what you have already built.

  • whatever

    They are not socialists, they are rather more akin to fascists now. Moreover Russia was making very obvious progress and saw huge improvements across the board in the years following the collapse of communism…

    Too bad the natives didn’t see it this way.

  • Too bad the natives didn’t see it this way.

    Too bad indeed as they are the ones who will most fully reap the consequences.

  • Paul Marks

    “Putin is Dr Evil”

    Actually he is – in that he sometimes does bad things simply because he likes doing bad things (he does bad things when doing good ones would suit his interests better).

    Soviet Union – Treasure House of nations.

    If only Germany or France had adopted full blooded Marxism NOT RUSSIA.

    Had a country that depended on manufacturing exports (not having slaves dig up gold and so on) tried to have Marxism it would have been much less dangerious.

    Korea and Japan and corporatism.

    Both these nations really depended on secure private property rights and low taxes.

    MITI in Japan was a joke – telling Mr Honda he would never make money producing cars (and so on).

    Most people in Japan (even today) work for small companies – not the big household names everyone has heard of. Not that big household names are a bad thing – as long as they do not depend on subsidies (either open subsidies or hidden ones like “easy credit” the sweet heart loans that Korean banks were pushed to give to certain companies).

    As for the Republic of Korea – there were all sorts of problems with the big state promoted firms. They were actually a drain on the rest of economy.

    Taiwan did not bother with them.

    Of course neither Korea or Taiwan really took off till American economic aid ended in the mid 1960′s – no aid meant no money to waste on silly projects.

    In Japan things started to go well after the Dodge plan (really anti plan) of 1948.

    He went in said “we can not keep spending money like this” and cut off the subsidies – Japan then had decades of high economic growth.

  • Sunfish

    If Paul’s assessment of Russia under Putin is correct, where does that leave your average European?

    Screwed?

    but because the west (more or less) ended ‘war socialism’ after the war ended and the Soviets did not, the USSR greatly out produced the west in military hardware during the 1950,60 & 70s…

    Quantity is not necessarily quality. Soviet production and soviet doctrine, exported combined to become something left on the sand of southern Iraq in 1991.

    Terrorizing a populace which has spent five generations learning to fear a knock at the door is one thing. Terrorizing Europeans of 2007…nevermind.

  • Plamus

    whatever, you said: “The SU was a grain importer since early 60s. It’s now a grain exporter. (Was one also in the 30s, but we all now know at what cost.)”

    And export levels of raw materials are relevant how exactly in a modern economy? In the commie years all the newspapers there trumpeted how now the SU was producing more steel then the American imperialists. Much good did that steel do for them – the imperialists were building computers. A popular joke (of the kind that could land you in trouble) was a mock slogan: “Soviet microchips are the biggest in the world!”

  • Paul Marks

    Plamus

    Selling gold, oil, gas (and so on and so on) gives Mr Putin lots of money – that is why it is relevant.

    Of course it is not a good basis for the long term.

    But Mr Putin is a follower of Lord Keynes in that respect:

    “In the long run, we are all dead”.

    I despise both Putin and Keynes – but in the short term they have an edge.

    It is a bit like a sporting contest against a person who uses drugs.

    In a few decades a man who trains in a healthy way will still be fit and strong (at least for his age) whereas the man who uses drugs will (if he is still using them) be a physical mess – or dead.

    But on the race track here and now……