Streetwise Professor

April 25, 2012

I Doubt That They Will Be Riding With Dogs’ Heads on Their Pommels, But . . .

Filed under: Economics,Politics,Russia — The Professor @ 9:49 pm

Fiona Hill’s and Clifford Gaddy’s The Siberian Curse documents how the Soviet/Russian obsession with developing Siberia led to a colossal waste of resources. From the blurb:

This is a provocative look at a problem that has been overlooked since the collapse of the Soviet Union. Using economic statistics, economic geography, and history, the book argues that what traditionally has been perceived as one of Russia’s major strengths – its enormous size – is in fact its greatest weakness. The authors describe how years of forcing people and economic activity out into the vast, resource-rich, but inhospitably cold, territory of Siberia has burdened Russia with huge problems and costs. Defying nature as well as the market, the Bolsheviks forcibly industrialized the gigantic landmass they inherited from the Tsars in 1917. They deployed slave labour to build factories and cities and operate industries in some of the most forbidding places on the planet. They then used costly incentives to attract new workers when the prison camps closed. Today, people and factories languish in places communist planners put them – not where market forces would have attracted them. The book explains why this problem was not rectified in the 1990s and why it is likely to persist. Russian leaders still see Russia’s future prosperity as intimately linked to Siberia and its resources. They focus on Siberian redevelopment rather than resettlement to the warmer, western regions of the country. The authors conclude by considering ways in which Russian leaders should rethink the relationship between Russia, its economy, and its territory, especially Siberia.

In another Russian chapter of the Satayana Chronicles, it appears that Putin has similarly grandiose plans to develop Siberia.  Indeed, it is Satayanesque in both choice of goals (exploitation of Siberian mineral wealth) and means (a state corporation endowed with special privileges):

Putin is pushing development of the Far East and eastern Siberia, and with it a revival of some mines dating back to Tsar Nikolai II, after winning another six-year term as president. During campaigning for the March 4 election, he said a state corporation was needed to speed up projects.

Putin’s first deputy, Igor Shuvalov, may be a candidate to head the body, Vedomosti said yesterday. Russia may use earnings from the 2.6 trillion-ruble ($90 billion) National Well-Being Fund, it reported, citing a law drafted by the Economy Ministry.

“The driver of Russia’s development isn’t in Europe any more, it’s in Siberia,” said Artem Volynets, chief executive officer of En+ Group, billionaire Oleg Deripaska’s mining and energy holding company. “China has emerged as a major economy in the last decade and is ready to consume commodities from across the border. If we don’t do it, somebody else will: Africa or Australia.”

This drive is predicated on the belief that proximity to the Chinese market will make these developments profitable.  But economic geography is not measured only as the crow flies.  Climate, and its effect on human habitability, and the nature of the terrain are as or more important.  And it is not as if the distances are small: to the contrary, they are still vast.  Moreover since these distances must be overcome through the construction of infrastructure that must cope with climatic and terrain challenges: the developments proposed are scattered, and hence cannot exploit the economies of density that characterize transportation costs. Most telllingly, they must also overcome the arguably heavier burden of corruption, and its consequent inflation of costs.

Yes, Brazil or Australia are further from China than Siberia, but ocean transport is cheap compared to the cost of constructing low density transport infrastructure across alternately boggy and frozen wastes.

The development plan recognizes that these initiatives are not commercially sustainable.  Subsidies are needed, including subsidies to pay the compensating wage differential necessary to induce people to live and work in Siberia-a region where people have been fleeing from since the collapse of the USSR made this possible:

The state won’t be able to exile prisoners into Siberian labor camps like Stalin, who also sought to stifle Zionist calls for a home in Palestine by setting up the Jewish Autonomous District. Instead it will need to lure workers to the region by ensuring employment and building roads, houses and schools.

The Far East lost more than 20 percent of its population from 1990 to 2011, according to data compiled by Andrei Kokoshin, a former deputy defense minister now at the Russian Academy of Science. To reverse the trend, Russia must provide startup funds and cheap mortgages, he said.

At least $425 billion of investment is needed by 2030, with the state providing a quarter of that, or $6 billion a year, six times its rate of spending in the past decade, Kokoshin said.

Some of these monies will likely come from the National Well Being Fund.  Such a huge subsidy from the state makes the unviability of these efforts plain.   The Fund monies could be much better spent on human-scale projects in the populated part of Russia.  But that’s not the Russian way. The projects will also benefit from highly favorable tax treatment (zero percent profits tax) and effectively unlimited rights of eminent domain.  It is exempt from numerous laws and regulations.

The organization of the state corporation is rather remarkable.  It reports directly to the President-Putin, for the foreseeable future-and appears outside any real legislative checks, such as they are in Russia.  It is therefore a marvelous source of power, and corruption.

The scale of the project is so vast, and the powers carved out by Putin so expansive, that it has drawn comparison to Ivan IV’s oprichina, a state-within-a-state.  I doubt that Putin’s men will be roaming the countryside toting dogs’ heads, as did Ivan’s oprichniki, but there is more than a little justice in the comparison.  As described, this seems very much like a private Putin enclave, separate from the formal structures of the state.  It is more state than corporation.

The grandiose project has earned one influential foe: Kudrin:

The Russian government’s plans to create a mega state corporation to develop Russia’s depressed eastern Siberia and the Far East will make the investment climate in the country worse, former Finance Minister Alexei Kudrin said on Tuesday.

The bill to create the state corporation, already nicknamed “Far Eastern Republic,” was finalized by the Economic Development Ministry and filed with other ministries for approval. The mega-corporation will be partially exempt from federal legislation and be subordinate only to the president.

“These plans immediately cross out the target for Russia to jump to the 20th place in international doing business ratings from the current 120th position,” Kudrin said.

. . . .

“The creation of such a market player capable of implementing any private project, considering the state’s administrative resource and using special preferences, means that any other investor in this area must be aware that at any moment another player with special preferences, special administrative resources and special access to finances may come to the market,” he said.

Kudrin is now more outsider than insider, so it is doubtful that his trenchant criticism will make the slightest difference.

No, this seems to be an extractive institution par excellence, both literally (in that it is focused on mining) and figuratively (in the Acemoglu-Robinson sense).  A vast tunneling scheme that takes resources from the Russian state, and directs them to exorbitantly expensive projects directly under presidential control, permitting the skimming of vast sums.  Credit Mobilier on PCP.  Just think of the possibilities.  Putin and his minions can issue huge contracts to favored firms (in which they hold stakes, or from which the collect bribes), and pay for them with state money.   They can allot development rights to favored parties, and collect some boodle by various means.

Under the USSR, it is at least possible that there was an ideological basis for the obsession with Siberian development, as demented as the idea was in practice.  Putin should have the advantage of learning from the failure of the Soviet efforts.  Either he is insane in the Einstein trying-the-same-thing-repeatedly-expecting-a-different-result sense, or he just views this as a marvelous opportunity to accumulate power and money.  I’m not ruling out the former, but I’m leaning heavily towards the latter.

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  1. Excellent article, and hard to argue with your main argument. I particularly like the historical link – the fact is that Russia keeps on reverting to a similar form of government (autocratic bureaucracy) with period attempts at various other forms (democracy, dictatorship, 1920s Soviet power, absolute monarcy). But the bureaucracy as a self-serving autonomous class keeps on reasserting itself.

    So I disagree a little with the two choice presented in your final paragraph. Putin’s definitely not insane (although the term: “differently rational” might apply), and I don’t think you can ascribe his actions purely to a desire to enrich himself and his cronies. I think it’s more that he’s captive to a model of ruling Russia that has dominated for a long time. In the old days the Russian sovereign had armies, led by generals, and used these armies to fulfil various strategic tasks. The generals and colonels were then rewarded with “dan'” – they were given estates to manage with peasants to do the hard work. The estates were owned by the sovereign, but the generals had the rights to the fruits, the use, but not the “abusus”, i.e. the right to sell or entail. (This is an oversimplification, but bear with me)

    Putin is in a similar position – he needs people to run his government and to do his dirty work, and he needs to reward them. So he’s already parcelled out the choicest bits (Stroytransgaz, Olimpstroi, countless other construction projects), and these have gone to reward faithful bureaucrats for doing his dirty work. But those bureaucrats have given way to other bureaucrats who now need to be rewarded, so Putin needs something to offer them. Hence the Siberia corporation – Shuvalov won’t be the main beneficiary but will be in charge of distributing the richesse. He’s already done this with the spending on the APEC conference in Vladivostok.

    Maybe I’m splitting hairs, but it’s more that Putin is captive to the system that he has allowed to arise, rather than this being part of a venal master plan on his part. If he gets shot in the head tomorrow, then whoever replaces him will probably end up doing the same thing, no matter how benign their original intentions. I spoke with a senior Duma deputy the other day, who is a businessman and definitely a liberal (one of the Bolotnaya organisers). He said that he met with Putin, and told him that the MVD is essentially a mafia organisation. He said that Putin thought for two minutes before replying and, not disagreeing, replied that: “Yes, but the problem is, the moment I try to actually change anything there, they stop working.” So his fear is that the MVD will cease to provide their usual services of law and order (and they do actually perform their functions in this respect, to a limited degree) if they lose the ability to make money on the side.

    Now you can argue that this is Putin being disingenuous, but I can believe that he really doesn’t see any other way of running Russia. Now, I still believe that the liberal democratic model will win out in Russia, no matter how hopeless that seems at the moment. My only real counter argument is that if you look at America in 1850 or even 1900, things seemed equally hopeless then, but the system is robust enough to assert itself over the long run. Putin’s tragedy is that he’s chosen to align himself with the forces of reaction, because that’s the path of least resistance, so history will remember him as just another bureaucrat who was crushed by the bureaucracy.

    Comment by Tom Adshead — April 26, 2012 @ 12:17 am

  2. The climate in South Siberia is more stable for agriculture than Central Russia.

    Comment by So? — April 26, 2012 @ 12:25 am

  3. There is only one word for Russia, and that word is: Barbarism. Russia’s obsession with territory for its own sake, as if that made Russia somehow important, is as pathetic and delusional as its obsession with oil. These twin fantasies bring Russia only national ruin.

    Comment by La Russophobe — April 26, 2012 @ 4:59 am

  4. Moreover since these distances must be overcome through the construction of infrastructure that must cope with climatic and terrain challenges:…

    Aye, and Russia is just brilliant at building roads.

    Comment by Tim Newman — April 26, 2012 @ 7:02 am

  5. @Tom. Thanks for the thoughtful comment. The insanity remark was intended to be flip, but is consistent with your characterization: being captive to a model that has led to results that have turned out so well in the past. He would only be insane (per the Einstein definition) if he expects a different result. I don’t know that he does. He probably doesn’t, but feels he has no choice.

    And you are right that it’s not all about making Putin rich personally, though that will happen too. It is definitely about creating a structure that “feeds” clients and servicemen (in the feudal sense of that term). Putin needs to be able to distribute a stream of rents in order to maintain a set of contented servitors. That’s the way that a somewhat stable equilibrium is maintained.

    I wrote about this model quite a bit in the past. I leveraged off the North-Wallis-Weingast “Natural State” model, and drew argued that Russia was a quintessential natural state that uses various economic and political constraints to generate rents for the elite, thereby securing their loyalty. The recent Acemoglu-Robinson “extractive institutions” ideal fits as well. If you search for “natural state” on SWP you’ll find a number of points that make the same argument as you do in your comment-including the idea that Putin is essentially a captive of the system. A further implication is that the system is pretty much stuck in this equilibrium, and it is very difficult to see a way out of it. Which is why I refer to “the hamster wheel from hell” and “Putin’s purgatory.” And which would also explain why he uses this model-he has no choice as transitioning to some other equilibrium is well-nigh impossible.

    There definitely is a strong element of historical continuity. Pipes discusses in detail in Russia Under the Old Regime the concept of the patrimonial state, and analyzes in detail the operation of Muscovy, and later Russia, as a patrimonial state in which the entire country was the Tsar’s patrimony. All property was effectively his, and he doled it out in exchange for loyalty and service. The Siberian megacorporation bears more than passing similarity to this model.

    So I agree with your comment. I accept your criticism and disagreement. I made it sound like this was all a self-enrichment scheme, when in fact it is a time-honored means of maintaining political equilibrium in Russia, although it will enrich Putin as well as those whose support he is buying. I think that there is plenty on the blog that indicates I understand that very well, and should have made that connection in this post. Thanks for doing it for me.

    The ProfessorComment by The Professor — April 26, 2012 @ 1:45 pm

  6. I’ll make you a friendly wager – gentleman’s agreement, no handshake necessary – of a 40-ouncer of your favourite tipple against the same of mine (London Dock Demerara Rum)that the “Far Eastern Republic” makes back double its initial investment before Iraq is a prosperous, free, western-leaning democracy. That was kind of a grandiose project when it was announced, too, perhaps even inviting similar comparison to Ivan’s Oprichnina, although few were as pessimistic at the time as you are here. Perhaps Ivan didn’t have that old exceptionalism mojo workin’ for him. However, Ivan’s decision-making days are over. I feel pretty good about my chances, because if you compare the two leaders – the one who now promises to open up Siberia and make it pay, and the one who promised to make Iraq a prosperous, free, western-leaning democracy – which one has showed the greater propensity for chucking good money after bad?

    Is it a bet?

    Comment by Mark — April 26, 2012 @ 6:25 pm

  7. @Mark-more whataboutism Try to stay OT. For once.

    And by the way, how many Russian rulers have promised to open up Siberia, and make it pay? How many have succeeded?

    If you want to bet, bet with Bush or Cheney or Wolfowitz. You know, people who actually claimed that Iraq might become prosperous, etc. I didn’t. Arab political dysfunction is more extreme than Russian. Iraqi society was particularly broken, by years of extreme brutality. So I had no illusions about its prospects. Bet with somebody who did.

    The ProfessorComment by The Professor — April 26, 2012 @ 7:49 pm

  8. Within decades, as AGW progresses, Siberia (and Arctic Canada) will be transformed into some of the most prime real estate on earth. Skyscrapers will rise above the green ocean of the taiga, and armadas of ships ferrying goods and peoples will crowd the the blue ocean of the Arctic. The polar nights will become pierced with the lights of industry, and the ethereal polar days will become saturated with the din of commerce. Russia itself will transition from being a Eurasian land power to an Arctic oceanic power, and its capital may even move to Murmansk or Norilsk.

    In short: Russia is doing the right thing by heeding the words of futurist visionaries, as opposed to the small men of economics, who can’t see past short-term profits.

    Comment by Sublime Oblivion — April 26, 2012 @ 8:23 pm

  9. @S/O: Speaking of futurism, how’s the artificial womb thing working out? Is that the real reason you killed Sublime Oblivion? To cover up such embarrassing futuristic spewing?

    BTW, Futurism was a Soviet staple in the ’20s. Worked out so well.

    Norilsk. The most polluted city in the world. You are past delusional.

    The ProfessorComment by The Professor — April 26, 2012 @ 8:36 pm

  10. I did not kill it. Lies as usual. All the material has been moved to two new sites, Da Russophile (Russia) and (everything else). Artificial wombs aren’t going to spring up in a matter of a few years obviously.

    Soviet Futurism (and Russian Cosmism) provided spiritual inspiration for the drive that would take the USSR into the stars. The spirit has to be revived. Some people (e.g. you) are content with bourgeois drudgery. Others (e.g. myself) are not.

    Comment by Sublime Oblivion — April 26, 2012 @ 8:52 pm

  11. S/O. Your malignant narcissism is showing. I can see why you pant after Assange.

    And last time I checked, the USSR doesn’t exist, in the stars-or on earth. To associate anything “spiritual” with the USSR is typically delusional. Except if you are discussing its pre-eminent success at crushing the human spirit, the human casualties of which are beyond counting. The pathological lack of trust that pervades Russia today is in large part a product of those “spiritual” endeavors.

    Stalin would have considered you a romantic idiot. So would Lenin. Right before they sent you to the camps.

    The ProfessorComment by The Professor — April 26, 2012 @ 9:06 pm

  12. S/O. Read Deirdre McCloskey’s Bourgeois Dignity. And consider this fact: your existence would not be possible without the labors and dignity of those bourgeoisie you so heartily despise. You are a parasite. Someday you will have to work and pay your way. Your romantic bullshit won’t get you very far. Enjoy your fantasy life while it lasts.

    The ProfessorComment by The Professor — April 26, 2012 @ 9:12 pm

  13. 1. I don’t “despise” the bourgeoisie. I don’t care for their values. There’s a difference.

    2. You would have been the NKVD executioner under Stalin (going by your consistent admiration for The Man and usage of parasite rhetoric). Well, you’re kinda intelligent in a narrow way, so perhaps more like Lysenko.

    3. I read a few reviews of Bourgeois Dignity and would not want to waste time on it sounds like a one massive narrative fallacy (building stories around facts, in retrospect), or clear argument separating cause from symptom. It is lackluster at predicting growth today, with Chile or Georgia (where bourgeoisie have far more dignity) growing much slower than China or Vietnam. To the contrary, national levels of human capital are far better at predicting a country’s economic status – especially once central planning legacies and resource windfalls are taken out of the equation – than virtually any other factor.

    But hey you also think Georgia is some kind of economic success story so it’s clear your views are based on ideology as opposed to facts and statistics.

    Comment by Sublime Oblivion — April 26, 2012 @ 9:46 pm

  14. Make me laugh, boy. You presume to judge McCloskey’s work from some reviews. Yeah. That’s intellectual rigor.

    Read the book.

    She is a true scholar not a narcissistic dilettante, like the one you see when you look in the mirror.

    Re Georgia-so, I guess you ignore “central planning legacies and resource windfalls” when it suits you. And you grotesquely exaggerate what I’ve said about Georgia.

    Your disdain for the bourgeoisie oozes from every pore. You aren’t fooling anyone. Own up to your convictions.

    And let go with The Man stuff. For your own good. It’s self-satire. I was around when that expression was current the first time. It was beyond lame then. The retro version is just pitiful.

    And yes. You are a parasite. What are you producing? Other than Putinist agitprop, I mean.

    The ProfessorComment by The Professor — April 26, 2012 @ 9:57 pm

  15. Re-McCloskey. Reviews are useful because life is short. Reads like a rewriting of Landes’ book but less readable.

    Re-Georgia. If your views were valid, it should be an economic super-star. It is not. Despite its advantage of a very low base and the fact it hasn’t yet even recovered to Soviet era peak output levels, its overall growth performance has been modest under Saakashvili, no higher than the average under Shevardnadze, and overshadowed by Armenia. Saakashvili’s fans (of which you undoubtedly are) have no convincing explanation for that. (No, 08/08/08 or Russian wine bans aren’t convincing. Armenia is land-locked and blockaded on two sides). This suggests some other factor is at work. Say, the fact that the average Georgian student’s literacy and numeracy levels are similar to India’s.

    Re-Man. What do you wish to call it then. The Establishment? You are an Establishment flunky then. An amplifier in the right-wing echo chamber. Etc, etc.

    Re-parasitism. What are most students producing? What are they supposed to produce? Page me back in the mid-2010’s.

    Comment by Sublime Oblivion — April 26, 2012 @ 10:23 pm

  16. @SPW & @Tom Adshead

    I think your analysis is spot on regarding what drives Putting and what might be a derivative of that drive. Moreover, it is consistent with how a regular Russian sees the situation. And that explains why most of the Russians vote for the current regime. Yes, they vote for it, but out of the same considerations as expressed in your analysis. There is a wide spread belief that “you cannot have it other ways in Russia.” Whether one agrees with this or not, unfortunately this is how it is viewed by the vast segments of the population and it is an established belief.

    As a matter of national character Russians are very educated, intelligent, kind, generous, decent people despite some of the existing in the West and elsewhere negative stereotypes. They are also strong people who love their nation and homeland. Most of the time they don’t respond to the criticism directed at them because they agree with most of it, first, and second, as any strong people, they don’t care about what others say. Besides, when someone loves his homeland, he/she frequently is most critical of her. The one who justifies every ill and negative phenomenon in the country or society is the real enemy of that country.

    Think of it as if it was a family. If the son in the family is a drag addict or a criminal, and the parents justify him every possible way, are they not culprits of the crime? Doesn’t the real loving parent himself/herself behave as the most critical and uncompromising disciplinary?

    Now, what you see in this blog, I mean the opinions expressed along the lines of fighting out every single criticism directed at Russia and portraying Russia and the Russian leadership to be something she is not, has nothing to do with Russia and Russians.

    When some hyperactive kid with constant demand for attention is throwing himself at the center of teh room, it has nothing to do with Russia. His ding-danging should be just translates as “look at me, am I not wonderful? I am going to scream if you don’t say so.”

    Therefore, my advice is to treat such person as one usually treats a spoiled brat…

    A couple of words about Georgia… I don’t find Sahakashvili to be an appealing leader, I don’t think of him highly, I think he is an adventurist, cynical, etc. I can go on and on. Ordinary Georgians despise him massively. However, despite what one can read here about Georgia, he has almost succeeded in eliminating corruption in the Georgian police and state apparatus, and Georgia currently has one of the best business climates in the world as evidenced by the inflow of investment capital into the country and the prospering of the investment banking sector. If not for the political risks associated with the conflict with Russia, Georgia would be the most desirable country to do business in the region.

    Comment by MJ — April 26, 2012 @ 11:45 pm

  17. Sorry for the spelling error. Meant to say Putin with no irony.

    Comment by MJ — April 27, 2012 @ 12:22 am

  18. MJ, you are the one living in fantasy land. Russians are clearly inferior in intelligence (IQ=96-98) to East Asians (c.105) and probably Germanics (c.102), and many of them are murderous alcoholics (homicide rate=10x that in W. Europe). There are many Russians – especially liberals – who hate their own country, and likewise there are a great many Russians who are prickly to criticism as any perusal of a site like Inosmi would show. In other words, you are a raging Russian chauvinist.

    Comment by Sublime Oblivion — April 27, 2012 @ 12:33 am

  19. Yes, you are wonderfull…

    Comment by MJ — April 27, 2012 @ 1:36 am

  20. SUBLIME PSYCHOPATH: What good will that do Russia, when Siberia will be Chinese?

    Comment by La Russophobe — April 27, 2012 @ 5:28 am

  21. LaR,

    Russia is a cold, inhospitable backwater. Why are you so obsessed with it? You only have one life. Why waste it on something that doesn’t matter?

    Comment by So? — April 27, 2012 @ 6:51 am

  22. Within decades, as AGW progresses, Siberia (and Arctic Canada) will be transformed into some of the most prime real estate on earth.

    Heh! As if Russia is short of what should be prime real estate right now.

    Comment by Tim Newman — April 27, 2012 @ 6:59 am

  23. Prime real estate isn’t the issue, it is the ability to farm, make investments in agriculture and reap the benefits. In other words secured property rights. God alone knows we have enough problems with PR in the USA, but in any absolutist or personal dictatorship they become impossible.

    Comment by sotos — April 27, 2012 @ 10:50 am

  24. @LR,
    We’ve gone over this before. The mechanics by which “Siberia will be Chinese” are all implausible for at least the next few decades. But don’t bother replying (see next post).

    It kinda is. It’s very cold (much colder than the southern Canadian belt, with which it is often compared), inhospitable, continental, and a large part of it is permafrost. Once the Arctic sea ice melts, it will have the world’s longest and most strategic coastline. The Northern Sea Route is 40% shorter than Suez/Malacca so the bulk of global shipping will reorient itself to the north. A similar process, albeit smaller-scale, will be taking place on the Northwest passage.

    See that’s what I dislike about ideologized approaches. Theories like that are fine but problem is when facts collide with them – are the theorists will to reconsider their theories? As per stats, investment in Russian agriculture is growing strongly, reaching $12bn in 2011 and grain output now consistently exceeding RSFSR levels. Presumably, agro-entrepreneurs to not find Russia’s (supposed) “absolutist or personal dictatorship” to be an “impossible” barrier to “make investments in agriculture and reap the benefits.”
    Anyway, this will be my one and only comment on this topic (see below), so fell free to avoid replying.

    Comment by Sublime Oblivion — April 27, 2012 @ 1:08 pm

  25. I’m going to be taking a page off Mr. X’s book and leaving you guys, who are clearly far more know knowledgeable on all matters pertaining to Russia, AGW, political economy, civility, etc., to it.

    This isn’t to say I won’t comment again, but the break will be for at least a few months, as I will be rather busy this summer. In the meantime, don’t break your hearts over my absence. Or expect a reply. Since I can’t resist replying after reading any one of a substantial a substantial percentage of SWP’s posts, I will not be checking in either.

    Comment by Sublime Oblivion — April 27, 2012 @ 1:10 pm

  26. Akismet again.

    Comment by Sublime Oblivion — April 27, 2012 @ 1:27 pm

  27. Siberia is empty for the same reason why Chinese prefer California to Alaska.

    Russians are perfectly evolved for their crap climate (only Eskimos have it worse). GW will cause an influx of people better adapted to the warmer climes, who will out-compete and then replace the locals.

    Comment by So? — April 27, 2012 @ 5:43 pm

  28. It kinda is.

    No, it’s not. If there is one thing Russia is not short of, it is land. Russia west of the Urals alone is the size of western Europe, yet little of it is prime real estate. Why? Because for land to become prime real estate, it needs to: 1) be developed, and 2) people have to want to live there. It is notoriously difficult to develop anything in Russia because of the mind-boggling bureaucracy which must be negotiated in doing so, making developments three or four times the cost they should be. And nobody, even if it does get 5 degrees warmer, will want to live in Siberia. The idea that Russia will gain enormously from having more land to develop overlooks the laughably inefficient use of the land it alread has.

    Once the Arctic sea ice melts, it will have the world’s longest and most strategic coastline. The Northern Sea Route is 40% shorter than Suez/Malacca so the bulk of global shipping will reorient itself to the north. A similar process, albeit smaller-scale, will be taking place on the Northwest passage.

    Right, and how will this make Russia rich? Is Panama enviably wealthy due to the Panama canal? Ditto Egypt with the Suez Canal? I’ve yet to see the mechanism by which Russia will suddenly become rich by ships passing by 50km off their coastline. Maybe the odd port town or two will make a buck here and there supplying booze and hookers to sailors, but those places which grow wealthy from shipping – London, Rotterdam, Antwerp, Hong Kong, Sinapore – are gateways or hubs to enormous population centres. Why would any ship stop in northern Russia on its way from the US to Asia?

    Of course, this is assuming – somewhat charitably – that the batshit crazy idea that the arctic is going to melt some time in the next century holds water.

    Comment by Tim Newman — April 28, 2012 @ 1:43 am

  29. About the agricultural sector of Russia… It has been greatly liberalized lately, contrary to such expectations and promises from Ukraine.

    Furthermore, significant state resources (state loans) have been allocated for this sector. So, it is not really the foreign investors that make the sector thrive (relative to Soviet times) but the state sector. Clearly, that has its own consequences.

    The agricultural sector of Russia should have the highest prospects, if let to its own devices. Russia has world’s largest “black soil” (followed by Ukraine and Canada) or “chernoziom,” and under the right circumstances a lot of capital would flow into Russia from many Sovereign Wealth Funds – especially of Asian countries, where they have concerns about riots emanating from the predictions of shortages of agricultural output in this decade. Middle Eastern Sovereign Wealth Funds also have strategic interest in the sector. However, trust is a serious impediment. Everyone would remember the embargo of grain exports out of Russia some two years ago as a result of perception of bad harvest. Not only Russian government imposed embargo, it also twisted hands in Ukraine to not let loaded ships leave their ports. So, there is a gap between the strong chance for growing good harvest and deliverability.

    Another impediment for Russian agricultural sector’s growth is that of geography impeding exports. The Russian ports of the Black Sea are shallow ports (most with draft under 4m), except in Novorossiysk. And the latter is already crowded as a primary hub for energy exports. This is significant, since the primary consumers of Russia’s agricultural output are the Middle Eastern and North African nations. On the Asian fronts the geography poses its own understandable challenges.

    So, yes, Russia has a good chance to be a world leader for agricultural production and exports, but the realization if this goal requires further liberalization (I doubt it will happen in the near future) and transportation infrastructure – a much harder problem.

    Comment by MJ — April 28, 2012 @ 3:35 am

  30. By liberalization of the Russian agricultural sector I meant above the right to own and sell agricultural land in secondary markets of Russia, contrary to that of Ukraine.

    Comment by MJ — April 28, 2012 @ 4:40 am

  31. Try to stay on topic, So? We were talking about saddles, military horsemanship and dog’s heads.

    “Russians are perfectly evolved for their crap climate (only Eskimos have it worse). GW will cause an influx of people better adapted to the warmer climes, who will out-compete and then replace the locals.”

    But since you mention weather, I have to say it’s disheartening to see such breathtaking ignorance. Russia is a huge country, with diverse climate systems, and there’s something for everyone. Since we were talking about Siberia, let’s use that for an example. Here are the annual average temperatures for Tobolsk, Western Siberia:

    Brrrrr!!!! Only 24 Celsius in July. Make sure to bring your sheepskin underpants. Here, according to the same weather engine, are the averages for Fairbanks, Alaska.

    Wow! look at that. Generally speaking, Fairbanks is colder in winter than Tobolsk, and pretty much exactly the same in summer.

    Do people live in Fairbanks? Why, yes, they do. Since there are no armed guards or chainlink fences at the city limits, I have to assume they do so by choice. What happens to citizens of Fairbanks when they visit New York City? Do they break out in hives, or burst into flames? Gee, how do they manage to adjust from that crap climate so rapidly? The richest man in Russia (on and off) lives in Siberia, and claims to love it. How did such a stupid guy get so rich, not to mention running for President?

    What it boils down to is that you know as much about Russia as you do – to all appearances – about everything else. Might as well add Global Warming to the list. Global Warming will not necessarily make everything warmer, although that is a popular conservative amusement: “Washin’ton had record breakin’ snowfalls this winner – where’s yer global warmin’ at now, Al Gore? Hyuk, hyuk”. What it is projected to do, although nobody really knows (but I would trust a scientist further than I would trust, say, James Inhofe or Orrin Hatch) is introduce anomalous climate change. That might mean hotter, might not. Where I live, for example, on Vancouver Island, is forecast to be under a cloud/fog bank most of the year, and average temperatures will drop. If it happens.

    Development of Siberia is indeed a major challenge, but not because (a) it’s a crap climate that makes you grow fur or something so you can live there, or (b) because the horrible bureaucracy makes it impossible to get anything built, but because (a) there is a worldwide trend toward living in cities, and somewhere between 75% – 80% of the world’s population now lives in cities, and (b) Russia is an enormous country with a small population. In this it is analogous to Canada, and I’d bet there is as much undeveloped land in the province of Ontario as you there is in any three American states you could name. Is that because we have a crap climate and nobody wants to live here? If it is, someone better tell immigration, because they have shut down processing applications for parents and grandparents for a year in order to catch up with the backlog. Is it because the bureaucracy makes it impossible to get permits to build anything, and just rips everybody off ’til they get discouraged and give up? Maybe; I’m not in the building industry. But I doubt it. I suspect it is just as I said, that it’s a big country with a small population, and nobody wants to live in the boonies of northern Ontario where there’s no work. If there are good-paying jobs in Siberia, it can be done. Putin has as good a chance of it working as anyone else. I trust him not to build some fake enterprise in the middle of nowhere that is financed by taxpayer rubles and looks good on paper but is losing money hand over fist – anyone could do that. Given that Russia has a big cash surplus while most of the west’s most influential countries have huge deficits, I don’t think my trust is misplaced.

    Comment by Mark — April 28, 2012 @ 3:12 pm

  32. Last I heard, Alaska was a backwater. Climate and geography affect work patterns. As befitting the Martian climate, Russians can work extremely hard for short periods of time, followed by very long stretches of doing nothing. This can be seen on every level and every time scale. People from better climes are more accustomed to pace themselves and make steady progress. The latter is always better.

    Comment by So? — April 28, 2012 @ 7:22 pm

  33. I’m sure Alaskans will be enlightened by your work patterns theories. Not to mention how well their geographical location is preparing them for the Martian climate; a wise investor might want to get started establishing a monopoly on colonial work permits. Meanwhile, as Tim Newman is fond of saying, I’m afraid I’m going to be a bother and ask for some substantiation for your work-hard-for-a-short-time, long-periods-of-doing-nothing hypothesis.

    Comment by Mark — April 28, 2012 @ 10:59 pm

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