Where goeth Russia?

One of the themes of my futuristic ebooks is how economies might work, and one of the conclusions is that it may not matter all that much, because whatever economic system a country adopts, the outcome depends largely on the competence or incompetence of those in key positions. If we now look at Russia, we can see why, despite it having a very wide range of resources, it is in the economic doldrums.

Russia’s problems start with various Tsars, who basically wanted to control everything themselves, but did not want to do the required work. Probably the most successful economy led by a single person would have been Rome under Augustus. Augustus had several things going for him, namely the people of Rome wanted an end to civil wars, with Roman killing Roman, he had an economy that was working reasonably well considering the times, Rome had recently conquered a considerable amount of territory so it had a good income through taxing the conquered, the Roman system was essentially free enterprise, or at least much freer than anything else of the time, and also he had one of the most exceptional people who could get things done in Marcus Agrippa. Even so, Augustus was a workaholic, and even then, Roman civilization started its decline in terms of creativity. The Tsars were bone lazy, and spent most of their time terrifying the population.

The Soviet Union might well have worked, but for top management. Stalin actually had some ideas as to what had to be done, but his basic insecurity (kill anyone who looks like a political threat) and his total lack of care for the population (much better to kill a hundred innocent than let one guilty person escape, and, guilt merely involved disagreeing with Stalin, or even being disliked by Stalin) meant that not a lot really got done properly. Stalin was in too big a hurry to bring the Soviet Union into the modern age and he spent no time bringing the people with him. The reason: he feared an invasion from Hitler. He was correct.

Let us look at what happened at the end of WW2. Stalin offered the west a buffer zone. Stalin would withdraw to the Soviet boundaries IF the West left Germany to be neutral. What Stalin wanted was to have a good neutral barrier between him and the West because he believed the Americans hated Communism. He was not that wrong. When the Soviet Union collapsed, the economy was heavily distorted towards military manufacturing, with very little effective consumer goods being made. The agricultural sector was a mess because first collectivization led to few incentives, and second the transport and storage infrastructure was poor. Then when the Soviet Union fell, Yeltsin permitted a number of fly-by oligarchs to take over the industries, many of which they let collapse and after asset stripping, too much of the money ended up being shipped offshore. The net result was that Russia’s manufacturing base fell backwards, the agricultural sector still had a hopeless infrastructure, and as oil production grew, too much of that income simply went to oligarch’s offshore accounts.

Now, with sanctions and a falling rouble, the Russian economy can either collapse in a heap and western financiers can pick over the residues, but only if the military let them, or they can reorganize themselves and start up their own manufacturing base and make products. They may not be brilliant ones, BUT they will be competitive because in Russia there will be little else affordable. So Russia may finally construct a balanced economy. No guarantees, but their choices are do or not do, and not do leaves them in a real mess.

So, this is a triumph for the West? Anyone who thinks that is a clod. Russia is in trouble because oil prices have fallen, thanks to US fracking. What that does is to depress the price of oil to the extent that it is no longer economically sensible to proceed with many of the biofuel options, so oil replacements will stay not implemented. What that means is the sea level rises are inevitable, and the biggest losers from this may well be the Western economies. This is an example of the unintended consequences of something that is immediately good. Fracking has been great for the US economy, but not so good for global warming. Oddly enough, Russia, and Canada, will probably benefit from global warming, as most of it is not beside a coastline, and the north is horribly cold. Useful land will move north.

For the time being, though, Russia is in for a very hard time, no matter what happens, or what they do now. Even if they pulled out of Crimea and Ukraine and bent over and took their whipping from the West, that would not make a jot of difference. They must now pay the price for their history. The only question is, how do they do it? Their only real option is to use their resources and regenerate their economy themselves. Western investment is useless to them, because again, all the wealth from the resources will disappear offshore, leaving the average Russian as little better than an impoverished peasant. At present, Putin may not be what everyone wants to see, he is not exactly a genius leader, but he is all that Russia seems to have at present to avoid the worst of the collapse. Remember that while the West dislikes him, they do not care at all for the benefit of Russians; they only care about themselves, for that is the reality of the invisible hand of the market.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s