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Streetwise Professor

February 26, 2007

Antarctica and Mobile Polar Highs

Filed under: Climate Change — The Professor @ 6:14 am

My post on the Antarctic temperature research neglected to mention a very interesting book by Marcel Leroux titled Global Warming: Myth or Reality. Leroux’s theory of Mobile Polar Highs can perhaps explain some of the discordant data from the polar regions. Specifically, whereas the Antarctic Peninsula is warming rapidly, the rest of the continent is not. Leroux argues that colder polar temperatures (especially in the summers as a result of lower insolation) cause more intense MPHs. As they move towards the equator, the MPHs cause cyclonic movement at their leading edges. These cyclones transport warm, wet air back towards the poles. More intense MPHs result in more intense cyclones. This could explain the more intense winds mentioned in the post. It could also explain warming in the Peninsula occurring simultaneously with cooling in the interior of the continent.

This is an interesting theory that reconciles the varying temperature trajectories in different parts of the Antarctic that the general circulation models cannot readily explain. Overall, Leroux’s book is an entertaining and iconoclastic (and very Gallic) take on the climate change debate. Many of his points are well taken and deserve more attention.

Uzbekistan+Gazprom

Filed under: Energy,Russia — The Professor @ 5:59 am

Vladimir Socor of the Jamestown Foundation’s Eurasia Daily Monitor writes of a new deal between Gazprom and Uzbekistan that increases the amount of gas the Uzbeks will supply, and raises the price from $65/mcm to $100/mcm. Socor also claims that “Gazprom delivers the gas [to Europe] at prices in the range of $300 per 1,000 cubic meters in 2007.” I have not seen reports of these prices for European gas, so I am inquiring about the source of this data. Even at a delivered price of $230 in Germany and a $100 price in Uzbekistan, the calculations in my earlier “Yes, But What Kind of Market?” post demonstrate that the margin is very fat; a $300 price in Europe pushes the margin beyond fat.

Articles last week also reported that Gazprom was squeezing not just furriners, but Russian electricity suppliers as well. Russian electrical utilities have to meet their gas needs in excess of their long term contractual purchases at an auction. Gazprom, as the only transporter, extracts a very healthy margin on these purchases.

The Uzbek story also claims that the Russia-Uzbekistan deal is part of the Kremlin’s long term plan to lock up gas supplies in order to increase their leverage over the Europeans. Hello, anybody home? Anybody paying attention? Wakeup call number . . . well, to tell you the truth I’ve lost count. Using Uzbekistan, Kazakhstan, and Turkmenistan to supply gas also helps address Gazprom’s own production problems.

A trans-Caspian pipeline would redound to the great benefit of the ‘Stans, Azerbaijan, Georgia, and the Europeans. It would outflank Russia, and allow direct European customer access to the ‘Stans, thereby raising prices there and lowering them in Europe. It is technologically feasible (and certainly far more economically and environmentally sensible than Nordstream). Moreover, it would deprive Gazprom of the gas piggybank that it draws on to offset its own declining production. European, American, and Turkish diplomatic efforts should be focused on making this a reality. It is Russia/Gazprom’s biggest vulnerability. There would be a major brawl over this, as it strikes at the heart of Russia’s long term strategy to exploit energy for economic and political purposes, but it is a battle well worth fighting.

February 20, 2007

No Symmetry

Filed under: Commodities,Energy,Russia — The Professor @ 10:53 am

Commentor (and former student) Samir makes several excellent points, but I’ll focus on one. Specifically, the uncoordinated European response to Gazprom.

One of the points that Gazprom and its acolytes attempt to use to gull the lazy minded is that there is a symmetry between Europe and Russia/Gazprom. Europe has one major supplier–Russia–but Russia has only one consumer–Europe. I have even seen the term “bilateral monopoly” used in this context. Relatedly, Gazprom constantly retorts “security of demand” whenever Europeans have the temerity to question the security of their Russian supplies, suggesting that Gazprom is as vulnerable to opportunistic behavior by its customers as are its customers to a gas shutoff by Gazprom.

Strike up another chorus of “I don’t wanna hear it!” Europe is not a monolithic entity in the same way Gazprom is. Not only are there several handfuls of European countries, each of whom pursue their own interests (EU rhetoric to the contrary), but even within most European countries there are multiple consumers of gas, including utilities and industrial consumers. That is, the demand side is relatively fragmented and competitive compared to the supply side. Moreover, Gazprom is a past master at playing off one European government against the other, and European companies against one another. Divide and conquer is an old game, and Gazprom/Russia play it well. Sad to say, they are aided in this by short sighted, cynical European governments. As Samir notes, the French just cut their own deal with Gazprom. Germany has been a major enabler, although Angela Merkel is pulling back somewhat. The question remains, however, as to whether she can overcome the influence of the German banking and industrial establishment, which has a long history of cynical dealings with Russia (as during the early Bolshevik period immediately following Brest-Litovsk). The Italians have also been major collaborators.

Thus, there is no symmetry between the monolithic Russian supply side and the fragmented European demand side, and Putin’s/Gazprom’s repeated attempts to assert such balance where none exists is further evidence of their disingenuousness. Actually, I can tolerate that; I don’t blame the wolf for its nature. What I cannot tolerate is the failure to think by those in the west who parrot such nonsense.

February 17, 2007

Yes, But What Kind of Market?

Filed under: Commodities,Energy,Russia — The Professor @ 11:12 am

The most common defense of Russia’s/Gazprom’s increasing the price of gas to Ukraine, Belarus, Azerbaijan and others is to deny that the motive is political, and to claim instead that these consumers are now being charged the same market price as the Western Europeans. There is a kernel of truth to this, but it obscures the crucial question: just what kind of market is this?

Some markets are competitive. Some markets are not. The market for Russian and most Central Asian gas falls squarely under “not.” Gazprom has a state enforced monopoly on the transit of gas across Russian territory. Moreover, the Russian government is aggressively playing the “Great Game” in Central Asia and the Caucasus to stymie development of any alternative transport routes. For instance, Russia used its overwhelming leverage against Armenia to get that impoverished nation to limit the size of a gas pipeline from Iran, thereby ensuring that the pipe could not be used to transport Iranian gas into Europe.

Russia’s central geographic position, and its heretofore successful efforts to impede development of alternative transportation routes gives the transit monopoly Gazprom great market power. It is effectively a monopsonist upstream, and can exploit this monopsony power to depress the purchase price of gas from Turkmenistan and other “independent” suppliers. Moreover, because the supply of gas into Europe from non-Russian sources is constrained (and will continue to be so unless and until Europe invests in substantial LNG capacity), Russia faces a downward sloping demand for its gas in Europe, which gives it some monopoly power. Indeed, Eastern and Central Europe have even fewer alternatives to Russian gas, and are even more vulnerable to the exercise of market power.

This combination of monopoly and monopsony power is reflected in the chasm between the purchase price of gas from Turkmenistan and Kazakhstan–about $45-$65 per mcm for years, lately raised to $100 per mcm–and the price in Europe–upwards of $230 per mcm. Based on a price of $230 to Germany, and a price in Turkmenistan of $65, this translates to a price difference between consumer and producer of about 3.5 cents per mcm per kilometer. This represents a markup over the Turkmenistan price of about 63 percent per 1000 kilometers. (Even at the now higher Turkmenistan price of $100, the shadow price of transportation is about 2.8 cents per mcm per kilometer, and the markup is 42 percent per 1000 kilometers.)

To put things in perspective, the basis (i.e., the price difference) between the price of gas in Chicago, and the price of gas at the AECO hub in Alberta, a distant Canadian gas supply location, averaged a little over 1 cent per mcm per kilometer from November 2003-January 2007. The markup is about 5.5 percent per 1000 kilometers. Examining the AECO-Iroquois route (Iroquois is a gas hub in New York state), the average basis worked out to about 1.5 cents per mcm per kilometer in 2003-2007, and the markup was about 7.5 percent of the AECO price per 1000 clicks. Iroquois is often quite congested, especially during the winter, so it tends to exhibit a wide basis compared to other locations in North America. Nonetheless, the Europe-Turkmenistan basis dwarfs the Iroquois-AECO basis, and dwarfs the Chicago City Gate-AECO basis even more.

Now, some of the disparity arises because of Gazprom’s inefficiency. (If the exercise of market power doesn’t bother them, global warming worriers should fret about the massive amounts of methane–a greenhouse gas much more potent than CO2–that leaks from Gazprom’s pipes.) But a healthy chunk reflects a market power rent that exists in the no-entry Russian market but does not exist in the much more competitive North American gas transportation market.

The Europeans have importuned Russia to open its gas transportation system. Sorry, not going to happen. This arrangement is too lucrative for the Russian government and the various hogs that feed at the Gazprom trough. This market is not competitive, and is unlikely to become so any time soon.

So let’s call a spade a spade. Let’s not pretend that the price of gas in Europe is a competitive market price. It’s not. It’s a monopoly market price, supported by a state-enforced entry barrier. It deserves no deference from supporters of free markets. The subsidized prices that once prevailed in Ukraine and Belarus don’t deserve deference either; nor does the highly subsidized domestic Russian price.

But two wrongs don’t add up to a right. This has long been a dysfunctional market supported by the dysfunctional exercise of government power. The old dysfunction was to subsidize the consumption of energy by inefficient manufacturing enterprises. The new dysfunction is to extract monopoly and monopsony rents. Prices were too low before. They are too high now (for consumers–still too low for producers).

So, the next time I hear someone repeat the mantra that Gazprom is just charging “the market price,” I will be tempted to sing a few bars from the Minor Threat song “I don’t wanna hear it”:

I don’t want to hear it
‘Cause I know that none of it’s true
I don’t want to hear it
Sick and tired of all your lies
I don’t want to hear it
When are you gonna realize…

That I don’t want to hear it
Know you’re full of ****

Except, I’ll probably fill in the ellipses. ‘Cuz I am–The Streetwise Professor.

Big hat tip to former students Monika and Samir for bird-dogging the data for me. Mucho obligo.

Models vs. Data

Filed under: Climate Change — The Professor @ 11:11 am

File this under “looking for the cloud surrounding the silver lining.” Un-freaking-believable. A sad commentary on the state of climate science and its dominance by the modeling priesthood.

On 15 February, David Bromwich of Ohio State University released results of an important study showing that “[a] new report on climate over the world’s southernmost continent shows that temperatures during the late 20th century did not climb as had been predicted by many global climate models. . . . It also follows a similar finding from last summer by the same research group that showed no increase in precipitation over Antarctica in the last 50 years. Most models predict that both precipitation and temperature will increase over Antarctica with a warming of the planet.” Bromwich states: “What we see now is that the temperature regime is broadly similar to what we saw before with snowfall. In the last decade or so, both have gone down.”

So far, so good. Solid empirical research on a crucial geographic region. Indeed, inasmuch as the most alarming (and probably most alarmist) prediction regarding global warming is that heating in the polar regions will result in a massive release of water that will raise sea levels by catastrophic amounts, these findings represent very good news. Or at least, you’d think they would. But you’d be wrong. And that’s where the real interest in this story lies.

These results regarding snowfall and temperature are starkly at odds with the predictions of global climate models. These models predict that warming should be greatest at polar latitudes. Hence, these empirical results represent a major challenge to these models—and hence to the entire edifice of climate change theorizing and policy that rests on the models.

But rather than point this out in the emphatic way it deserves, Dr. Bromwich does everything he can to minimize the importance of his own research! (What’s up with that? The usual academic sin is to over-hype one’s own results.) Bromwich says “It isn’t surprising that these models are not doing as well in these remote parts of the world. These are global models and shouldn’t be expected to be equally exact for all locations.” [Query: Why should remoteness from civilization matter a rat's rump in determining the implications of a region's climate for global climate change? Isn't the global climate a collection of largely remote regional climates? Or if it does matter, shouldn't this cut the other way? That is, if economic development corrupts the surface temperature record, as has been plausibly argued and reasonably documented, wouldn't you want to look at remote regions less affected by such development and place more emphasis on the results derived therefrom? Is Dr. Bromwich a reverse Bayesian who wants to put less weight on less biased observations and more weight on more biased ones? For that matter, if remote regions don't matter, why is Dr. Bromwich wasting his time—and presumably freezing his tukkus—studying them? Masochism?]

In some ways the best response to Bromwich’s denigration of the poor regional performance of these models is “Duh”: it is well known that the skill of models in predicting the regional climate is pitiful. But the problem is much deeper than that. If the models are right, the regional impact of greenhouse gases should be greatest in the polar regions because the models predict that these regions are most sensitive to CO2 emissions. That is, if the models are right, they should do best in the Arctic and Antarctic, rather than failing miserably.

Dr. Bromwich attempts mightily to spin away from this obvious conclusion. He avers that “[i]t’s hard to see a global warming signal from the mainland of Antarctica right now. It’s very hard in these polar latitudes to demonstrate a global warming signal. . . . Part of the reason is that there is a lot of variability there.” However, the models predict that the climate change signal should be STRONGEST in the polar regions! If we can’t find it there, where the models predict it should be strongest, how can we have any confidence that we can detect it anywhere else? That is, if natural variability makes it “very hard in these polar latitudes to demonstrate a global warming signal” where the signal should be strongest how in God’s name can we detect it where the models predict it should be weaker? [Further my last aside: shouldn't this enhance suspicion that the purported detection of a global climate signal from the instrumental record reflects in part—and perhaps in large part—biases in that record?]

There are other interesting tidbits. For instance, the research documents increasing strength in westerly winds in Antarctica. Well, an increase in the temperature gradient between polar and temperate regions is the most likely cause of an increase in winds. Standard models predict that GHG induced global warming should reduce the gradient (i.e., the poles should warm relative to temperate regions) and hence the winds should decrease in intensity.

Strike Three!: temperature predictions (wrong); snowfall predictions (wrong); wind predictions (wrong). Not even a foul ball in the whole at bat. Three cuts, three bad whiffs.

Bromwich notes that the increase in westerlies may be contributing to the warming of, and the consequent breakup of ice on, the Antarctic Peninsula—another iconic image in the Church of Global Warming. But if the winds result from an increase in the temperature gradient, this warming of the Peninsula is not a signal of global warming. Indeed, it could actually be a signal of global cooling—or at least polar cooling, which is flatly inconsistent with the anthropogenic global warming hypothesis which unambiguously predicts that the warming should occur disproportionately at the poles.

Like the recent research on the decline of heat content in the ocean in recent years, this study presents a major challenge to the model-driven “consensus.” (Ugh—how can self-respecting scientists worship consensus?) Rather than shout this from the rooftops, Dr. Bromwich cringingly attempts to shield the models from criticism. It’s not quite an auto da fe, but I suspect that Dr. Bromwich is striking such an attitude precisely because he wants to avoid offending the modeling establishment, thereby deflecting criticism and funding problems, or the necessity of walking through the public square recounting and recanting his heresy.

This is an inversion of the scientific method. Models are wrong. Always. Good modelers know they are wrong when they create them, but at the outset we don’t know how or why they are wrong. They are fleeting matches we light in a dark cave, not the Eternal Light of Truth. We are ignorant of the particular ways in which they are wrong, and learn by discovering their failures and adjusting our models and our understanding accordingly. Models push empirical work, and when empirical work documents failings in models the appropriate response is to revisit and revise—and sometimes junk—the received models. Scientific progress should be built on the rubble of discarded models.

Acting like the sycophants in “The Emperor’s New Clothes” is exactly the wrong way to respond to anomalous empirical results. The models are disposable, rapidly depreciating assets. The empirical evidence is not. The latter should take precedence. Spinning the empirical results so as not to discredit the models is antithetical to the advancement of our understanding of complex processes.

This episode and the ocean heat content one that preceded it (explained away as a “speed bump” as described in an earlier post) are symptomatic of a divergence between how science should work and how it works in practice. This should not be surprising. Kuhn pointed out years ago that there was a gulf between how science really works and the ideal scientific method. In practice, the tendency is to suppress empirical anomalies that challenge the conventional wisdom, rather than to pursue them doggedly in order to improve on—and perhaps jettison—the conventional wisdom.

So, there is little new under the sun. However, given the immense stakes in the climate change debate, these methodological deficiencies are much more costly than when the dispute involved phlogiston theory or the theory of the ether.

So please, Dr. Bromwich: revel in your results. Point out with relish how they conflict with the predictions of the models. Relentlessly needle the modelers into improving their products. Exult if your research consigns current models to Ozymandias-like oblivion. Go out and collect more data, and let the empirical chips fall where they may. Wear apostasy like a badge. Disdain consensus. In other words, be a scientist.

Hit Hard. Hit Fast. Hit Often.

Filed under: Military,Politics — The Professor @ 11:04 am

The early reports suggest that the “surge” in Baghdad is working. “Insurgents” (read “gutless thugs”) are fleeing in all directions like cockroaches.

The only surprise is why anyone considers this a surprise. The American military’s capacity for violence is so overwhelming that no one with the slightest instinct for self-preservation will stand in its way when it is unleashed against them. When we take the initiative and utilize a fraction of our national power, nobody can stand up to it, least of all a rag bag bunch of soldier posers and backshooters. (Not to mention that as John Keegan noted in his masterful book A History of Warfare, Arabs have historically eschewed face-to-face battle by organized formations in favor of the hit-and-run raid.)

There is a lesson to be drawn from this. As Macauley said, “The essence of war is violence. Moderation in war is imbecility.” We have been in a war in Iraq for 4 years, the last 3 plus years or so of which we have attempted to wage it nicely, nicely—that is, moderately. We have been imbeciles.

This is not to say that we should have been going all Roman on anyone downrange. Not only is the American military’s capacity for violence unprecedented, the precision with which it delivers that violence is also without historical parallel. Not to say that innocents would not have died had we acted more violently in the past three years—they would have. But how many innocents died because we deliberately conceded the initiative to a brutal enemy? They number in the thousands, blown apart by car bombs or fanatics with suicide belts. If their blood is on our hands, it is because of what we failed to do, not because of what we did. Out of a fear of being labeled killers of innocents, we have acted in a way that has condemned many innocents to horrid deaths.

And initiative is the key word. Initiative is the cardinal military virtue. “The Offensive” is one of the rules of war—this is just a synonym for initiative. Stay on the offensive. “L’audace, toujours l’audace.” Act as in the Halsey quote (memorized from my Naval Academy days) that is the title of this post. Do everything you can to maintain the initiative. The aggressor has incalculable advantages—advantages that we ceded to Al Qaeda, the Mahdi Army, unreformed Baathist killers, and just plain criminals whose only ideologies are power and money. We are staring defeat in the face as a result. Why should we surrender the initiative to such a collection of military nullities, thereby permitting them to wreak havoc on the innocent whom we are supposedly there to help? Because we were afraid of not being the nice guy? Listen to Leo. Nice guys finish last, in war, at least.

It’s even worse than that. We didn’t win any points for our forbearance, but we may lose the war because of it.

Perhaps desperation is finally leading us to act as prudence and wisdom should have from the start. Perhaps we are finally channeling Macauley. Better late than never. But hopefully not too late.

February 7, 2007

Mr. Khodorkovsky, Meet Mr. Kafka

Filed under: Commodities,Energy,Russia — The Professor @ 10:32 am

Mikhail Khodorkovsky and his colleague Platon Lebedev are the subject of new charges in Russia. These charges involve money laundering, supposedly involving sham sales of oil.

As yet, the charges have not been circulated publicly, and the evidence is unlikely to be. All indications are that the trial will be tightly controlled, and the result a foregone conclusion. The holding of the trial (illegally, as I understand it) in a prison complex in the isolated Siberian backwater of Chita rather than Moscow; the Kafkaesque procedural machinations; the intimidating security presence in Chita (complete with squads of Spetsnaz commandos in black balaclavas toting automatic weapons on the streets); and the ongoing intimidation of the defendants’ attorneys all make it abundantly clear that this is not about finding facts and dispensing justice, but is instead all about power. Indeed, as is common in authoritarian and totalitarian states, the blatant and unapologetic mockery of justice and due process is intended to send a message to anyone who dares challenge the authority of Putin and the siloviki.

The more outrageous the charges, and the more sinister the procedure, the more effective the signal. A fair and regular procedure with reasonable charges would be a far less effective method pour encourager les autres. Arbitrary and absurd charges are so much more . . . persuasive. They demonstrate that the law is not a constraint on the state, but its tool. It says “The state can do anything it wants. It can convict you on absurd charges if you challenge it. So be smart—don’t challenge.”

I do not know that Khodorkovsky and Lebedev did not break any Russian laws. However, a just government and legal system convinced of the truth of its charges and the strength of the evidence to back them would not hesitate to risk an open and fair trial operating under internationally recognized standards of due process. The Kremlin’s actions betray no such confidence, and provoke considerable skepticism about the truth of the allegations.

The single-minded intensity with which the Kremlin going after anyone connected to Yukos, which brings to mind Ahab pursuing the White Whale to the ends of the earth, or Inspector Javert hounding Jean Valjean, is truly creepy. The hatred is palpable. This is clearly very personal, which lends credence to the view that the true motive is deeply political, and that Khodorkovsky in particular is a mortal threat to Putin and his coterie.

In some respect, this fear is surprising, because Khodorkovsky is such a polarizing figure that there is reason to doubt his political viability. Like many of those who became unbelievably wealthy in the chaotic 1990s, he is widely resented in Russia, and his fate apparently attracts little public sympathy outside of the increasingly beleaguered liberal community. His supporters point to his corporate governance reforms; his critics claim that these were a newfound religion, and that his allegiance to clean governance was honored more in the breach than the promise during his rise to control of Yukos.

One accusation that seems difficult to credit is that Yukos is just a Russian Enron. The evidence that I have seen suggests just the opposite. Accounts from respectable independent sources state that under Khodorkovsky’s leadership, Yukos’s production and efficiency rose smartly—and that under Rosneft management, the same assets have become markedly less productive. That is, Yukos was a real company with real assets, and managed these assets well.

If it were not, why would the Russian government move heaven and earth to get control of it and its assets? If the US government had seized Enron, what would it have found? A shell of a company with far fewer assets and far more liabilities than it claimed. A knowledgeable government would have never tried to expropriate Enron (knowing that there was little to expropriate); a knowledgeable Kremlin’s expropriation of Yukos gives the lie to the Enron analogy.

What’s more, in a country where the rule of law is a nullity, and the government and its minions are willing to use any foul means to seize assets or cash flows that catch their eyes, it is understandable that corporate managers will engage in creative means to protect their companies’ assets. Again, I have no basis to determine with any certainty that the transactions at issue in the most recent Khodorkovsky allegations did not represent “tunneling” of Yukos assets for the personal enrichment of the firm’s management. I only mean to emphasize there are reasonable alternative hypotheses that could justify the use of complicated financial transactions by a firm rationally paranoid (which, as the Transplants song says, is “way past concerned”) about the predatory intentions of the government.

I obviously have no direct knowledge of which hypothesis is correct. I can observe, however, that the Russian government is bound and determined to avoid an open, transparent, and equitable process by which the evidence for each hypothesis can be presented and weighed by an impartial finder of fact to reach an appropriate verdict. And that speaks volumes.

February 3, 2007

A Must Read

Filed under: Russia — The Professor @ 11:14 pm

This interview by Russian novelist Vladimir Sorokin is a must read. I have to say that I agree with virtually everything he says.

I was particularly gratified to read that his most recent book is titled “The Day of the Oprichnik,” and that Sorokin draws the analogy between Putin’s Russia and Ivan IV’s Oprichnina–an analogy I drew in my post the “New Oprichnina.” I was unaware of Sorokin’s work–another example of Merton’s Theory of Multiples, I guess.

After twisting my arm to pat myself on the back, in fairness I must now give myself a jab. Commentor Dmitri wrote to say “‘oprichnina’ is a feminine noun, so the title should be ‘Новая опричнина.’ ” An illustration of the perils of using free online translators in an attempt to appear more erudite than one is.

More substantively, Dmitri makes the case that Ivan the Terrible should really be called Ivan-the-Not-as-Terrible-as-Henry VIII. Maybe so, but Ivan’s body count is still enough to earn him the “Terrible” sobriquet (although “Grozny” can also be interpreted as “the Great.”) After all, extirpating a city is a terrible thing. Dmitri argues that Novgorod deserved it because of its treasonous dalliance with Poland-Lithuania. This begs the question of why Novgorod–an advanced, developed place, especially by the standards of 16th century Russia–preferred Polish rule to Muscovite. Dmitri also excuses the Oprichnina on the grounds that its depredations were directed at the boyars, and gave the serfs a break. The boyars were certainly not angels, but this is no defense for autocratic, extra-legal persecution that was motivated more by cupidity and rage at being thwarted than by a desire to see justice done; another parallel to today (cf. Mikhail Khodorkovsky.) Finally, although the evidence from the time is sketchy, that which exists suggests that the Oprichniki’s depredations were not so discriminating, and devastated boyar and serf alike.

So, Dmitri, I imagine we agree to disagree–but I appreciate your thoughtful comment.

More Historical Parallels

Filed under: Military,Russia — The Professor @ 11:07 pm

My winter break reading has included Richard Pipe’s “Property and Freedom.” It is an enjoyable read, like most of Pipes’s books. To an economist it is somewhat unsatisfying, because although Pipes does an excellent job describing the historical differences in property rights and political and civil rights in England and Russia, he does not provide a plausible explanation as to why these countries evolved so differently. Why were the nobles, and eventually the commons and cities of England able to resist the power of the crown, whereas they were not able to do so in Russia? Royal ambitions were certainly nearly as lofty in England as in Russia, but these ambitions were checked (albeit with much conflict and bloodshed) in the former while they ran roughshod in the latter.

There are certainly some hints. The Tatar Yoke certainly tilted things in favor of centralized power early on in Russia, but then too the Norman Conquest certainly enhanced central power in England as well. The difference is that central authority retained its grip much longer in Russia, but eroded steadily in England. What underlying factors were at work? An interesting question that Pipes does not raise, much less answer.

Off the top, I conjecture two important considerations, both relating to differences in the physical landscape that affected the balance of military force between the center and the periphery.

First, Russia’s sprawling extent and abysmal transportation system made it more difficult for the nobility to coordinate and cooperate in opposition to the crown than was the case in small, and relatively accessible, England. The Tsars further impeded coordination and undermined cooperation by moving servicemen from place to place, making it difficult for them to form lasting connections with a web of nearby peers, whereas tenures in England were more settled. [This of course begs the question why the difference in tenures—perhaps I'll explore this at a later date.] Unsettled tenure also undermined the incentive to invest in defensive works, the benefits of which would have likely accrued to some later occupant.

Second, Russian terrain and distance made it difficult to defend territory against an incursion by the central government. There were few natural obstacles to impede a determined foe, and the massive distances put each serviceman out of mutual support from potentially like-minded fellows, thereby facilitating a divide-and-conquer strategy. Relatedly, England’s proximity to foreign powers, including especially France but also Scotland (which was often the French cat’s paw), allowed the disaffected to gather some foreign support that credibly threatened the crown. In contrast, in isolated Russia, this threat was much less severe. For years, the most important outside power that had the capacity to threaten the Tsars—the Mongols/Tatars—was firmly allied with the Tsars, who were their tax collectors. In other times, foreign powers such as Poland-Lithuania or Sweden posed only intermittent and weak threats to Moscow-centered power.

In the end, in England, the military balance between the crown and nobles affected the parties’ relative bargaining power. Property rights were not granted out of the monarch’s beneficence, but as the result of negotiation in which force was the ultimate arbiter—the ability to resort to force that credibly threatened the monarch determined the fall back position that defined the bargaining powers of the contending parties. Bargaining power in Russia was determinative too, but the “correlation of forces” was much more favorable to the center due to the objective military conditions which made noble revolt an unrealistic option.

Despite my quibbles with “Property and Freedom”, I highly recommend the book as providing interesting grist for thought. After all, a book can be enjoyable because it provides information that stimulates provocative questions even if it doesn’t answer them.

Not surprisingly, given his stature as perhaps the greatest living American historian of Russia, Pipes’s discussion of the Russian Patrimonial state is the best part of the book. What really struck me were some of the historical parallels to today. (Note again my earlier caveat about reading too much into these—but they are fascinating nonetheless.)

Among them:

• In the 16th-17th centuries, “Russians had no certainty that government agents would seize any object of value in their possession and forbid trade in any commodity by declaring it a state monopoly.”
• Under Peter the Great, the use of any pretext to expropriate property: “In the first half of the 18th century the crown seized many estates for such offenses as the landlord’s failure to show up for service . . . negligence in performance of duties, embezzlement of state property, political dissent, or simply falling into disfavor.” Inasmuch as the Tsar or his/her minions were the ultimate arbiter, unconstrained by third party courts, the holders of property were largely powerless against the predations of the state.
• The formation of a “Chancery of Confiscations” to systematize state expropriation of property.
• The failure of Catherine the Great’s well-intended attempts to reform Russian government and economic policy (especially as related to property rights) because these efforts were “[p]erceived as self-serving license for the few rather than a basic human right, and moreover acquired at the expense of millions of human chattel.” That is, the reform efforts empowered and enriched a few and actually impoverished the many.
• Catherine the Great implicitly conditioned the loosening of the tie between property tenure and state service on the nobility’s staying out of politics. The nobility was free to exploit their estates—and their serfs—but were to stay out of politics. [This argument is actually set out in Pipes's "Russia Under the Old Regime," another book I highly recommend.]

La plus ça change, la plus la même chôse

Mocked by the Fates

Filed under: Energy,Russia — The Professor @ 11:04 pm

In an earlier post I mentioned Robert Service’s history of Russia post-1991. Reading it in the context of recent developments in Russia reminds me yet again of Fate’s twisted, ironic, sense of humor. When there was a serious commitment to reform under Yeltsin, rock bottom oil prices undermined the fiscal foundations of the Russian state, making the success of this reform all but impossible. Now, when the commitment to reform has vanished, and has been replaced by an obsession to restore the power of the Russian state to its past imperial grandeur, high energy prices are fueling an aggressive foreign policy. Seventy dollar oil (or even forty dollar oil) in 1995 would have gone far to cushion the impact of shock therapy and would have reduced the dependence of a penurious Russian state on the oligarchs; fifteen dollar oil in 2006-7 would starve the current Russian government of all of the geopolitical leverage that it is so zealously exercising. Timing is indeed 90 percent of life.

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