Archives for December 2008

Communism is our Road to Redemption

Communism is not usually regarded as a green political system.The lack of attention to negative environmental externalities on the part of central planners bequeathed the areas under their control a legacy of wilted forests, poisoned waters and darkened skies. The dissolution of the Soviet empire revealed these failures to the world – the overflowing chemical sink of Dzerzhinsk, the black sulfurous snows of Norilsk and, most iconically, the radioactive zone of Chernobyl. The post-Soviet economic collapse idled the smokestacks and destroyed many of the most egregiously polluting enterprises; yet the hellish mills grind on in China, home of 16 of the world’s 20 most polluted cities. So the claim that Communism could have saved the planet from ecological oblivion will no doubt be met with a fair amount of skepticism.

However, we must first define what kind of pollution we’re talking about. For instance, European medieval cities lacked the most basic sanitation and epicenters of pestilence. Until the nineteenth century, their death rates were permanently higher than their death rates, and needed a constant influx of people from the countryside to sustain themselves. However, in that period humanity’s ecological footprint, even measured per capita, was very small and sustainable. This is because that kind of pollution was extremely localized. Modern man would no doubt find life in the medieval city unbearable, at least initially. However, if you venture outside its (typically small) perimeter, a lost world of bucolic idyll would open up before you. (Then you’d get hanged for vagrancy or killed by bandits or starve to death, but that’s beside the point).

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X-Mas Special – Zen and the Art of Vodka Drinking

The ability of Russians to drink prodigious amounts of alcohol before getting knocked out is legendary in the West*. It is a subject at once of grudging respect for the hardy Russian soul and airy condemnation of their shallow barbarism. Actually, there is nothing particularly supernatural or mysterious about it, nor is it a result of genetic resilience to the embrace of the green serpent acquired over generations. It is a simple procedure that anyone can learn, albeit mastering it is more of an art. With the ongoing Christmas and New Year festivities, as your drinking guru I feel it is my duty to inform you of how to drink lots of spirits and enjoy it.

The traditional party begins with a meal in the evening and lasts well into the night. If you are a healthy, non-East Asian adult male, you can expect to consume around about 500-750ml of 40% vodka (that is, the equivalent of 2-3 13% wine bottles, or 4-6 litres of beer) during a typical “zapoi”. Adjust upwards if you have exceptional alcohol tolerance, adjust down if you are a woman (smaller body mass, higher percentage of fat), a pure-blood East Asian (many of them lack the gene that breaks down alcohol) or have health problems, particularly heart or liver related. Or if you’re a child…unlike the French, Russians are generally strict on this. At best you’ll get a glass of low-alcohol apple cider before being sent to bed sometime around 10pm. Now 500-750ml of vodka sounds like a really big amount, inducing a certain sense of fear and loathing in the average Westerner. But spread over several hours and consumed according to a certain procedure, you should overpower this beast with no problems.

The key principle is to fill your belly up with foods that slow down the transfusion of alcohol into the bloodstream. This should prevent the dangerous spikes in alcohol levels that knock out the uninitiated, albeit it does mean that you’ll remain drunk as late as next midday. This means that you should eat lots of fatty, starchy and salty stuff. A typical (hopefully) set-up for a zapoi will include some of the following: fried potatoes and onions; salads like Olivier, vinaigrette or potato salad with their heavy mayonnaise or oil-based dressings; cucumber, cabbage and other pickles; cheeses, sausages and hams; oily fish like sprats, herring or sardines, preferably pickled or oil-preserved. Perhaps the ultimate “zakuska” (something you “bite over”) is salo, salted pork fat. Personally I’ve always found it rather disgusting and refrained from eating it, regardless of my state of inebriation. It is important to eat a zakuska immediately after downing a shot so as to soak up the vodka and release it into the blood steadily rather than suddenly.

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Russia Economic Crisis III: On the Importance of Self-Sufficiency in Liquids

In this essay, I analyze three major areas of concern about the current Russian economy – the debt burden, balance of payments and future fiscal sustainability. Although on paper Russia is comfortably solvent, rolling over debt has been problematic for Russia Inc. because of the shutdown of its traditional financing mechanisms, cheap American credit and foreign direct investment, coinciding with an avalanche of collapsing commodities. The underdevelopment of its domestic financial system forced the government to respond in an improvisatory, but swift and effective, way. Although Russia’s capital account will go deep red, the current account should remain in the black, or will at worst take on a pinkish hue; as such, the balance of payments will remain manageable, given the country’s huge foreign currency reserves. The consolidated budget may run a small deficit due to dwindling oil revenues, a smaller tax base and increased spending, but it will be easily financed out of the state’s rainy day funds. Growth in GDP will be small or stagnant, but the social impact will be mitigated by an expanding safety net. After the crisis, Russia will emerge with a stronger, more self-sufficient domestic financial system – and just in time to enjoy a new oil bonanza.

The fast shrinkage of Russia’s foreign currency reserves, plummeting oil prices and the weakening ruble means that Russophobes1 of all stripes are having a field day. They prophecy the collapse of the currency, soaring inflation, and the disintegration of the ‘Putin system’ as populist unrest undermines it from below and silovik clans fighting over dwindling oil rents rend it apart from above. Relying as they do on unsubstantiated claims fitted to support a flawed narrative of Russia as a virulent kleptocracy governed by economic illiterates, their predictions are once again doomed to come to naught – much like prior auguries of fascist takeover or ethnic disintegration2 after the 1998 crisis. This article will reveal why.

In the new millennium, loose US monetary policy and perverse regulations channeled cheap credit into a massive housing bubble. This explains why the US ‘enjoyed’ a consumer boom, even though the Bush II period was historically unique in that median household incomes never exceeded the peak level attained prior to the last recession3 (the dotcom bust after 2000). The borrowing binge spread to Russia in 2005 and intensified up to 2007. Even as the government shed off its debt with the help of soaring oil revenues and squirreled away 600bn $ in foreign currency reserves, its private banks and national champions gorged themselves at Greenspan’s trough to finance domestic and foreign expansion. But all unsustainable things come to a point where they can not longer be sustained, and by 2007 that junkiest junk, the subprime loan market, began to come apart at its seams.

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Russia Economy Crisis II: Anatomy of the Crisis

As promised in the last post, here is a follow-up about Part II of the 17th World Bank Russia report, the reading of which cannot be stressed as too important in the current climate. Like in the last post, I summarize the main reports, using a lot of unattributed straight-out quoting of salient phrases and sentences of the report, interspersed with my own commentary (which I sometimes make explicit by adding NOTE). After this, I plan on writing one more post about the economic crisis in Russia to clarify and further expound on my views, hopefully in a more coherent and readable format that these first two Russia Economy Crisis posts.

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Russia Economy Crisis I: How Red will Russia Get?

Recently the World Bank’s November issue of the biannual Russian Economic Report came out. At the time I was busy with other things, amongst others planning the move from Blogger to self-hosted WordPress; as such, I did not give it the comprehensive treatment that it deserved at the time. Of course, reading about these things today is much more important than at any time since 1998 (or 1987, or even 1929)…and if I devoted an entire post to the last November issue, surely this new compendium of graphs galore and pecuniary palaver deserves some special attention?

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Victimized Venezuela II: Beware of Schadenfreude

Much like Putin’s Russia, Venezuela has been unfairly victimized by Washington’s foreign policy elite and savaged by the Western MSM, which have caricatured Chávez as a run of the mill Latin American populist strongman. In a previous post on this matter, I drew attention to the work of Mark Weisbrot at the CEPR, who has demolished these crude myths (The Venezuelan Economy in the Chávez Years). Under the Bolivarian regime poverty plummeted, access to high-quality healthcare, education and affordable food widened and the GDP skyrocketed by 94% from Q2 2003 to 2008.

Unable to criticize Venezuela on humanitarian grounds, the only option left open to the neoliberal ideologues was to claim that the Venezuelan economic miracle was nothing more than an ‘oil boom headed for collapse’. Unfortunately for them, the Venezuelan state kept a balanced budget, reduced its foreign debt from 47.7% of GDP in 2003 to 24.3% in 2007 and total interest on all public debt amounted to just 2.1% of GDP in 2006 – overall, a fiscal policy far more responsible than Washington’s itself. For 2008, the government assumed an oil price of 35$ per barrel; it is true that in practice the state spends beyond budgeted expenditures when oil revenue far exceeds the budgeted for price, so a fall in oil prices would trim government spending and growth. However, a budgetary crisis or economic downturn are very unlikely, since the government has more than 50bn $ of international reserves it can draw upon in a crisis.

That was the theory when Weisbrot published the paper in February 2008…but how does it stack up in the face of 50$ per barrel today?

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Russia’s Fertility Future

The excellent demographic journal Demoscope has an extensive discussion of fertility trends in Russia. Some of it backs my own views in Demography I – The Russian Cross Reversed? and consequently, the assumptions behind the future demographic projections in Demography III – Faces of the Future.

The issue starts off with 2007: Fertility Year, which notes that from 1999 to 2007 the crude number of births increased by 33% from 1,214,700 to 1,610,100. Furthermore, only 37% of the increase above was due to an increase in the size of the childbearing age segment of the population (the ‘echo’ of the 1980’s baby boom) – the other 63% is due to the rise in the total fertility rate (TFR), which is independent of the population’s age structure by definition. In 2007, these two figures widened to 10% and 90%, respectively. So the common Russophobe argument that recent increases in the birth rate are only due to the current youth bulge is at best only a third valid.

Total fertility rates 1925-2006. From top to bottom - Russia; Spain; Italy; USA; Finland; France; Sweden; Japan.

Total fertility rates 1925-2006. From top to bottom – Russia; Spain; Italy; USA; Finland; France; Sweden; Japan.

After that they give us a standard discussion of comparative Russian fertility history. Although Russia was at the forefront of the demographic transition in the 1950’s and 1960’s, unlike most Western European countries its TFR remained stable and edged upwards in the wake of the new maternal benefits and social guarantees of the 1980’s, peaking at 2.23 in 1987. It collapsed in the face of the socio-economic tsunamis of the 1990’s, reaching a nadir of 1.17 in 1999, albeit there has been an incipient recovery since the new millennium. It has accelerated very recently, reaching 1.41 in 2007. (According to preliminary data, the crude birth rate increased by a further 8.1% in the first nine months of this year, so the TFR for 2008 should be at around 1.5 – far from the replacement level of 2.1, but already in the top half of the industrialized nations).

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