Russia Fading

[BiscayneSunrise]

Excellent and thoughtful reply. I find the idea of a trans siberian mag-lev line intriguing.

Many months ago on a thread far, far away, there was a discussion as to whether the oligarchs, despite all their warts, were deep down inside, entrepreneurs.

As for their morose mindset, If the central government can rejuvenate and properly channel those robber baron animal spirits, Russia could potentially have something.

[sishya]

Re: Russia Fading

Greg,

Russia definitely has a lot of challenges.

In macro - the basic problem is that the previously fairly mechanized economy of the 70s was dismantled in favor of commodities by the 'democratization' process.

Sure, there were lots of inefficient state factories then as well as now.

But inefficient or not - being reliant on foreign factories has its own pitfalls.

The relatively strong ruble in recent years had several major negative effects:

1) Discouraging internal investment in manufacturing
2) Encouraging outsourcing of non-export commodities
3) Asset price bubbles in land and knock-on commercial real estate and residential property
4) Overmuch borrowing at the corporate level

As an example of the above, there was a publicly owned company that once farmed around St. Petersburg. The mayor of St. Petersburg basically sold all that land - and it is now covered with shopping malls and apartments.

The global credit squeeze is fixing 4)

Increasing enforcement of existing customs rules is working on 2) (fix is not clear)

Economic general troubles are fixing 3)

The last item - 1) - it is not clear if the fixing of 2) through 4) is enough or specific additional action is needed.

As for how Russia can proceed - in my mind it isn't rocket science.

Russia needs to regain its previous agriculture capabilities. Russia once supplied grain to much of Europe but today imports a lot. Australia can never do this as most of its land is desert.

Secondly Russia needs to rebuild its own manufacturing capabilities. Having Toyota and GM plants doesn't count. Australia also cannot do this as it simply is too small population wise.

Lastly Russia needs to mobilize its far flung land mass. At present most of Russia's land is not used for much of anything. Certainly it is not all useable, but equally certainly a lot of its potential could be tapped if better communications and transportation infrastructure were put in.

At present most of Russia's productivity is in the European side - while most of its commodities come from the Asian side.

The open letter I sent out concerning a trans-Siberian maglev line would be one possible example.

So I would absolutely agree with you that Russia has huge challenges facing it.

But I disagree that being a commodities exporter is the only way out.

Having a goal and seeing measurable progress towards that goal is one of the best ways to reverse a generally morose mindset - in a nation known for moroseness. That alone might be sufficient to reverse the demographic issues brought about by the 'democratization' of Russia by Yeltsin.

I personally like Russia and typically third world Media has been very kind reporting about Russian actions.

Clue - Before all these actions, I personally think Russia has to do the reverse of things it did for the past 100 years.

- Bring back good Capitalism(no favoritism)
- Encourage Family and Religious values in population, tax incentives to help
- Move away from state companies.
- Some methods to curb alchohol consumption.
- Last but not least, find some way to encourage population growth(much more than what is touted)

[vanvaley1]

Re: Russia Fading

Be nice to see Rissian organized crime reeled in also. But I suspect they'll have as much luck with that as we do with organized crime in the US...not much.

[nero3]

Re: Russia Fading

I think the Russians are a very talented people, among people coming to Norway, people from Russia are those who have the best articulation, hands down. Sometimes you can't even tell they are foreigners at all. I think that is a testimony of the intelligence found in the Russian population.

Putin is doing all the right things, taking away the power from these capitalist robbers is definitely the right thing to do. I think that's why he is popular as well. I don't think it's over. I think Russia is just as much on the same growth path as Brazil, China and India.

[BiscayneSunrise]

Re: Russia Fading

I think the Russians are a very talented people, among people coming to Norway, people from Russia are those who have the best articulation, hands down. Sometimes you can't even tell they are foreigners at all. I think that is a testimony of the intelligence found in the Russian population.

Putin is doing all the right things, taking away the power from these capitalist robbers is definitely the right thing to do. I think that's why he is popular as well. I don't think it's over. I think Russia is just as much on the same growth path as Brazil, China and India.

You won't get any argument about the intelligence and grit shown by the Russian people. Their tragedy has been poor leadership over the centuries and the prison of their geography.

Putin has been popular because he reined in the excesses of the oligarchs and restored Russian pride. The real question is whether his policies will have long term success given the many problems Russia faces.

Just curious. The Russians in Norway; are they settling permanently? or are they there just temporarily? What kinds of businesses or employment do they engage in? Do they keep close ties with family back home or fellow Russian ex-pats elsewhere around the world?

[c1ue]

Re: Russia Fading

Many months ago on a thread far, far away, there was a discussion as to whether the oligarchs, despite all their warts, were deep down inside, entrepreneurs.

Greg,

In my view, the oligarchs by and large are NOT entrepreneurs.

Because they didn't create anything. What they did was use various levers including bribery, extortion, fraud, and leverage in order to capture large parts of formerly state owned resource extraction operations.

Did they make these operations more efficient? Competitive worldwide?

I think the answer is no.

Plus with the benefit of hindsight - we can see that most of them were simply the most aggressive and lucky ones who are not hoist by their massive double- and triple-down borrowing.

Clue - Before all these actions, I personally think Russia has to do the reverse of things it did for the past 100 years.

- Bring back good Capitalism(no favoritism)
- Encourage Family and Religious values in population, tax incentives to help
- Move away from state companies.
- Some methods to curb alchohol consumption.
- Last but not least, find some way to encourage population growth(much more than what is touted)

I would like to point out again that Russia's demographic problem didn't stem from the Soviet era - it started with the collapse of the Soviet Union and has continued up through the last 20 years of 'democracy'.

Having a renewed sense of national purpose and/or hope for the future might itself be enough to reverse these trends.

[sishya]

Re: Russia Fading

I would like to point out again that Russia's demographic problem didn't stem from the Soviet era - it started with the collapse of the Soviet Union and has continued up through the last 20 years of 'democracy'.

Having a renewed sense of national purpose and/or hope for the future might itself be enough to reverse these trends.

I may be wrong, but from what I read, Tartar population is not coming down, Chechen population is also good(removing the violent deaths). I read that Muslim Minorities in Russia are having a good healthy population growth. Societies which have good family and religious values - thrive. At least that is what I think.

[D-Mack]

Re: Russia Fading

12 Russian targets for U.S. nuclear missiles
11:55 | 17/ 04/ 2009

The Federation of American Scientists and Natural Resources Defense Council has published a study entitled From Counterforce to Minimal Deterrence: A New Nuclear Policy on the Path Toward Eliminating Nuclear Weapons.

It recommends abandoning the decades-old "counterforce" doctrine and replacing it with a new and much less ambitious targeting policy that the authors call "minimal deterrence."

It says a new targeting category and policy, termed "infrastructure targeting," would focus on "a series of targets that are crucial to a nation's modern economy," naming in the report 12 potential targets in Russia.
http://en.rian.ru/infographics/20090417/121174792.html

http://img.rian.ru/images/12117/45/121174557.jpg

Don't like the Russian infrastructure?

[medved]

Re: Russia Fading

Greg,

In my view, the oligarchs by and large are NOT entrepreneurs.

Because they didn't create anything. What they did was use various levers including bribery, extortion, fraud, and leverage in order to capture large parts of formerly state owned resource extraction operations.

Did they make these operations more efficient? Competitive worldwide?

I think the answer is no.

Plus with the benefit of hindsight - we can see that most of them were simply the most aggressive and lucky ones who are not hoist by their massive double- and triple-down borrowing.

This is correct. After 70 years of the communist rule there was no private initiative left, whoever could exercise it was either killed or emigrated. For several generations Russians were brainwashed with massive commie propaganda. Eventually, not that many people believed it, but that was never the authorities’ goal. The ultimate goal was to create the population that believes nothing, and is not ready for any kind of social association, initiative or risk taking. The only exception in this environment are criminals. Criminal elements successfully resist this environment and preserve their initiative, their group ties and their own culture. As one of my friends in SPb told me, he was initially surprised to find in the 1990s that most of the new mafia rulers were closely associated with former commie apparatchicks. Later he learned, it was the rule, rather than exception.

I personally think Russia has to do the reverse of things it did for the past 100 years.

- Bring back good Capitalism(no favoritism)
- Encourage Family and Religious values in population, tax incentives to help
- Move away from state companies.
- Some methods to curb alchohol consumption.

First of all, in Russia there was never any Capitalism (good or bad) to speak of. Russian Capitalism was making its first baby steps in the environment of the rotting Empire at the end of the 19th century and was wiped out by WWI, civil war and commie “revolution”.

To the degree, that Russia restores its Orthodox Christianity it can hope to restore the Family. This is an ongoing process, and not an easy one.

Moving away from state companies in the nearest future will be disastrous, but so is staying with them for too long. This is the same problem as nationalization in the US, it is necessary in an emergency, but dangerous as a permanent solution. I doubt even US can solve this problem, much less Russia.

Curbing alcohol consumption in Russia is out of question.

I would like to point out again that Russia's demographic problem didn't stem from the Soviet era - it started with the collapse of the Soviet Union and has continued up through the last 20 years of 'democracy'.

It did not start with the collapse of the USSR, it started much earlier. To the degree, that Russia is a part of the Western culture (and it is, although not 100%), it will have this problem.

http://www.atimes.com/atimes/front_page/ED08Aa01.html

Having a renewed sense of national purpose and/or hope for the future might itself be enough to reverse these trends.

IMHO, Russian natioanalism is good in limited proportion. Indeed, it gives hope to many people I know. At least, it can create some healthy political environment where senile commie system is replaced by smart and capable government. Just compare Mr. Gorbachev to Mr. Putin : Mr. Putin is quite intelligent and speaks some German while Gorbachev hardly speaks Russian (he sounds like an illiterate peasant, his Russian is worse, than GW's English).

OTOH, excessive nationalism causes excessive drive to various political/military adventures, it can cause a lot of problems both in Eastern Europe and around the world. Besides, majority of the people with this mindset tend to be “anti-capitalist”, which brings us back to the problem of excessive socialism in Russia.

[nero3]

Re: Russia Fading

You won't get any argument about the intelligence and grit shown by the Russian people. Their tragedy has been poor leadership over the centuries and the prison of their geography.

Putin has been popular because he reined in the excesses of the oligarchs and restored Russian pride. The real question is whether his policies will have long term success given the many problems Russia faces.

Just curious. The Russians in Norway; are they settling permanently? or are they there just temporarily? What kinds of businesses or employment do they engage in? Do they keep close ties with family back home or fellow Russian ex-pats elsewhere around the world?

Anything really. There is many people here from Poland, but they mainly work in construction. Those from Russia are more often higher educated working as doctors, teachers, nurses, that kind of jobs, I think it's because the rules for immigration are more strict for countries outside the EU. It seems to me that they loose contact with their family back home more often, and stays more permanent than those from Poland.

[nero3]

Re: Russia Fading

l. The ultimate goal was to create the population that believes nothing, and is not ready for any kind of social association, initiative or risk taking. The only exception in this environment are criminals. Criminal elements successfully resist this environment and preserve their initiative, their group ties and their own culture.

This is the best explanation I have seen to why there seems to be so many bad guys in the big businesses.

[BiscayneSunrise]

Re: Russia Fading

Thanks you all for the excellent insight.

It seems we are in agreement Russia faces enormous challenges, the most damaging seems to be the lack of entrepreneurial drive. What little there is, tends to emigrate.

Ironically, the best thing Russia may have going for it right now is Mr. Putin.

[c1ue]

Re: Russia Fading

This is correct. After 70 years of the communist rule there was no private initiative left, whoever could exercise it was either killed or emigrated. For several generations Russians were brainwashed with massive commie propaganda. Eventually, not that many people believed it, but that was never the authorities’ goal. The ultimate goal was to create the population that believes nothing, and is not ready for any kind of social association, initiative or risk taking. The only exception in this environment are criminals. Criminal elements successfully resist this environment and preserve their initiative, their group ties and their own culture. As one of my friends in SPb told me, he was initially surprised to find in the 1990s that most of the new mafia rulers were closely associated with former commie apparatchicks. Later he learned, it was the rule, rather than exception.

Medved,

I can see why you have this view - but in response I'd like to point out that the American system is not so much different. Instead of 'From each according to his ability, to each according to his need', instead Americans get 'Freedom, apple pie, and Mom'.

Indeed crushing original thought may not even be an ideological purview - it could simply be a function of bureaucracy. And no nation was as bureaucratic as the Soviet Union!

From my own point of view - I have not had the same experience though I'll freely admit it is likely from a different generation. Whether it is the educated elite from St. Petersburg State U, or returned veterans from Chechnya, or low end bureaucrats, or small/medium sized business owners, the curiosity and flexibility I've seen are easily the equal of what I find in the US.

OTOH, excessive nationalism causes excessive drive to various political/military adventures, it can cause a lot of problems both in Eastern Europe and around the world. Besides, majority of the people with this mindset tend to be “anti-capitalist”, which brings us back to the problem of excessive socialism in Russia.

I agree nationalism used as a tool to distract from present issues is a path leading to darkness. But the sense of national purpose doesn't have to be Rossiya Uber Alles - it can be directed toward building a better future in Russia.

One of the gauges I use to estimate progress is the enforcement actions by Russian customs. Possibly nowhere outside of military appropriations is so much corruption.

http://translate.google.com/translat...history_state0=

In particular look at the sidebar of specific enforcement actions.

In previous years the number and sizes of busts were significantly smaller.

[Supercilious]

Re: Russia Fading

This is correct. After 70 years of the communist rule there was no private initiative left, whoever could exercise it was either killed or emigrated. For several generations Russians were brainwashed with massive commie propaganda. Eventually, not that many people believed it, but that was never the authorities’ goal. The ultimate goal was to create the population that believes nothing, and is not ready for any kind of social association, initiative or risk taking. The only exception in this environment are criminals. Criminal elements successfully resist this environment and preserve their initiative, their group ties and their own culture. As one of my friends in SPb told me, he was initially surprised to find in the 1990s that most of the new mafia rulers were closely associated with former commie apparatchicks. Later he learned, it was the rule, rather than exception.



First of all, in Russia there was never any Capitalism (good or bad) to speak of. Russian Capitalism was making its first baby steps in the environment of the rotting Empire at the end of the 19th century and was wiped out by WWI, civil war and commie “revolution”.

To the degree, that Russia restores its Orthodox Christianity it can hope to restore the Family. This is an ongoing process, and not an easy one.

Moving away from state companies in the nearest future will be disastrous, but so is staying with them for too long. This is the same problem as nationalization in the US, it is necessary in an emergency, but dangerous as a permanent solution. I doubt even US can solve this problem, much less Russia.

Curbing alcohol consumption in Russia is out of question.



It did not start with the collapse of the USSR, it started much earlier. To the degree, that Russia is a part of the Western culture (and it is, although not 100%), it will have this problem.

http://www.atimes.com/atimes/front_page/ED08Aa01.html



IMHO, Russian natioanalism is good in limited proportion. Indeed, it gives hope to many people I know. At least, it can create some healthy political environment where senile commie system is replaced by smart and capable government. Just compare Mr. Gorbachev to Mr. Putin : Mr. Putin is quite intelligent and speaks some German while Gorbachev hardly speaks Russian (he sounds like an illiterate peasant, his Russian is worse, than GW's English).

OTOH, excessive nationalism causes excessive drive to various political/military adventures, it can cause a lot of problems both in Eastern Europe and around the world. Besides, majority of the people with this mindset tend to be “anti-capitalist”, which brings us back to the problem of excessive socialism in Russia.

Thanks medved for putting it so clearly. This is exactly the picture I get from my Russian friends in Russia or in the west (Europe and North America) . One of them told me there hasn't been a real change in the structure of the Russian society for the last 500 years. Regardless of the official name of the system (czarism, communism, capitalism) Russia is actually a cast system composed of:
-the ruling class with four sub levels which define the internal equilibrium of power : the government bureaucracy, the official repression apparatus (KGB or Ohrana), the military and the more or less organized crime families.
-a thin tolerated layer of idealist intellectuals, shaved continuously into an endangered species official mowing emigration and economic punishment.
- the slave cast which is the majority (95%+) of russians.

He also told me that as long as this cast system will be maintained there is no hope to cut on the votca and that Putin's "revolution", and the apparent order and social stability brought by him, is based on the meging of the subcomponents of the ruling cast.

[BiscayneSunrise]

Re: Russia Fading

Here is a WSJ interview with VP Joe Biden. He really doesn't say anything we don't already know but maybe has a slip of the tongue.

Note in the 4th paragraph, he says that Russia may not "be able to withstand the next 15 years" Is Biden admitting the current economic crisis may last 15 years? If so, will we begin to hear politicians becoming more forthright about our dilemma?

http://online.wsj.com/article/SB124848246032580581.html

By PETER SPIEGEL

WASHINGTON -- Vice President Joe Biden said in an interview that Russia's economy is "withering," and suggested the trend will force the country to make accommodations to the West on a wide range of national-security issues, including loosening its grip on former Soviet republics and shrinking its vast nuclear arsenal.

Mr. Biden said he believes Russia's economic problems are part of a series of developments that have contributed to a significant rethinking by Moscow of its international self-interest. The geographical proximity of the emerging nuclear programs in Iran and North Korea is also likely to make Russia more cooperative with the U.S. in blocking their growth, he said.

But in the interview, at the end of a four-day trip to Ukraine and Georgia, Mr. Biden said domestic troubles are the most important factor driving Russia's new global outlook. "I think we vastly underestimate the hand that we hold," he said.

View Full Image

Agence France-Presse/Getty Images
Joe Biden, in a his speech in Kiev Wednesday, reiterated the Obama administration's commitment to strengthen ties with Ukraine.
"Russia has to make some very difficult, calculated decisions," Mr. Biden said. "They have a shrinking population base, they have a withering economy, they have a banking sector and structure that is not likely to be able to withstand the next 15 years, they're in a situation where the world is changing before them and they're clinging to something in the past that is not sustainable."

Mr. Biden's remarks were the most pointed to date by a senior administration official on why the Obama administration believes its "reset" with Russia is likely to succeed, while previous efforts to engage Moscow by the Clinton and Bush administrations ended with little progress.

The remarks also are among the administration's most critical of Russia's current role in the world, and come just weeks after President Barack Obama insisted that the U.S. seeks a "strong, peaceful and prosperous Russia" in an address at his high-profile July summit in Moscow with Russian President Dmitry Medvedev.

Natalya Timakova, a spokeswoman for Mr. Medvedev, declined to comment on Mr. Biden's remarks. Ms. Timakova acknowledged that the Russian government is currently looking at many of the issues he raised -- including economic challenges, the banking sector and the country's shrinking population.

Excerpts: Biden on Eastern Europe
“I can see Putin sitting in Moscow saying, 'Jesus Christ, Iran gets the nuclear weapon, who goes first?' Moscow, not Washington.”
Read more interview excerpts
Journal CommunityDISCUSS
“Who gave Joe Biden the truth serum? The only person I'm [beginning] to respect in the Obama administration is Biden, go figure. ”
— Sam Defre
Despite Russia's economic and geopolitical difficulties, Mr. Biden said, Moscow could become more belligerent in the short term unless the U.S. continues to treat Russia as a major player on the international stage. He said Russian leaders are gradually beginning to grasp their diminished global role, but that the U.S. should be cautious not to overplay its advantage.

"It won't work if we go in and say: 'Hey, you need us, man; belly up to the bar and pay your dues,' " he said. "It is never smart to embarrass an individual or a country when they're dealing with significant loss of face. My dad used to put it another way: Never put another man in a corner where the only way out is over you."

Since the end of the Cold War, consecutive U.S. administrations have tried to re-engage with Moscow on a range of foreign-policy issues, in the belief that the two countries had increasingly common national-security interests. After initial charm offensives, however, both the Clinton and Bush administrations' efforts were stymied.

Mr. Biden's remarks illustrate the extent to which the Obama administration believes the balance of power is shifting toward Washington, giving the White House a new opening to leverage its strategic advantages to persuade Moscow to reduce Russia's nuclear arsenal, loosen its grip on emerging democracies on its border, and cooperate on Iran and North Korea.

More

Biden Backs Georgia, but U.S. Won't Supply Arms
"It's a very difficult thing to deal with, loss of empire," Mr. Biden said. "This country, Russia, is in a very different circumstance than it has been any time in the last 40 years, or longer."

Specifically, he said, economic troubles played a central role in Moscow's strong desire to restart nuclear-reduction talks. He noted that Russia can no longer afford to maintain an arsenal that, while much smaller than Cold War levels, is still one of the two largest in the world by far. "All of sudden, did they have an epiphany and say: 'Hey man, we don't want to threaten our neighbors?' No," Mr. Biden said. "They can't sustain it."

He also argued that Russia's domestic struggles have made it less able to influence events in its so-called near abroad -- the former Soviet republics that, to varying degrees, are seeking increased independence from Moscow.

Russia maintains thousands of troops in the northern Georgian provinces of Abkhazia and South Ossetia, and has shut off gas flows into Ukraine twice in the last three years. Despite such shows of power, Mr. Biden said, even a close Russian protectorate such as Belarus has shown signs of bucking Moscow recently.

Mr. Biden said Moscow's efforts to strong-arm former Soviet republics through use of its energy resources have backfired. He noted that Russia's running dispute with Ukraine has galvanized European efforts to build a new pipeline through Turkey and southern Europe, known as Nabucco, that would bypass Russia.

"Their actions relative to essentially blackmailing a country and a continent on natural gas, what did it produce?" he said. "You've now got an agreement that no one thought they could have."

—Alan Cullison in Moscow contributed to this article.
Write to Peter Spiegel at peter.spiegel@wsj.com