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unsolved-socialism-problem

The latest in our series of translations of Russian national-conservative thinker Egor Kholmogorov.

Translated by: Fluctuarius Argenteus; slightly edited by AK.

Original: http://zavtra.ru/blogs/pravoslavnyij-sotsializm

***

Socialism Not Dead: Paradoxes of an Unsolved Problem

It may seem strange that, at the turn of the 21st century, the word “Socialism” is back in the popular political idiom. The final decade of the preceding century seemed to have been the time of its complete (and, so it would seem, irreversible) annihilation.

Soviet-style “Real Socialism” ended in a pathetic disgrace, striking its colors at the sight of a sausage pointed at its heart. Who would have thought that churning out missiles, dams, and factories wouldn’t be enough to sustain a planned economy based on communal property? It was also necessary to grant the Socialist people access to consumer goods at least remotely comparable to those available under Capitalism; otherwise, falling behind not only in living standards but also in technology became inevitable. Soviet Socialism collapsed under the weight of this contradiction, while China enacted reforms so deep that, while looking at Chinese billionaires, one can’t help but wonder whether it’s still Socialism or a “Red Capitalist” oligarchy of the Chinese Communist Party – quite probably no worse than any other oligarchy in history.

Meanwhile, the Capitalist world with its triumphant Liberalism seemed to have scored a doubtless moral victory. Not only did it outpace Socialism, it completely consumed it. All more or less sensible Socialist ideas were incorporated into the structure of the “welfare state”, leaving “Real Socialism” with such dubious achievements as complete socialization of property or pedantic ideological censorship. Socialism appeared to have been entirely devoured and digested by a Capitalism that had reached in this struggle a new stage in its historical evolution.

A quarter of a century after this victory over Socialism, the foundations of the global Liberal order are more and more visibly shaken. Within the US Democratic party, Hillary Clinton’s Liberalism, oriented at racial and sexual minorities, has been challenged by “Democratic Socialist” Bernie Sanders who is cajoling White American workers into rising against the 1%, the Wall Street loan sharks. Socialist? US Presidential candidate? Early 21st century? It seems patently absurd. Meanwhile across the pond, the Labour party in the UK eschewed fine-looking bureaucrats in favour of Jeremy Corbyn, a Socialist, an anti-militarist, and general diehard Leftist. One of his first acts as leader of the Shadow Cabinet was creating a committee for a new economic policy, including such anti-inequality fighters as Thomas Piketty and Nobel Prize winner Joseph Stiglitz.

All of a sudden, we not only see a ressurection of Socialism in two of the leading countries of the Capitalist world, but positioning itself as a powerful political political alternative to the dominant Liberal mainstream. If we take into account that this mainstream is also under attack by right-wing populism of the likes of Donald Trump and Marine Le Pen (the program of the latter replete with anti-Capitalist and anti-Globalist vocabulary), the Liberal “end of history” seems to have ended quite rapidly. If this wave hasn’t reached us yet, it is only because both our Liberalism and our Capitalism are quite peculiar, and our political system doesn’t operate under Western-style rules. However, one cannot completely shut oneself off from a revolution of ideas, and it seems likely we will soon hear the march of a new Socialism here in Russia.

What is the cause of this 2010s Socialist re-revolution? The return of economic conditions that had caused the heyday of Socialism in the 19th century and were drastically changed in the 20th. The driving force of the Socialism of two centuries ago was a contradiction between the ideals of civil liberty and equality brought about by the French Revolution and the Enlightenment, and an absolute economic inequality typical of ancien régime Europe. The latter became more prominent and intolerable at the start of the Industrial Revolution, when hundreds of thousands of proletarians became concentrated in the stench and stuffiness of the working-class suburbs of developed countries.

Liberalism was faced with a monstrous and insoluble contradiction: why, after declaring human rights and liberties in thought and politics, giving equal rights to all social strata and doing away with the feudal ladder of estates, should it remain the guardian of a gap between wealth and misery, the protector of economic inequality? The situation of defending equality in the sphere of ideas, less important for most of the people, and championing inequality in the sphere of the stomach, of much greater everyday importance, seemed entirely ridiculous.

Excuses invented for explaining why some people are poor and some rich pushed those who considered this to be an injustice to certain solutions. “Private property is inviolable, you have no right to infringe upon it, therefore, you dare not touch the wealth of others,” said the wealth apologists. “It simply means that property is theft, and it must be destroyed or redistributed to close the gap between wealth and poverty,” replied the champions of the poor. “Liberty is not the equality of results but that of opportunities. We should be equal at square one, and then let each one gain according to his energy and talents,” said the wealth apologists. “Then we should socialize the work effort, and then we’ll have a common result: From each other according to their ability, to each other according to their needs. Also, let’s create truly equal opportunities, because the prospect of equal chances for millionaires and have-nots is a bald-faced lie,” replied the champions of the poor.

The ideas, methods, and moral high ground of the Socialism of yesteryear stemmed from a European yearning for equality, described by Alexis de Tocqueville, and the angst caused by the monstrous material inequality in the Europe in an age when the gaps between wealth and poverty were insurmountable. These gaps are the subject of a spirited dialogue between a young Rastignac and a cynical, conniving Vautrin in Honoré de Balzac’s Le Père Goriot. Vautrin explains to Rastignac, then a young idealist, that his chances of making good money thanks to learning, personal qualities, and industriousness are equal to zero. The only way of winning a fortune is getting it from somebody who already has it, by way of inheritance or marriage. The only way of becoming rich is being rich.

The world that spawned most Socialist theories, especially those of Saint-Simon, Proudhon, and Marx, was not a liberal world of free competition and equal opportunity. It was a polarized world devoid of a middle class: the 1% of haves and the 99% of have-nots.

What did this mean in practice? All talk of alleged opportunity in life granted by a Liberal version of Capitalism seemed naught but a myth. Big money was a magnet that attracted even bigger money. The lion’s share of national income, regardless of the pace of its growth, was distributed in the same proportion that was fixed in the structure of national capital. Simply put, those who controlled the majority of wealth gained the majority of income while making little to no effort.

America was the sole exception, with a lower concentration of wealth and a higher share of income distributed through free competition. Hence the image of the USA as a Promised Land, a land of opportunity, a magnet for migration. A good way of making money in Europe was moving to America (with the possibility of returning to the Old World with newfound wealth in tow left open).

No industrial growth, no Socialist attacks on the government or the bourgeoisie could change anything in the structure of this world until the start of World War I. This explains the revolutionary character of European socialism and the borderline utopian radicalism of its proposed solutions: Total socialization of industry, expropriation of the ruling classes, dictatorship of the proletariat, dreams of a World Revolution.

piketty-capital-income-ratio-europe

Source: Capital in the 21st Century by Thomas Piketty. Not part of Kholmogorov’s article.

This World Revolution did come to pass – but it started not in 1917, but in 1914. As brilliantly demonstrated by Thomas Piketty in Capital in the 21st Century, the Great War kickstarted a default of old European wealth. The horrors of war, the collapse of world trade, the Russian Revolution with its devastation and expropriation of the wealthy classes, the defeat and hyperinflation in Germany and Austria, the demographic crisis and budget deficit in the UK and France, the impeding dismantlement of colonialism – all of this led to a catastrophic decline in capital concentration in Europe.

piketty-russia-inequality-history

Source: From Soviets to Oligarchs: Inequality and Property in Russia 1905-2016 by Filip Novokmet, Thomas Piketty, and Gabriel Zucman (2017). Not part of Kholmogorov’s article.

The revolutionary role of Russia, whose bourgeoisie was sacrificed at the altar of transformation, consisted not so much in socializing property and launching the Socialist experiment as in crashing the world rent. The enormous Russian debt that had fed millions of rentiers all over Europe turned into dust in the blink of an eye and doomed the rentier civilisation to extinction.

From the 1920s to the 1940s, the level of capital concentration in the world capitalist system continued its decline. Contributing factors included the Great Depression that had finally made its way to America, the devastation of World War II, the post-war wave of nationalisations, and tax deductions for national reconstruction. The ratio of capital to national income fell from 6:1 under the old regime to 2:1, i.e. the entirety of concentrated capital (be it in the form of real estate, shares, or foreign assets) became equal to only two years’ worth of national income.

What were the socioeconomic consequences of this Great Default? The grip of Capital loosened, its magnetic effect wasn’t as far-reaching, and the problem of economic equality was tackled within the framework of global Capitalism, without employing the radical recipes of fin de siècle Socialism. More precisely, those radical recipes were relegated to countries that were lagging behind in industrial development, such as Russia and China. The main goal of this radicalism was a wilful, determined achievement of an industrial breakthrough. Socialism in so-called Socialist countries was most concerned with productivity and not wealth redistribution.

Western countries, however, having no need for a “great leap forward”, were able to afford the luxury of a “Socialism sans Socialism”. Social Democracy, Christian Socialism, Swedish Socialism, Social Reformism all followed the same model. Without abolishing private property as such, without creating a dictatorship of Leftist parties, by limiting themselves to a selective nationalisation, they achieved economic equality by fostering a system of high wages and a well-developed social sphere, ushering in the welfare state. Essentially, it was a huge Ponzi scheme organized according to Keynesian precepts: The state took away a sizable portion of incomes via taxation in order to redistribute this money, also as income but under a more egalitarian distribution.

This was the zeitgeist of the treinte glorieuses of 1945-1975, when all Western governments followed, with slight variations, a single socioeconomic policy targeted at bringing social inequality as far down as possible, raising national income redistributed as salaries to the detriment of rents, dividends, etc., and widening the social responsibilities of the state. It was the age of a rising middle class, the 40% that follow the 10%-strong strata of the wealthy; this class laid claim to 30-40% of national wealth as opposed to just 5% before World War I. The 50% of the poor were stuck with the same 5% as before, but at least they gained a much greater chance of breaking out of poverty by dint of education, good work, entrepreneurial spirit and general savvy.

The social lifts seemed to be working. A peculiar anthem of the era is Chuck Berry’s tongue-in-cheek 1964 song You Never Can Tell, the accompaniment to John Travolta’s and Uma Thurman’s wild gyrating in Pulp Fiction. It’s the story of a young Black couple from New Orleans that makes decent money, buys a house, mail-order furniture, a fridge, a phonograph, even a used jalopy… New capital growth was slow but steady, not in the form of rent or foreign bonds but mostly as real estate, shares and equity.

The most positive Soviet-era memories of those who were impacted by the system are based on largely the same processes, just disguised with red banners and “Glory to the Communist Party” posters. The income levels of Soviet workers were incommensurably lower, as was the quality of consumer goods offered by the market (it took a long time to realise that the Western market of the era was just a mechanism for redistributing wealth that was gained through not entirely market-based means). However, the Soviet system was infinitely more helpful with regards to restoring and accumulating… capital. It was even explicitly called “capital construction.” Most Soviet citizens were granted, entirely free of charge, real estate that was worth many years of individual income and still commands an impressive market price. And so construction proceededly rapidly apace to build the cosy, even slightly bourgeois world of 1970s Soviet comedies.

The Socialist system, like that of the West, followed the route of reconstructive capitalism. Meanwhile, Socialism as an idea gradually fell out of favor over the 20th century as its main raison d’être, inequality, disappeared. The semi-Socialist policies of Western countries created a perfect model village of Capitalism: Low inequality levels, broad opportunities, intensive social lifts, high levels of welfare, a wide availability of consumer goods thanks to a developed and flexible market. All of it seemed like a brilliant alternative to Socialist experiments: Socializing not wealth, not industry, but revenue, redistributing it so that everyone could decide where to spend it within a wide spectrum of options.

An ideal world of freedom and equality finally seemed to be within grasping distance. It also had a place for racial and gender equality, the 1960s becoming a triumph for equal rights activists of all stripes. At the same time, Socialism was quagmired in internal antagonism, the total control of the state eroding all freedom and neutering the enjoyment and variety of everyday life.

piketty-top-income-tax-rates

Source: Capital in the 21st Century by Thomas Piketty. Not part of Kholmogorov’s article.

However, the economic developments of the treinte glorieuses were the gravedigger for both Soviet Socialism and Western Welfare Capitalism. They signed their own death warrants themselves. A natural accumulation of capital was underway, via saving a part of income in the West or direct capital giveaways by the state in the USSR. But a feature of capital is that it “magnetizes” and draws income. The owner of capital tends to rent-oriented, not work-orientated, behavior. This “capitalist” wants to gain interest and rent, to make his capital inheritable, to pay the lowest taxes he can, and thoroughly despises the have-nots whose claims to a share of his income seem to him most outrageous.

The late 1970s saw the rise of a new Capitalism with many faces, from British Thatcherism to US Reaganomics to the waves of privatization that swept away the Soviet system and its socialist economy. It was a massive uprising of capital that wanted back its right to extract revenue and spend it on itself without sharing with society. Just like the pendulum swinging towards Socialism in the early 20th century, its return towards pure Capitalism at the end of the century was most pronounced and most socially destructive in Russia. A savage, dog-eat-dog oligarchic Capitalism that took sway in the country freed itself from practically all burden of social responsibility. It was a tyranny of wealth limited only by the garrotte in the hands of thugs, be they mafia racketeers or bureaucrat raiders.

However, it would be unreasonable to claim that the nature of the processes that transpired in those decades was drastically different in Russia, Europe, and the US. It was a time of large predatory fortunes, scams and profiteering, social polarization, and growing inequality everywhere. Americans and Western Europeans, accustomed to slogans of “equal opportunity,” suddenly once again found themselves in the era of Rastignac, when the only way to get rich – was to be rich. Also, the very notion of wealth had changed: It was no longer a reasonable, comfortable prosperity, but a blatant, tacky luxury.

In The Price of Inequality, Stiglitz describes the behavior of modern American business as “rent-oriented.” Nobody wants to improve real economic indices, nobody wants to make money, everybody wants to live as a rentier off unfounded bonuses, “golden parachutes,” and other forms of self-financing so common in American corporations. Is it that different from Gazprom cleaning women?[1]

At the other end is the growth of inflamed poverty: according to Stiglitz, the life expectancy of US White men with no college education is plummeting at the rate of 1990s Russia. Over the last 15 years, everyone and their mother have talked about the “death of the middle class.” Piketty projects that at the current rate of increasing inequality, Europe will return to 19th century levels by 2050: 10% of the population will own 80% of capital, and 60% of all income.

The society built by the global anti-Capitalist uprising of the early 1900s is becoming a thing of the past, as is faith in market-based self-regulation of Capitalism, allegedly evolved enough to solve social issues. It turns out that self-regulation played no part whatsoever, and the growth of economic equality occurred due to a catastrophe that had wiped out the “old money,” paving way for a unique Social-Capitalist system. Conversely, growing capital concentration, seemingly normal for a self-regulating capitalism, simply reproduces inequality.

A Neo-Socialism is the natural response of a society that enshrines equality to the emergence of a new inequality. Will it be different from classic Socialism? It will be, and rather strongly so.

Destruction of private property and socialization of the means of production proved to be a rather dubious road to Socialism. In practice, they only led to the creation of a new class – the nomenklatura, a decline in individual initiative, logistic and planning errors leading to shortages and even famines. And, in the long run, they failed to prevent the restoration of Capitalism in its most savage incarnation. In addition, small-scale private property continued to develop even if when it all private property was nominally abolished.

The utopia of complete socialization is opposed by the following fact: As material progress unfolds, a human being demands more, not less space for individual existence and self-expression. The ideal of a normal human, as it turns out, is his own house, not an army barracks. Collectivism invariably leads to a tyranny of mediocrity and dooms the societies that adopt it to backwardness in scientific-technical development.

Under these conditions, Neo-Socialism presupposes, above all, the socialization of income and prohibitive measures on capital concentration. The world of future Socialism is a world where all offshores are annihilated and each and every fatcat is subjected to high income and property taxes, with inheritance laws hampering the transfer of super-wealth. This nullifies the magnetic effect of large capital, and most of income is redistributed as wages in the context of free labor and a free market. From an instrument of optimizing income, the market turns into an instrument of optimizing expenditure.

Here, however, the New Socialism faces several classic pitfalls, already singled out by Joseph Schumpeter in the mid-20th century. The impossibility of super-wealth, limiting unfair and imperfect competition, monopolism, and profiteering lead to the waning of that very entrepreneurial spirit that nurtures the Capitalist economy. There will a dearth of those interested in starting a new business to beat all competitors and make a nice buck. And, needless to say, an “inventor and innovator” certificate[2] is a feeble substitute for super-incomes.

The only remedy to entrepreneurial crisis within Neo-Socialism could be a change in business philosophy: Stop chasing big money and instead take pride in the individuality of your business, its attractiveness and social relevance. This, however, only works for small and middle-sized businesses, while bigger enterprises require investments (including non-returnable ones) and risks so enormous that a small-time businessman can only afford it if he is aiming for a super-income. An alternative is a planned, state-run innovation policy, a “Communism of ideas” that will be of dubious long-term efficacy.

A society that guarantees a relative equality of income would be doomed to low economic growth. However, it is precisely the form of economic growth stabilization – especially within the core of the Capitalist system – envisioned by Neo-Socialist economists, Piketty above all.

Another question inevitably brought forward by Neo-Socialism is its relations with globalization. In a Neo-Liberal world, globalization is a world market system that forces the expenses of wealthy and developed countries on the poor and undeveloped by creating “common markets” that stifle economic development. They confine poor countries to the lower stages of technological chains while keeping the rights to ideas and the final product in the hands of developed countries. This is exactly the principle of the Transatlantic and Trans-Pacific Partnerships, modern attempts to cement the eternal commercial dominance of the US.[3]

An alternative to this economic globalism is economic Nationalism; the greater the drop in economic growth and surge in inequality, the more that will it be visible. Countries with independent industrial potential and inner market resources will isolate themselves from the rest of the world as much as they are able to, from imports to economic immigrants, in order to maintain their development level despite in spite and at the expense of others.

This Nationalist alternative is seen as the greater threat to the Neo-Socialist project. Its defenders keep putting a lot of effort into criticising Nationalist and Protectionist ideas and rallying to the defence of Smithian dogmas of “relative advantage” that lead to international division of labor and creation of common markets.

Nevertheless, preserving global markets under a Neo-Socialist policy would require a serious “leveling of fortunes” everywhere on the planet. Wealthy countries, much like wealthy people, would be compelled to spend most of their wealth to improve the living standards of the poor up to a certain “golden mean.” According to modern GDP per capita statistics, it would be represented by the living standards of a Turkey or a Mexico – probably even lower in reality, because rich countries create much of their GDP and national income by virtue of being rich. Were they to be more modest in their lifestyle, much of their national product simply wouldn’t be produced.

Is it possible to downgrade the living standards of rich countries and prop up the poor ones to even slightly reduce global inequality? One may well doubt this, especially considering that for most of humanity, it is the quality of life in the developed countries that really matters, not the tyranny of averages. Everyone in the world dreams of a Lexus, not a Zaporozhets.[4]

And now we re-encounter a fundamental contradiction within the Socialist dream. It is inspired by a global historical trend towards equality and social justice, but the justice in question turns out to be a tyranny of mediocrity, the erasure of extremes of arrogant wealth and abject poverty. But how is the value of this justice comparable with the imperative of development that presupposes certain extremes? To move forward, one must desire to be the best, which is impossible without a certain, sufficiently wide score chart – even if it comes at the expense of others.

Combining the values of justice and equality with the values of development is a task yet unsolved by the New Socialism.

***

Notes

[1] Allusion to a news item at around the time of this article’s writing featuring a woman employed as a cleaner in the Gazprom office who had reported the theft of her Christian Dior handbag worth $26K.

[2] Allusion to the Soviet practice of rewarding technical and industrial innovators with honorary diplomas and certificates, as opposed to patent rights or other, more substantial awards.

[3] A cheap rear-wheel-drive supermini mass-produced in the USSR (and then, briefly, in independent Ukraine) in 1958-1994 that became a byword for shoddy, uncomfortable, and breakage-prone cars in (post-)Soviet culture.

[4] On January 23, 2017, the US announced its withdrawal from the Trans-Pacific trade agreement.

***

Translator’s Note

The article was written in April 2016 and reflects the political and economic situation of the era.

 
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graph-iq-gdp-per-capita

There are three main reasons why the correlation between national IQ and GDP per capita is only around r=0.7, instead of r=0.9.

Oil/resource windfalls: Saudi Arabia would otherwise be about as prosperous as Yemen.

The legacy of Communism: Central planning and especially the lunacy that is Maoism are far less effective than free markets.

The legacy of Malthusianism: This is the most subtle factor, but it used to be very important. Countries like China, Japan, and to a lesser extent India used to be stuck in a high-level equilibrium trap; quite intelligent and productive, but unable to accumulate capital surpluses due to almost everyone being at the limits of subsistence.

This was not the case with relatively land-rich Latin America, where escaping from the Malthusian trap was easier. As a result, the degree of human capital there has long correlated much better with the region’s wealth. (Argentina even had a resource windfall effect around a century ago).

But all these factors will diminish in the coming decades!

Practically everyone outside Sub-Saharan Africa has more or less escaped the Malthusian trap.

Communist regimes have nearly all collapsed, leaving just a few relics like Cuba and Best Korea as monuments to failure. Moreover, over the long term, we can expect institutions everywhere to get better, as different countries adopt established best practices – occasional backsliding as with Venezuela regardless.

The impact of resource windfalls – apart from a few exceptions (e.g. Botswana – diamonds), we’re speaking about oil – will likewise decline. Technology has conquered Hubbert’s peak from the supply side, and soon enough, electric batteries are going to cut in from the demand side.

map-usa-automation-risk

Even today, it is presumably not an accident that the countries with the most developed automation in manufacturing – Germany, Switzerland, (Northern) Italy, Japan, South Korea, parts of the United States, and increasingly, China – are those where the core populations have 100-105 range average IQs.

The coming automation of more and more sectors of the economy, including services, will impact disproportionately on low IQ jobs, so the impact on economic performance of average IQs – and especially smart fractions – should if anything increase even further.

The one thing that could throw a wrench into this – sort of – is if countries were to begin randomly adopting large-scale intelligence augmentation at highly differential rates (e.g. via CRISPR + genomics of IQ). But it isn’t likely to be random. It will almost certainly be the richest and least superstitious/obscurantist countries that will adopt these technologies first, and both of those factors are already highly correlated with IQ.

 
• Category: Economics • Tags: Automation, Futurism, Human Biodiversity 
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lenta-russian-billionaires-2014

In 2014, Lenta.ru conducted a study into the ethnic composition of Russia’s billionaires. (Steve Sailer picked it up as well). The observation that Jews constituted 21% of the Russian Forbes 200 predictably drove handshakeworthy journalists, Jews, and especially Jewish journalists into a tizzy (as I recall, when I asked him when he was also going to condemn Forbes Israel, which also loves to count Jewish billionaires, that was when anti-Russian hack Ben Judah blocked me).

The hysteria concealed real failings in the article. There was no clear methodology. Furthermore, the numbers of Ukrainians in the ratings seemed vastly inflated. They supposedly constituted 12% of Russian billionaires, even though most of them were nothing of the sort; the analytical team seems to have just consigned everyone with a surname ending in “ko” to the Ukrainian race. This makes about as much sense as counting Donald Drumpf as a German oligarch in America.

Still, some general trends could be clearly discerned. Russians – that is, Russians and Russians misattributed as Ukrainians and Belorussians – consituted about 66% of the list’s members and almost exactly half of the combined capital of $481 billion. Jews and Mountain Jews constituted 24% of the list, and had 28% of the capital. All of the rest belonged to Caucasian and Muslim minorities. Notably, there were no traditionally Buddhist/animist Siberian minorities on the list.

top-10-russia-billionaires-2017

In recent days, the blogger Ivan Vladimirov, who produces excellent data-heavy material on Russian demographics, published a similar census based on the spring 2017 edition of the Forbes 200 for Russia for the nationalist journal Sputnik and Pogrom: Who Owns Russia?

Here are some of the more pertinent take-away points:

1. First, he notes that state ownership is now at 70% of the Russian economy, twice its share 10 years ago, so in actual fact, the real “owners” of Russia are now the curators and appointed directors of its state behemoths, such as Igor Sechin (Rosneft) and Alexey Miller (Gazprom).

2. Unlike Lenta.ru, he goes into some detail into his methodology:

  • No “svidomy zmagars” – all the billionaires with distant Ukrainian or Belorussian ancestors are assumed to be Russians by default.
  • Nationality is passed on down the paternal line, including with the Jews.
  • Unless they have openly declared they identify more with another aspect of their ancestry. For instance, Petr Aven (head of Alpha Bank), despite being a Latvian-Russian métis through his father, identifies more with his Jewish maternal grandmother and belongs to Jewish organizations, so he’s considered to be a Jew.
  • No presumption of Jewishness or non-Jewishness based on just the name since there are too many false positives.

russia-billionaires-2017-ethnicity

3. Now we come to the actual numbers – out of the Forbes 200 and their cumulative $459 billion in assets:

Russians constitute 127 (63.5%) of the people in the list, including 57.4% of the capital.

Jews have 41 (20.5%) people in the list, with 24.8% of the capital.

After those came Armenians (7), Tatars (6), Azeris, Chechens, and Ingush (3 each), and two Uzbeks, though one of the latter, Alisher Usmanov, is the fifth richest billionaire in Russia and has a relatively “interesting” public profile (a spat with Navalny; funding Western race realists).

4. Vladimirov also notes that the Russian billionaires tend to have a very low degree of national consciousness.

For instance, Evgeny Kaspersky’s comments when asked if he had any Jewish ancestry on a visit to Israel:

I searched and searched, alas, I did not find… I got the name from Polish peasants, who during the uprising in the 1860s emigrated somewhere under Nelidovo about 300km from Moscow. There they married into Russians (that is, Slavic, Tatar, Polovtsian and whatever else constitutes “Russian” blood from in me). By mother is from the Tambov peasants. But this is the most interesting thing. Tambov was inhabited by soldiers who served their lives in various places. And soldiers sometimes came with brides from the most different places. And according to indirect data – I have roots from Scandinavia and Persia. But from Israel – alas, no… Although who knows?

This is, of course, nonsense from a population genetics standpoint. But one of the tropes of Soviet/Russian multiculturalism is that Russians are mulattoes up and there is no such thing as a Russian anyway. And the Russian elites respect this legacy, after as they’ve long done away with the economic aspects of Soviet dogma.

In fairness, this multicultural spirit likewise applies to Russia’s Muslim elite. He cites the example of Mikhail Gutsuryev, who sits on the Board of Trustees of the Jewish Museum and Center of Tolerance, while at the same time funding the construction of synagogues, Orthodox churches, and mosques. Or Lukoil head Vagit Alekperov, an Azeri-Russian, who renovated the main Russian Orthodox church of Imperial-era Baku, and prefers to keep his silence on matters of religion: According to a NYT profile of him from 2004, he “prudently keeps leather-bound copies of both the Koran and the Bible at his office, to allay any concerns that he prefers one almighty to another.”

5. I also noticed that Russia’s statistics are rather similar to America’s.

In the US, North-West Europeans make up 51% of the members and own 56% of the cumulative assets in the Forbes 2010 list – this is almost identical to the figures for Russians in Russia, though on the other hand, this demographic group only makes up about 50% of the US population (non-Hispanic Whites minus Greeks, Italians, etc.), whereas Russians constitute 80% of Russia.

Jews own about a quarter of Russia but more than a third of the US – that said, they only make up 0.1% of the Russian population, versus 2% of the US population. That said, as Vladimirov points out, the more relevant indicator would be their 0.5% share of the Soviet population c.1989.

It is also interesting to note that “southern” diasporas, which in Russia’s case are Caucasians (Armenians, Azeris, Ingush, and for that matter, the Jews), are relatively more successful in commerce/becoming billionaires in Russia. This is also true for the US, where Italians, Middle Easterners, and Greeks are overrepresented as a share of the population. This is even though with the exception of the Jews, who are massively overrepresented, their IQs are no higher than those of WASPs or Russians, and possibly noticeably lower. I have speculated at times whether this “commercial trait” of people with Near Eastern/East Med ancestry could have developed as a consequence of their unrivalled length of experience with urban life and the associated haggling, bartering, etc. skills it selected for over the millennia.

 
• Category: Economics • Tags: Billionaires, Russia 
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East-Central Europe – the Visegrad nations and the Balts – are commonly considered to have had far better post-Communist transitions than Russia. They started earlier, and from a more privileged position; in contrast, the Soviet economy was more distorted in the first place, and there were no living memories of prewar capitalism. They got more economic and institutional support from the West. There was no haphazard rush to privatize state assets, preempting the development of a powerful oligarch class that in Russia’s case has become a byword for sleaze and boorishness.

One positive result of this was a generally much lower degree of income inequality than in Russia.

europe-gini-index

This conventional view is mostly true.

However, as Leonid Bershidsky has just pointed out, citing a recent research paper by Thomas Piketty et al., there is a small catch.

Finally, the large negative foreign asset positions of Eastern European countries should obviously be put in relation to the fact that these countries have adopted a development strategy based upon economic and political integration within the European Union. Eastern European countries are largely foreign-owned, but the owners tend to come from EU countries (in particular from Germany). So in some sense it is not entirely different from the situation of peripheral regions that are being owned by more prosperous central regions in a large federal country.

It is also worth noting that these patterns of foreign ownership also have consequences for the study of domestic inequality. In particular, as demonstrated by Novokmet (2017), the fact the holders of top capital incomes tend to be foreigners rather than domestic residents contributes to lower top income shares in countries like the Czech Republic or Poland or Hungary (as compared to countries like Russia or Germany). I.e. foreign owned countries tend to have less domestic inequality (other things equal).

In other words, a lower net international investment position – all other things equal – should result a country having lower inequality by dint of their 1% being foreigners.

niip-eastern-europe

The two major exceptions in the ex-Communist world are Russia and China.

Finally, it is interesting to compare ex-communist countries with respect to the importance of foreign assets (see Figure 7d). It is particularly striking to contrast the case of Russia and China, which both have positive net foreign assets (i.e. these two countries own more assets in the rest of the world than what foreigners own in Russia and China), and Eastern European countries, which all have hugely negative net foreign assets (i.e. these are largely foreign-owned countries). These differences are partly due to differences in economic and natural endowments. In particular, it makes sense for countries with large (but not permanent) natural resources such as Russia to accumulate trade surpluses and foreign reserves for the future.

Certainly Russia’s resource endowments helped and perhaps made it possible, but there was also a political element to it. Even under Yeltsin, the Kremlin had always been loathe to privatize state corporations to foreigners, even though they managed them better than either the state or domestic oligarchs.

One explanation is that privatization was unpopular enough, and selling off assets to foreigners would have made it even more politically untenable. A more cynical interpretation is that foreigners were harder to influence or to provide the kickbacks and favors their benefactors in the state expected for their largesse.

Be that as it may, Russia (and China) developed national oligarchies, whereas Visegrad and the Baltics ceded theirs to the established oligarchies of Mitteleuropa.

Finally, the large negative foreign asset positions of Eastern European countries should obviously be put in relation to the fact that these countries have adopted a development strategy based upon economic and political integration within the European Union. Eastern European countries are largely foreign-owned, but the owners tend to come from EU countries (in particular from Germany). So in some sense it is not entirely different from the situation of peripheral regions that are being owned by more prosperous central regions in a large federal country.

Ergo for Belarus and the Ukraine (!) with respect to Russia. (Despite everything that’s happened since 2014, Russia remains the biggest foreign investor in Ukraine).

Now as Bershisky goes on to point out, while foreign ownership has its benefits – institutional integration, better management, etc. – there is also a price to pay: A loss of sovereignty.

It’s not really a choice; Eastern Europe will eventually need to champion integration, just as it once championed membership. My own view is that eventually, it will no longer matter where a European company is headquartered because a united Europe will have a common budget, and economic cohesion will become inevitable. Nationalism may be having a moment, but it’s too late: The Eastern European countries have been open to investors for too long, and they’ve lost too much control over their economic future to hold on to political control.

Of course opinions on the desirability of this will differ.

As an immigration optimist who had a hysteric fit on Twitter over Brexit, we can be pretty sure that Bershidsky will see this as a good thing.

That said, Bershidsky might be jumping the shark here. As the Ukraine has shown, if there is sufficient political will, an economic “colony” can well defy its foreign owners, despite the economic cost of it (a 15% collapse in GDP). On the other hand, could Muslim immigration really be the hill on which Eastern Europe’s populists and Brussels skeptics make their last stand? After all, multicultural enrichment is a process that takes years if not decades to get noticed and to start having a marked effect on natives’ lives, whereas the loss of Crimea and the Donbass – and the ensuing threat to Ukraine’s continued statehood – was a much more sudden jolt.

In the lack of any such highly visible state of emergency, it is easy to imagine the East Europeans taking their hush money and piping down.

 
• Category: Economics • Tags: Eastern Europe, Inequality 
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According to the latest estimates, Russia might harvest as much as 133 million tons of grain this year.

russia-grain-production

This would make 2017 a record harvest not just by post-Soviet standards, which were pretty dismal until the past decade, but relative to the RSFSR’s peak of 127.4mn tons in 1978.

(This is the case even after adjusting for Crimea’s absence from the RSFSR after 1954, since the parched peninsula only produces about a million tons of grain per year).

The US Department of Agriculture predicts that Russia will overtake the US and the EU to become the world’s largest single wheat exporter in 2017, accounting for a sixth of the world’s total and recovering its old Tsarist status as one of the world’s great breadbaskets.

world-grain-exports

Incidentally, if it were to also recover its Tsarist era borders, especially the Ukraine and Kazakhstan, it would account for about a third of world wheat exports.

One of the big proximate reasons for this are recent economic developments. Few sectors of the Russian economy have gained as much from the ruble devaluation and the sanctions as agriculture.

However, there are strong secular trends that Russia’s new breadbasket status is here to stay.

The world population is growing, and the climate is warming. This will raise global demand for calories, channeling investment into Russian agriculture, even as crop yields go up thanks to longer growing seasons and more atmospheric CO2, and previously inhospitable lands are opened up for agricultural exploitation.

burke-temperature-economy Russia is predicted to economically benefit more than any other country from global warming, and relatively speaking, agriculture can be expected to benefit more than any other sector. Meanwhile, conviently, major competitors such as Australia and the US will be wracked by droughts.

Russia is no longer the Soviet Union, where grain imports were running at 30 million tons by the 1980s – that is, about as much as just Russia by itself now exports – and draining the country of foreign currency. There are now many agricultural conglomerates competing in a free global market, responsive to price signals and intolerant of waste (about a quarter of the Soviet potato harvest rotted away in transportation). This is an opportunity that Russia will continue to exploit.

Minister of Agriculture Alexander Tkachev has suggested that in the future, Russian export earnings from grain exports may come to equal or even eclipse those from hydrocarbons, in effect fully returning Russia to its foreign trade position during late Tsarism.

This is unlikely any time soon. Even as late as 2015, Russia exported a total of $7.4 billion of crops, which is not only an order of magnitude lower than its $189 billion worth of hydrocarbons and minerals exports, but is not even sufficient to cover its $9.3 billion worth of crop imports (primarily vegetables and tropical crops like coffee and citrus fruits).

Nonetheless, both the global prices for and Russian production of grains is likely to continue soaring in the decades ahead. Meanwhile, the outlook for oil is far less certain. While the supergiants continue depleting rapidly, new extraction technologies have postponed the oil peak for an indeterminate number of future decades, and electric cars will increasingly bite away on the demand side. So Tkachev’s vision is not altogether fantastical.

 
• Category: Economics • Tags: Agriculture, Russia 
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Results of the Pakistan Census are out and show that the population has reached 207,774,520 people as of 2017.

pakistan-census-2017

After hurtling past Russia around 2000, Pakistan has now just about converged with Brazil, which has approximately 207,932,000 people as of this year.

Considering that Pakistan increases by 4 million every year to less than 2 million in Brazil, it is very likely that it has already overtakenthe South American giant to become the world’s fifth most populous country.

population-russia-pakistan

Note that the UN Population Division estimated Pakistan’s population to be 197 million in 2017, or 10 million lower than the just released census figures.

Low-lying and impoverished Bangladesh is more commonly cited as the big country facing the greatest threat from global warming, but it has gotten its population growth under control to a far greater extent than Pakistan, and the effects of Greenland/Antractic melt on sea levels will take centuries or millennia to fully percolate.

But Pakistan might be in more of a immediate pickle (as in, within the next few decades). Unlike the other rivers of the Indian subcontinent, which are mainly powered by monsoon precipitation, the Indus is reliant on glacial runoff for the great bulk of its water flow. Will Pakistan be able to feed itself as those glaciers shrink over the coming decades?

 
• Category: Economics • Tags: Demographics, Pakistan 
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Africa has more than 50 political entities and more than a billion people with some of the highest concentrations of genetic and cultural diversity on the planet.

For every destitute failure like Niger, you have some country that bucks the stereotype and dispels some of the doom and gloom that predominates in HBD-realistic commentary about the “dark continent”. One of the biggest and most striking exceptions is Ethiopia, noteworthy as the only African country to successfully resist European colonization.

Reprinting Al’s comment from my post trying to counter some of the extreme skepticism towards Africa:

For a supposedly reality-based community, the HBDosphere has a major blind spot regarding where Africa is today and possible scenarios for its future. Africa has 55 countries; doom and gloom is not applicable to them all.

I’m in broad agreement with your major points, and I which to illustrate them with some examples from the one case I know best, and which has been mentioned in the comment thread. Ethiopia. I lived there for several years in the last decade as an expat, still visit regularly, have invested not only other people’s money, but my own, in there. This is going to be long, sorry.

First of all, keep in mind that Ethiopia is landlocked, has few useful minerals (just a little gold), has no oil and therefore must pay a hefty energy bill in imports, and as a very montainous place it is really difficult and expensive to build modern infrastructure. They speak their own language (Amharic) and, never having been colonized, don’t have the head start that other Africans have in speaking/understanding English or French. It’s also in an exciting neighborhood: Sudan (terrorism and civil war), South Sudan (civil war), Eritrea (formal state of war, tenuous ceasefire at the border), Somalia (’nuff said), Kenya (terrorism), Djibouti (only decent neighbor). That’s on top of whatever ancestral disadvantages it might possess on HBD grounds.

Someone expressed doubts about the increasing crop yields. They’re true. Ethiopia has been growing at or over 10% year-on-year since the turn of the millenium. This growth has been obtained by investment on family farms (there are very few large private estates in Ethiopia, since the Communist dictatorship of 1974-1992 had expropriated all land). This means growth has been broad and benefited a large proportion of the population. It also means it is sustainable. Ethiopia is set to be the fastest growing economy in the world this year, despite suffering from a drought (more below).

Foreign investment is pouring in, mainly Chinese, Korean and Turkish, but with non-negligible and rising amounts coming from the West (U.S., Netherlands, Germany) and Japan. They have made some inroads in products such as flowers, leather, and the textile industry, i.e., the first-tier, labor-intensive stages of industrialization. This is almost certain to go on.

They have also turned Ethiopian Airlines into a major player in world long-haul cheap air transportation, despite not having the bottomless amount of cash the Arab sheikdoms can give Qatar, Etihad, Emirates &c. Ethiopian Airlines revenue has been growing at 25% year-on-year for the last decade or so. It has surpassed South African as the largest African carrier.

Foreign investment (mainly Chinese here) has been pouring into infrastructure. The Chinese have built a major new railway to Djibouti (Ethiopia’s outlet to the sea) and motorways between the major cities. I have used them several times and the quality is generally very good in an absolute sense (in Africa, they have few peers).

Sub-Saharan Africa is famous for electricity shortages, and that kills any possible industrialization. Ethiopia is building the Grand Ethiopian Renaissance Dam on the Blue Nile, which has already started producing a small amount of energy and is set to be completed shortly. It is the seventh largest dam in the world and will supply several times Ethiopia’s current electricity needs. The shortages will not only disappear, but prices will be dirt cheap in global terms – cheap enough to attract foreign investors. Best part? The whole cost of the dam, some USD 7 billion, is being financed from the government budget – not donors, not foreign aid, not outfits like World Bank, and such. It is their own money.

Another thing the Ethiopians are doing is at least trying in education. They have now achieved full primary school enrollment; that is, very nearly all school-aged children really are attending school. This is a major achievement for a Third World country, and one as poor as Ethiopia. They have also created about a dozen universities, and are busy churning out engineers and agronomers. I mean, really: the government has a cap of about 15% on how much social science (that includes law) degrees the universities can grant. They have the priorities in the right place.

Of course, the standards of this education are low on an absolute scale, but even then… Several times I’ve spoken about this with other expats (Asians and Westerners) who were directly involved with supervising their Ethiopian workforce. To the question, ” you know, is someone with a degree in engineering from an Ethiopian university really an engineer?”, the answer almost unanimously was: “well, not really, of course it’s not the same thing as an engineering degree from back home in [China, Netherlands, Korea], but it is much better than we expected. The balance between expertise/salary levels is excellent and headquarters is really pleased. Plus, there are more than enough people capable of continuing to receive training and achieve higher productivity levels”. I myself did not run a large team, but my experience has been much the same.

Ethiopia is world-famous for the 1980s famine. That had nothing much to do with “incompetence”, though. It was planned, and very well planned if I may say so, by the then ruling Communist government (who else?) to genocide the population of the heartland of the opposition. The global repercussion took them by surprise and they had to appear to do something; so they happily received the world’s donations of food and money, gave them to their soldiers or sold them to get guns, and kept the people starving. They lost in the end, thank God (the opposition guerrillas took over the capital in 1992, and they are the basis of the current ruling party).

From late 2015 or so, Ethiopia (and East Africa from Eritrea to Mozambique generally) has been suffering from the effects of the latest El Nino phenomenon in the Pacific Ocean, which interferes in the framework of air currents in the southern hemisphere with the result that in East Africa the rainy season is shortened by one or two months. As Karlin’s piece shows, there is barely any major irrigation works in Africa. (In the case of Ethiopia, the topography makes it nearly impossible in most of the country, and in all the more densely settled regions). Well, the current Prime Minister gathered the high-ranking foreigners in there (ambassadors and businessmen) to tell them, in effect: “if you say you’re our ally, this is the time to chip in. By the love of God, if you want to help, don’t give us food. What we need is money that we can funnel to the peasantry of the most affected areas, so they can buy food, and seeds and cattle to replenish their decimated holdings. If you give us food, more of our peasants will be priced out of the market and things will only get worse. And by the way, if you don’t help us, we will do this ourselves with our own money”. Funds from abroad were not forthcoming, and none of you has heard of any major famine in Ethiopia in the last two years. The economy did not even slow down! Why? Becase Ethiopia has been achieving nearly 40% of investment/GDP ratio, and invests over two thirds of its budget on capital investment (infrastructure); numbers almost unheard-of in the Third World, and particularly in countries as poor as Ethiopia.

Of course, this has focused on the positive side of the picture, because few people know about this, and – as I see – none in the HBDosphere. (Those who do, are making money out of it). There are of course, major, enormous, obstacles for Ethiopia to continue improving; the most immediate is, what else, rivarly between the ethnic groups. (Today, the minority Tigrayans, just some 4 million people out of 100 million, hold the upper hand and buy out the elites of the other way more populous ethnies. The Oromo have been staging demonstrations since last year, and large parts of the country are currently under a relatively mild martial law). Acute foreign exchange shortage is another difficulty; exports are growing, and growing well, but are still too small to finance industrialization-driven growth, so the government is very careful with the foreign exchange it gets (this is a major pain in the ass for foreign investors; but if the government did not do this, the now-more-numerous middle and upper classes would spend this money away importing luxury goods from Asia and the West).

The Ethiopian economic strategy proclaims the relatively modest objective of achieving middle-income status by the end of the 2020s. (If they keep up their current rates of growth, they’ll get there well ahead of schedule). That’s a pittance if you’re a Westerner, but a genuine achievement if you were the world’s poster-child for abject poverty just a few decades ago.

I could tell you a lot more, about politics, security. terrorism, crime, the problem of Islam, etc, but I’m sure your eyes glazed over into TL;DR long ago. Anyway, if someone read this far and is interested in more information, look up the name of Arkebe Oqubay.

What makes this all the more impressive is that Ethiopia was subjected to an IQ shredder of sorts during the Italian occupation.

A reader and long-term correspondent on primarily Eurasian matters sent me the following email:

I’ve been there a couple of times. Ethiopia is fucking amazing. It’s like what visiting Korea in 1960 must have been: still poor, but with all the numbers going up, up, up.

Anyway, here’s a depressing bit of historical trivia about Ethiopia: when the Italians took over, back in 1936? Mussolini literally told the new colonial regime to “liquidate” as many educated Ethiopians as possible. Which they enthusiastically did. Haile Selassie’s government had laboriously scraped together the cash to send a couple of hundred Ethiopians abroad to university. Almost all of them were killed, as were most of the country’s literate administrators and technicians. If you want the depressing details, google Yekatit 12 or the Graziani Massacre. The exact numbers are of course contested, but it looks like the Italians killed 20,000 to 30,000 (out of a population that was then 9 – 10 million), disproportionately targeting the educated and skilled.

That is similar to the Katyn massacre in absolute terms, twice as bad in relative population terms, and perhaps an order of magnide or two worse in terms of its impact on the educated, technically competent fraction of the population of Ethiopia relative to Poland. And yet the former is an order of magnitude or two better known. I’ve read several books covering the lead-up to WW2 and this is the first time I’d heard of Yekatit 12.

Additional wrinkle: this ended up being a double whammy for Ethiopia, because after the war, they very reasonably asked for war crimes trials for the people who did this. This was terribly embarrassing to the Allies, because some of these exact same people had switched sides and were now key players in the new postwar Italian government. (In particular Marshal Badoglio, the first postwar prime minister, had been implicated in all sorts of horrors in Ethiopia.) The Allies did not want an Italian equivalent to the Nuremberg trials! So, to shut up the Ethiopians, they made a deal: they gave them Italian Somaliland — modern Eritrea. This turned out to be a poisoned gift, because Eritrea is ethnically and linguistically distinct from Ethiopia. Before long there was an independence movement, and then a grinding twenty five year long guerrilla war that helped keep both countries poor and miserable.

The last war with Eritrea ended in 2000. Ethiopian GDP per capita (PPP) – i.e., adjusted for population growth – has expanded by 150% since 2000 ($620 to $1600 constant 2005 international dollars), if from a very low base. I think that’s the highest rate of expansion of any Sub-Saharan Africa with the exception of some small resource exporters.

 
• Category: Economics • Tags: Development, Ethiopia 
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prague-deus-ex I think Czechia might just be the best country in the world.

  • Europe’s best gun rights (just further liberalized)
  • But lower homicide rate than UK/France/Germany because no aggressive Third World minorities
  • Social liberalism without the poz and purple-haired SJWs
  • Also most atheist European country
  • But with a higher fertility rate than Holy Poland nonetheless
  • Sane foreign policy
  • Richest country in ex-Communist Europe.
  • Has more industrial robots per capita than France or UK (the word “robot” comes from the Czech/Slavic word for “worker”).
  • 40% cheaper than the US.
  • Member of the Schengen zone.

Okay, someplace like Switzerland or Norway might give it a run for its money, but if I were a Westerner looking to downshift to someplace nicer, affordable, and more European, Czechia seems to check all the boxes.

Is this about right, or do I have an overly rosy view of the Czechs?

 
• Category: Economics • Tags: Czech Republic, Living Standards 
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This is a horse I’ve pretty much beaten to death, but still worth pointing out – not many Russians want to leave Russia. And not many Russians ever wanted to leave Russia.

Results of the latest Levada polls:

levada-leave-abroad

levada-how-prepared-to-leave

Incidentally, when I was in Saint-Petersburg, the hotel receptionist said that if anything, there has been a substantial increase in repatriates like myself.

Another account to that effect.

I am not going to claim that there is some great repatriation trend, because I am not a dishonest Western hack who constructs a “sixth wave of emigration” meme on the basis of purely anecdotal evidence.

Still, it’s something to think about it.

Incidentally, according to the OECD’s latest PPP benchmarks (2014), actual Russian household consumption is comparable to the rest of East-Central Europe and the Baltics, and is at 50%+ of the German/French/UK level and 42% of the US one.

gdp-ppp-consumption-russia

The OECD countries & partners, with Russia in red.

gdp-ppp-consumption-russia-progress

Russia has also continued gaining relative to the US through to 2014, despite the Great Recession. It must have fallen somewhat during the 2014-2016 recession and devaluation, but only modestly, since Russia produces most of its own consumer goods.

Rule of thumb for Russia: While wages might be 4x lower than in the developed Western countries, prices are likewise 2x lower, so the differential in living standards is far more modest.

So, no particular reason for Russians to want to leave, considering the administrative barriers they face as a non-Schengen European country.

I suppose that if Russia had freedom of movement with the EU (like Poland, Romania), or was truly destitute (like Ukraine, Moldova), then there would surely be more emigration.

But this is not the case. And, hypocritical though it might be on some level, that’s probably for the best. Russia has already lost enough of its cognitive elites during the 1910s-1930s and the 1990s.

 
• Category: Economics • Tags: Emigration, Russia 
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So the other day Mark Zuckerberg, who is all but officially campaining for the Presidency in 2020, came out in favor of basic income:

Every generation expands its definition of equality. Now it’s time for our generation to define a new social contract. We should have a society that measures progress not by economic metrics like GDP but by how many of us have a role we find meaningful. We should explore ideas like universal basic income to make sure everyone has a cushion to try new ideas.

I do support basic income.

Though who cares what I support. Two to three decades down the line, basic income will become all but inevitable if the oligarchs want mass consumer capitalism to survive under mass automation.

The only problem is that Mark “I Don’t Know Why They Trust Me, Dumb Fucks” Zuckerberg is just about the last person you’d trust to implement a basic income.

Don’t like his sister’s ideas on “whitewashing ancient statues”? That’s a 10% cut in your soypack purchasing power.

zuckerberg-basic-income

Mainstream Republicans and Democrats are corrupt retards who care naught beyond more tax cuts for the oligarchs and gibsmedats for the ghettoes, respectively. So its likely that it will be some political outsider President who ends up instituting basic income. In practice, given their wealth and high IQ, this in turn probably means some Silicon Valley plutocrat.

 
• Category: Economics • Tags: Facebook, Universal Basic Income 
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In recent weeks I’ve had cause to look at Moscow property prices.

moscow-property-prices-2013

There are basically three major socio-economic regions in Moscow:

  • The center – Upper middle class, very high property prices (300-400,000R/sq m), cosmopolitan, tilted against Putin and towards liberal parties like Yabloko, full of cafes with Macbook toting hipsters, do not discriminate against immigrants when renting out their properties (presumably because its not like Central Asian Gastarbeiters can afford the prices there anyway).
  • The south-west and west – Middle class, moderately high property prices (200,000R/sq m), tilted against Putin and towards liberals and Communists. This region traditionally hosted a large percentage of Moscow’s academic/R&D institutions and hi-tech factories, so the locals tend to be engineers and technicians and their well-educated children.
  • The east, south and north – Lower class, low property prices (150,000R/sq m), tilted towards Putin and especially the nationalist LDPR, majority proles – though very few work in factories, with a significant contingent of lumpenproles (one woman in my flat died from a drug overdose a few weeks ago) with a growing immigrant presence.

Whereas you see many Central Asians in the center of Moscow, there they are almost inevitably doing street sweeping or construction work, whereas in the outskirts there many of them start appearing out of work uniform. Most of them actually live in the cheaper outskirts, and are increasingly buying up property there. This is accompanied by ethnic tensions. One such region, Biryulyovo – which has Moscow’s second lowest property prices – was the site of a small race war back in 2013 provoked by the murder of a Russian by an immigrant. That said, it’s (still) a long way from the yearly “fireworks” you have in Paris.

In the meantime, I also suspect that many of the more successful locals from the prole areas are making their way to more prestigious regions. In the USSR, you tended to live where you worked (your apartment was assigned to you). With a free market in real estate, the way is clear for the sort of “cognitive clustering” that you see throughout the US and Europe, where the brightest, richest, most successful (all inter-correlated) converge onto good neighborhoods close to the center, while the duller and less successful elements are left behind in the Biryulyovo banlieues.

(Incidentally, this cognitive stratification is a microcosm of Russia as a whole – the average IQ in Moscow is ~106, versus ~96 in the rest of the country).

Here is a graph that I think supports this interpretation (left: Rubles / sq m, right: USD / sq m).

moscow-property-prices-2000-2017

Vykhino and Zhulebino (blue, orange) are classic prole regions – at 120,000R per sq m, they are marginally more upscale than Biryulyovo, but only just. Sokol (red) is a solidly middle-class region, and contains two universities and an industrial museum within its boundaries. Its average property price is 200,000R per sq m. Tverskaya (green) is a super-elite central region that hosts many of Moscow’s tourist landmarks, including the Bolshoi Theater; property prices there are a cool 400,000R per sq m.

But the trend is even more interesting – note the steady stratification of property values of Sokol and Tverskaya relative to prolecore Vykhino-Zhulebino. Even as early as 2013, Sokol was only about 40% as expensive, whereas today it is more than 60% as expensive. The differential between Vykhino-Zhulebino and Tverskaya has increased from being twice as expensive a decade ago, to almost four times as expensive today.

(This isn’t due to any particularities of the chosen regions – the trend for the prole South-East as a whole relative to the middle-class South-West and the elite Center matches the specific example above).

london-house-price-map Nor do I think this is likely to change anytime soon. This differential in real estate prices is now approaching what you see in both Paris and London (see right), both of which are far more advanced on the diversity (and financialization/cognitive clustering) front than Moscow.

This isn’t great for me personally. For instance, while it was still possible to leverage my apartment, which is in one of the crappier regions, to jump into the center a decade ago and maybe 5 years ago, it’s no longer so realistic today. I suppose I should hurry up while regions like Sokol are still within reach.

I suspect these differentials will continue widening in the years ahead. Immigration will continue, and might intensify as the Russian economy emerges out of recession. Cognitive clustering has a momentum of its own and isn’t going to run out of steam anytime soon.

Finally, I suspect that the advent of driverless cars in one or two decades will produce another major uptick in housing prices in the central regions of the world’s metropolises. One of the few major downsides of life in big cities is that traffic congestion costs go up 34% with every doubling of the urban population. The much greater efficiency of driverless cars should largely nullify those costs, turbocharging property prices in big cities and especially the central, already very expensive cores of the big cities even further.

I am obviously not in the business of giving financial advice. That said, even all else equal, I suspect that in Russia as in most of the Western world, people who move to the big cities – especially the expensive, prestigious regions where high property prices form an effective wall against vibrant diversity – will do financially better than those who stay in the outskirts.

 
• Category: Economics • Tags: Moscow, Real Estate, Urbanization 
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Here is a graph of monthly births in Russia since 2006 through to March 2017:

russia-births-2006-2017

It is pointless to make sweeping conclusions based on demographic data from the past one or two months.

That said, the three month moving average has been down relative to the same period in the previous year since the middle of 2016, and as of this year, has widened to 10%, an unprecedented figure in the past decade.

russia-births-change-2006-2017

Now to be sure, birth rates should – all else equal – be falling, because the diminished generation of the 1990s is now moving into its peak childbearing years. It shouldn’t be falling by 10% in any one year, however. If this new trend continues, Russia’s TFR for 2017 should fall to about 1.65 children per woman from the 1.76 in 2016.

OTOH mortality continued improving, falling by 1% in the first three months of 2017 relative to same period last year, which translates into a correspondingly greater improvement in life expectancy because of Russia’s ageing population (i.e. for the same reason that Russia’s fertility rate would increase if the number of births was to stay the same).

So I don’t want to imply all is doom and gloom after having covered Russia’s demographic turnaround for almost a decade.

However, it does perhaps warrant a reassessment of the weight we attach to different demographic projections.

For instance, the “Medium” scenario in my Russian demographic model – also the one which I long thought likeliest – involves the assumption that the TFR would converge to about 1.75 (where it has generally been since 2012), with steady convergence in life expectancy to developed world levels, and annual (official) immigrant inflows of 300,000. In this scenario, Russia’s population would actually increase to about 150 million in 2025 and 158 million by 2050 (that’s including Crimea, aka +2 million).

However, if the recent fertility decline is not a one-year blip, and were to instead to continue falling to about 1.50, then Russia’s population would stagnate (this is from before Crimea):

Low (TFR=1.5 from 2010)Population growth starts from 2011, going from 142mn to 143mn by 2023. Then it falls slowly to 138mn by 2050. The birth rate peaks at 12.5 in 2013, falls sharply to 7.8 by 2032, and then remains in the 8-9 range. The death rate troughs at 11.4 in 2032, then rises to 12.9 by 2050. Positive natural increase is never attained.

Not really the demographic apocalypse long promised by the Western media either, but a disappointing outcome nonetheless.

It’s also possible that this will further encourage the kremlins to intensify immigration from Central Asia.

 
• Category: Economics • Tags: Demographics, Russia 
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Ernst & Young regularly carries out large-scale surveys of corporate employees across a range of countries on issues such as ethics and corruption in the workplace.

In the latest Global Fraud Survey (PDF), which took place at the end of 2016, 88% of Ukrainian employees thought that bribery and corrupt practices are widespread in business in this country.

Incidentally, this figure was 85% in the 2013 survey, the last year of “normalcy” before the Maidan. It was also at 80% in 2015. In short, overthrow of the “kleptocratic” Yanukovych made no difference to these figures. Zilch.

Now to be sure, the E&Y survey is more a measure of corruption perceptions than a measure of corruption itself, and the two are not necessarily the same. Still, there is definitely a correlation – according to Transparency International’s direct surveys of bribery incidence, the Ukraine consistently competes with Moldova for the status of Europe’s most corrupt nation, while the country with the lowest (best) ranking on the E&Y survey, Denmark, had 0% of respondents saying they had to pay a bribe in the past year when they were queried about it.

Overall, this is just one more piece of evidence to the effect that the Maidan has failed to solve the main problem that it set for itself.

In other news, Central Bank head Valeria Gontareva has offered up her resignation (after having disappeared from the limelight several weeks ago). In her three years of office under Poroshenko, she and her relatives appear to have done well for thmselves, like many bureaucrats throughout the post-Soviet world. Still, but many accounts, she has done a pretty good job; some 40% of financial institutions have been closed, including many offshoring funnels and pocket banks, while most of the rest have been forced to clarify their ownership structures. But with mounting uncertainties over the future of IMF credits piling up and an emerging crisis over fraud at Kolomoysky’s Privatbank before its nationalization, I suppose now is as good a time as any to part ways.

***

E&Y: Corruption perception by country

  • Question: Can you indicate whether you think it applies, or does not apply, to your country/industry or whether you don’t know?
  • Answer: Bribery/corrupt practices happen widely in business in this country.
Rank Country %
1 Ukraine 88
2 Cyprus 82
3 Greece 81
4 Slovakia 81
5 Croatia 79
6 Kenya 79
7 South Africa 79
8 Hungary 78
9 India 78
10 Egypt 75
11 Slovenia 74
12 Nigeria 73
13 Italy 71
14 Bulgaria 68
15 Turkey 67
16 Russia 66
17 Spain 64
18 Czech Republic 63
19 Portugal 60
20 Serbia 57
21 Jordan 53
. Average of all participants 51
22 Latvia 51
23 Ireland 47
24 Lithuania 47
25 Germany 43
26 Saudi Arabia 43
27 Poland 38
28 Belgium 36
29 Austria 32
30 Estonia 32
31 Romania 31
32 France 28
33 UAE 27
34 UK 25
35 Netherlands 23
36 Oman 19
37 Sweden 18
38 Switzerland 18
39 Finland 16
40 Norway 10
41 Denmark 6

.

 
• Category: Economics • Tags: Corruption, Ukraine 
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In an infamous 2008 article, Alexander Dugin makes the distinction between “patriotic corruption” and “comprador corruption,” or “Eurasian corruption” and “Atlanticist corruption.”

Here are the main features of “Eurasian” (patriotic) corruption:

  • Doesn’t damage Russia’s national security;
  • Concentrates the proceeds of corruption on Russian territory, or that of allied or strategically important countries;
  • Doesn’t put the corruptioneers in a state of dependency on Russia’s enemies;
  • Do not try to legitimize themselves through political lobbying and establish themselves as social norms.

And the main features of “Atlanticist” (comprador) corruption:

  • Damages Russia’s national interests;
  • Concentrates the proceeds of corruption outside Russia, in offshore havens and in countries hostile to Russia;
  • Makes the corruptioneer susceptible to blackmail from the governments and intelligence agencies of foreign Powers;
  • Attempts to create and empower lobbying structures, such as NGOs and political parties, that could legitimize the positions of Atlanticist corruptioneers in society.

Now okay, this distinction between “patriotic” and “comprador” corruption is trivially fun to make fun of. It is almost self-parodying. It is easy to ridicule whoever is making this argument, regardless of whether or not he benefits from said corruption. Dugin was endlessly ridiculed for it (even though there are no end of other, far more legitimate ways to make fun of him, such as his opposition to Hawking’s physics). No doubt I will be ridiculed for this post.

But for all that, Dugin is not wrong.

If large-scale corruption has to exist – and we know that for most countries outside North/West Europe, it must – it is doubtless better for corruptioneers to invest in their own society, like the American robber barons did in the 19th century and which the Chinese elite mostly do today, than to stash it away abroad, as was typical for Russia in the “roving bandits” era of the 1990s, when Yeltsin’s “family” was ferrying away assets in London and Switzerland like there was no tomorrow.

And the recent revelations about the network of charitable fronts that sustain Medvedev’s property empire prove that at least Russia’s political elites have embraced “patriotic” corruption.

Consider the following:

1. Of Medvedev’s $1.2 billion empire, a good 90% of investments are in Russia itself. And the 10% that is abroad – the Tuscan villa and vineyard – is in Italy, a country that does not have any particular animus towards Russia, unlike the favorite bolthole of corrupt Russian elites, Londongrad. In the 1990s, these ratios would have likely been the inverse.

2. As “stationary bandits” with some degree of interest in preserving the value of their holdings, the Russian ruling clique has a common interest in regulating corruption. Those who overstep the bounds of what is permissible, e.g. by practicing “compador” corruption, such as United Russia MP Vladimir Pekhtin with his Florida waterfront condo; or who end up stealing far too much for their station, such as the former head of Russian Railways Vladimir Yakunin and former Defense Minister Anatoly Serdyukov, are quietly dismissed. The question of whether or not Medvedev overstepped his station is now on the cards, with the systemic opposition in the Duma, such Fair Russia’s Sergey Mironov, calling on Medvedev to answer the questions raised by Navalny’s investigation.

3. The properties in question do not directly belong to Medvedev, not even to his direct relatives, but to an opaque network of charitable foundations credited with interest free loans by Russian state banks. And since what is given can be withdrawn, and – most critically – not on the whims of Western lawmakers (who in practice only target corrupt Russians who do not serve Western geopolitical interests), but on that of the dozen or so security men around Putin who rule Russia. To be sure, those “silovarchs” like to enjoy la dolce vita themselves, but at least they are not compradors themselves, i.e. they are more loyal to Russian national interests than to foreign ones.

4. “Patriotic” corruption, relative to “comprador” corruption, is closer to how political corruption tends to operate even in Western countries such as the United States. It’s an open secret that the Clinton Foundation has very little to do with charity, and a lot more to do with currying favor with one of America’s most powerful political dynasties. One critical difference, of course, is that it is not American state banks (hence, taxpayers) providing the financing, but private actors, companies, and foreign governments that expect to get some return on their investments. Now on the one hand, personally financing the lavish lifestyle of your elites is more directly insulting. On the other hand, having the likes of George Soros and Saudi Arabia do it for you is perhaps not an altogether superior alternative.

5. To end on an especially whimsical note: Although Navalny in his video criticizes Medvedev for owning Russian vineyards while also pushing for lower excise taxes on wine, one cannot judge him too harshly for it, since it would be a great boon for public health in Russia for alcohol consumption to shift from vodka to wine. To be sure, Medvedev – or rather, the charitable funds who finance the properties and vineyards he occasionally stays at – monetarily benefits from that, but then so does the life expectancy of Russians. Perhaps former Finance Minister Alexey Kudrin, one of Putin’s few confidantes who still enjoy respectability in the West, is personally less corrupt than Medvedev, but he has also gone on record calling for Russians to smoke more to benefit the Treasury; his fiscally hard-headed lack of concern for the social good was one of the reasons why he fell out with, and was eventually sacked by, Medvedev. Which of these two would be the better choice as PM for the average Russian? It is not clear that it would be Kudrin.

Well, that’s my strained defense of Russia’s corrupt thieving elites out of the way. They should pay me for the PR, or something.

 
• Category: Economics • Tags: Corruption, Dmitry Medvedev, Russia 
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On March 29, the High Court in London has decided that the sanctity of Eurobond debt trumps Ukraine’s special pleading to treat the Russian $3 billion loan to the late Yanukovych regime as odious debt and wave it away on account of Russia’s supposed “aggression” against it.

This is not the final judgment, which is still a few weeks away, but Ukraine’s chances of winning have now diminished to the purely theoretical.

Once that happens, Ukraine will be found to be in default on its loan to Russia, and since Russia belongs to the Paris Club of major creditor countries, the IMF will be prohibited from any further lending to Ukraine.

At that point, the IMF will have to decide whether it is willing to bend its own rules to continue to lend to Ukraine. On the one hand, Western countries – the United States, the EU countries, and Japan – hold a narrow majority of the voting power in the IMF, so perhaps a pro-Ukrainian decision could be lobbied through.

However, I agree with Alexander Mercouris that this is unlikely. The Ukraine has made zero to negligible progress on combatting corruption, and with the recent transport blockade of the Donbass and the nationalization of Ukrainian enterprises in the LDNR, a huge chunk of Ukraine’s foreign currency earnings are now going to go up in smoke. The IMF decision to forego a planned $1 billion tranche on March 20th cannot augur anything very good for the Ukraine.

At that point, the Ukraine could either comply with the court decision for IMF lending, or it could not.

The former will be politically risky, especially given that Poroshenko’s position now seems to be far more fragile than it was even a few months ago, with the Kolomoysky-Turchinov-Tymoshenko alliance flouting his authority with apparent impunity, from the Donbass blockade to the ejection of Russian banks from Ukraine. The alternative would be to live without the IMF, but could the Ukraine manage that?

The economy, at least until the Donbass blockade, showed signs of finally turning the corner, recently clocking up 4.7% growth by the end of the year (albeit from an extremely depressed base). The loss of the LDNR enterprises means will force the Ukraine to make deeper than planned cuts this year, and will sink its current account deep into the red just as the positive effects from its post-Maidan devaluation begin to wear off. Even in 2015, Ukraine’s government debt to GDP ratio was at 79% – anything over 60% is considered to be the danger zone for emerging economies (Russia defaulted at 75% in 1998) – and it will be worse today. Meanwhile, its war chest of $15 billion in foreign currency reserves, though a great improvement over its nadir at $5 billion in 2015, could drain away rapidly if shorn of IMF support.

The markets agree that the situation is fraught. 5 year credit default swaps for Ukraine are currently at 628 basis points, which implies that the default risk for Ukraine is higher than for any other major country bar Venezuela.

 
• Category: Economics • Tags: Economy, Ukraine 
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Why is corruption so bad in Eastern Europe? And what can be done about it?

hbdchick-europe-corruption-2012-hajnal-line

First off, I don’t know to what extent it can be reduced. According to the hbdchick’s theories on the Hajnal Line, ceteris paribus, Southern and Eastern Europe will always be more corrupt than the countries of “core Europe” because they did not undergo its centuries of selection for beyond-kin altruism.

Despite decades of institutional convergence under the aegis of European integration, Italy and Greece remain considerably more corrupt than Germany, Britainn, and Sweden. Poland has improved greatly since the 1990s, but reached an asymptote at around Italy’s level; Romania, at Greece’s. From the outset, this implies that Eastern European countries should keep their ambitions realistic, regardless of the policies that they choose to pursue.

Still, political economic factors do play a large role.

The main concept that I would draw upon is Mancur Olson’s distinction between “roving bandits” and “stationary bandits.”

In unstable polities, the elites can be replaced at any time, often through unpredictable and lawless methods such as coups, or “people power” driven “color revolutions” if the new gang are more pro-Western. The elites know this. As such, they have an interest in maximizing their thievery in the here and now, with corresponding disincentives to large, capital-heavy investments that will only pay in the long-term. Most likely, they will not be around to enjoy the fruits of their labor a decade or two down the line. But a Mayfair apartment and British Virgin Islands cash stash won’t go anywhere.

This describes Ukraine, and Russia in the 1990s.

In polities where the system is more stable, “roving bandits” start to settle down – they become “stationary bandits.” There are relatively greater incentives for long-term investments – if you steal less today, your pie will be greater tomorrow. Although corruption still exists, and may even remain systemic, the more predictable nature of the tariffs levied by “stationary bandits” enables corporations to account for them in their business plans. It’s not even so much the degree of corruption that’s important as its predictability. Furthermore, the bandits at the very top have greater incentives to clamp down on their underlings, since if they get start getting too greedy it will bite into their own profit margins. This in turn can pave the way for the emergence of institutions that can upgrade the war on corruption from manual to semi-autonomous mode.

This describes countries such as Russia, Kazakhstan, and Belarus. (China would also fall into this category).

industrialized-transition These ex-Soviet countries, ruled by “stationary bandits,” have been far more successful at economic recovery (and growth) than Ukraine. For all the “Gabon with snow” jokes, Ukraine is still an industrialized country with a well educated population and a respectable average IQ of perhaps 95, with considerable natural resources, access to the sea, and Russian gas subsidies that have totalled approximately $200 billion since independence.

So the Ukrainian economy should be doing MUCH BETTER, given the huge gap between potential and reality (perhaps the biggest gap of any country in the world). But as of 2015, its inflated-adjusted GDP was a mere 60% of the UkSSR’s in 1990 (Russia: 110%; Belarus: 180%), and is now in a neck-and-neck race with Nigeria in terms of Internet penetration.

Telling example: One of the few genuinely bright spots in the Ukrainian economy has been the IT sector. In particular its presence on the video game scene is rather impressive in relative terms – Cossacks, Stalker, Metro 2033.

Why? Because that is what you get when you combine roving bandits with a high IQ population. Few people are willing to build anything substantial like a multi-billion dollar factory. Hence, so far as heavy industry goes, it just continues to coast on the ever depreciating Soviet legacy.

How much capital do you need to launch a middle-sized video game studio? Can’t imagine it’s much more than $100,000. Most of the value is in the brains, and you get some of the best cognitive bang per dollar in the Ukraine. You can sell your game on Steam, and should instability strike, you can just bugger off to someplace warmer and more civilized, like Cyprus or Malta (like 4A games, the creators of Metro 2033, did in 2014).

Incidentally one can see the same thing (if to a significantly smaller extent) in both Russia and Belarus.

How to solve – or at least mitigate – corruption follows naturally from the above observations.

(1) The roving bandits need to be settled down. (Replacing one gang with another under the cover of a color revolution doesn’t do anything – as Ukraine has already proven, TWICE).

In Ukraine’s case, that means it needs to put an end to its never-ending internecine struggles. Broadly speaking, both Novossiya supporters and Ukrainian nationalists have the right idea, even if they are otherwise diametrically opposed. (Nadia Sevchenko represents a curious convergence of these two streams: A Ukrainian nationalist to the core, she has negotiated with LDNR authorities in contravention of official Kiev policy while suggesting that Ukraine needs a period of dictatorship to get itself sorted out).

(2) East Asia furnishes many several examples of non-Hajnal societies that have successfully solved the corruption problem. One approach is greater criminal penalties for corruption (“kill the chicken to scare the monkey,” as the Chinese proverb goes); another is to richly compensate civil servants, so as to reduce the relatice incentive for additional thievery (Singapore government ministers are paid like the CEOs of big corporations, and in tandem with harsh punishments and wealth, this has helped Singapore become one of the world’s least corrupt societies, despite traditional China’s penchant for corruption).

In practice, neither of these is practical for Eastern Europe. European human rights regulations preclude the killing of chickens; and East Europeans themselves are far too populist and demotic to tolerate elitist-technocratic policies like CEO-scale salaries for bureaucrats (with the result that said bureaucrats will unofficially continue to compensate themselves at CEO levels anyway, but with huge markups).

(3) The removal of roving bandits will enable faster economic growth, and greater tax receipts allow you to pay more to develop institutions, while greater per capita wealth leads to money floating about for the development of an indigenous civil society. It also makes e-government, which makes far less demands on face-to-face interactions between citizens and bureaucrats, with all their associated potential for corruption, far more realizable.

(4) To be sure, it can be very frustrating to live in a country that is visibly and strikingly more corrupt than the fairylands of core Europe. It is understandable that people, especially young people without much life experience, want change, and they want it quick. More often than not, the result is a cargo cult approach to combatting corruption, which results in spectacles such as Anti-Corruption Forums to which the participants show up in Mercedes and Lexuses (a most apt metaphor for Euromaidan).

From this perspective, an understanding of the deep gene-cultural underpinnings of corruption might not lead you to forgive everything, but it will at least imbue you with a sense of realism as to what is and what is not possible. A slow, steady convergence over two or three decades to Italy’s or even France’s level of corruption – entirely possible, even likely. A new Sweden overnight through the power of mass lustrations and Lenin statue topplings? Nope.

Going ahead will only set you up for eventual disappointment, but in the meanwhile, you’d have wrecked your own country.

Finally, don’t worry. In the end, corruption just isn’t that important to economic growth! Just compare Chile and China: One by far the cleanest country in South Americat; the other one is far more corrupt, but a standard deviation higher in average IQ. Which of those two is the economic steamroller, and which one has nothing to write home about? Exactly. And corruption tends to diminish with increasing wealth, as the power of institutions and civil society increases. Just don’t smother your economy with regulations and central planning, don’t allow roving bandits to pick the place clean and stymie all long-term development, and the problems should ultimately resolve by itself without any particular further effort on your part.

PS. Daniel Chieh comments: “These days, modern China has moved significantly from executions to pressuring corrupt officials to commit suicide: possibly a return to honor suicides that was the norm in Asia and perhaps part of the entire initiative for Xi’s “return of traditional Chinese virtues.” Honor suicides just doesn’t seem to be a thing in East Europe, that I know of, anyway. Human rights law in Europe in theory wouldn’t stop all methods of “killing the chicken” as there are a number of other “greater criminal punishments” that don’t include capital punishment – which is rarely used these days, to be honest. Mass social shaming, prohibitions on future job-seeking, reduced status opportunities and unfavorable associations that spread even to the family all work just as well.The life of a pariah can be worse than death, imo.

 
• Category: Economics • Tags: Corruption, Russia, Ukraine 
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The final figures for life expectancy and TFR in total and for the regions have been released today.

The Rosstat computations give an estimate of TFR = 1.76 children per woman and LE = 71.9 years for 2016, which are pretty close to my rough estimates a month ago.

The total population is estimated to be 146,804,372 at the end of the year.

Not really much extra to comment on than what I already have in February.

One thing of note is that Crimea has by now been fully integrated into the statistics so we can begin to analyze how its doing after liberation from the yoke of Ukrainian backwardness.

For instance, in terms of disposable income, Crimea remains well behind almost all majority ethnic Russian regions, including neighboring Krasnodar Krai (which became post-Soviet Russia’s main breachfront location). However, it is also converging quickly. Although Russia was in a recession during 2016, with only 0.7% growth in disposable incomes (-5.4% inflation), Crimea and Sevastopol both grew by more than 15% – the fastest rate of increase in Russia.

Ukraine was, of course, also in recession during this period.

The fertility rate in Crimea and Sevastopol has also increased since 2014, which you presumably wouldn’t expect of regions under brutal occupation.

TFR

TFR 2013 2014 2015 2016
Russian Federation 1.707 1.750 1.777 1.762
Central Federal District 1.478 1.514 1.575 1.595
Belgorod Oblast 1.526 1.544 1.561 1.547
Bryansk Oblast 1.534 1.557 1.650 1.612
Vladimir Oblast 1.591 1.643 1.730 1.712
Voronezh Oblast 1.437 1.471 1.517 1.484
Ivanovo Oblast 1.554 1.572 1.629 1.595
Kaluga Oblast 1.644 1.689 1.836 1.785
Kostroma Oblast 1.852 1.866 1.890 1.880
Kursk Oblast 1.674 1.699 1.716 1.643
Lipetsk Oblast 1.601 1.657 1.700 1.687
Moscow Oblast 1.522 1.600 1.675 1.727
Orel Oblast 1.530 1.552 1.603 1.590
Ryazan Oblast 1.552 1.595 1.640 1.703
Smolensk Oblast 1.480 1.528 1.522 1.509
Tambov Oblast 1.423 1.493 1.512 1.503
Tver Oblast 1.639 1.663 1.696 1.709
Tula Oblast 1.424 1.466 1.568 1.547
Yaroslavl Oblast 1.635 1.640 1.695 1.710
Moscow 1.328 1.341 1.406 1.460
North-West Federal District 1.574 1.613 1.657 1.670
Republic of Karelia 1.648 1.744 1.766 1.763
Komi Republic 1.961 2.013 2.002 1.972
Arkhangelsk Oblast 1.803 1.835 1.847 1.833
of which:
_Nenets Autonomous Okrug 2.312 2.423 2.584 2.774
_Arkhangelsk Oblast 1.784 1.812 1.818 1.795
Vologda Oblast 1.852 1.856 1.922 1.897
Kaliningrad Oblast 1.644 1.699 1.745 1.728
Leningrad Oblast 1.227 1.282 1.286 1.318
Murmansk Oblast 1.623 1.649 1.714 1.653
Novgorod Oblast 1.700 1.749 1.776 1.776
Pskov Oblast 1.675 1.695 1.741 1.796
St. Petersburg 1.482 1.522 1.591 1.634
Southern Federal District 1.642 1,711 1 1,735 1 1.719
Republic of Adygea 1.684 1.730 1.724 1.681
Republic of Kalmykia 1.882 1.853 1.831 1.708
Krasnodar Krai 1.825 1.818 1.763
Republic of Crimea 1.724 1.805 1.840 1.829
Astrakhan Oblast 1.911 1.968 1.970 1.938
Volgograd Oblast 1.529 1.571 1.589 1.574
Rostov Oblast 1.522 1.605 1.627 1.596
Sevastopol 1.649 1.821 1.726
North Caucasus Federal District 1.987 2.034 1.979 1.936
Dagestan Republic 2.015 2.077 2.022 1.978
Republic of Ingushetia 2.231 2.278 1.971 1.752
Kabardino-Balkar Republic 1.803 1.831 1.753 1.724
Karachay–Cherkessia 1.673 1.650 1.541 1.518
Republic of North Ossetia – Alania 1.977 2.009 1.930 1.891
Chechen Republic 2.925 2.912 2.799 2.622
Stavropol Krai 1.548 1.617 1.644 1.678
Volga Federal District 1.750 1.789 1.818 1.788
Republic of Bashkortostan 1.887 1.948 1.939 1.860
Republic of Mari El 1.926 1.981 1.993 1.980
Republic of Mordovia 1.366 1.374 1.360 1.403
Republic of Tatarstan 1.832 1.844 1.863 1.855
Udmurt Republic 1.922 1.959 2.006 1.956
Chuvash Republic 1.851 1.878 1.909 1.869
Perm Krai 1.932 1.977 2.018 1.979
Kirov Oblast 1.868 1.885 1.913 1.943
Nizhny Novgorod Oblast 1.561 1.593 1.669 1.649
Orenburg Oblast 2.001 2.027 2.013 1.946
Penza Oblast 1.486 1.529 1.550 1.503
Samara Oblast 1.589 1.647 1.708 1.714
Saratov Oblast 1.536 1.574 1.601 1.550
Ulyanovsk Oblast 1.611 1.673 1.712 1.705
Ural Federal District 1.907 1.960 1.965 1.919
Kurgan Oblast 2.115 2.101 2.123 2.030
Sverdlovsk Oblast 1.871 1.921 1.945 1.911
Tyumen Oblast 2.004 2.073 2.072 2.009
of which:
_Khanty-Mansiysk Ugra-Autonomous Okrug 2.050 2.090 2.073 2.020
Yamalo-Nenets Autonomous Okrug 2.090 2.189 2.188 2.084
Tyumen Oblast 1.959 2.054 2.064 2.002
Chelyabinsk Oblast 1.802 1.855 1.843 1.809
Siberian Federal District 1.880 1.902 1.902 1.870
Altai Republic 2.815 2.883 2.677 2.634
Republic of Buryatia 2.205 2.260 2.280 2.237
Republic of Tuva 3.424 3.485 3.386 3.345
Republic of Khakassia 2.013 2.007 1.986 1.967
Altai Krai 1.830 1.841 1.811 1.777
Zabaykalsky Krai 2.014 2.078 2.057 1.979
Krasnoyarsk Krai 1.775 1.807 1.837 1.815
Irkutsk Oblast 1.978 1.966 2.012 1.989
Kemerovo Oblast 1.787 1.778 1.726 1.713
Novosibirsk Oblast 1.749 1.765 1.817 1.805
Omsk Oblast 1.867 1.951 1.911 1.808
Tomsk Oblast 1.591 1.593 1.600 1.581
Far Eastern Federal District 1.814 1.869 1.893 1.858
Republic of Sakha (Yakutia) 2.168 2.247 2.191 2.090
Kamchatka Krai 1.773 1.850 1.887 1.890
Primorsky Krai 1.685 1.732 1.761 1.736
Khabarovsk Krai 1.744 1.787 1.854 1.779
Amur Oblast 1.844 1.849 1.838 1.817
Magadan Oblast 1.693 1.659 1.664 1.596
Sakhalin Oblast 1.808 1.962 2.019 2.156
Jewish Autonomous Oblast 1.857 1.948 2.022 1.987
Chukotka Autonomous Okrug 1.906 2.041 2.097 2.112

Life Expectancy

Russian Federation 70.76 70.93 71.39 71.87
Central Federal District 71.93 72.10 72.72 73.07
Belgorod Oblast 72.16 72.25 72.61 72.87
Bryansk Oblast 69.75 69.42 70.36 70.92
Vladimir Oblast 69.13 69.25 69.82 70.28
Voronezh Oblast 70.89 70.82 71.67 72.08
Ivanovo Oblast 69.84 69.88 70.62 70.77
Kaluga Oblast 70.02 69.93 70.73 71.18
Kostroma Oblast 69.86 70.05 70.38 70.87
Kursk Oblast 70.14 70.11 70.80 70.94
Lipetsk Oblast 70.66 70.60 71.07 71.62
Moscow Oblast 70.78 70.94 72.26 72.50
Orel Oblast 70.22 69.88 70.38 70.73
Ryazan Oblast 70.74 70.80 71.46 71.87
Smolensk Oblast 68.90 69.44 69.74 69.98
Tambov Oblast 70.93 71.11 71.67 72.11
Tver Oblast 68.13 68.43 69.10 69.24
Tula Oblast 69.41 69.63 70.06 70.56
Yaroslavl Oblast 70.45 70.64 70.98 71.21
Moscow 76.37 76.70 76.77 77.09
North-West Federal District 71.25 71.42 71.70 72.16
Republic of Karelia 69.19 69.36 69.16 69.78
Komi Republic 69.27 69.05 69.40 69.45
Arkhangelsk Oblast 70.16 70.23 70.71 70.82
of which:
_Nenets Autonomous Okrug 65.76 70.65 71.00 71.08
_Arkhangelsk Oblast 70.27 70.20 70.70 70.80
Vologda Oblast 69.35 69.74 70.40 70.24
Kaliningrad Oblast 70.51 70.28 70.58 71.92
Leningrad Oblast 70.36 70.28 71.23 71.70
Murmansk Oblast 70.46 69.97 70.24 70.94
Novgorod Oblast 67.67 68.41 68.70 69.15
Pskov Oblast 67.82 68.07 68.48 69.25
St. Petersburg 74.22 74.57 74.42 74.90
Southern Federal District 71.76 71,74 1 72,13 1 72.29
Republic of Adygea 71.80 72.01 72.22 72.59
Republic of Kalmykia 71.35 72.03 72.15 73.35
Krasnodar Krai 70.74 70.52 70.74
Republic of Crimea 72.29 72.28 72.53 72.83
Astrakhan Oblast 71.34 70.76 71.36 72.20
Volgograd Oblast 71.42 71.62 71.98 72.49
Rostov Oblast 71.39 71.30 71.90 72.20
Sevastopol 72.28 70.67 71.64
North Caucasus Federal District 73.95 74.11 74.63 75.13
Dagestan Republic 75.63 75.83 76.39 77.23
Republic of Ingushetia 78.84 79.42 80.05 80.82
Kabardino-Balkar Republic 73.71 74.16 74.61 75.12
Karachay–Cherkessia 73.94 73.91 74.44 74.72
Republic of North Ossetia – Alania 73.94 73.82 74.20 75.05
Chechen Republic 73.20 73.06 73.45 74.20
Stavropol Krai 72.75 72.75 73.36 73.40
Volga Federal District 70.06 70.20 70.71 71.39
Republic of Bashkortostan 69.63 69.76 70.08 71.00
Republic of Mari El 69.30 69.42 69.80 70.75
Republic of Mordovia 70.56 71.38 72.06 72.25
Republic of Tatarstan 72.12 72.17 72.81 73.64
Udmurt Republic 69.92 70.03 70.46 70.86
Chuvash Republic 70.79 70.62 71.35 71.52
Perm Krai 68.75 69.04 69.09 69.74
Kirov Oblast 70.26 70.59 71.11 71.71
Nizhny Novgorod Oblast 69.42 69.53 70.17 70.75
Orenburg Oblast 68.90 68.73 69.63 70.57
Penza Oblast 71.54 71.63 72.12 72.53
Samara Oblast 69.40 69.63 70.35 71.08
Saratov Oblast 70.67 70.95 71.40 72.07
Ulyanovsk Oblast 70.50 70.37 70.46 70.97
Ural Federal District 70.06 70.20 70.38 70.82
Kurgan Oblast 68.27 68.75 69.03 69.43
Sverdlovsk Oblast 69.81 69.76 69.83 70.02
Tyumen Oblast 71.35 71.50 71.76 72.33
of which:
_Khanty-Mansiysk Ugra-Autonomous Okrug 72.23 72.27 72.58 73.50
Yamalo-Nenets Autonomous Okrug 71.23 71.92 71.70 72.13
Tyumen Oblast 70.14 70.32 70.58 71.03
Chelyabinsk Oblast 69.52 69.71 69.90 70.50
Siberian Federal District 68.63 68.85 69.31 69.81
Altai Republic 67.34 67.76 68.44 70.13
Republic of Buryatia 67.67 68.54 69.15 69.61
Republic of Tuva 61.79 61.79 63.13 64.21
Republic of Khakassia 68.57 68.83 68.68 69.33
Altai Krai 69.77 70.01 70.44 70.74
Zabaykalsky Krai 67.11 67.38 67.34 68.33
Krasnoyarsk Krai 69.06 69.23 69.69 70.01
Irkutsk Oblast 66.72 66.87 67.37 68.20
Kemerovo Oblast 67.72 67.80 68.31 68.72
Novosibirsk Oblast 70.19 70.28 70.86 71.20
Omsk Oblast 69.74 70.13 70.41 70.78
Tomsk Oblast 70.33 70.67 71.25 71.66
Far Eastern Federal District 67.81 68.21 68.68 69.22
Republic of Sakha (Yakutia) 69.13 69.81 70.29 70.84
Kamchatka Krai 67.98 68.06 68.56 68.66
Primorsky Krai 68.19 68.74 69.21 69.66
Khabarovsk Krai 67.92 68.01 68.72 69.13
Amur Oblast 66.38 67.00 67.27 68.28
Magadan Oblast 67.12 67.19 68.11 69.00
Sakhalin Oblast 67.70 67.89 67.99 68.66
Jewish Autonomous Oblast 64.94 65.20 65.04 65.88
Chukotka Autonomous Okrug 62.11 62.32 64.16 64.42
 
• Category: Economics • Tags: Demographics, Russia 
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The reason I don’t write much about Russia’s demographics nowadays is that there isn’t much point to it.

Up until the early 2010s, the Western media was brimming with misinformation about the subject – what we now call #fakenews – so refuting it was both profitable and easy. Incredibly easy. You didn’t really have to do anything much more complicated than taking a few minutes to browse through Russia’s national statistics database, but apparently that was beyond the capabilities of most Russia journalists.

However, by now a critical number of Western pundits have apparently acquainted themselves with at least the Wikipedia article on Russia’s demographics. In the longterm, reality wins out, and so with a lag time of about a decade, references to Russia’s “plummeting population” and “sixth wave of emigration” have steadily petered out (the last major holdouts of Russia demographic doomerism was Barack Obama in this 2014 interview with The Economist, and Michael Rubin for Commentary in 2015,).

We can now finally say that the “Dying Bear” meme has fulfilled lived up to its own name.

***

Anyhow, preliminary demographic results for 2016 are in.

Births remained marginally ahead of deaths, both at around 12.9/1,000 people, though the usual ~300,000 annual net immigrants (almost half of them from Ukraine) will ensure that overall population growth remains decidedly positive.

russia-births-deaths-1946-2016

Births decreased by 2.6%. The full impact of the small 1990s cohort is now being felt, so this was always inevitable. Deaths also declined by 1.2%, despite the ongoing aging of the population. This pretty much completes what I termed The Russian Hexagon, the successor to the so-called “Russian Cross” in the early 1990s when the births and deaths graphs intersected; in the past decade, birth and death rates once again converged, but from the opposite direction, forming a sort of hexagon.

russia-tfr-1946-2016

The Total Fertility Rate seems to have stabilized at around 1.75 children per woman (inevitable question: How much without Muslims/ethnic minorities? Approximately 0.1 children less, based on completed fertility data from the 2010 Census).

This makes sense. As I pointed out almost a decade ago, Russian fertility preferences are similar to those of Scandinavians and the Anglosphere (~2.5 children per woman), and higher than that of Visegrad/The Med (~2.1 children) or the Teutonic world (1.7 children), so convergence to at least this level was always on the cards as soon as some semblance of economic stability and predictability was restored.

As I pointed out, this makes Russia’s fertility rates reasonably respectable by European standards; they are only noticeably higher in France, Ireland, the UK, and Sweden.

russia-life-expectancy-1946-2016

Life expectancy is now close to 72 years, which is the highest it has ever been in Russia’s history.

One way of looking at this is that mortality trends in Russia are basically tracking improvements in the ex-Soviet Baltics (and the City of Moscow) with a lag of ten years, so there is good reason to expect this trend will continue.

This is primarily linked to the big reduction in vodka bingeing during the past decade, which depressed Russian life expectancy by about a decade relative to what it “should be” based on its GDP per capita and healthcare system. This “alcoholization” began to soar from around 1965, and peaked in the 1990s and early 2000s. According to calculations by the demographer Alexander Nemtsov, something like a third of Russian mortality around 2005 could be attributed to it.


Blast from the Past

Incidentally, back in 2008, I created a demographic model for Russia, which enabled me to accurately predict a resumption in both total (2010) and natural (2013) population growth to the exact year.

In the scenario where TFR is set to a constant 1.75 children per woman, the “Medium” scenario of mortality improvements (which has best tracked Russia’s life expectancy trends to date), and about 300,000 annual immigrants, it predicted the following:

Medium (TFR=1.75 from 2010)The population grows from 2010, rising from 142mn to 148mn in 2025 and 156mn in 2050. The death rate troughs at 10.8 in 2034, before zooming in to 11.5 by 2050. The birth rate peaks at 13.6 by 2014, before plummeting to 9.7 in 2033, before recovering to 11.9 in 2046 and again falling, although less rapidly than before.

How does this stack up against reality? The birth rate reached a multi-year plateau at 13.3 children per woman during 2012-2015, when the decline in the numbers of women of childbearing age were exactly offset by rising total fertility rates. The mortality rate fell steadily throughout this period, just as predicted, though it is marginally higher as of 2016 (12.9/1,000) than in the Medium variant (12.6/1,000).

Overall, this is pretty close, and suggests that the model is fundamentally sound and thus so are its future population projections.

Of course it has to be adjusted upwards by 2.3 million to take into account Crimea, and any further (re)gatherings of rightful Russian clay.


 

As alcohol abuse fell, so did all of the other components of mortality, especially those most strongly associated with it, i.e. deaths from external causes:

russia-deaths-external-causes-1990-2016

… which includes homicides, suicides, deaths from transport accidents (despite soaring vehicle ownership), and, self-referentially, deaths from alcohol poisoning.

russia-mortality-alcohol-murder-suicide-1990-2016

Part of this reduction was due to cultural change, including the realities of life under capitalism (if you turn up to work drunk, you can be fired, unlike under socialism), part of it was due to economics (more diversity of choice), and part of it was thanks to specific Kremlin policies, such as steady increases in the excise tax on alcohol and restrictions on alcohol advertising.

Finally, the abortion rate continues to quietly decline. The ratio of abortions to births is now down to 40%, down from well more than 100% during the era from the post-Stalin legalization of abortion to the 1990s. This is still about 2-3x higher than in most of Western Europe and the US, but Russia is longer the absolute outlier it once was.

russia-abortion-rate-1957-2016

Just like the trends with fertility and mortality, this too can be considered a return to “demographic normality” after the Soviet aberration.

One important point: Conservative talking points to the contrary, there is no hard evidence that high abortion rates actually decrease fertility. Low abortion rates are good though for general health reasons and (depending on your religious views) for ethical ones but they have very little to do with demographic health per se.

Even though it completely bans abortions, Poland has one of Europe’s lowest fertility rates. For some reason Mark Steyn never did dwell on that…

 
• Category: Economics • Tags: Demographics, Russia 
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transparency-cpi-2016

Has been released.

It is basically a composite index of about a dozen subjective corruption ratings given out by various development organizations and more political NGOs (e.g. Freedom House).

Although it generally reflects reality, as in it correlates well with other, more objective measures of corruption, there are two major caveats:

(1) It is not necessarily accurate for any one particular country. You would be better off looking at things like Transparency International’s own Global Corruption Barometer surveys of everyday bribery, the World Bank’s enterprise surveys, and expert assessments (preferably blind) of national legislation such as the Global Integrity Index, the Open Budget Index, and the Revenue Watch Index. (I tried to combine some of them here).

(2) The people actually doing the ratings are employed by outfits such as the World Bank and democracy promotion NGOs. This means their perspectives are going to be ideologically loaded in predictable directions.

For instance, it’s pretty likely that despite the Maidan’s promises, Ukraine is still considerably more corrupt than Russia. Although Ukraine and Russia score an equally bad 29/100 according to the CPI, there are differences in their component scores [XLSX]. The World Economic Forum Executive Opinion Survey, which queries businesspeople who are more concerned with profits than politics, gives Russia 38/100 to Ukraine’s 27/100. The “political” NGOs, however, rate Ukraine higher; Freedom House gives it 33/100 to Russia’s 25/100.

 
• Category: Economics • Tags: Corruption 
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In international sociological comparisons of happiness Russia and the ex-USSR have become pretty much bywords for very low levels of happiness and life satisfaction.

Here is a not atypical graph showing Russia as one several extreme outliers.

russia-happiness-2000

However, polling evidence suggests this is an increasingly dated view, much as demographic data has already long invalidated the “dying Russia” trope.

russia-happiness-vciom-1990-2016

The above graph shows the results of VCIOM opinion polls on subjective happiness since 1990. The index represents the numbers of people saying they feel very or somewhat happy minus those saying they feel very or somewhat unhappy.

There was a peak at the height of the late 2000s boom, which went down during the recession. However, sentiments quickly recovered, and were impervious to the effects of the current (much milder) recession.

Moreover, the percentage of Russia now saying they are “very happy” – at 39% – is now almost twice as high as the 22% seen in 2008, to say nothing of the typical 5-10% figures during the 1990s.

 
• Category: Economics • Tags: Happiness, Russia 
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Anatoly Karlin
About Anatoly Karlin

I am a blogger, thinker, and businessman in the SF Bay Area. I’m originally from Russia, spent many years in Britain, and studied at U.C. Berkeley.

One of my tenets is that ideologies tend to suck. As such, I hesitate about attaching labels to myself. That said, if it’s really necessary, I suppose “liberal-conservative neoreactionary” would be close enough.

Though I consider myself part of the Orthodox Church, my philosophy and spiritual views are more influenced by digital physics, Gnosticism, and Russian cosmism than anything specifically Judeo-Christian.


PastClassics
The “war hero” candidate buried information about POWs left behind in Vietnam.
The evidence is clear — but often ignored
Are elite university admissions based on meritocracy and diversity as claimed?
A simple remedy for income stagnation
Confederate Flag Day, State Capitol, Raleigh, N.C. -- March 3, 2007