Category Archives: Brazil

Russia’s Budget Is Getting More Transparent

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Not often that you see Russia in some color other than bloody red on a world map of corruption or institutional quality. But according to the Open Budget Index (2012 results), the Russian budget is actually pretty transparent as far as these things go.

Of the major countries, only the UK (88), France (83), and the US (79) are ahead. The other major developed countries in the survey like Germany (71), Spain (63), and Italy (60) are all behind Russia (74), as are its fellow – and supposedly far cleaner – BRICs fellows Brazil (73), India (68), and China (11). Of perhaps greater import, only the Czech Republic (75) edges above Russia in the CEE group, whereas all the others – Slovakia (67), Bulgaria (65), Poland (59), Georgia (55), Ukraine (54), Romania (47), etc. – lag behind it. Also noteworthy is that Russia’s typical neighbors on Transparency International’s CPI, such as Zimbabwe (20), Nigeria (16), and Equatorial Guinea (0), reveal almost nothing in their national budgets.

Now of course the Open Budget Index is not the same thing as corruption. You can have an open budget but still steal from it (and this does happen in Russia frequently), and you can also have a closed budget from which few people steal, at least directly (as was the case in the USSR… or to take a more modern example, while Russia’s OBI is now higher than Germany’s, it is inconceivable that state corruption is even in the same league in these two countries).

Nonetheless, there is surely a very significant degree of correlation between the two. Having an open budget means that it is can be subjected to scrutiny; were Russia’s budget closed like China’s or Saudi Arabia’s, Navalny’s work to expose corrupt state tenders would be simply impossible (as it is, the latest ploy corrupt bureaucrats have been forced to resort to is to sprinkle Latin characters into the Cyrillic texts of state tenders so as to confound search engines).

Second, a high OBI score demonstrates the state’s commitment to fighting corruption. If Putin and Co. really didn’t care and were truly the kleptocrats they are repeatedly labeled as by the Western media, they would instead do everything in their power to hide the budget so as to remove the possibility of scrutinizing it. But they don’t. To the contrary, Russia’s OBI has increased from year to year.

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Russian Journalists Are Far Safer Than Mexican Journalists, Ordinary Russians, And Their Own Counterparts Under Yeltsin

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One of the most common tropes against Russia is that critical (independent, democratic, etc) journalists there are dying like flies, presumably because of the “culture of impunity” created by Putin or even on his express orders. It is rarely mentioned that the statistical chances of a Russian journalist dying by homicide is an order of magnitude lower than in several countries widely recognized to be “democratic” such as Brazil, Mexico, Columbia, and the Philippines, or that – unlike Turkey or Israel (!) – Russia does not imprison any journalists on account of their professional work. To this end, I compiled a “Journalism Security Index” to get a more objective picture than the politicized rankings produced by outfits like Freedom House that put Russia on par with Zimbabwe.

As usual in these situations, a few graphs are worth thousands of words.

The graph above shows the numbers of journalists killed in Russia for every year since 1992 as compared with other “democratic” countries like Brazil, Mexico, India, and Colombia. As one can see, the situation has improved greatly in the past three years, with only one journalist (in Dagestan) getting killed in 2011; meanwhile, the situation in Mexico has deteriorated to levels unseen in Russia since the early 1990′s. Does this mean that Felipe Calderón is the next Stalin? Or is it that he is just faced with a drugs war that is rapidly spiraling out of control?

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Peter Savodnik: Portrait Of A Democratic Journalist

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I recently had the dubious pleasure of engaging in an extended Twitter exchange with Peter Savodnik. Peter is a consummately credentialed journalist based in New York. He is also a classical representative of the well-paid prostitute class otherwise known as Independent Western Journalists in polite (i.e. doublethink) society, as well as of that emigre clique which delights in smearing their former homeland at every opportunity (as with Julia Ioffe, Miriam Elder, etc). So nicely does he encapsulate the dinner suit-wearing, respectability-laden double standards, Western chauvinism, ingrained authoritarianism, and deep vein of conspiratorial paranoia that characterizes Western Independent Journalism that I think it useful to lay out our conversation in full.

Because protesting sky-high education costs and corporate corruption is so much more morally repugnant than defiling one of a country’s most sacred places.

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BRIC’s of Stability: Why Occupy Wall Street Isn’t Coming To Moscow Or Beijing

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As repeatedly noted by Mark Adomanis, the Russian liberals and the Western media have predicted about 10 of the last zero Russian revolutions. Likewise, the “Jasmine Revolution” in China that was the subject of so much talk about a year ago has fizzled out like a wet firework. Meanwhile, the Arab world remains in the midst of convulsions, and political instability is spreading into the West – most visibly in Greece and the Med, but also in the guise of Occupy Wall Street and associated movements in the US.

This is no doubt disturbing and aggravating to Western supremacists (it is telling that that the media organization providing the most detailed coverage of OWS, RT, is both non-Western and the object of venomous bile from the American exceptionalism culture warriors). Doesn’t the West (and the US in particular) have democracy, freedom of assembly, freedom of speech, free media, economic opportunities, equality under the law, etc. – things that are all starkly and completely absent in countries of the Other, e.g. Russia and China? What the hell are the hippies and liberals protesting? Are they doped up unemployed losers, useful idiots of Leninist agents of influence, or both?

I think the answer is far simpler than it seems. In Russia, younger people tend to be both higher earning (their skills are better fitted to a capitalist economy) and more economically optimistic than their parents, not to mention their grandparents. They are also far more pro-capitalist, and substantially more supportive of Putin and Co. than the older generations (who have not done as well under capitalism, and who have fonder memories of communism). In fact, in the minds of Russian youth – and in stark contrast to the picture drawn by uninformed commentators – capitalism, prosperity, and the Putin era are closely linked. Hence, no real Russian equivalent of OWS (at least for now).

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Russia’s Economic “Stagnation” In Global Perspective

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Иn the wake of the 2009 recession, declinist rhetoric has come to dominate discussion of Russia’s economic prospects. Jim O’Neill, the founder of the BRIC’s concept, has his work cut out defending Russia’s expulsion from the group in favor of Indonesia, Mexico, or some other random middle-sized country. Journalists in the Western media claim its economy is “not growing”, as do liberal Russian newspapers such as Vedomosti. Comparisons between Putin and Brezhnev (who presided over the Soviet Union’s period of stagnation, or zastoi) are piling up. Even President Medvedev isn’t helping the situation, telling a forum of international businesspeople that Russia’s “slow growth” hides stagnation (good job promoting your country, DAM! not….).

I don’t want to exchange rhetorical barbs in this post (which you may note is not tagged as a “rant“), and my skills at mockery and picking apart tropes aren’t nearly as well developed as those of Mark Adomanis or Kremlin Stooge, so I’ll do what I do best and go straight to the statistics. And so we have Fact #1: what is described as stagnation for Russia is a growth rate of 4%. It grew 4.0% for 2010. It was 4.1% in Q1 2011, and the government predicts it will be 4.2% for the whole year. The World Bank predicts 4.4% in 2011, 4.0% in 2012; the OECD expects 4.9% in 2011 and 4.5% in 2012; and the IMF forecasts 4.8% in 2011, 4.5% in 2012, tapering off to less than 4.0% in the “medium-term.”

This does not strike me as being particularly bad by global standards. This is obviously no miracle economy of Chinese-like 10% growth rates, but Russia (4.4%; 4.0%) does not compare badly to the World Bank’s projected growth for other typical middle-income countries such as Turkey (4.1%; 4.3%), Thailand (3.2%; 4.2%), Brazil (4.4%; 4.3%), Mexico (3.6%; 3.8%), or South Africa (3.5%; 4.1%). Facing real stagnation, many countries in the developed world such as the UK could only wish for Russia’s growth rate; though this is an unfair comparison, because Russia is poorer and can therefore find it easier to grow faster (see economic convergence), it is not less unfair comparing Russia to countries such as India (8.4%; 8.7%) or Indonesia (6.2%; 6.5%) because the latter are so much poorer than Russia in their turn.

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Names Of The Oligarchs On A Map Of The Motherland*

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Not really arguing anything in this post, just sharing some interesting stats I found about the affluent class in Russia (as compared with BRIC’s and others).

First, as we know Russia is (in)famous for the opulence of it oligarchy. But according to the research firm Wealth-X, despite a relatively high number of billionaires, its overall share of Ultra High Net Worth Individuals (UHNW) is far more modest as you can see in the table below. As a percentage of GDP (caveat: this is comparing apples and oranges, but still instructive since national wealth is correlated to yearly output), the wealth of the Russian UHNW’s is equal to 43% of a 1.5tn GDP in 2010 (as compared with 28% in China, 43% in Brazil, 44% in the US, and 55% in India).

So, same picture as with income inequality – as I’ve noted before on this blog, Russia’s levels of inequality are in fact quite modest by world standards – with a Gini index of about 40, it is higher than most European countries (25-35) but lower than the US and China (45) and most Latin American countries (50+).

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Why Russia is cemented to the other BRICs

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In the wake of the economic crisis in which Russia’s GDP fell by a stunning 7.9% in 2009, its status as a BRIC economy – with its connotations of promise and progress – was brought into question. After all, isn’t it a dying nation with rapidly degrading infrastructure? Isn’t it amazingly corrupt? Wouldn’t its contempt for liberal democratic values doom it to stagnation? And what happens now that oil production, the main locomotive of the Russia economy, has stalled thanks to the politicized persecution of “brilliant entrepreneurs” like Mikhail Khodorkovsky? Indeed, was not its economic collapse in 2009 a portent of things to come? And so on*.

There are many reasons to dismiss these arguments, as I will try to show in this post. First, the very inventor of the BRICs concept, Jim O’Neill of Goldman Sachs (who has probably thought more about it than anyone else) dismisses the argument that Russia is ineligible on the basis that is was the only country amongst them to show (highly) negative growth during the economic crisis as “rubbish”. He goes on to add that “the only reason that Russia was hurt so badly was unlike the others, it borrowed heavily on the international capital markets and, of course, it is dependent on the price of oil.” ** Of course, the Russian economy’s dependence on Western intermediation for its credit is a structural weakness, and one that was exposed in late 2008. But potential faultlines like this are hardly unique amongst the BRICs – its most promising member, China, critically depends on exports for continued growth***, and its banks are saddled with bad debts.

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Kremlin Dreams Sometimes Come True

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This April, Michael Bohm, editor at the Moscow Times, published the article New Kremlin Dreamers, which questioned Russia’s stated intention of becoming an advanced industrial nation by 2020. I wasn’t much impressed by its pessimistic assertions – for instance, regarding Russia’s hopes of becoming the world’s fifth largest economy by 2020, he falls into the frequent Kremlinologist fallacy of applying standard GDP growth rates to nominal GDP (as opposed to purchasing-power parity GDP, which corrects for exchange rate fluctuations). He similarly passes over that countries in the process of economic catch-up typically grow much faster than the leader nations, because they have greater returns to investment. Soon after Yevgeny Kiselyov wrote Dreaming of Modernization and Innovation on a similar theme.

I disagree with them on two fundamental points. First, I don’t share in their pessimism and I believe that on purely objective factors, Russia – and much of the rest of East-Central Europe for that matter – is well set to converge to Western living standards by 2020 (which will by then probably be stagnating in light of peak oil and intensifying competition for energy resources from other emerging-markets). This is a point I made a long time back in Towards a New Russian Century? and Education as the Elixir of Growth. Second, even if that were not the case there is still a lot to be said of the power and utility of positive, optimistic thinking – ambition is no sin in my eyes, and in the case of government a moral duty to their citizens. Hence this rebuttal. ;)

Two recent articles in the Moscow Times took issue with the “Kremlin dreamers” for their rose-tinted views of Russia’s destiny, alleging that the main goals of “Strategy 2020”, like becoming the world’s fifth largest economy or doubling GDP per capita, are nothing more than utopian pipe-dreams. Yet an objective look at key current trends – in educational attainment, economic growth, resource depletion and climate change – suggests that these “fairy tales” have the potential to become reality.

First, Russia’s educational profile resembles that of a First World country, unlike most of its emerging-market competitors. Around 70% of Russians go into higher education, compared with just 20-25% of Brazilians or Chinese. The quality of its primary education is substantially higher than in developing nations, as attested to by the results of international student assessments like PISA or TIMSS. For instance, in the 2006 PISA science assessment, only 15.2% of Brazilians possessed skills beyond those needed for purely linear problem-solving, compared with 47.6% of Russian and 51.3% of American students. A country needs to have sizable cadres of skilled workers to move into added-value manufacturing or complex services. Brainier nations will also assimilate technology more easily and thus their economic “rate of convergence” to developed-world status will be that much faster. In this respect, Russia and east-central Europe are in a different league from East Asia, let alone Latin America or the Middle East.

Second, while there’s no denying Russia is plagued by corruption, to suggest it is endemic like in a failed state, as suggested by Transparency International’s Corruption Perceptions Index, is ludicrous – and would frankly be obvious to anyone who has visited both Russia and some of its neighbors on the list. Its problem is that it’s a survey of outsider businesspeople and their subjective perception of the situation, which differs markedly from the experiences of ordinary people. When asked, only 17% of Russians admitted to paying a bribe to obtain a service in 2007, according to TI’s Global Corruption Barometer – putting them in the same quintile as Turkey or the Czech Republics, i.e. slap bang in the middle of world corruption, not the end. The effects of corruption must also be set in context against a panoply of other, equally important growth factors. Goldman Sachs compiled an index called the Growth Environment Score, which aggregates a wide range of stats on macroeconomic, institutional, educational and technological conditions to assess a nation’s potential for economic “catch-up”. In 2007, Russia came in at 66th out of 181 countries, tied with China and ahead of Brazil and India.

Third, to fulfill one of the main goals of “Strategy 2020” – to become the world’s fifth largest economy, all Russia has to do is surpass Germany in purchasing-power parity GDP. Since according to the IMF Russia’s GDP was 2.26bn $ and Germany’s was 2.91bn $ in 2008, this can be achieved merely by maintaining an average growth rate of 2% points higher than Germany to 2020 – which seems entirely feasible considering that from 1999-2008 this difference was more than 4%. Doubling the GDP per capita over the next 11 years is trickier and requires continuing the average 1999-2008 growth rate of 6%. Though complicated by the current economic crisis, coming close is still entirely possible.

Fourth, Russia’s economy is not overly dependent on natural resource exports – they have stagnated since 2003 and the bulk of growth came from retail, construction and manufacturing. They are however crucial to replenishing government coffers, allowing the Kremlin to spend lavishly on things like military modernization, infrastructure expansion and prospective sunrise industries like nanotechnology – thus turbo-charging its plans for an “innovation economy”. (Granted, some is wasted like the 1bn $ project on the bridge to Russki Island, i.e. to nowhere). Fortunately for Russia, there’s no reason to believe oil prices will remain low. Even now, in the depth of the biggest global economic crisis since the Great Depression, prices never fell below $40 a barrel and have now rebounded to over $60. With oil production close to or already past its peak and Chinese voraciousness unquenched, a second oil price spike is only a few years away.

Finally, according to researcher Trausti Valsson, further in the future global warming will unfreeze remote energy resources in the Far North to exploitation, open up the Arctic to shipping, bolster Russian crop yields and increase the carrying capacity of Siberia and the Far North. Russia could literally end up on top of the world.

Wells may have ridiculed Lenin as a “Kremlin dreamer” in 1920, yet precisely a decade or so later the Soviet Union began to produce aircraft, tanks, trucks, machine tools and chemicals, boasting growth rates far higher than that of any other industrial nation. And though the USSR did set over-ambitious goals for the Five Year Plans, the achievements were impressive nonetheless.

By 2020, Russia will experience increasing problems due to adverse demographic trends, slowing growth due to (paradoxically) successful “catch-up”, and perhaps waning European demand for its natural gas and dissatisfaction with an increasingly atrophied and unresponsive descendant of the “Putin system”. As such, far from being a fairy tale, the “Kremlin dream” is a strategy for maintaining Russia’s geopolitical relevance well into a troubled 21st century.