Streetwise Professor

January 1, 2011

Taking Care of Business

Filed under: Uncategorized — The Professor @ 3:42 pm

The Khodorkovsky verdict was announced Monday.  I don’t have much to say about the verdict itself that hasn’t been said already.  What I do find interesting is the Russian response to the near-universal foreign criticism of the outcome of the “trial.” 

Specifically, Foreign Minister Sergei (“The Spider”) Lavrov scuttled out to tell everybody (foreign everybodies in particular) to mind their own business.

Be careful what you ask for, Sergei, because as a result of the verdict, and the conditions that it epitomizes, foreign investors will be minding their own businesses thank you very much, and will be minding it somewhere other than in Russia–or at least not at the scale that the apparent opportunities would seem to justify. 

Yes, there will be exceptions, especially in retail and consumer products (as in the Pepsi deal for Wimm-Dann).  But even there the recent decision of Walmart to abandon plans for Russia, and the ongoing IKEA saga, demonstrate the trepidations that even heavy hitters have about investing in Russian retail/consumer markets.  Similarly, just because a politically connected behemoth like GE thinks that it has the heft and the influence to navigate the treacherous shoals of Putinland don’t conclude that others less hefty and less influential will have the same confidence.  Pepsi and GE are more the newsworthy exception than the unremarkable rule. 

And far more importantly, many Russians will conclude that minding a business is not worth the risks.  The Khodorkovsky prosecution, with its attendant absurdities, symbolizes quite graphically the arbitrariness of the system and the contingency of wealth and ownership in Russia.  This is a country where Putin has a call option on a business or a share of its profits; and where Putin deems a business to be unworthy of his attention, some local satrap has the call option.  And so it goes down the line, with the smaller the business, the smaller the thug (or thugs) with an option over the action.  But in the land of the raiders, every entrepreneur knows that his/her hard work–and his/her freedom or his/her life–is at risk to the depredations of some official or some mafiosi (to the extent that these are distinct classes, which too often they are not). 

The low rate of entrepreneurship and business formation in Russia is well known.  The reasons for it are not hard to find.  The Khodorkovsky saga is just the most notorious, larger-than-life, epitomization of a systemic problem.

It should be recognized, though, that this systemic problem is not easily addressed, because its roots are not merely political but cultural and historical: put differently, the political system is consistent with, rather than antithetical to, the beliefs of large numbers of Russians.  If there is anything to Deirdre McCloskey’s “Bourgeois Dignity” hypothesis–and I think there is, although I am not totally convinced–Russia is not fertile soil for modernization because of the widespread hostility towards entrepreneurial–“bourgeois”–values and enterprise. 

Indeed, Russia is McCloskey’s poster child for anti-bourgeois hostility and its corrosive effects on economic growth.  (McCloskey, nee Donald, I might add, was a student of Russian-born Alexander Gerschenkron at Harvard.)  This is not a new thing, but a very old thing, and hence quite difficult to change.

McCloskey points out that historically it was the outcast Old Believers that made up the bulk of the entrepreneurial class in Russia, to the extent it existed at all (and that many of the rest were Jews, also outcast).  Se further points to the zero-sum mindset that is characteristically Russian (and if you have doubts about that look at Russian foreign policy which oozes this mindset).  It is (was) widely believed in Russia that if anyone makes money, he made it by theft.  (Not that such beliefs are alien elsewhere, just that they are modal in Russia.) 

Sadly, there are many examples that support that belief.  (Arguably, Khodorkovsky himself for one, once upon a time.)  But that’s just a manifestation of a vicious circle, in McCloskey’s view.  To her, the cultural devaluation of bourgeois striving gives rise to a sort of Gresham’s Law, whereby the bad actors drive out the good.  If it is widely held that no respectable person goes into commerce, no respectable person will go into commerce.  Only a change in values–or the value placed on commercial activity–can make it possible to escape this fixed point.

So yes, the Khodorkovsky verdict is a bad omen.  But if McCloskey is right–and again, I think there’s a lot to what she has to say–Russia’s deeper challenges in achieving modernization would still remain even in the highly unlikely event that Medvedev were to rebel against the system that created him, realize his airy words about modernization and the ill effects of legal nihilism, and pardon Khodorkovsky tomorrow.  The Russian government and the Putin system are consonant with a set of beliefs that is deeply suspicious of people who mind their own businesses.  This set of beliefs is broadly held and long-established.  The system reinforces the beliefs and the beliefs reinforce the system.  This results in an equilibrium that will be hard to change, at least anytime soon.

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36 Comments »

  1. “This results in an equilibrium that will be hard to change, at least anytime soon.”

    Could be worse. Could be Latvia, where deaths exceeded births by almost 50% (yes, fifty. Five. Zero.)

    But then, that’s what happens when the economic policy of a country is being run from the grave by the bouldering bones of Herbert Hoover’s Treasury Secretary Andrew Mellon.

    Comment by rkka — January 1, 2011 @ 4:08 pm

  2. “Burke ever held, and held rightly, that it can seldom be right… to sacrifice a present benefit for a doubtful advantage in the future… It is not wise to look too far ahead; our powers of prediction are slight, our command over results infinitesimal. It is therefore the happiness of our own contemporaries that is our main concern; we should be very chary of sacrificing large numbers of people for the sake of a contingent end, however advantageous that may appear… We can never know enough to make the chance worth taking… There is this further consideration that is often in need of emphasis: it is not sufficient that the state of affairs which we seek to promote should be better than the state of affairs which preceded it; it must be sufficiently better to make up for the evils of the transition.”

    The casually confident advocacy here of a vast social engineering project of questionable advantage and likely vast human cost, renders your “advice” to Russian leaders something that, to say the least, they are unlikely to take.

    Comment by rkka — January 1, 2011 @ 4:28 pm

  3. Dear Mr. Pirrong: Thanks for your lucid and interesting use of my amateurish comments on sad Russia in my book Bourgeois Dignity: Why Economics Can’t Explain the Modern World. Despite being a Gerschenkron student I am not expert on the matter. But when still another act in the Khodorkovsky drama concludes, everyone who cares about liberty shakes her head. One minor complaint: “her” head, not “his.”
    Sincerely,

    Deirdre McCloskey

    Comment by Deirdre McCloskey — January 1, 2011 @ 9:04 pm

  4. Specifically, Foreign Minister Sergei (“The Spider”) Lavrov scuttled out to tell everybody (foreign everybodies in particular) to mind their own business.

    It was clearly addressed to hypocritical Western leaders who love to shameless harp on about how Khodorkovsky’s rightful imprisonment constitutes derailment of the rule of law in Russia – never mind the illegal indefinite detentions of so-called “terrorists” at Guantanamo, ruthless drone strikes against an “ally” in the “war on terror” and total unaccountability over rendition flights and torture at “black sites – while themselves completely subverting the spirit of the rule of law by demanding fixed judicial outcomes and hence unethically interfering in the judicial process.

    And far more importantly, many Russians will conclude that minding a business is not worth the risks. The Khodorkovsky prosecution, with its attendant absurdities, symbolizes quite graphically the arbitrariness of the system and the contingency of wealth and ownership in Russia.

    To the contrary, no ordinary Russians – at least those not brainwashed by Radio Liberty or shilling for MBK’s PR machine – give a damn about Khodorkovsky. To the billionaires it is a salutatory and appropriate reminder not to attempt to take over the Russian state for their own narrow, self-serving interests.

    Sadly, there are many examples that support that belief. (Arguably, Khodorkovsky himself for one, once upon a time.)

    Why “once upon a time”? Are you arguing that once you start spouting off about rule of law, Western transparency and the Chekist regime all your crimes are washed away in a baptism of freedom?

    But if McCloskey is right–and again, I think there’s a lot to what she has to say–Russia’s deeper challenges in achieving modernization would still remain even in the highly unlikely event that Medvedev were to rebel against the system that created him, realize his airy words about modernization and the ill effects of legal nihilism, and pardon Khodorkovsky tomorrow.

    How is pardoning a crook a blow against “legal nihilism”? Now while it might make sense for Bush supporters, it doesn’t to most normal people.

    This set of beliefs is broadly held and long-established. The system reinforces the beliefs and the beliefs reinforce the system. This results in an equilibrium that will be hard to change, at least anytime soon.

    And thank God for that! Russian learns and improves after all…

    Comment by Sublime Oblivion — January 2, 2011 @ 12:36 am

  5. Hmm, the “ruthless drone strikes against an ally” that were approved by the Pakistani and Yemeni governments in order to eliminate terrorists that threaten the very existence of both countries?

    And Sublime Retard, regardless of his real crimes, the fact is that this prosecution of Khordokovsky was political, intersting how none of the other oligarchs, who committed far worse crimes as a general rule, have been prosecuted.

    BTW, please provide evidence that western governments “fix” verdicts in legal cases against terrorists, there have been quite a few acquittals in those cases, not something usually done if the government can “fix” the result.

    As for how is pardoning a crook a blow against “legal nihilism”? well the President of Russia, Medvedev, certainly thought so at one stage. Until of course his master Putin changed his instructions.

    Ordinary Russians that I am acquainted with, not the FSB types and communists that you worship, despair of their country ever advancing economically, politically, or culturally, while scum like Putin, Lavrov, and others run the place as a mafia state.

    Once again SO, why don’t you go and live in Russia if you detest the west so much? I am sure you would get a good job at the Russian propaganda mouthpiece RT.

    You would probably raise the average IQ’s of both countries by emigrating to Russia.

    Comment by Andrew — January 2, 2011 @ 3:23 am

  6. Wow, Deirdre. I never would have expected that you would have stumbled across my extemporaneous musings linking your wonderful book to Khordorkovsky (though I suspect Google Alerts may have had something to do with it:) I had literally just finished reading Bourgeois Dignity when I sat down to write the post, and the connection came to me in a stream-of-consciousness sort of way. Thanks for your kind words.

    I very much admire your book, which I have told my daughter (who is now applying for econ PhD programs) she absolutely has to read. You sell yourself short re Russia: if you are amateurish in that regard, it is only compared to your deep knowledge of so many other subjects. But I think that Russia is definitely an excellent illustration of your deeper point–viz., that social attitudes towards the dignity of commerce decisively influence economic prosperity (not to mention human development, more fully considered). Russia is definitely a foil to the Dutch, as you use it in your book. (It is sadly ironic, isn’t it, that Peter went to the Netherlands and was awed by the technology, but was blind to the social and rhetorical conditions that created it? Interesting counterfactual: would history have been any different if he had seen with different eyes?)

    My deepest apologies re “his” vs. “her.” I stand corrected and will correct.

    Thanks again for writing. I am looking forward to the next book, and the book after that, etc.

    The ProfessorComment by The Professor — January 2, 2011 @ 6:47 am

  7. @SO, if Khodorkovsky is a crook, then why don’t they just charge him with a real crime? Putin and those like you love to say that he was a poisonous corruptocrat buying his way into power. Well, so why doesn’t he just go to trial for those things instead of for something ridiculously made up? Seriously, do you think he stole all that oil? No joke, seriously, do you think that? Was this a well-run trial? Again, seriously, do you think that?

    If he’s so bad and his crimes are so obvious, then why can’t the Russian legal system build a coherent, sensible prosecution? If he’s a murderer, then charge him for murder. If he bought government officials, then identify the officials he bought, and what he got out of it, etc. You are stunned by our disbelief in Khodorkovsky’s unfair treatment, yet you buy into some of the most unprofessional, incompetent, laughable legal efforts seen in the “civilized” world. Truthfully, I don’t know how you manage to rationalize these gross intellectual inconsistencies.

    I have no problem locking up Khodorkovsky if he, indeed, did something wrong that can be proven in a court of law. In Putin’s public comments, he has charged MK with just about everything BUT what he’s on trial for. I just don’t understand why this point gets missed time and time again by those who defend Russia so blindly.

    Comment by Howard Roark — January 2, 2011 @ 3:41 pm

  8. What Howard Roark said, plus…

    The point that an awful lot of commentators are missing is the manner in which the Russian law is inconsistently applied, not the law itself, is what forms the bulk of the criticism of this verdict. It is quite consistent for somebody to criticise the arbitrary application of the law – which adequately describes the prosecution of Khodorkovsky – whilst not denying that the case should have been prosecuted. I haven’t seen many westerners protesting Khodorkovsky’s innocence, but the Russians have gone out of their way to knock down this little straw man anyway.

    I didn’t find the actual laws to be so much of a problem when I lived and worked in Russia, it was the arbitrary manner in which they were applied which caused us far greater headaches. Note the way in which the Sakhalin II environmental concerns magically disappeared the moment Gazprom took the keys to the projects, for example. The destruction of Yukos was no different in this respect: what happened to their tax bill – the very same tax bill which was used to bankrupt the company – once Rosneft took it over?

    Comment by Tim Newman — January 2, 2011 @ 10:13 pm

  9. It’s a kangaroo court, no doubt. A real prosecution is not possible, because the powers that be would then have to to prosecute themselves as well. Now that wouldn’t make any sense, would it? You see it’s impossible to become a billionaire without selling your soul to the devil. In modern America, this means cheating, stealing, bullying. Guys like Steve Jobs, Gates and that facebook kid are a testament to that. In the economically collapsed clusterfuck that is post-Soviet Russia, this means a trail of dead bodies, whether your name is Khodorkovsky, Berezovsky, Abramovich, or Timchenko.

    Comment by So? — January 3, 2011 @ 12:22 am

  10. “The point that an awful lot of commentators are missing is the manner in which the Russian law is inconsistently applied, not the law itself, is what forms the bulk of the criticism of this verdict. It is quite consistent for somebody to criticise the arbitrary application of the law – which adequately describes the prosecution of Khodorkovsky – whilst not denying that the case should have been prosecuted.”

    Which is why Putin tried to draw a line under the previous era at the beginning of his first term. There were too many crooks to take on with any prospect of success, so his offer was “Pay your taxes and stay out of politics, and you can keep your loot.”

    Most got the message. A few didn’t. Mr. K chose to fight the State, and the State won. End of story.

    There is no reason to go back on the deal now in order to prosecute other Oligarchs who no doubt deserve it. The demand that Medvedev/Putin do so now is nothing more than evidence that the demander wants to see them fail.

    Comment by rkka — January 3, 2011 @ 5:56 am

  11. There were too many crooks to take on with any prospect of success, so his offer was “Pay your taxes and stay out of politics, and you can keep your loot.”

    Quite. Applying political conditions to the application of the law is precisely the problem I’m describing.

    Comment by Tim Newman — January 3, 2011 @ 6:06 am

  12. “Quite. Applying political conditions to the application of the law is precisely the problem I’m describing.”

    Would a failed assault on every Oligarch that deseved it, or no assault on any of them, have had a better result for Russia than the course of action Putin followed?

    I expect that Russia’s condition would now be much worse if either of these alternatives had been chosen.

    Comment by rkka — January 3, 2011 @ 6:21 pm

  13. @S/O.

    1. Thanks yet again for delivering a pitch-perfect example of exactly the mindset I wrote about. You prove my point. Again.
    2. I really have nothing to add to what Howard and Tim said re the way that the absurdity of the Khodorkovsky prosecution and “trial” completely undermine the credibility of the charges against him. If he’s guilty of something real, why prosecute him for something utterly fantastical?
    3. Re not giving a damn. Again, proving my point in the whole last part of the piece (where I was riffing off McCloskey). The fact that the prosecution of Khodorkovsky is popular with many, a matter of indifference to many more, and a matter of concern to so few is exactly what I was referring to in my discussion of the cultural/historical aspect.
    4. Don’t confuse popularity with justice.
    5. Don’t embarrass yourself with rants about the rule of law. When you understand the concept, we’ll have something to talk about. It’s clear you have no conception of the concept. And really, your Pavlovian reaction to the merest suggestion of the subject is quite revealing–and quite embarrassing.
    6. So one set of billionaires is warned off turning the state to serve their selfish interests–all so another set of billionaires can turn it to theirs. Obviously a big improvement. The crucial difference is which set of billionaires has the most weaponry.
    7. Does your conviction that thieves should rot in jail extend to Putin and the rest of the siloviki? If not, please explain why not.
    8. And the best for last: “Russian learns and improves after all…” I’m glad I wasn’t imbibing liquids when I read that, as I had been I would have ruined a perfectly good keyboard. Learns what, exactly? Improves how, exactly? In fact, Russia and the Putinists are the modern Bourbons: they have learned nothing, and forgotten nothing.
    9. GET OUT OF BERKELEY BEFORE IT’S TOO LATE.

    @rkka. Social engineering? Where did you pull that from? I said nothing about social engineering, nor would I, because I find the entire idea to be ludicrous, not to mention repellent. And I didn’t give any advice.

    What I said was quite the opposite: that the prospects for any change were bleak because of deep-seated historical, cultural, and political forces. Mine was a diagnosis–social engineering is a prescription. Just because one diagnoses dysfunction does not imply one is recommending a cure. Indeed, the whole point is that Russia is in equilibrium, and this equilibrium will be hard to change.

    As a general matter, I believe (a) bad institutions (where institutions is defined broadly to include culture, beliefs, etc., as is the case in much of the New Institutional Economics literature, e.g., Grief) lead to bad outcomes economically, politically, socially, and (b) it is very hard to change bad institutions. (b) is why I conclude that social engineering is almost always futile at best, and oftentimes destructive. And this is a conclusion that applies not just to Russia, or Sub-Saharan Africa, or South America–it applies in the US too.

    The ProfessorComment by The Professor — January 3, 2011 @ 7:33 pm

  14. Would a failed assault on every Oligarch that deseved it, or no assault on any of them, have had a better result for Russia than the course of action Putin followed?

    For the umpteenth time, it was not the assault per se that is the problem, it is the political nature of the assault. It would have been better if Russia had selected one or two oligarch’s to prosecute but without attaching political considerations to the decision to do so. Personally, I think far more damage has been done to Russia by their taking a political decision to prosecute Khodorkovsky than had they let him be. And as an aside, I think they’ve set their oil and gas business back by a decade by destroying what was Russia’s most modern and best-run oil company.

    Comment by Tim Newman — January 3, 2011 @ 8:58 pm

  15. AFAIR, Khodor was given a chance to bow out nicely, but he preferred to play the patriot instead. He could have been partying with Abramovich on the Eclipse right now.

    Comment by So? — January 3, 2011 @ 10:09 pm

  16. “As a general matter, I believe (a) bad institutions (where institutions is defined broadly to include culture, beliefs, etc., as is the case in much of the New Institutional Economics literature, e.g., Grief) lead to bad outcomes economically, politically, socially, and (b) it is very hard to change bad institutions. (b) is why I conclude that social engineering is almost always futile at best, and oftentimes destructive. And this is a conclusion that applies not just to Russia, or Sub-Saharan Africa, or South America–it applies in the US too.”

    Indeed. Due to unimpeded Western social engineering, deaths now exceed births in Latvia by nearly 50%. The Wall Street Journal recently held Latvia up as an example for other indebted nations to follow. The experiment continues, heedless of the human losses.

    “For the umpteenth time, it was not the assault per se that is the problem, it is the political nature of the assault. It would have been better if Russia had selected one or two oligarch’s to prosecute but without attaching political considerations to the decision to do so.”

    Mr. K’s refusal of the Putin offer was an excellent reason to single him out.

    “Personally, I think far more damage has been done to Russia by their taking a political decision to prosecute Khodorkovsky than had they let him be. And as an aside, I think they’ve set their oil and gas business back by a decade by destroying what was Russia’s most modern and best-run oil company.”

    While Mr. K had anything to do with the running of Russia, Russians were dying off at an alarming rate. That is no longer the case. Even Russia has aspects other than the oil industry.

    Comment by rkka — January 4, 2011 @ 6:06 am

  17. @Howard Roarke,

    I think the prosecution was rather incompetent from a PR perspective, which the MBK propaganda machine used to great advantage. That said, there are literally hundreds of accounts of Menatep’s thuggish tactics against those that stood and its way, at least five of whom happened to end up dead. He got warned to reign back early in Putin’s Presidency but he refused to take the hint. While the trial may not be up to the highest standards of rule of law (though I can’t really say one way or the other given the massive flows of propaganda every which way), I am sure that locking him away is at least poetically just and certainly a salutary reminder to other oligarchs not to use their ill-gotten wealth to subvert Russian politics to their own selfish interests.

    I don’t defend Russia blindly. There are millions of Russia worthier of being defended, e.g. Dymovsky, Magnitsky, etc spring to mind. But killer oligarchs figure very, very low down on my list.

    @SWP,

    Don’t embarrass yourself with rants about the rule of law. When you understand the concept, we’ll have something to talk about. It’s clear you have no conception of the concept.

    No, the real issue is not that I misunderstand the concept, but that we have different understandings of it. You don’t appear to have any problems sanctioning the US executive with ordering assassinations of US citizens abroad (Al-Awlaki), or formulating intricate but unconvincing arguments to place (supposed) “illegal combatants” into legal limbos without the right to know their charges and trial (if they are accused criminals) or enjoy the protection of the Hague Conventions (if they are soldiers), or the arrests and detentions of anti-war protesters for providing “material aid” to terrorists by calling for dialog (never mind Republicans in Paris shilling for the Mujahhideen-e Khalq – that’s cool because they’re terrorists against Iran), nor do I remember you condemning the arrests of Russia Today journalists covering the protests against Fort Benning, and if I could be bothered I could probably find about a hundred other legal double standards you hold against groups that you have a political disagreement with.

    So please don’t give me the BS about misunderstanding rule of law. It’s all perfectly clear. Possession is 90% of the law), and Khodorkovsky is a billionaire, and what’s best he’s a darling of the West, and hence prosecuting him is really very anti-rule of law. That’s all there is to it, right?

    So one set of billionaires is warned off turning the state to serve their selfish interests–all so another set of billionaires can turn it to theirs. Obviously a big improvement. The crucial difference is which set of billionaires has the most weaponry.

    It’s funny. Many Western commentators go on about how Putin is a billionaire, but provide no evidence (the original source of the claim was a 2007 article by a Russian political scientist, with no evidence included apart from pure speculation about the ownership structure of Gunvor).

    Does your conviction that thieves should rot in jail extend to Putin and the rest of the siloviki?

    Because I do not think he’s a thief, but if he was there’d be no exception for him.

    Anyway, do you have to bring in the Bourbons and Berkeley into every discussion on this. Actually WTF does Berkeley have to do with any of this?

    Comment by Sublime Oblivion — January 4, 2011 @ 7:11 am

  18. @rkka–Western social engineering caused Latvia’s demographic implosion? Really. The Soviet legacy has a lot to do with it. Latvia is only the most extreme case of something that is common across the entire FSU and ex-Warsaw Pact. And I think you are being somewhat cavalier with the term “social engineering.” As commonly understood, that means some centralized, coercive program to achieve a particular outcome. Stalin’s collectivization–that’s social engineering. Whatever happened in Latvia is something quite different.

    The ProfessorComment by The Professor — January 4, 2011 @ 5:34 pm

  19. @S/O. Re Putin and the rest of the lot: there are none so blind, as those who will not see. The corruption in Russia is so widely acknowledged, and so widely understood to extend to the very top, only the willfully blind deny it. I suggest you look into the Sovcomflot trial in London, in which Shuvalov was shown to be up to his elbows in a corrupt scheme. You can’t be so naive to believe that he’s unique. The idea that Putin is some kind of honest ascetic floating above a cesspool of corruption is so absurd I am amazed that even you would believe it.

    I have no interest in playing whatabout with you yet again. Your logic: A is imperfect, so no one in A can criticize R. There are all sorts of ways of making ordinal comparisons, and serious people do that, and grapple with the complexities. Unserious ones use logic like yours.

    Besides, I have never expressed any opinion on many of the matters that you raise. You are putting opinions in my mouth. And even if I had endorsed what you claim that I have, that would not gainsay the plain truth that by any measure, the US is far more law ordered than Russia is, or ever has been.

    The Bourbons–because Talleyrand’s remark about them is very, very fitting to Russia. Hamster wheel to hell, and all that.

    Berkeley–well, that’s another case of there are none so blind as those who will not see. You are so evidently attuned to the Berkeley mindset that you lapse into its mantras, which is tedious and unenlightening. You are a smart guy. You would do well by getting out in the world–the real world, which does not include Berkeley, BTW–and getting a totally different perspective. I do not say that out of meanness or spite. To the contrary. I think you would benefit from some time away fro m a pretty warped place that is at the center of an increasingly irrelevant and doomed intellectual and political culture. California may not fall into the f*ckin’ ocean physically, but it is doing so metaphorically, and the Berkeley mindset is a big reason why.

    The ProfessorComment by The Professor — January 4, 2011 @ 5:54 pm

  20. Mr. K’s refusal of the Putin offer was an excellent reason to single him out.

    Whether it was a good reason or not, you continue to miss the point: the fact remains that Putin singled him out for political reasons, and that, as far as I can tell, is what most of the criticism is focussed on.

    Comment by Tim Newman — January 4, 2011 @ 7:05 pm

  21. While Mr. K had anything to do with the running of Russia, Russians were dying off at an alarming rate. That is no longer the case. Even Russia has aspects other than the oil industry.

    Right, so destroying Russia’s best run oil company was necessary to stop Russians dying at an alarming rate? I don’t know about the others, but I’m convinced!

    Comment by Tim Newman — January 4, 2011 @ 7:07 pm

  22. As if Russians had stopped dying off at an alarming rate. As if jailing Khodorkovsky had made Russian healthcare less hopelessly inadequate or alcohol abuse less widespread. All it did was freed up some cash to invade Georgia. It’s not like all those bicycles and toilet seats that Russian troops looted from Georgia will help them live much longer.

    Comment by Ivan — January 5, 2011 @ 1:46 am

  23. “@rkka–Western social engineering caused Latvia’s demographic implosion? Really. The Soviet legacy has a lot to do with it.”

    Hardly. Latvia had no foreign debt upon independence, and a growing population of ~2.7 million. Now they pay ~30% of GNP in debt service, and have a population of ~2.2 million shrinking at a stunning rate.

    And they will never recover until they take responsibility for the situation they are now in.

    “Latvia is only the most extreme case of something that is common across the entire FSU and ex-Warsaw Pact. ”

    Thanks to Putin wresting control of oil revenues from the energy oligarchs, the now RF pays ~3% of GNP in debt service, down greatly since 1999 as Russia’s foreign debt declined from crushing to low.

    “And I think you are being somewhat cavalier with the term “social engineering.” As commonly understood, that means some centralized, coercive program to achieve a particular outcome.”

    Like, in the case of Latvia, becoming a mini “Galt’s Gulch” on the Baltic. An awesome place to build a business!

    Too bad the coming lack of a labor force there.

    “Stalin’s collectivization–that’s social engineering. Whatever happened in Latvia is something quite different.”

    Indeed. Stalin’s collectivization was part of the process of building an asset that would mean survival for “Slavic subhumans” who soon would be subjected to a war of racial extermination conducted with Teutonic thoroughness and attention to detail.

    People in Latvia are disappearing with stunning speed in order to pay off reckless Nordic bankers.

    Tim:
    “Whether it was a good reason or not, you continue to miss the point: the fact remains that Putin singled him out for political reasons, and that, as far as I can tell, is what most of the criticism is focussed on.”

    Frankly, Mr. K singled himself out, by his blind defiance.

    “As if Russians had stopped dying off at an alarming rate.”

    Births have closed the gap with deaths sufficiently that immigration now fills the gap.

    “As if jailing Khodorkovsky had made Russian healthcare less hopelessly inadequate or alcohol abuse less widespread.”

    Healthcare funding has risen since 2003, as has life expectancy and births. Deaths are down too.

    “All it did was freed up some cash to invade Georgia.”

    Among other things. Wages, commonly years in arrears under Yeltsin, are now paid to all but a tiny fraction of the Russian work force.

    “It’s not like all those bicycles and toilet seats that Russian troops looted from Georgia will help them live much longer.”

    Gorbachev’s example of sobriety had a positive effect. Comprador buffoon Yeltsin’s example of drunkennes had a negative effect.

    Putin sets an example of sobriety and athleticism.

    Comment by rkka — January 5, 2011 @ 5:03 am

  24. Frankly, Mr. K singled himself out, by his blind defiance.

    Quite. But it was his defiance of Putin’s political instructions, not the law, which singled him out. On the offchance you’ve missed the point for the billionth time, this is what people are complaining about.

    Comment by Tim Newman — January 5, 2011 @ 5:21 am

  25. > Births have closed the gap with deaths sufficiently that immigration now fills the gap.

    Yeah, right, except that everyone other than Putin’s propagandists already knows that this is an echo of the last Soviet baby boom, an echo that is rapidly coming to an end. Not to mention the human capital consequences of compensating university professor emigration with Central Asian unskilled workers immigration. Way to go for a natural state.

    > Stalin’s collectivization was part of the process of building an asset that would mean survival for “Slavic subhumans”

    Stalin’s collectivization was a genocide far more devastating to Slavic people than anything Stalin’s ally known as Hitler managed to accomplish.

    Comment by Ivan — January 5, 2011 @ 8:19 am

  26. > Healthcare funding has risen since 2003, as has life expectancy and births.

    Funding – maybe, effectiveness – not really. As for life expectancy, it has “risen” from 67.66 in 2003 to 66.16 in 2010, according to http://www.indexmundi.com/russia/life_expectancy_at_birth.html, with Russia’s rank among other nations falling from 142 to 160. The dreadful population-killer Khodorkovsky was in jail, so do you think there might be some more roaming out there?

    Comment by Ivan — January 5, 2011 @ 8:54 am

  27. “> Births have closed the gap with deaths sufficiently that immigration now fills the gap.

    Yeah, right, except that everyone other than Putin’s propagandists already knows that this is an echo of the last Soviet baby boom, an echo that is rapidly coming to an end. Not to mention the human capital consequences of compensating university professor emigration with Central Asian unskilled workers immigration. Way to go for a natural state.”

    Indeed. And Latvia had one too, with the birth rate rising from 14/1000 population in 1981 to 16/1000 population in 1987. At the time, Latvia’s birth rate was comparable to Russia’s.

    They have since diverged…

    “> Stalin’s collectivization was part of the process of building an asset that would mean survival for “Slavic subhumans”

    Stalin’s collectivization was a genocide far more devastating to Slavic people than anything Stalin’s ally known as Hitler managed to accomplish.”

    Hitler failed in his policy of exterminating Slavic untermenschen. Mostly because the Soviet variety of Slavic untermenschen had been endowed with the economic sinews of war such as no Tsar had ever dreamed.

    “> Healthcare funding has risen since 2003, as has life expectancy and births.

    Funding – maybe, effectiveness – not really. As for life expectancy, it has “risen” from 67.66 in 2003 to 66.16 in 2010, according to http://www.indexmundi.com/russia/life_expectancy_at_birth.html, with Russia’s rank among other nations falling from 142 to 160. The dreadful population-killer Khodorkovsky was in jail, so do you think there might be some more roaming out there?”

    The Russian statistical service disagree with the CIA World Factbook figures (where Indexmundi get their data), derived from models of the US Census Bureau. As does the Ukrainian, and Latvian statistical services.

    The government statistical services have direct access to birth/death registration data.

    “#

    Frankly, Mr. K singled himself out, by his blind defiance.

    Quite. But it was his defiance of Putin’s political instructions, not the law, which singled him out. On the offchance you’ve missed the point for the billionth time, this is what people are complaining about.”

    And according to the law, such as it was at the time, Russia was in a demographic death spiral. Folks were publishing articles with the title “Russia is Finished”, all according to the law, such as it was at the time.

    Fortunately, Putin did not share your tender sensibilities when faced with the situation below:

    “Oligarchs at the Trough

    Small businesses account for less than a tenth of Russia’s economy. Most economic activity—and theft—is conducted by those who have become known as the oligarchs. Until the collapse of the Russian economy, in August of 1998, the oligarchs, who number around fifteen, garnered praise from many Western journalists and aid officials as the glamorous magnates of the New Russia, daring pioneers out to establish a free market that would ensure the political demise of the Communists. Just as Russia was dubbed the Wild East, the oligarchs were christened the country’s Robber Barons. But the appellation is misleading: the oligarchs rose to prominence not by building railroads and industries but by exploiting antiquated pricing systems, disorganized legal codes, and—most important—Soviet-era connections with the government. In the early 1990s, in accordance with the economic “shock therapy” advocated by the West, the state relinquished control over the ruble and freed prices (which had been held artificially low) on consumer goods, but maintained more or less fixed prices on oil, gas, timber, precious metals, and other natural resources. The ruble plunged against the dollar, and within days the life savings of millions were wiped out. Absurdities resulted: for example, the one dollar for which a pack of Marlboros sold in Moscow would buy three tons of crude oil or a trainload of prime Siberian timber; one could buy a plane ticket and fly halfway across the country for the cost of a pound of potatoes.

    Those—including Boris Berezovsky, Vladimir Potanin, and Mikhail Khodorkovsky—with ties to the ministries that control natural resources took advantage of price irregularities to make export deals at astronomical profits. Thus it was their connections, rather than entrepreneurial initiative, that made these men wealthy; they used their wealth to buy influence in the media and the government. Wealth begat wealth and influence spawned influence. The oligarchs also established banks and arranged to have them designated conduits of state money, much of which—including hundreds of millions of dollars that Moscow later allocated for the rebuilding of Chechnya after the first Chechen war—simply disappeared.”

    The malign political power of Berezovsky, Potanin, and Khodorkovsky power lies broken, though Potanin was smart enough to take the deal Putin offered and retains his wealth and freedom. You whine about the process, though I haven’t heard even an outline of a plan that would have served Russia better in the years leading up to the global financial collapse of 2007-2009.

    Comment by rkka — January 5, 2011 @ 4:11 pm

  28. And according to the law, such as it was at the time, Russia was in a demographic death spiral.

    Demographics are a legal matter? Who knew?!

    Comment by Tim Newman — January 6, 2011 @ 12:06 am

  29. Those—including Boris Berezovsky, Vladimir Potanin, and Mikhail Khodorkovsky—with ties to the ministries that control natural resources took advantage of price irregularities to make export deals at astronomical profits.

    Yes, but Khodorkovsky was not prosecuted for simply being a beastly oligarch who made hefty profits at the expense of the Russian people, he was prosecuted for political reasons. Which, in case you missed the point, is what people are complaining about.

    Comment by Tim Newman — January 6, 2011 @ 12:10 am

  30. > Hitler failed in his policy of exterminating Slavic untermenschen.

    Despite their overall failure, Stalin and Hitler succeeded in jointly exterminating tens of millions of Slavic people. But that was later: it took some time to train Hitler’s generals in Russia, and also Stalin needed to loot resources to supply Hitler’s war machine, so he first went ahead with the extermination unilaterally.

    Comment by Ivan — January 6, 2011 @ 2:52 am

  31. “And according to the law, such as it was at the time, Russia was in a demographic death spiral.

    Demographics are a legal matter? Who knew?!”

    More a matter of survival.

    “Those—including Boris Berezovsky, Vladimir Potanin, and Mikhail Khodorkovsky—with ties to the ministries that control natural resources took advantage of price irregularities to make export deals at astronomical profits.

    Yes, but Khodorkovsky was not prosecuted for simply being a beastly oligarch who made hefty profits at the expense of the Russian people, he was prosecuted for political reasons. Which, in case you missed the point, is what people are complaining about.”

    What people are realliy complaining about is that Russia survives and has influence in the world.

    They were fine with a dying Russia. The process by which Russia recovered upsets them more than their dying off did, as you amply demonstrate.

    “> Hitler failed in his policy of exterminating Slavic untermenschen.

    Despite their overall failure, Stalin and Hitler succeeded in jointly exterminating tens of millions of Slavic people. But that was later:”

    It was never Stalin’s objective.

    “it took some time to train Hitler’s generals in Russia, and also Stalin needed to loot resources to supply Hitler’s war machine,”

    And got machine tools and other industrial equipment in return.

    And time to field many excellent new weapons.

    Stalin’s policy also changed British PM Neville Chamberlain’s foreign policy from “Germany and England as two pillars of European peace and buttresses against Communism”

    to

    “You may ask why Great Britain is concerned. We are concerned because we gave our word of honour to defend Poland against aggression. Why did we feel it necessary to pledge ourselves to defend this Eastern Power when our interests lie in the West, and when your Leader has said he has no interest to the West? The answer is-and I regret to have to say it-that nobody in this country any longer places any trust in your Leader’s word.

    He gave his word that he would respect the Locarno Treaty; he broke it.
    He gave his word that he neither wished nor intended to annex Austria; he broke it.
    He declared that he would not incorporate the Czechs in the Reich; he did so.
    He gave his word after Munich that he had no further territorial demands in Europe; he broke it.
    He gave his word that he wanted no Polish provinces; he broke it.
    He has sworn to you for years that he was the mortal enemy of Bolshevism; he is now its ally.

    Can you wonder his word is, for us, not worth the paper it is written on?”

    As can be seen, Chamberlain’s trust in Hitler had been extensive. It took many betrayals to turn it around. And even as late as October, his senior staff indicated there was hope of coming to terms with a German government from which Hitler had been removed.

    Comment by rkka — January 6, 2011 @ 4:36 am

  32. > It was never Stalin’s objective.

    Yeah, right. “A common tragedy” of murderers and their victims, as the current Kremlin-dwellers like to put it. True consolation in their eyes, no doubt.

    Comment by Ivan — January 6, 2011 @ 8:01 am

  33. What people are realliy complaining about is that Russia survives and has influence in the world.

    No, they’re not. That’s how Russians are presenting the criticism, but they, like you, keep missing the point by a mile. I suspect this is deliberate.

    Comment by Tim Newman — January 6, 2011 @ 8:30 pm

  34. “What people are realliy complaining about is that Russia survives and has influence in the world.

    No, they’re not. That’s how Russians are presenting the criticism, but they, like you, keep missing the point by a mile. I suspect this is deliberate.”

    What is deliberate is Westerners ignoring how catastrophic “reform” was. This is indicated by the vituperation directed at Belarus, despite the fact that percentage population losses have been much less there than in “reformist” Ukraine or Latvia. The West vituperates those who resist its will, and Putin is one of those. His accomplishment in reviving Russia counts for nothing, apparently.

    Comment by rkka — January 7, 2011 @ 6:03 am

  35. What is deliberate is Westerners ignoring how catastrophic “reform” was.

    Right, but we’re not talking about that, are we? We’re talking about the west’s criticism of the prosecution of Khodorkovsky, the point of which Russia and its supporters are deliberately missing. Merely pointing to other things in the big wide world which may also be deliberate is not going to change that.

    Comment by Tim Newman — January 7, 2011 @ 7:30 am

  36. The Western bleating about Mr. K. is of a piece with the Western bleating about Belarus, and is as ill-intentioned regarding the populations of the governments against which it is directed.

    Comment by rkka — January 8, 2011 @ 6:49 am

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