Tag Archives: vision

Why Russia And China Won’t Fight

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Every so often there appear claims, not only in the Western press but the Russian one, that (rising but overpopulated) China is destined to fight an (ailing and creaking) Russia for possession of its resources in the Far East*. For reasons that should be obvious, this is almost completely implausible for the next few decades. But let’s spell them out nonetheless.

1. China regards India, Japan, and above all the USA as its prime potential enemies. This is tied in to its three geopolitical goals: (1) keep the country together and under CCP hegemony – an enterprise most threatened by its adversaries stirring up ethnic nationalism (India – Tibetans, Turkey – Uyghurs) or buying the loyalties of the seaboard commercial elites (Japan, USA), (2) returning Taiwan into the fold and (3) acquiring hegemony over the South China Sea and ensuring the security of the sea routes supplying it with natural resources. The major obstacles to the latter two are the “dangerous democracies” of Japan and India, with the US hovering in the background. In contrast, the northern border is considered secure, and more generally, Russia and Central Asia are seen as sources of natural resource supplies that are more secure than the oceanic routes.

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Russia Burning: Not Apocalypse, but its Prelude

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This post is a meta-commentary on media coverage of Russia’s drought and wildfires. Now make no mistake, I admire the yeoman work of some journalists in covering Russia burning: no doubt a few will even make their way into the classical cannon such as The Saga of the Burned Foot (Miriam Elder) or The Tale of How Aleksandr Pochkov Quarreled with Vladimir Vladimirovich (A Good Treaty). :) But in my opinion, they almost all fail to consider the key facts that render their Kremlin criticism moot and fail to grasp the “big picture”: the Great Russian Heatwave of 2010 as a mere herald of things to come.

In summary: 1) There is nothing the Russian government could have done to contain a natural disaster of such magnitude, 2) many of the lectures about how Russia could have done better to prepare itself would have been counter-productive had they actually been implemented, 3) the hysteria about Moscow turning into a giant morgue from heat stress and smog or radioactive ash clouds is overblown, and 4) the real problem, or rather predicament, is global warming, the effects of which are expected to transform Russia’s heartlands into Central Asia within the next few decades.

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Some Updates on Russia’s Economy

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There is a wide divergence of views on Russia’s economic future. The pessimists project near zero growth (e.g. SWP, Guriev & Zhuravskaya), or even a renewed collapse if Europe goes haywire. The inventor of the BRIC’s concept (and Russia bull) Jim O’Neill of Goldman Sachs believes it will manage to eke out growth of 7%, nearly recovering the output lost in 2009. The consensus seems to be around 4-5% (World Bank, bne). In this post I’ll describe developments in Russia’s economy since I last did it in a systematic way in December 2008 and give some indicators of what to expect in the next few months and years. Most of this post is based on the information in the World Bank’s Russian Economic Report #22: A Bumpy Recovery.

1. After the sharp -7.9% contraction in 2008, Russia has began to recover at a slower than expected rate, with GDP rising by 2.9% in Q1 relative to the same period last year (in comparison with China’s 11.9%, Turkey’s 11.7%, Brazil’s 9.0%, India’s 8.9% and Mexico’s 4.3%). However, there are indications it accelerated in Q2. The slowness and bumpiness of the recovery is presumed to be due to the waning of crisis stimulus spending and continuing low demand.

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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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The People’s Choice, or how Ukrainians are learning to stop worrying and love Eurasia

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I enjoyed the egg-throwing scenes from Ukraine’s Rada on the ratification of the gas-for-fleet deal with Russia as much as anyone. It also reflected the polarized commentary on the interwebs. The Ukrainian patriot-bloggers get their knickers in a sweaty twist. The academic beigeocrat Alexander Motyl (he of “Why Russia is Really Weak“ fame some four years back) now warns of the “End of Ukraine”. Ukraine’s (self-styled) intelligentsia writes open letters condemning the Kharkov deal and Yanukovych’s sellout of the national interest. 2000 protesters stage a demonstration against his pursuit of closer ties with Russia in Kiev, a city of three millions. Alexander Golts, liberal Russian military analyst, argues that the asymmetric nature of the exchange – “with the lower gas prices to take effect immediately, Ukraine can now save roughly $4 billion annually, whereas the lease extension will only take effect only after the current agreement expires in 2017″ – means that Russia was duped. In my view, these screeds are ideologized, or approach the issue from a set of false or incomplete assumptions.

Let’s start from the “banderovtsy“ who despise the “sovok” Yanukovych for selling out Ukrainka to the Moskali Horde. (Yes, I’ve grossly caricatured three complex groupings in that sentence). Their problem is that they believe the “Ukrainian people” share their own rigid conception of Ukraine as a rigid nation-state, rejecting opposing views that stress its civilizational commonalities with the Orthodox, Slavic, or Eurasian spheres. This manifests itself in a particularly antagonistic attitude to Russia and Russianness, which are perceived, not inaccurately, as the greatest enemies of Ukrainian nationhood yesterday, today and tomorrow. Their biggest problem and frustration – indeed, their predicament – is that by and large, the Ukrainian people simply do not buy into their efforts to imagine into being a narrow, militantly Ukrainian vision of Ukraine*.

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Defending the Loop

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Following my posting of Russia’s Sisyphean Loop, the influential East-Central Europe expert, Vlad Sobell, wrote up an interesting critique at the Untimely Thoughts Russia Discussion Group. It addresses what may be considered some weak, or at least not thoroughly explained, points from the original article, so I thought it would be useful to reproduce it in full along with the ensuing e-mail conversation.

I first give a very condensed version (inevitably a caricature) of what he has written, and then proceed to inform him what is wrong with it.

His thesis goes as follows:

In its effort to modernise and catch up with the West (mainly for reasons of defence) Russia has been going in circles, or historical cycles – a Sisyphean Loop. Anatoly has developed a useful model (his Belief Matrix TM) which illustrates the parameters in which this cycle is set.

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Russia’s Sisyphean Loop

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Anatoly Karlin @ www.DaRussophile.com
PDF version | DOC version

Russia’s Sisyphean Loop

The Eternal Return to the Future?

In this article I attempt to explain Russia’s historical cycles of failed Westernization and to project its future socio-political trajectory. First, I note the nature of and linkages between Russia’s geography, cultural traditions and imperial cycles. Second, using a ‘Belief Matrix’ model and drawing on historical observations, I accumulate evidence that Russia is caught in a ‘Sisyphean Loop’ in which all its attempts to Westernize – for a panoply of economic, cultural, and political reasons – merely end returning it to its imperial Eurasian past-and-future. In this century, there are three possible ‘steady state’ outcomes: either the Loop will continue as Russia returns to authoritarian stagnation or even succumbs to ‘totalitarian reversion’, or it will break – resulting in Russia’s entwinement within a ‘liberty cycle’ in which it finally manages to anchor liberal values onto its population.

I. The Curse of Geography

Russia’s physical geography can be characterized in three words – big, cold, and flat. This unique combination has left an indelible mark on the national character and the nature of the Russian state that cannot be ignored in any work on its political economy[1]. Let’s consider the deleterious effects of each of them in turn.

The early Rus’ state emerged in the coldest region to ever produce a settled population, a problem compounded by its post-16th century eastern expansion into Eurasia. Growing seasons are short, late spring droughts are recurrent and grain yields are low. This made Russian agriculture outside the southern Black Earth regions, where the cold is mitigated by exception soil fertility, unproductive and barely sufficient for population subsistence. Peasants throughout the world have traditionally viewed merchants with suspicion, since capitalism’s profit motive undermined the egalitarian village social relations and support mechanisms[2] necessary to guarantee community survival in a Malthusian world predating modern economic growth. The especially precarious nature of Russian peasant life further amplified these psychological attributes, making Russia deeply averse to the development of capitalist enterprise, with its emphasis on individual initiative and steady capital accumulation[3].

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Reconsidering Parshev

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In most Russian bookstores, there is a bookshelf or two dedicated to so-called “patriotic literature” – reappraisals of Stalin against “liberal revisionism”, overviews of Russia’s secret super-weapons, the exploits of its special forces and Russian theo-philosophy. Much of it is (apparent) nonsense, but the economic crisis has forced me to reconsider one particular “patriotic” thesis – Andrei Parshev’s Why Russia is not America.

His big idea, an elaboration and tying together of earlier work, is that Russia’s economy is structurally uncompetitive on the world stage, and that integrating with the global economy will lead to catastrophe. This is because of his counter-intuitive observation that Russia is overpopulated. Though its population density is low on paper, the cold climate, huge landmass and poor riverine connections means that the carrying capacity of north Eurasia is nowhere near as high as that of the world’s other centers of economic and political power – the US, China, and Europe. Because manufacturing is inherently loss-making on the Eurasian plains, it is much more economically “efficient” to just ship out Russia’s mineral resources to fuel manufacturing in warmer, coastal regions such as the Pearl River Delta or the Great Lakes. No more than 20mn Russians are needed to service the pipelines and grow fat from the proceeds; the other 120mn are free to eke out a subsistence living on Russia’s marginal lands, or die out (as indeed many did during the era of neo-liberal reforms). He recommended a return to sovereignty, autarky and sobornost as the solution to these woes.

I agreed with Parshev’s analysis upon my first reading of his book in 2002, a time when I still thought Putin was no more than a better-dressed, sober gangster in Yeltsin’s mold and the country showed little signs of real recovery. Yet as evidence mounted that Russia really was prospering by the mid-2000′s and I became influenced by Krugman’s criticisms of competitiveness, I increasingly came to reject his ideas (e.g. see this comment). However, since then increasing awareness of the vital role played by protectionism in “catch-up” industrial development, the reality of peak oil and above all the economic crisis forced me into reconsidering Parshev.

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Categorizing the Russia Debate

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Here I will try to categorize all the major Russia-watching schools along two axes: 1) a Russophobe – Russophile axis and 2) a values spectrum on attitudes towards the West as a universal mental matrix. Along these lines I created the image map below which attempts to graphically deconstruct the belief systems many prominent Russia-watchers today subscribe to. I mostly limited myself to those with a presence on the Anglophone blogosphere, though I’ve added in some nationalities and ideological groupings to clarify the terrain and fringe elements to demarcate the boundaries.

Jeff Nyquist ( A Step at a Time (David McDuff) Window on Eurasia (Paul Goble) Thomas P.M. Barnett Gordon Hahn (Russia: Other Points of View) The Ivanov Report (Eugene Ivanov) Dale Herspring Moscow Tory (Carl Thomson) Mike Averko Andrew Wilson (Virtual Politics) Vilhelm Konnander Mark Ames (eXile) Mat Rodina (Stanislav Mishin) Kirill Pankratov Russian Blog (Konstantin) Russia in the Media (Fedia Kriukov) Truth and Beauty (Eric Kraus) Nicolai Petro Vlad Sobell Eduard Limonov Siberian Light (Andy Young) La Russophobe (Kim Zigfield) Edward Lucas Streetwise Professor (Craig Pirrong) Robert Amsterdam Russia Blog (Charles Ganske & Yuri Mamchur) Sublime Oblivion (Anatoly Karlin The Russian Government (Dmitri Medvedev & Vladimir Putin) Peter Lavelle The Spirit of Terrorism (Jean Baudrillard) The End of History (Francis Fukuyama) Sean's Russia Blog (Sean Guillory)

Introduction: A Very Brief History of Russia-Watching

Though bloggers generally consider the Russophile-Russophobe dichotomy in contemporary terms, this division was as stark and relevant in the 1930’s. The following remarks made by John Scott in Behind the Urals, an account of life in a Soviet industrial town, are as relevant today as they were back then:
In talking with people in France and America I was impressed by the interest in the Soviet Union and the widespread misinformation about Russia and all things Russian. Everyone I met was opinionated [aren't we all lol!]. The Communists and their sympathizers held Russia up as a panacea…Other people were steeped in Eugene Lyons’ stories and would not concede the possibility that Russia had produced anything during recent years except chaos, suffering and disorder. They dismissed the industrial and material successes of the Russians with an angry wave of the hand. Any economist or businessman should have been able to see that the tripling of pig-iron production within a decade was a serious achievement, and would necessarily have far-reaching effects on the balance of economic and therefore military power in Europe.
So basically, opinions on Russia were binaried amongst those who cared to express an interest. And they were almost all wrong. The hardcore Communists would not admit that life remained hard for most people, that Russia’s level of development remained far below that of the West (despite the Depression) and ignored the high level of political repression. On the other hand, the anti-Communists were just as wrong. Their ideologized refusal to acknowedge the high morale, technological progress and the huge rise in Soviet military-industrial potential under Stalin did them no good, especially for those Nazi strategists who thought all they had to do was kick the door and the whole rotten Soviet structure would come tumbling down.
Another point I would make here is that Russia’s history is highly cyclical, going through a pattern of collapse, recovery, expansion, stagnation and collapse. There are some convincing reasons that much of this is tied to its geography and derived cultural traditions. The archetypical Russia is economically weak (cold climate, vast distances and subpar riverine interconnectivity) and insecure (open, undefended borders). This traditionally meant that the Russian state had to marshal all available resources to compete as a Great Power, necessitating a strong state capable of maintaining superior armed forces, keeping abreast of foreign technological developments and providing bread and games to the people. However, the strain of supporting a metastasized empire out of proportion to its economic development, as well as the ideological rigidities necessary to thwart its premature dissolution, meant that when critical amounts of pressure did build up collapses tended to be far more total and catastrophic than in the West.
A succinct summary of this theme of eternal rise and fall can be found in Paul Kennedy’s Preparing for the 21st Century:
At present, all we see is chaos, struggle, economic collapse, ethnic disintegration – just as the observers of 1918 did. How could they have foreseen then that a decade or so later the USSR would have begun to produce chemicals, aircraft, trucks, tanks, and machine tools and be growing faster than any other industrialized society? By extension, how could Western admirers of Stalin’s centralized economy in the 1930’s know that the very system contained the seeds of its own collapse?
And as is well-known very few Kremlinogists accurately predicted the breakup the Soviet Union until 1989 (although it should be noted that contrary to current conventional wisdom, they were well-justified in their complacency because the Soviet political economy was fundamentally stable, albeit stagnant, and collapse was precipitated by Gorbachev’s abandonment of central planning in the absence of evolved market mechanisms). And yet soon after the pendulum swung the other way. Now quoting myself in Reading Russia Right:
Wildly optimistic predictions of tigerish growth rates and flourishing democracy were confounded, as practically every socio-economic statistic worsened and reforms were perceived to have authorized the wholesale looting of Russia – ‘the sale of the century’ – and the creation of a ‘historyless elite’ focused on the ‘exchange of unaccountable power for untaxable wealth’. By the end of the 1990’s, the state’s monopoly on the legitimate use of violence, tax collection and monetary emissions had eroded; market fundamentalism had transformed the Upper Volta with missiles into a ‘looted and bankrupt zone of nuclearized anarchy’ in a demographic death spiral presided over by the ‘world’s most virulent kleptocracy’ about to splinter along ethnic lines and fall into fascism sometime tomorrow. The Atlantic put it nice and simple: ‘Russia is Finished’.
And we all know what happened since 1998, even though some Russophobes have yet to catch up with the times – much like the ideologized anti-Communists of the 1930′s… (Of course, this is not to say that Putin is the next Stalin. I’m talking about the economic recovery, and the increasing investments into things like nanotechnology, which will probably be as important in this century as coal and steel were in the last).
Russia and Ideologues: Past Debates on Russophobia

Anyone familiar with Western commentary on Russia will know that much of it is bifurcated into two camps, the so-called “Russophiles” and “Russophobes”. Both range the whole gamut of opinion from classical liberalism to nationalist arch-conservatism, and tend to invoke Orientalist interpretations of Russian culture to make their points. This dichotomy has a millennial heritage, going back as far, perhaps, as the medieval period when Western Christendom first acquired a primal aversion to the dark, chaotic steppes to the east; yet an aversion tempered by seductive legends such as that of Prester John, who ruled a perfect Christian kingdom in a place beyond the darkness of Tatary.

Though bloggers generally consider the Russophile-Russophobe dichotomy in contemporary terms, this division was as stark and relevant in the 1930’s. The following remarks made by John Scott in Behind the Urals, an account of life in a Soviet industrial town, are as relevant today as they were back then:

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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.