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Mafia Economics

This description of Russia’s economy grows into an interesting analysis of how power and economic reality interact.

Some bits may strike you as not so very unlike Biden’s US.

Of course, it was all investigated. Of course, dishonest CEO of Russian factory was arrested. Fortunately, they found out that the governor was innocent & didn’t know about CEO’s shady schemes. … Fortunately her patriotism and hard work were well-noticed by Putin and he promoted her. Now she’s an Auditor of the Accounts Chamber of the Russian Federation. She’ll be checking the transparency of other branches of government and make sure they use government funds efficiently.

Other parts, however, give examples of how economic activity in places like Russia and Mexico is determined by things that we in the anglosphere are not too familiar with (yet!).

Russians are good in sciences and very good in math. … How come Russia can’t produce anything competitive on the world market? Apparently it’s not a technical skill that is a limiting factor.

Having asked the question, he goes on to provide answers.

23 comments to Mafia Economics

  • bob sykes

    On a PPP basis, Russia’s economy is at least 10 to 20$ larger than Germany’s. But, considering all the things Russia does make and does do, the Russian economy is probably more than twice as large as Germany’s. That would make it half the US economy. (That implies Russia’s military spending is about one-third the US’.)

    As to manufacturing, Russia does make lots of modern, high technology stuff, like the rocket motors the US uses to launch its spy satellites. Also, over the last 30 years, while the US spent its money fighting Muslim militias, Russia eliminated the US’ technological leads in the military area. It now leads the US is missiles, radars and other military hardware.

    Russian manufacturing is actually more diverse and comprehensive than the US manufacturing sector, although it is smaller.

    It does export manufactured goods, but not a lot. Most of their industrial exports go to countries other than the EU. This is likely a residue of the USSR. Russia, like the old Soviet Union, is almost an economic autarky. Western sanctions have reinforced that autarky.

    The current Russo-Ukrainian war will exacerbate the isolation of Russia from Europe, but NOT from the rest of the world. China (especially), India, almost all of Asia, including Turkey, and Latin America, including Mexico, and Africa are refusing to participate in the US/EU sanctions. Even the EU refuses to participate in the US embargo on oil imports.

  • Petr Borysko

    That would make it half the US economy.

    Ok, you’ve obviously never been to Russia, let alone do business there 😀

    So many westerners who write about Russia don’t realise how funny they are.

  • I find this Kamil Galeev guy’s analyses interesting. Here is one he wrote on February 27th on how the Ukraine war would go and why.

  • bobby b

    Petr Borysko
    March 10, 2022 at 2:51 pm

    “Ok, you’ve obviously never been to Russia, let alone do business there 😀

    So many westerners who write about Russia don’t realise how funny they are.”

    I’ve never been to Russia, and have never done business there.

    For the benefit of dummies like me, why was that funny?

    Not aiming this at you specifically, nor at any individual, but there are few things as frustrating to me as someone on a forum who types “if you knew what I know . . .” and then . . . stops.

    Share info, not just invective. Convince, don’t just deride.

  • bobby b

    Galeev does describe American society also.

    The simple industries – oil and gas as an example – are understandable and co-optable, and so have been taken over by government regulation and nudging.

    The complex industries – social media and internet operation and basic IT stuff, as an example – are still beyond comprehension for most government folk, and so remain independent. For now. Once they become rote commodities, and the power to be had exceeds the convenience of them “not being government”, they’ll be subsumed, too.

  • Chester Draws

    It now leads the US is missiles, radars and other military hardware.

    Russians sure are funny!

    Does anyone actually think that Russian military equipment is superior? It is cheaper. Sometimes more robust. But better?

    Every time Russian made equipment comes up against US equipment, the reality is quickly exposed.

  • Snorri Godhi

    The article is quite interesting. I did not expect to read it to the end, but i did.

    My speculation is that this kind of economic system is likely to last for long only in resource-rich countries.

    The bit about Russian industry depending on Western tech is something to keep in mind in the coming months.

  • bobby b

    “The bit about Russian industry depending on Western tech is something to keep in mind in the coming months.”

    It means the entire world is dependent upon China.

  • “Better” is a concept best reserved for items like planes or rockets, rather than entire nations. There were two engineers working in the lab where I spent my time as RA. If one designed it, it was pedestrian, but it worked, and stayed working. If the other designed it, it was Nirvana if it worked. But it didn’t always work.

    Which of them was the better designer? All I know is that the lab was lucky to have them both.

  • Nicholas (Unlicensed Joker) Gray

    Russia sounds a bit like China. Both produce geniuses (genii?), but the system can’t accept them. Look at what happened to Ali Baba, the chinese company- the Government seems to have appropriated it. It was doing so well that the Government felt threatened. And in Russia, the oligarchs prefer to move to western countries. Of course, if they had different systems, they would be better countries.

  • Nicholas (Unlicensed Joker) Gray

    I wonder if we could adopt a Utopian solution here? In the novel ‘Utopia’, the utopians decide that if a foreign power tries to invade them, then they will offer a reward for the assassination of the leader. If a large price was put on Putin’s head, how long would it stay on Putin’s body? And would any succeeding leader risk war with such outcomes?

  • Tim the Coder

    @Nicholas (Unlicensed Joker) Gray
    “then they will offer a reward for the assassination of the leader.”

    Interesting idea, but it’s symmetrical. ALL leaders must then expect the same assassination bonus on their heads. Attractive though that might seem, it would mean all leaders living in isolation, behind endless bodyguards and never mixing with the proles. An end of any remnant of ‘representation’. Boskone everywhere.

  • Interesting idea, but it’s symmetrical.

    Not entirely symmetrical. Western nations are mostly run by institutions, so killing the chap at the top has *some* effect but not all that much. Killing Boris would have far less impact on UK policies than killing Vlad Putin would have on Russian policies.

    An end of any remnant of ‘representation’.

    There is not much to be lost.

  • John B

    ‘ Russians are good in sciences and very good in math. … How come Russia can’t produce anything competitive on the world market? Apparently it’s not a technical skill that is a limiting factor.’

    The answer has been provided by Adam Smith, F A Hayek, Prof Deirdre McClosky and a host of others. Any economy that is centrally planned and controlled is not a free market capitalist economy and will lack incentives for innovators.

    The misunderstanding is that technology is not a benefit in itself, but only when it has a use. It is innovators who find uses for technology. Steam engine technology was invented in 73AD, but nobody had practical uses for it until the innovators of the 18th Century found them.

    The Russian economy never became really free after Communism. The EU is very like Russia, lacking innovation and with a bit more Democrat Government, the USA will go the same way.

  • bobby b

    Nicholas (Unlicensed Joker) Gray
    March 11, 2022 at 9:50 am

    ” . . . they will offer a reward for the assassination of the leader.”

    Imagine what that level of constant realistic fear of violent death would do for the mental stability of the leaders of world powers if this was considered to be “in play.”

    Imagine a partially Alzheimered and confused Biden, enraged at some perceived threat against him personally from Putin. Or Trump. Boom! Moscow! Boom! Mar El Lago!

  • Tim the Coder

    My point Perry, was that this would do far more damage to us than to those we want to target.
    Putin, President Eleven, and similar despots already live behind endless security, fearing assassination from rivals.
    By and large, in the West, less so, not least for the reasons you state.

    But backing such a policy would put them in fear of assassination, and hence turn us into isolated despot-class states, like those we oppose.
    Yes, there is already little actual representation, but it’s not gone altogether, as Brexit showed. And we need to build on what little remains, not lose it altogether. Lord Nigel of Dundee’s latest “Net Stupid” campaign for example. Good timing.

    However, I think you have a blockbuster book idea here!
    Who killed JFK? It was the Soviets. It was the Cubans. It was the CIA. It was the husbands. It was the Mafia. Yawn. Been done.
    New theory: “Who cares? Presidents are 10 a penny. We have lots spare!”
    And it’d help if the presidential candidates were too stupid & senile to understand the risk in their job application…The Joe and Kamala criteria?

  • New theory: “Who cares? Presidents are 10 a penny. We have lots spare!”

    Works for me 😀

  • The words ‘assassin’ and ‘hashish’ come from the same route – the ‘old man of the mountains’ who was feared by crusading Christian and jihading Muslim alike (he was a Muslim but intolerant of Muslims whose interpretation of the Koran diverged from his own) for his ability to arrange their assassination at the hands of his followers. He uses hashish to persuade his ‘hashashin’ that paradise would be wonderful so they need not fear the death that was extremely likely to follow their completing a mission.

    HOWEVER, the old man of the mountains paid protection money to the Knights Templar. If he assassinated a knight in charge of some post, that guy was merely replaced by another, who might be as competent or more so. His methods were effective against Christian feudalists and Muslim rulers, but not against the knights’ impersonal organisation.

    In more modern times, the many who desired to assassinate Hitler included some with no thought of reward or even survival – some whose chosen method guaranteed their own death – but he lived to take his own life on a day when his death would no longer spare the world more than a few days of war at most. The world had to get rid of him the hard way.

    Osama bin Laden would have been happy to assassinate any US president. Even the advantages to radical Islam of leaving Joe Biden in place would not have made him pass up an opportunity, I think – not even if Kamala and Pelosi were out of the line of succession.

    If those with access to Putin decide their lives would be better in the absense of his, his death will be a consequence of Russian actual failure before it becomes a cause of Russian open defeat.

    Just my 0.02p FWIW.

  • Paul Marks

    It is very much Mr Putin’s war in the Ukraine – so Perry is correct, his death would have an effect. The new ruler could say (quite truthfully) “this was Mr Putin’s war – I am pulling Russian forces out of the Ukraine”.

    As for the general point about lack of private property rights and truly LIMITED government.

    This is horribly true of Mr Putin’s Russia – where it is clear that the regime (and their friends) can steal anything they want. But it is also becoming horribly true in the West – accept (as Perry states) it is not so much individuals as institutions that violate private property and basic liberties in the West. For example, Prime Minister Johnson did NOT create the Covid policies (the lockdown and so on) – indeed he briefly resisted these policies, till it was made clear to him that the function of a modern politician in the West is to be the face on major policy (to be the “frontman” as it were), not to make basic policies – which are made by educated experts (increasingly on an international basis).

    Hegel argued for this in the German lands two centuries ago – and he was only one of many admirers of Prussian bureaucracy (honest, hardworking and educated) who did so.

    And such thinkers as Jeremy Bentham and the Mills (James and John Stuart – as the other “philosophical radicals”) argued for it in Britain. Of course Parliament would still meet and elections would still happen (indeed they wanted everyone to have the vote – not just the minority who had the vote at the time), it would just be a little thing of who won the elections no longer mattering….(which is why they were happy with everyone having the vote – as it would not really matter which way they voted).

    Dedicated, hardworking, honest and educated professional experts deciding basic policy matters….

    A bit like Sir Charles Trevelyan in Ireland in the late 1840s (he later created the British Civil Service) – only “reactionaries” would consider the possibility that this might not have turned out well.

    “The New Despotism” as Chief Justice Hewart called it in his 1929 book – still trying to stop it being created.

    It has been a long slow process – for example as recently as the 1980s elected politicians had much more real influence on policy. And it is not over yet – for example a few brave American State Governors said NO to lockdowns – in defiance of “the experts” (and in defiance of Google and Amazon – and other “Stakeholders” in the “public-private partnership”).

  • Paul Marks

    If you want truly limited government – then get government OUT of money and banking. No more Cantillon Effect – no more small group benefiting at the expense of everyone else.

    Roger Sherman was correct about money – both the need to strictly limit government spending, and (a related matter) the need to make sure that government (and its friends) could not create money on whims. Money being a real commodity that people valued before-and-apart-from its use as money and lending being from Real Savings (not Credit Bubbles backed up by Paul Krugman’s “Men With Guns” – because Credit Bubble bankers always call on the government, the “men with guns”, to save them).

    As the late Murray Rothbard (yes a person I have often attacked – on other matters) was fond of pointing out that John Holt Carroll argued the case for sound money and honest finance (against both governments and Credit Bubble bankers) all through his long life.

    “Paul – John Holt Carroll died in 1890”.

    So he did – and John Maynard “gold is a barbarous relic” Keynes died in 1946.

    And Plato, who started the attacks on gold and silver (and first pushed “scientific” statism) died in 347 BC – which does not stop Klaus Schwab and the “rules based international community” following Plato to this day.

    Why does John Holt Carroll dying in 1890 AD discredit him, but Plato dying in 347 BC not discredit him?

  • Paul Marks

    An honest Boston merchant such as John Holt Carroll would have had nothing but contempt for BOTH Mr Putin and for the “international community” of Mr Biden and co.

  • Mr Ed

    I found this interesting video on the impact of sanctions on the Russian economy. I can’t vouch for the stats, but he says that 95% of automobile spares used in Russia are imported. If he’s right and sanctions are stuck to, then Russia is going back to the 1990s very fast.

  • Nicholas (Unlicensed Joker) Gray

    John b., you are right about the numbing effects of the EU bureaucracy. James Dyson, an inventive multimillionaire (I think he’s in the billions by now) has complained endlessly about the attempts by European competitors to use legalisms to keep his products out of Europe. One of their tricks was to point out that the slogan ‘It has no bag’ didn’t describe the vacuum cleaner- and therefore it should be banned! Dyson won his case in the ECoJ. I used to think that Dyson was charging high prices because he had high customer demand. It turns out the Dyson was more expensive to make, and that is why he charged higher prices, which customers were prepared to pay.