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Some populations are more adapted to vegetarianism than others.

Kothapalli, Kumar et al. – 2016 – Positive selection on a regulatory insertion-deletion polymorphism in FADS2 influences apparent endogenous synthesis of arachidonic acid:

Long chain polyunsaturated fatty acids (LCPUFA) are bioactive components of membrane phospholipids and serve as substrates for signaling molecules. LCPUFA can be obtained directly from animal foods or synthesized endogenously from 18 carbon precursors via the FADS2 coded enzyme. Vegans rely almost exclusively on endogenous synthesis to generate LCPUFA and we hypothesized that an adaptive genetic polymorphism would confer advantage. The rs66698963 polymorphism, a 22 bp insertion-deletion within FADS2, is associated with basal FADS1 expression, and coordinated induction of FADS1 and FADS2 in vitro. Here we determined rs66698963 genotype frequencies from 234 individuals of a primarily vegetarian Indian population and 311 individuals from the U.S. A much higher I/I genotype frequency was found in Indians (68%) than in the U.S. (18%). Analysis using 1000 Genomes Project data confirmed our observation, revealing a global I/I genotype of 70% in South Asians, 53% in Africans, 29% in East Asians, and 17% in Europeans. Tests based on population divergence, site frequency spectrum and long-range haplotype consistently point to positive selection encompassing rs66698963 in South Asian, African and some East Asian populations. Basal plasma phospholipid arachidonic acid status was 8% greater in I/I compared to D/D individuals. The biochemical pathway product-precursor difference, arachidonic acid minus linoleic acid, was 31% and 13% greater for I/I and I/D compared to D/D, respectively. Our study is consistent with previous in vitro data suggesting that the insertion allele enhances n-6 LCPUFA synthesis and may confer an adaptive advantage in South Asians because of the traditional plant-based diet practice.

Here is a map:

adaptive-allele-to-vegetarian-diet

And from the supplementary notes, a more detailed table showing the I/I values for the populations in the 1000 Genomes Project study (population key):

vegetarianism-supplementary-table

There is a distinct correlation between this and meat consumption:

meat-consumption-2009

To be sure, Africa’s and India’s poverty play a big role, but compare, say, Vietnam and India, whose GDP per capita have tracked each others almost perfectly since the 1980s. But annual meat consumption per capita in Vietnam in 2009 was, at 49kg, more than ten times as high as India’s 4.4kg. The I/I figure for South Asia was 70%, one of the world’s highest, to Vietnam’s 8%, one of its lowest. Although one might rejoinder about Hinduism’s aversion to meat consumption, that applies universally just to beef; strict vegetarianism is prescribed only for members of the priestly Brahmin caste. In any case, one has to ask why such a religious taboo evolved in South Asia but pretty much nowhere else. And why Pakistan, despite being slightly wealthier than Vietnam until the past decade (though admittedly much less socially developed), nonetheless also has, at 15kg per annum, significantly lower meat consumption than Vietnam.

Amongst East Asians, I/I values are much higher amongst northerners, which is an inversion of the global pattern: Beijing Chinese – 48%; Japanese – 54%; Southern Han Chinese – 22%; Vietnamese – 8%. Any ideas why that might be the case? This is pretty strange, because northern Chinese peasant fare is not too dissimilar from what you’d find in traditional Eastern Europe. This does however seem to be borne out by cultural patterns: A quick search shows that Hong Kong has the world’s highest beef consumption, and Vietnamese cuisine is notably beef heavy.

This also illustrates the dangers of adopting vegetarianism as a dietary fad for populations with no biological adaptations to them. Maybe this is at least one form of cultural appropriation we could do without?

 
• Category: Race/Ethnicity • Tags: Genetics, India 
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There is, once again, widespread excitement about the prospects of the Indian economy. This comes on the heel of news that India’s Q3 growth has now marginally edged above China’s, after a statistical adjustment. Can we now expect the Elephant to replace the Dragon as the motor of the world economy?

At times like these it helps to take a longer term view. Assembling GDP growth data since 1960 from the World Bank and taking a moving average of 5 years, I made the following two graphs of the longterm economic performance of the world’s two demographic giants.

The comparison does not come out well for India. It has underperformed China without break, even when China was ruled by Maoists who made Soviet central planners look like paragons of competence by comparison. (The dip at the very beginning is an artifact of the Great Leap Forward and the ensuing chaos and famine). The Licence Raj might not have exactly been a panacea either, but at least markets functioned, and that alone should have made conditions for economic growth orders of magnitude better. Even though China is now about two and a half times richer per capita than India in PPP terms, there are no signs of convergence even to this day, as India continues falling relatively behind.

india-china-gdp-growth-1965-2014

The difference is, if anything, even more profound when you adjust for population growth, which has been systemically higher in India than in China since the 1970s.

india-china-gdp-per-capita-growth-1965-2014 Will India’s growth rate eventually converge with and overtake China’s? That is almost certain, since relatively poorer countries should in theory be able to grow much quicker than richer one’s by buying/stealing knowhow. The main question is how long will it take: Will it happen in the next few years? Or a decade? Or a few decades?

Increasing numbers of economists are coming round to the view that human capital is the main, overriding determinant of economic growth. According to my own calculations, there is an astounding R2=0.84 correlation between PISA-derived national IQs and GDP (PPP) per capita amongst countries that do not benefit from a resource windfall or suffer from a Communist economic legacy. Unfortunately, India’s IQ appears to be very low, somewhere in the low 80s, so I remain very skeptical of its prospects for becoming a second China.

Still, I don’t want to come off as an India basher. There are a few factors working in its favor too. First, it’s got a very substantial “smart fraction,” i.e. it has relatively more bright people than you would expect from the standard bell curves you have in more homogenous countries. Thank the caste system for that. As Heiner Rindermann showed, smart fractions have a disproportionate effect on a country’s overall economic performance. Furthermore, Indian IQs might be even more environmentally suppressed than in Sub-Saharan Africa. India has comparable rates of malnutrition, likely worse sanitation and hyeginic standards, and more inbreeeding. All this might sound bad and it is but that likewise creates the potential for very rapid improvement, should a strong and capable hand be there to help it along.

In this respect, India is lucky to have gotten Modi.

 
• Category: Economics • Tags: China, Convergence, India, Indian Economy 
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My latest for the US-Russia.org Expert Discussion Panel. Also as usual it appears at Voice of Russia. The version printed here is a slightly longer one:

There are already a lot of opinions on the topic of Russian corruption, and I see no pressing need to add more to that morass. I do however think it will be useful to ground the scale and trajectory of Russian corruption in quantifiable facts and statistics.

There are three major ways of measuring corruption: (1) Subjective assessments; (2) Objective assessments; and (3) Opinion polls.

The most famous subjective assessment is Transparency International’s Corruption Perceptions Index. Russia might go up and down this index across the years, as per the businesspeople and “experts” it queries, but overall it remains consistently stuck somewhere in between Honduras and Equatorial Guinea. Bearing in mind that they also believe Italy is more corrupt than Saudi Arabia – a country that is owned by its royal family even in name – one must ask to what extent this PERCEPTIONS index reflects actual corruption in any particular country, as opposed to the generosity of the expat packages it offers and its friendliness to the international business community. Is it a complete coincidence that Russia’s already low CPI score started plummeting to new depths about the exact same time it jailed Khodorkovsky?

russia-corruption-subjective

(1) CPI = Corruption Perceptions Index.
(2) WBGI = World Bank Governance Indicators.

Russia does much better on assessments that include precise methodologies for calculating scores, i.e. a particular anti-corruption law either exists – or it doesn’t. On the Global Integrity Index, it scores 71/100, which is comparable to many other middle-income countries like Lithuania (74), Hungary (73), and Mexico (68). On the Open Budget Index, which measures fiscal transparency, Russia improved drastically from 47/100 in 2006 to 74/1000 by 2012, and is now ahead of all the other BRICs, all of East-Central Europe barring the Czech Republic, and even ahead of Germany.

Likewise, widespread tropes of shady siloviki appropriating all the proceeds from the Russian oil industry – typically accompanied by terms such as “Muscovite patrimonialism” or “rent-seeking clans” by those seeking to project an aura of learnedness – to the contrary, Russia is second only to Brazil and Norway in the transparency of its oil and gas accounts, as measured by the Revenue Watch Index.

Now all of this is not, of course, to say that the Germans steal more from their budget than the Russians; that would be ridiculous. These indices try to tally laws that promote integrity and institutional transparency, not corruption per se. It does however mean that Russia releases more information about its budget than a wide array of other middle-income and even developed countries, which – all else being equal – should make any thefts and shady dealings easier to detect. For instance, Navalny’s work to expose corrupt state tenders is hailed in the press – and rightly so! – but had not the kleptocratic Kremlin made those tenders publicly accessible on the Internet, his activities wouldn’t have even been possible in the first place! If Russia truly were the “mafia state” it is frequently painted as by the Western chattering classes, why on earth would it want to shine more light onto its own rotten essence by steadily increasing its integrity and transparency indicators?

russia-corruption-objective

(1) OBI = Open Budget Indicators.
(2) GII = Global Integrity Index.
(3) RW = Revenue Watch Index.

The final method of measuring corruption is both the most direct and democratic – asking ordinary Russians how often they experience it in their everyday lives, as opposed to the musings of ivory tower “experts” and limousine expats. Unfortunately, opinion polls on the matter – most of which come from Transparency International’s Global Corruption Barometer, the Levada Center, and FOM (The Foundation for Public Opinion) – are too irregular and differently worded to confidently discern any decadal trend. On average, as we can see from the graph below, about 20%-25% of Russians tend to say they or their families have experienced corruption in the past year or two.

russia-incidence-of-bribery

(1) GCB = Global Corruption Barometer (“In the past 12 months, have you or anyone living in your household paid a bribe in any form?”)
(2) Levada – “Did you have to pay a bribe anywhere in the past 12 months?”
(3) FOM 1 – “In the past year or two, have you personally met any state servant who asked or expected an unofficial payment or service from you for doing his/her work?”
(4) FOM 2 – “Have you ever given a bribe to a state official or not?”

In the most comprehensive international survey, that of Transparency International’s Global Corruption Barometer, some 26% of Russians said they or a member of their household paid a bribe in the past year. This is directly analogous to countries like Hungary (24%), Romania (31%), and Mexico (33%) – and not far below the worst-performing “old European” country, Greece (18%). This is, of course, nothing to write home about; but neither is this comparable to India (54%), let alone aforementioned Honduras or Equatorial Guinea. Bear this in mind the next time you read some opinion columnist pontificating about Russia as “Zaire with permafrost” or “Nigeria with snow” (for the record, more than 60% of the respondents from those two countries said they or a member of their household paid a bribe in the past year).

If ordinary corruption is difficult to quantify, it is doubly so for elite corruption. And rumors about Putin’s $40 billion dollar Swiss bank accounts – especially if they are sourced from his political opponents like Stanislav Belkovsky and Boris Nemtsov – aren’t going to get us very far. We need concrete sums and figures – say, the total of $100 million or so that appears to have been stolen in the recent Oboronservis scandals. This is an order of magnitude or so higher than the largest corruption scandals in developed Western countries, but on the other hand, it’s unfortunately quite typical of major corruption scandals in places like China, India, and Latin America. (The overall sums are smaller in truly deprived regions of the world because there is far less to steal in the first place).

Case in point. In a Twitter argument about whether it was better to live in Russia or India, the Swedish diplomat Mats Staffansson wrote to me, “India has enormous poverty but has one big advantage. A functioning noncorrupt legal system. Good British heritage… Corruption in India is definitely a problem but on a much smaller scale than in Russia.” In response, I challenged him to find a single Russian corruption case from the past decade that is remotely comparable to the theft of food worth $14.5 billion in India that was supposed to have been sold at subsidized prices to the poor – and the poor in India are really poor, as half of India’s children are chronically malnourished – but was instead looted by “corrupt politicians and their criminal syndicates.”

I am still waiting for an answer from him

As for Vlad Sobell’s question of whether corruption in Russia can ever becom e “the exception rather than the rule”… Well, where precisely is this threshold? Corruption is part of a continuum, not a set of discrete states. I will venture to say that with the correct incentives and cultural propaganda, it is certainly plausible for Russia to reduce its levels of corruption from the levels of Romania or Mexico today… to the somewhat better levels of Italy or Poland. I do not know if improvements beyond that are possible. Whether it was due to Protestantism, or the out-breeding fertility patterns specific to family life within the Hajnal Line (which according to some theories promoted altruism), the peoples of north-west Europe seem to have reached a level of very low corruption that has been equaled by very few other societies. In Russia’s case, just converging with Mediterranean and Visegrad corruption norms would be an adequate achievement.

(Republished from Da Russophile by permission of author or representative)
 
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Not often that you see Russia in some color other than bloody red on a world map of corruption or institutional quality. But according to the Open Budget Index (2012 results), the Russian budget is actually pretty transparent as far as these things go.

Of the major countries, only the UK (88), France (83), and the US (79) are ahead. The other major developed countries in the survey like Germany (71), Spain (63), and Italy (60) are all behind Russia (74), as are its fellow – and supposedly far cleaner – BRICs fellows Brazil (73), India (68), and China (11). Of perhaps greater import, only the Czech Republic (75) edges above Russia in the CEE group, whereas all the others – Slovakia (67), Bulgaria (65), Poland (59), Georgia (55), Ukraine (54), Romania (47), etc. – lag behind it. Also noteworthy is that Russia’s typical neighbors on Transparency International’s CPI, such as Zimbabwe (20), Nigeria (16), and Equatorial Guinea (0), reveal almost nothing in their national budgets.

Now of course the Open Budget Index is not the same thing as corruption. You can have an open budget but still steal from it (and this does happen in Russia frequently), and you can also have a closed budget from which few people steal, at least directly (as was the case in the USSR… or to take a more modern example, while Russia’s OBI is now higher than Germany’s, it is inconceivable that state corruption is even in the same league in these two countries).

Nonetheless, there is surely a very significant degree of correlation between the two. Having an open budget means that it is can be subjected to scrutiny; were Russia’s budget closed like China’s or Saudi Arabia’s, Navalny’s work to expose corrupt state tenders would be simply impossible (as it is, the latest ploy corrupt bureaucrats have been forced to resort to is to sprinkle Latin characters into the Cyrillic texts of state tenders so as to confound search engines).

Second, a high OBI score demonstrates the state’s commitment to fighting corruption. If Putin and Co. really didn’t care and were truly the kleptocrats they are repeatedly labeled as by the Western media, they would instead do everything in their power to hide the budget so as to remove the possibility of scrutinizing it. But they don’t. To the contrary, Russia’s OBI has increased from year to year.

As we can see above, Russia’s budget transparency in 2006 was… about middling; consistently below developed world standards, but higher than plenty of Third World countries and even quite a few CEE countries. But by 2012 it was 10th out of 100 countries. If Russia’s government were truly only committed to stealing as much as it possibly could why would it bother with the legislative and institutional improvements that enabled such a change in rankings?

It is now the most transparent of the BRIC’s, having overtaken both (consistently transparent) Brazil and (also rapidly improving) India in 2012.

Of most pertinence, Russia has massively improved its relative position to other CEE countries; only the Czech Republic and Georgia under Saakashvili have registered such appreciable improvements. To the contrary, both Poland and Romania actually registered declines in their overall levels of budget transparency.

Russia no longer even trails the developed world in this regard.

I would also note that this chimes with the findings of the Revenue Watch Index, which found Russia to be one of the world’s best countries at reporting information about revenue from the extractive sector. This in particular goes against the widespread trope of shady siloviki appropriating all the proceeds from Russian oil and gas and murdering the investigative journalists who go after them.

Conclusions

Once again I would like to emphasize that the OBI does not measure corruption. For instance, China is nowhere near as corrupt as the numbers indicate here; FWIW, my own impressions from perusing various indices and reading comments boards from both countries is that “everyday” corruption is somewhat higher in Russia and elite-level corruption is comparable. Nonetheless, the OBI is an objective measure, drawn from concrete metrics, and that alone makes it superior to Transparency International’s CPI, which is a measure of corruption perceptions.

To remove any possible insinuation that I only castigate the CPI because it ranks Russia abysmally low, I would ask the following question: Is it really plausible that Italy is more corrupt than Saudi Arabia, as implied by the CPI, when there is such a vast gulf in their levels of budget openness and other objective assessments of institutional quality?When we actually pretty much know that a substantial chunk of Saudi Arabia’s budget goes into feeding the country’s 15,000 odd princes… that the very country is named after the family that rules it? I find that very improbable. I would suggest it is somewhat more likely that the “experts” and businessmen asked to assign CPI ratings simply bumped up the Gulf states for their (admittedly) very generous and sumptuous hospitality and their pro-Western policies; all factors that would work in the reverse direction in the cases of countries like Russia, or Venezuela.

Still, all that is speculation. Much like the CPI itself. Back in the world of concrete statistics and facts, I think this further confirms my basic thesis on Russian corruption, which goes something like this:

  1. It was extremely high during the 1990′s.
  2. It declined at a steady if not breakneck rate (media narrative – it keeps getting worse every single year under Putin).
  3. The state itself is moderately but not extremely interested in curbing corruption (media narrative – Russia is a “mafia state”).
  4. Today, Russia is not an outlier or an anomaly on corruption when compared against Central-Eastern or Southern Europe. To the contrary, it is comparable to the worst-performing European countries (e.g. Hungary, Romania, Greece), and about middling in the overall global corruption ratings. (media narrative – “Nigeria with snow”).
  5. It continues to improve at a slow but steady pace.

For more information see my Corruption Realities Index, which I developed in 2010 and takes into account the OBI when computing corruption levels.

(Republished from Da Russophile by permission of author or representative)
 
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India backs out of global education test for 15-year-olds.

Indians were put to test for the first time in the last assessment in 2009. On the global stage, they stood second last among 73 countries, only beating Kyrgyzstan on reading, math and science abilities… This time around, sources said India shied away from the assessment as government officials felt our children were not prepared for such a test.

“India didn’t sign up for the PISA 2012 assessment because when countries were asked to sign up for that assessment, India had only signed up for the PISA 2009 assessment, which it carried out with a year later delay in 2010,” said Juliet Evans, who handles communication and administration for the PISA Secretariat. Unlike India, several other countries like Costa Rica, Malaysia, Georgia and the UAE who had carried out the PISA evaluation in 2010 did sign up for the upcoming assessment.

Which of these Soviet leaders does this remind you of?

Lenin, Stalin, Khrushchev and Brezhnev are all travelling together in a railway carriage. Unexpectedly the train stops. Lenin suggests: “Perhaps, we should call a subbotnik, so that workers and peasants fix the problem.” Stalin puts his head out of the window and shouts, “If the train does not start moving, the driver will be shot!” But the train doesn’t start moving. Khrushchev then shouts, “Let’s take the rails behind the train and use them to construct the tracks in the front”. But it still doesn’t move. Brezhnev then says, “Comrades, Comrades, let’s draw the curtains, turn on the gramophone and pretend we’re moving!”

Anyhow, most countries will continue participating, including some new ones. I am especially looking forwards to seeing how Vietnam performs. It is about ten years behind China, and its genetic IQ level is probably about 5 points lower than China’s. As such, if its IQ comes out to be appreciable lower than 95 (my own estimate is 90-92) then it would be a further blow against Ron Unz’s theory of the East Asian Exception (to the Flynn Effect).

(Republished from AKarlin.com by permission of author or representative)
 
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My post on Indian IQ (max potential is low to mid 90′s) spawned an interesting analysis by commentator rec1man. It is not very well organized but he does have a ton of useful information that deserves to be highlighted. It’s reprinted in full below interspersed with occasional commentary by myself:

Caste Analysis

75% of the Indian population gets affirmative action quota in India and is genetically low IQ.
25% of the Indian population is upper caste and higher IQ and does not get quota.
Most of the upper caste population has Y-DNA = R1A = Russian / Slavic.

AK: The Slavic max. potential IQ appears to be around 100.

In North India there are 3 levels of quota, each quota level corresponding to a different IQ level:
In North India Upper caste > Other Backward Caste > Dalit – Untouchable – Tribal.

In South India, there are 4 levels of quota:
Brahmin > Dravidian Backward Caste > Dravidian Most Backward caste > Dalit-Untouchable-Tribal.

Upper castes and Brahmins dont get quota. In North India, upper castes and Brahmins are genetically the same of Aryan origin. In South India, the only Aryan origin caste is Brahmin.
The others are Dravidian.

5% of the Indian population is of Oriental race and they dont have a high IQ.

Next vegetarianism = Most upper castes, the higher IQ segment is vegetarian.
The lower castes are non-vegetarian and have lower IQ.

AK: This is interesting. I wonder to what extent (if any) Brahmans can improve their intelligence even further by switching to a meat-based diet? I know that among high-caste Indians adherence to vegetarianism is far from universal. I lived with two of them one. That said, being “non-vegetarian” may not mean that much for most Indians, as most are too poor to regularly afford meat anyway.

Jains are a 100% vegetarian merchant caste and they have beaten the Jews in the diamond trade, even in Tel Aviv.

The world chess champion Vish Anand comes from a vegetarian brahmin family.

AK: As I said, Brahmans appear to be the Jews of India. The most famous Soviet/Russian chess champion, Kasparov, is an Armenian Jew. Actually more than half of the Soviet chess champions were Jews. The most prominent exception was Anatoly Karpov.

In India, a non-vegetarian person is likely a low IQ affirmative action caste
You can check a persons caste rank by simply asking whether they are vegetarian, which implies higher caste

In the Indian Manhattan project team of 18, of which 15 were brahmin and 3 merchants.

AK: Thanks for confirming. :) “(I cannot find the source but I recall reading that almost all members of India’s version of the Manhattan Project were composed of Brahmins).”

Each Indian diaspora is different and has a different caste blend and a different IQ
The lowest level IQ diaspora is the agricultural laborer , 50% Shudra, 50% untouchable
This forms about 95% of the Indian population in South Africa, Fiji, Malaysia, Trinidad, Guyana etc

The Patels and Sikhs are Upper-Shudra / Vaishya and this is 80% of the diaspora in UK
In UK, they outperform whites academically and per Lynn , in the 2nd generation, measured and IQ of 97.

In the USA, 60% of the Indian diaspora is upper caste, and 40% from middle-level castes like Patels and Sikhs.

AK: The mean IQ of Indian immigrants to the US is 112.

Qatar School Rankings

Qatar School Ranking, top 30 schools out of 153

Mean PISA = 500 = IQ 100
SD PISA = 100 = IQ 15

Science, Math, Reading scores

For comparison Shanghai = 575, 600, 566 = 112 IQ

1. Al-Khor Indian Stream, ( GEMS ) = 566, 592, 604 = 113 IQ = Indian Hindu technicians and Engineers of NGL
2. The International School of Choueifat ( SABIS ) = 554, 562, 565 = 109 IQ = Lebanese Xtian
3. Doha College Private ( British Embassy ) = 572, 553, 563 = 109 IQ = UK
4. DPS Modern Indian School ( Delhi Public School Society ) = 552, 538, 563 = 107 IQ = Indian Hindu
5. Qatar Academy ( US educators ) = 540, 547, 562 = 107 IQ
6. American School of Doha, ( US Embassy ) = 553, 546, 559 = 108 IQ
7. Park House English ( UK ) = 568, 528, 552 = 107 IQ
8. Birla Public School = 586, 539, 549 = 108 IQ = Indian Hindu
9. Qatar Intl Private School ( UK ) = 539, 529, 540 = 105 IQ
10. Al Bayan Girls = 481, 464, 516 = Muslim Arab = 98 IQ
11. Cambridge Intl Private School = 531, 484, 514 = 101 IQ
12. Doha Modern Indian School ( Jai Gopal Jindal ) = 554, 525, 514 = 104 IQ = Indian Hindu
13. Al-Khor British Stream ( GEMS ) = 507, 505, 503 = 102 IQ
14. Dukhan English School ( UK ) = 529, 501, 500 = 102 IQ
15. Debakey High School for Health ( USA ) = 492, 467, 493 = 98 IQ
16. Qatar Canadian School = 451, 456, 491 = 95 IQ
17. MES Indian School ( Muslim Education Society ) = 484, 469, 490 = 97 IQ = Indian Muslim
18. Ideal Indian School Girls, ( Muslim ) = 481, 450, 489 = 96 IQ = Indian Muslim
19. Sudanese School = 463, 411, 488 = 93 IQ , remarkably high for black-arab mullatos
20. Al Arqam = 454, 451, 484 = 95 IQ
21. The Gulf English = 468, 448, 482 = 95 IQ
22. Philipine School = 466, 461, 480 = 96 IQ
23. Jordanian School = 446, 422, 472 = 92 IQ
24. Tunisian School = 459, 436, 463 = 93 IQ
25. Lebanese School ( Muslim ) = 444, 501, 463 = 96 IQ
26. Middle East Intl = 484, 452, 461 = 95 IQ
27. Al Andalus = 446, 397, 454 = 90 IQ
28. Ideal Indian School, boys ( Muslim ) = 462, 465, 453 = 94 IQ = Indian Muslim
29. Egyptian School = 463, 435, 434 = 92 IQ
30. American Academy = 462, 434, 434 = 92 IQ

Qatar, 153 school average = 379, 368, 372 = 81 IQ

School -1 and School-13 are both identical, run by GEMS, and solely for children of
employees of NGL

School-1 has Hindu students and School-13 has white students from UK
and the Hindu students are ahead of white students by nearly 1 SD

Indian muslims significantly lag behind Indian Hindus

California performance

In the California 2012 National Merit list, there were 184 Indian winners of which

Brahmin = 112
North Indian Aryan Upper castes = 40
Dravidian Upper castes = 25
Patels ( middle ranking ) = 3
Sikhs ( middle ranking ) = 4

In the US diaspora, Sikhs and Patels despite being 40% of the diaspora, win just 4%.
In the UK, these same Patels and Sikhs are 80% of the Indian diaspora and easily outperform whites academically.

The above data, also shows that sampling has to be very accurate to reflect the various caste IQs.

Future Indian IQ = 93

Calculating Average Indian IQ from PISA

TN raw math PISA score = 351
TN implied IQ = 100 – 1.5 x 15 = 78

HP raw math score = 338
HP implied IQ = 100 – 1.62 x 15 = 76

Indian Avg IQ based on raw PISA = 77

AK: Why only Math, and not also Reading and Science? (including them would bring down average IQ to 75.4).

Next step is to remove the bias caused by the PISA sample having 75% bilingual kids (Tibetan kids facing Hindi PISA exam and Telegu kids facing Tamil PISA exam).

TN mono-lingual = 378
Implied IQ = 500 – 1.22 x 15 = 82

HP mono-lingual = 401
Implied IQ = 500 – 15 = 85

AK: Fair enough – though this adjustment is needed not just in India.

Next there is a 40 point difference between scores for ‘Village’ and scores for ‘Large city’. In HP and TN, the village category is over-represented by a factor of 4. Even worse, in HP, City and Large City are entirely removed from the survey sample.

So adding an urban correction of 20 (half the village-large city difference).

TN semi-urbanised mono-lingual = 378 + 20 = 398
Implied IQ = 85

HP semi-urbanised mono-lingual = 401 + 20 = 421
Implied IQ = 100 – 0.79 x 15 = 88

Current Indian IQ = 86

Next we look to the future as malnutrition is removed. The only Indian kids who go to govt school is for the mid-day meal; if they are not starving they go to private school.

Private schools score 45 more than govt schools and that’s the future as poverty reduces.

AK: Not necessarily as it is richer (on average more cognitively endowed) Indians who are today sending their children to private schools. Disagree with this adjustment.

HP – future – semi-urbanised- mono-lingual = 401 + 20 + 45 = 466

Implied IQ = 95

TN – future – semi-urbanised – mono-lingual = 378 + 20 + 45 = 443

Implied IQ = 91

Future Indian IQ = 93

Given the huge bias in sampling towards over-representing the lower end IQ, by the poverty pimp NGOs, I am certain that none of the CBSE or Cambridge schools
that serve the top 15% are included in the survey.

And they have an entirely different IQ profile and cause an IQ bulge at the top end.

AK: A plausible estimate, with the IQ bulge at the top bringing up average Indian IQ by another point or two. But crucial flaw as far as I can see is the +45 point (+7 IQ points) adjustment, which assumes that the cognitive potential of private and public schoolchildren is essentially equal. That is very unlikely.

Addendum

15% of the Indian population is Muslim, who are also highly inbred, and brainwashed in islamic madrasas, which lowers IQ potential. Another 15% is untouchable and another 10% is tribal.

These 3 groups as a whole have an IQ ceiling , even with nutrition of no more than 85, and these are 40% of the population.

The middle 40%, the Patels and Sikhs, based on UK performance, have an IQ ceiling of about 95.

However, Indians do not have unwed mothers, and Patels and Sikhs are thrifty, have the benefits of extended family and caste networks and save a lot and are a lot richer than whites in UK and Canada and USA.Ori

Averaging the lower 80%, gives an IQ ceiling of 90.

Anything beyond 90 IQ average ceiling, is a bonus and that’s due to the top 20%.

Most PISA type surveys are going to catch the bottom 80%.

The top 20% is extremely urbanised and goes to very good quality private schools. The Orissa TIMMS survey, showed that the 95th percentile was comparable to 95th percentile of Norway and Orissa is a very backward state.

On a system wide level, India is going to behave like 90 IQ ceiling.

On cutting level achievements, the top 20% is extremely world competitive.

Jing’s Counter-argument (8/18)

Orissa’s TIMSS 95% percentile compares favourably to Norway’s because Orissa’s is one of India’s higher scoring states and Norway is oddly enough Europe’s lowest by far. Norway’s 95% percentile was 573 (Orissa’s 577) but this is significantly lower than Bulgaria (611), Serbia (618), and Romania (619). To add some more perspective, neighboring Sweden is 614, Lithuania 628, Estonia 645, and Latvia 625. Russia is at 632, America 635 and England 627. To cap it off Hong Kong is at 691, Japan 697, South Korea 715, Singapore 723, and Taiwan tops the charts at a ridiculous 733.

India’s top 5% would not even make the 50% cutoff in any of the east Asian polities.

All data available here.

Rec1man’s Qatar comparisons are even more irrelevant because he is comparing the absolute HIGHEST ranked schools of high sigma Indian professionals in the country against OECD AVERAGES. Pick out the highest ranked school in Shanghai or the 10th for that matter and compare it against them and you will see just how far the gap is.

The data tables are available online for anyone who cares to delve more deeply into them for the 2009 PISA at the following link.

Selecting the two Indian participating states that (QTN and QHP) with the variable ST19Q01 as the student variable compares how well Indian students did based on the language of the test. Indian students who took the test in a language OTHER than the one spoken at home score higher than the ones who took the test in their native language.

By the way, Richwine’s backward digit span test correlated to a 112 IQ for India’s taken from the GSS survey had a sample size of less than 10 if I recall.

(Republished from AKarlin.com by permission of author or representative)
 
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The question of Indian IQ is a big puzzle. Far trickier than China’s IQ which I think I’ve basically figured out (101-102 today; 106-108 genetic ceiling).

The PISA-adjusted IQ of India – as extrapolated from the states of Tamil Nadu and Himachal Pradesh, which are relatively rich and are reputed to have good school systems by Indian standards – is a miserly 75.4; Richard Lynn, in his latest estimates based on an international standardized test from 1970 and a more recent TIMSS study in the states of Rajasthan and Orissa is 82.2. The chart above compiled by Steve Sailer from Lynn’s data on numerous IQ tests also indicates it is the low 80′s. In my opinion the low 80′s figures given by the IQ tests is more accurately reflective of today’s Indian g because PISA is after all an academic test and Indian schools leave a lot to be desired.

Regardless, the differences between Indians, and East Asians and Europeans, are huge. India is in fact at the upper level of sub-Saharan African IQ which typically ranges from 65 to 80. There are lots of factors holding India back: Malnutrition (which is on average perhaps worse than in sub-Saharan Africa), vegetarian diets, poor education system, a moderately high rate of consanguineous marriage. But all that said the sheer size of the gap makes me skeptical that all of it is down to environmental factors alone.

On the other hand the average IQ of Indian immigrants to the US is an Ashkenazi Jewish-like 112. Ramanujan was assessed by G.H. Hardy, no lightweight himself, as the most gifted mathematician of his age. Going back further in time, India has a pretty stunning religious, linguistic, mathematical, and philosophical heritage. Only a continuous stream of very high IQ individuals could have both created and sustained such a heritage.

Another very telling feature of India is the pervasive inequality that has characterized it throughout time. Kenneth Pomeranz notes in his book The Great Divergence on why it was Europe and not China that underwent the Industrial Revolution that Early Modern India had levels of inequality significantly in excess of that of either China or Western Europe. Consider that (1) redistributive wealth mechanisms were virtually non-existent then, (2) that India unlike China or Europe nonetheless still had a lot of unused resources which typically puts a damper on inequality; (3) the always relevant correlation between wealth and IQ. All this implies an “IQ Gini index” considerably greater than in either Europe or China even in the pre-industrial past. And according to Sailer, even today whereas “China focuses on giving the masses a solid basic education that prepares them for manufacturing jobs” India on the other hand “focuses more on giving outstanding university educations to the meritocratic elite.”

Finally, we also know that India remains a heavily caste based society, despite very vigorous government attempts to legislate it away. They don’t tend to intermarry. They eat different foods. And they do appear to differ markedly in IQ. Brahmins occupy a lot of the intellectually demanding positions (I cannot find the source but I recall reading that almost all members of India’s version of the Manhattan Project were composed of Brahmins). A lot of the (super high IQ) US Indian immigrants appear to be Brahmins. Meanwhile Indian immigrants to Britain or those who live as diasporas in sub-Saharan Africans tend to under-perform Anglo whites by about 0.5 S.D. These are the “Patels”, etc were talking about who are mostly Vaishya or Shudra and who constitute the vast bulk of India’s population. If they are typically scoring in the low 90′s and India’s average is in the low 80′s then *that* difference can plausibly be ascribed to the Flynn Effect.

So let’s do the power summary for India:

  • Many cultural achievements (philosophy, religion, literature) that up until the Early Modern period compared respectable with those of European, Near Eastern, and East Asian civilization, but were much less prevalent in sub-Saharan Africa.
  • Levels of inequality in Early Modern times that were higher than in Western Europe, China, or Japan even though on objective factors (e.g. lower levels of land stress) should have been lower.
  • The caste-based nature of traditional Indian society that the government has been powerless to stamp out.

What I conclude from this is that in terms that would be familiar to Westerners: India is a nation of Gypsies and Jews.

Over the centuries, Brahmins have been selected for intelligence. They were expected to master requisite texts and those who couldn’t handle it dropped away. These selective pressures did not apply to the lower castes who made up the vast majority of the population.

The reason for why India split along caste lines was because of Hinduism and its origins as a religion/ideology to hold society together under the boots of the conquering light-skinned Aryans who brought down the original Harappan civilization (indeed 4 millennia on Bollywood still glamorizes lighter-skinned actors and this is not very controversial within Indian society). These invaders became the Kshatriya military caste, and the Brahmins became their spiritual apologists and enablers. (The Kshatriya were also the one major caste that was allowed to eat meat to build up muscles. Quite logical). The darker skinned aborigines had to continue tilling the soil for their new masters.

Christianity.proclaimed the spiritual inequality of all men. In fact it was a very special religion in that it took a very strict line against within-kin marriages in general. Hence why a caste society or anything resembling it is pretty much impossible under Christianity as long as everyone is considered a fellow Christian. (Whereas caste is inherent to Hinduism). Nonetheless we learn that even a millennium after the Norman invasion of Britain people with Norman surnames such as Darcy, Percy, Baskerville and Mandeville are still on average richer than Anglo-Patels like Smith, Mason and Cooper. Nonetheless British society as Western Europe in general traditionally considered itself as one organic society with only small groups of “service nomads” like Gypsies (peddlers, fortune tellers) and Jews (moneylenders) outside it.

In India basically the entire population appears to be composed of “service nomads” who belong to their own groups and exchange services with other groups. The Vaishya are traders and artisans; The Shudra are farmers; the Kshatriya are warriors; the Brahmins are priests and scholars. Their religion is what binds them together and keeps the whole thing flowing, hence why it is not opposed even by those ostensibly disadvantaged by it. Over several millennia of this caste society operating, in which different castes hardly ever intermarried, you got a plethora of distinct populations that were adapted to their particular divinely-appointed task in life.

In practice this meant a small subsection of Ashkenazi Jewish-like Brahmins with very high IQ’s; and a huge mass of peasants with genetic IQ ceilings somewhere in between those of Europeans and Negroids.

(I would also hypothesize that after the coming of medical modernity this makes for a bad dysgenics situation because Brahmin families will probably have far lower fertility rates than say Shudra, so their share of the Indian population will dwindle; in contrast, homogeneous European and East Asian populations would appear to be more insulated against dysgenic trends because in those societies dysgenics only occurs via lower IQ segments of the population having more kids, while in a place like India – or increasingly multicultural America/Europe – not only lower IQ individuals have more kids but also lower IQ population groups).

So my estimates: (1) India’s current IQ is in the low 80′s; (2) The Flynn effect could yet bring it up to perhaps the low 90′s if India successfully develops (in China the gap is about 5 points but China is of course far richer now and eats far more meat); however, successful development is much harder than in China because starting point IQ’s are far lower. We can expect India to continue growing and gaining on the developed nations but at a pace that will never match China’s; nor, barring technological revolutions (brain-computer interfaces, etc), will it feasibly ever develop to the levels of majority East Asian or European societies.

India will continue benefiting from an extremely intelligent and culturally creative but also very small intellectual upper class of Brahmins. Unfortunately much like Jews they cannot be expected to be all that loyal to the Indian nation (to the extent that an Indian nation exists).

(Republished from AKarlin.com by permission of author or representative)
 
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Via The Economist, I’ve come across some fascinating research by Orley Ashenfelter and Stepan Jurajda (Comparing Real Wage Rates, 2012) showing how real wages can be meaningfully compared across different regions by taking notes on prices and wages in McDonald’s restaurants.

The methodology seems solid. Big Macs are a very standardized product, hence they are already used in the so-called Big Mac Index to assess international price differences (and whether currencies are undervalued or overvalued) and REAL wage rates (prices tend to be lower in poorer countries, mitigating the effects of lower nominal wages). By combining these two measures, you can derive the quantity of Big Mac a McDonald’s worker can buy through one hour of his labor (BMPH). This in turn is a good proxy for real median wages, i.e. the life of the average Joe and Ivan in comparative perspective. While we might not want to people to buy too many Big Macs it’s a positive thing if they can actually afford to.

The results for Russia are stunning, and no doubt go a very long way why Putin has retained 70% approval ratings since 2000. Russia’s BMPH increased by 152% (!) from 2000 to 2007, and a further 43% through to 2011, leaving all other economic regions in the dust, even despite a sharp recession in the latter period. The only major region with a comparable performance is China. In contrast, the BMPH has stagnated throughout the developed world since 2000; and Not So Shining India joined them from 2007.

During the boom years of 2000-2007, real wages for lower-class workers appear to have risen sharply in Russia, China, and India; while stagnating or declining in Japan, the US, and Canada.

Furthermore, the MBPH continued rising sharply in Russia throughout 2007-2011, despite a very deep recession; and to a lesser extent, in China and the rest of Eastern Europe. Two of the BRICS, India and South Africa, had very deep declines.

The result of this growth is that even by 2007, the Russian BMPH was already at about 50% of West European and American levels; while its wages were still much lower, this was mitigated by concurrently low prices for its Big Macs.

Another noticeable thing is that the effects of higher West European minimum wages disappear as they are mitigated by higher Big Mac prices relative to the US. As a result real wage rates across the developed world seem to be remarkably similar, with Japan’s somewhat higher. But Japan too would converge by 2011.

BMPH 2000 BMPH 2007 BMPH 2011
U.S. 2.59 2.41 2.19
Canada 2.41 2.19 2.06
Russia 0.47 1.19 1.70
South Africa 0.81 0.56
China 0.36 0.57 0.71
India 0.23 0.35 0.30
Japan 3.03 3.09 2.22
The rest of Asia 0.53 0.50
Eastern Europe 0.8 0.86
Western Europe 2.23 2.12
Middle East 0.39 0.39
Latin America 0.35 0.36

Using data on BMPH growth rates from the original publication, I calculated the BMPH for 2000 and 2011 in addition to 2007 to get the figures above.

This shows the BMPH for 2000, 2007, and 2011 for each major economic region. What’s remarkable is that even in many of the countries lauded as “emerging markets” there was hardly any visible progress, and in a few cases, outright decline.

But what’s most fascinating is how Russia, whose economy has never received much in the way of praise, has emerged from Latin American-like destitution in 2000 to perch fairly close to the BMPH of the US, Canada, Japan, and Western Europe by 2011. If that is not an “economic miracle” then I don’t know what is.

This convergence is reflected in many other aspects such as Internet penetration (now equal to Greece and Portugal), new car sales (Czech Republic), GDP in PPP terms (Poland). Furthermore, as the MBPH directly reflects the earnings of lower income workers, it implicitly accounts for the relatively high – but by no means exceptional – levels of inequality in Russian incomes.

That said, the finding that Russian real incomes (as per the BMPH) are now at about 80% of American and West European levels has to be treated with some caution. After all, the Big Mac is domestically produced, but to buy stuff like quality cars or take foreign holidays you have to pay international prices which are far higher than Russian domestic prices. E.g. only 8% of Russians will vacation abroad in 2012 (5% if you just include the ex-USSR Far Abroad), compared to 20% of Americans.

As shown in the graph above, originally compiled by Sergey Zhuravlev, Russian consumption of food products, meat, fish, milk, and fruit is now essentially equal to US and West European levels. (Consumption of tobacco and alcohol is unfortunately significantly higher). But spending on clothing, housing, furniture, healthcare, transport, holidays, and restaurants is below 50% of US levels, even after accounting for price differences. (The situation vis-a-vis Western Europe is slightly better).

On the one hand, this means that whereas Russians now have full bellies, the country still lags on life’s perks and luxuries – most especially on restaurants and holidays. On the other hand, it may well presage strong growth in the years to come as Russia during the past decade has laid the base for a rich consumer society.

(Republished from Da Russophile by permission of author or representative)
 
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When I cited TI figures showing that Russian everyday corruption is middling by global standards (percentage paying bribes: 26%, compared to 15% in Latvia, 18% in Greece, 24% in Hungary, 28% in Romania) – as opposed to being on the same plank with Zimbabwe or Liberia – one of the most common counter-arguments was that corruption in Russia is especially concentrated in the upper commercial/political social crust.

However, as Vedomosti recently covered (h/t Nils), the acceptability of corruption in Russia has basically converged to global averages. According to the table below from the original study by Ernst & Young, Russia in fact now appears to perform slightly better than the global average (and vastly better than low-income countries like India, Indonesia, and Vietnam, all of which are nonetheless ranked higher than Russia in the Corruption Perceptions Index).

Furthermore, the last year has seen significant improvements, e.g. whereas now only 16% see cash payments as acceptable to win or retain business, this figure was 39% in 2010. This is practically equal to the global average of 15%, which unlike Russia rose from 9% in 2010.

Power summary: Russia is a normal country in the sense that its level of corruption, as reported by ordinary citizens and businesspeople, is what you would expect of a middle-income country. However, it is near rock bottom as perceived by various self-appointed experts. I wonder who’s more reliable.

(Republished from Da Russophile by permission of author or representative)
 
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One of the most common tropes against Russia is that critical (independent, democratic, etc) journalists there are dying like flies, presumably because of the “culture of impunity” created by Putin or even on his express orders. It is rarely mentioned that the statistical chances of a Russian journalist dying by homicide is an order of magnitude lower than in several countries widely recognized to be “democratic” such as Brazil, Mexico, Columbia, and the Philippines, or that – unlike Turkey or Israel (!) – Russia does not imprison any journalists on account of their professional work. To this end, I compiled a “Journalism Security Index” to get a more objective picture than the politicized rankings produced by outfits like Freedom House that put Russia on par with Zimbabwe.

As usual in these situations, a few graphs are worth thousands of words.

The graph above shows the numbers of journalists killed in Russia for every year since 1992 as compared with other “democratic” countries like Brazil, Mexico, India, and Colombia. As one can see, the situation has improved greatly in the past three years, with only one journalist (in Dagestan) getting killed in 2011; meanwhile, the situation in Mexico has deteriorated to levels unseen in Russia since the early 1990′s. Does this mean that Felipe Calderón is the next Stalin? Or is it that he is just faced with a drugs war that is rapidly spiraling out of control?

However, even this likely overstates the risks to Russian journalists, because there are simply a great many of them. According to the latest UN data, there were 102,300 newspaper journalists in Russia, far more than in Brazil (6,914) or India (16,079), and while data for the other two does not exist, I will assume that there are as many journalists per capita in Colombia (so 1,670) and three times as many in Mexico (13,027) as in Brazil. You can adjust the latter two figures within the bounds of plausibility but as you will see, this would not make a cardinal difference. So let’s start calculating annual homicides per 100,000 newspaper journalists (latest figure) – a rough but valid proxy for the general level of journalistic peril in any given country.

Wow! You can’t see anything past Colombia! Let’s remove it.

So once you make some necessary adjustments for respective journalist populations, it emerges that Russian journalists have been relatively safe compared to other democratic countries throughout virtually its entire post-Soviet history. They are now safer by orders of magnitude. (The dip in Brazil’s and Mexico’s rates in 2012 are artificial as only half the year has passed).

Finally, homicides per 100,000 journalists are compared with the population as a whole. As one can see from the above graph, Russian journalists were always safer than the average Russian citizen, and are now safer by an order of magnitude. Only one Russian journalist was killed in 2010 and 2011 for a rate of about 0.5/100,000 per year, relative to an overall homicide rate of slightly less than 10/100,000. The average journalist is far less likely to have criminal or binge drinking proclivities than the average citizen (factors that account for the overwhelming bulk of homicides in Russia) so it is right and proper that their homicide rate should also be well below the national average.

The same cannot be said of the other countries we are comparing Russian journalists to. In 2010, the homicide rate in Mexico was 18/100,000 (vs. 77/100,000 for journalists), in Brazil it was 25/100,000 (vs. 14/100,000 for journalists in 2010, but soaring to 87/100,000 in 2011), and in India it was 3.4/100,000 (vs. 12/100,000 for journalists).

It need hardly be mentioned at this point that for most of the “democratic” Yeltsin period, life was riskier for Russian journalists than under “authoritarian” Putin and his “stooge” Medvedev. There were 41 journalists killed in Russia from 1992-1999, compared to 30 from 2000-2008, and 6 from 2009-today (of which 5 occurred in 2009). Does this then mean that Yeltsin, not Putin, was the real Stalin? Of course not. The journalist killings in the 1990′s were a product of the chaos and lawlessness of that time, much like the narco-related killings decimating the ranks of Colombian, Brazilian, and Mexican journalists today. As one can see from the graph above, killings of Russian journalists have always been substantially correlated with the overall homicide rate; the latter began to sustainably decline from the mid-2000′s, and from 2009, journalist killings appear to have followed suit.

Why then does Russia have one of the lousiest reputations for journalist killings in the world, whereas a purely statistical analysis implies that it is in fact now extremely safe relative to several other “democratic” countries like Brazil, Mexico, the Philippines, India, and Colombia, and does not imprison any journalists unlike Turkey or Israel?

Ultimately, I think it has much to do with the unhinged hostility of the Western media to Russia. Case in point, let’s look at The Guardian’s coverage.

When a journalist is killed in Mexico or Brazil, it is reported placidly and matter of factly, the newspaper restricting itself to: Names and identities (four journos from Veracruz; Mario Randolfo Marques Lopes); possible culprits (“the work of the cartels”; “accusing local officials of corruption”); some basic context, e.g. quantity of other journalist killings in the recent past. And apart from a final sentence or two noting that “corruption means it is often difficult to define where the authorities stop and organised crime begins”, that is pretty much the harshest judgment they make.

Now turn to the Guardian’s coverage of the sole Russian journalist killed in the past three years – Khadzhimurad Kamalov, in Dagestan, 2011. The difference begins with the titles. What used to be “Four Mexican journalists murdered in last week” or Brazilian journalist and girlfriend kidnapped and murdered” now becomes “Truth is being murdered in Putin’s bloody Russia.” And it continues in the same vein, with rhetoric being substituted for facts: “Crimes against freedom bathed in slothful impunity”; “Inside Moscow, rulers who pay lip service to human rights parade only an indifference that makes them complicit in these crimes” (is Calderón or Dilma Rousseff complicit in journalist killings in their countries?); “How many more, Mr Putin? How long are we supposed to mourn fellow journalists who died trying to tell us, and their fellow Russians, what a slack, slimy, savage state you run?”

No further comment is necessary.

(Republished from Da Russophile by permission of author or representative)
 
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That title sure caught you attention? Good. Now for the 1000-words-in-a-picture evidence.

gdp-human-capital-socialist-bloc-3

Human capital refers to educational attainment, as measured by the results of the PISA and TIMMS standardized tests*. As you can see, there is a very close correlation between human capital and GDP (PPP) per capita. The exceptions all confirm the rule. For now I have only done the post-socialist space, because of its sheer variety – different cultures, different rule-of-law and ease of business environments, difference resource endowments and political systems – which lets me illustrate just how irrelevant all those factors are compared to human capital. The same laws hold at the global level, and I intend to cover it in a consequent post, but that involves a lot more work so for now I’ll just settle for this.

The Near Developed nations have respectable GDP per capita (approaching the poorer members of the classical developed world, such as Portugal and Greece), and levels of human capital that are basically equivalent to those of the rich countries. They are close to converging with the developed world, so growth tends to be relatively slow by the standards of more dynamic (but much poorer) emerging markets, on the order of 3%-5%. Despite their low positions, neither Russia nor Latvia are outliers; more recent calculations by the World Bank give Russia a PPP GDP of $20,000 for 2010, wedging it in with Hungary, Poland, and Lithuania; while Latvia was very severely affected by the late recession. The Czech Republic is close to being a positive outlier: One reason may be its proximity to developed Germany, another the early start of its reforms.

The Red Train is, basically, China. Its searing growth rates aren’t because of its state capitalist system or the Confucian work ethic, but because its human capital is wildly out of line with its economic development. Its high school graduates are ready to operate complex machines and staff the most hi-tech enterprises, but the legacy of Maoist economics – which, hard as it is to believe, were even more inefficient and offered fewer incentives than under Soviet central planning – means that a significant share of the population still uses oxen-pulled plowshares for farming. So it is no wonder that, with its markets freed, the system is straining to catch up – at the pace of 10% per year – to its equilibrium place along with South Korea and Japan. Note also that according to some estimates, China’s PPP GDP is now larger than America’s, which would give a per capita level of $10,000 or so; significantly higher than the figure displayed on the graph.

The Slow Middle are countries with moderate levels of human capital, and they are significantly poorer than the Near Developed nations; for them, convergence to developed country levels is still far away. Their growth rates are modest because their economic development is only slightly, if at all, below the level natural for their degree of human capital. While Turkey and the Balkan countries don’t look that far away from the poorest Near Developed countries, it should be noted that all three are currently suffering from major disbalances that could well end up in Latvian-style crashes. To set themselves on a sustainable development path, they will have to raise their human capital levels by at least another notch. The two negative outliers are Ukraine and Armenia. Ukraine has just been horrendously mismanaged; as I argued in a prior post, it never left the period of “anarchic stasis” that characterized Russia in the 1990′s. That said, the Ukraine may not so much of an outlier; its prices are low, and salaries are comparable to Serbia’s, so its PPP GDP may well be substantially underestimated. Armenia is an even more glaring outlier, with human capital that is comparable to the weaker Near Developed members, but I suppose huge military spending and being blockaded on two sides, and bordering Georgia and Iran on the other two, isn’t conductive to prosperity.

The Doldrums consist of Georgia and Moldova. Georgia has had good management under Saakashvili (it is now far less corrupt than Russia, or its Caucasian neighbors, and Ease of Business is very good by global standards), and Moldova has had bad management; nonetheless, their differences in GDP per capita are modest. The problem is that their schools produce people who are, largely speaking, functionally innumerate; so no matter how hard Saakashvili wills it, Georgia isn’t becoming a Singapore of the Black Sea any time soon. Sustained convergence to developed country levels is out of sight; radical improvements in human capital will first have to be made, and they can’t happen in the space of a few years; they require decades. The Saved By Oil group include Kazakhstan and Azerbaijan. They are as wealthy as the Slow Middle, but as stupid as the Doldrums. But in a world of high oil prices they should be relatively well off.

Kyrgyzstan is in the Third World. Although its Soviet-era legacy has enabled it to provide universal primary schooling, the quality of the products of that schooling is comparable to India – at the very bottom of the global heap. It may achieve decent growth of perhaps 4% or 5%, but it will be from a very low base.

There are several conclusions to this. First, there are only really three important factors to economic development. First, above all, human capital, i.e. primarily, the quality of education. It makes sense on an intuitive level and there’s a ton of literature in support but the graph above makes it… graphically clear. Second, resource endowments, when highly concentrated per unit of non-resource extraction based GDP – as in Kazakhstan and Azerbaijan, but not quite in Russia – will hugely, and positively, influence the level of GDP (it does play a substantial positive role in Russia but it should be noted that Russia’s oil production per capita is less than Canada’s, and its oil production per unit of GDP is far less than Kazakhstan’s or Azerbaijan’s). Third, political management. Especially incompetent regimes such as the ones in Ukraine will hold it back from achieving the full potential enabled by its human capital; if its monstrously incompetent and repressive of growth, as in Maoist China, the resulting gap between reality and potential can develop to truly vast proportions; consequently, when the most egregious barriers are removed, as during the late 1970′s, growth takes off at truly prodigal rates.

Equally important is the fact that things commonly cited by Thomas Friedman, Davos Man, The Economist, The WSJ, The Financial Times, the respectable experts, etc. etc. as important for economic growth turn out to be largely irrelevant. Ukraine is more democratic than Russia and Kyrgyzstan is more democratic than China, but their growth profiles are much worse regardless. Russia is fairly corrupt – though not nearly to the extent implied by Transparency International’s Corruption Perceptions Index – and so is Hungary, and they both have much poorer Ease of Business indicators, but they are both much better off than cleaner and business-friendly Georgia. Latvia was part of the “clean” Baltics, but that didn’t stop it from tumbling to the bottom of the Near Developed pack in the wake of the global financial crash; is it too much of a coincidence that Estonia, which has a slightly edge in human capital, managed to hang in tight? The three biggest outliers by far in a best fit line on the graph – China, Kazakhstan, and Azerbaijan – are all patently explainable by a Maoist legacy and oil windfalls.

Suffice to say, most of the former socialist bloc – most of the world, in fact, but that’s for another post – is at precisely the economic development levels implied by their levels of human capital. There are exceptions, most especially China, but to a lesser extent also many of the poorer Near Developed countries, where the distortive legacy of central planning has resulted in lower current economic development levels than should otherwise have been the case had markets been allowed to function; nonetheless, they tend to compensate with respectable growth rates, as the reality – potential gap seeks closure. If you need to blame someone for why your country is poor, don’t bother trotting out the usual canards: State interference, authoritarianism, corruption, anti-Western policies, privatization and liberalization will solve everything! (liberal canards); neocolonialist exploitation (leftist canards); Russian exploitation (East European nationalist canards). More likely than not your countrymen are illiterate, innumerate slobbering buffoons and it’s as simple as that.

* Human capital was calculated by the average of PISA 2000 scores in Math and Science, and of TIMMS 2008 scores in Math and Science. Where data sets for both assessments existed for a particular country, the TIMMS score was – on average – around 7.7% higher than the PISA score, so I adjusted the former down by that amount. The human capital index was calculated by taking the average of the PISA and adjusted TIMMS scores where applicable, or either the PISA score or the adjusted TIMMS score where data for only one of them existed.

(Republished from Sublime Oblivion by permission of author or representative)
 
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It is not a secret to longtime readers of this blog that I rate India’s prospects far more pessimistically than I do China’s. My main reason is I do not share the delusion that democracy is a panacea and that whatever advantage in this sphere India has is more than outweighed by China’s lead in any number of other areas ranging from infrastructure and fiscal sustainability to child malnutrition and corruption. However, one of the biggest and certainly most critical gaps is in educational attainment, which is the most important component of human capital – the key factor underlying all productivity increases and longterm economic growth. China’s literacy rate is 96%, whereas Indian literacy is still far from universal at just 74%.

Many people claim that China’s educational success is superficial, arguing that although it has achieved good literacy figures, standards – especially in the poor rural areas that have been neglected by the state during the reform period – are very low. This is not a minority view. The problem is that for proof they cite figures such as the average number of years of schooling or secondary enrollment ratios – which are still substantially inferior to those of developed nations – and assume that they directly correlate to the human capital generated among Chinese youth. This is a flawed approach because it doesn’t take into account the quality of schooling. Though not without its problems, by far the most objective method of assessing that is to look at international standardized tests in literacy, numeracy, and science. The most comprehensive such study is PISA, and it tells a radically different story.

The big problem, until recently, was that there was no internationalized student testing data for either China or India. (There was data for cities like Hong Kong and Shanghai, but it was not very useful because they are hardly representative of China). An alternative approach was to compare national IQ’s, in which China usually scored 100-105 and India scored in the low 80′s. But this method has methodological flaws because the IQ tests aren’t consistent across countries. (This, incidentally, also makes this approach a punching bag for PC enforcers who can’t bear to entertain the possibility of differing IQ’s across national and ethnic groups).

In contrast, the PISA tests are standardized, and – barring a few quibbles – largely free of the consistency and sampling problems that tend to plague international IQ comparisons. And they confirm what the IQ data has long hinted at: At least among schoolchildren close to graduation, the Chinese are simply far, far smarter than their Indian counterparts (necessary caveat: As measured by these tests).

I already covered China, so I will simply quote in extenso from an older post. I emphasize the most important part in bold.

“As regular blog readers know, I think that educational capital and more broadly average IQ levels are one of the key – and frequently under-appreciated due to political correctness – determinants of economic development and whether or not convergence to developed country levels is even possible. Its much higher educational capital is one of the key reasons why I think China will continue doing much better than India in development, regardless of its “democratic deficit.” However, many people argue that China’s human capital must actually be quite low, because it doesn’t spend much on education, resources are bare in the provinces, statistical fudging under unaccountable governors, etc.

The recent results from the international standardized PISA tests in math, reading and science will make this an increasingly untenable position. Shanghai got by far the best results out of all the OECD countries (never mind the developing ones). Now while you might (rightly) argue Shanghai draws much of the elite of the Yangtze river delta, the Financial Times has more: “Citing further, as-yet unpublished OECD research, Mr Schleicher said: “We have actually done Pisa in 12 of the provinces in China. Even in some of the very poor areas you get performance close to the OECD average.””

Since countries like the US and France get scores “close to the OECD average”, this means that the workforces soon to be entering China’s economy, even from its poorest regions, will be no less skilled than those of leading Western economies (note too that the numbers of Chinese university graduates are soaring). And with China’s massive population, four times bigger than America’s, its road to superpowerdom must be all but guaranteed. [AK adds: I.e., because under market economies, development - as proxied by GDP per capita - tends to converge to a level commensurate with the human capital level of the country in question].”

Also in December 2011, but unnoticed by myself until now, PISA released additional information on nine countries*. Critically, this included two Indian provinces, Tamil Nadu and Himachal Pradesh. How did they do relative to China?

On math proficiency, Tamil Nadu scored 351 and Himachal Pradesh scored 338. On science, they scored 348 and 325, respectively. In both cases, they were at ROCK BOTTOM of the league table of the 74 sampled countries together with Kyrgyzstan. Literally no other country did worse.

In comparison, even the poorest Chinese regions performed close to the OECD average of about 500, putting them in the same rank as the bottom half of the industrialized countries such as Russia, Italy, or the United States (high 400′s); but well above other prominent developing states such as Brazil, Mexico, and Malaysia (high 300′s-low 400′s). The better off Chinese regions will have presumably done better, perhaps similar to Australia or Japan, while the most developed Chinese region, Shanghai, blew every other country out of the water with a mean score of 600 in math and 575 in science.

Note that Tamil Nadu is fairly developed by Indian standards, while Himachal Pradesh is about average. One simply shudders to imagine what the results would be in a poor state such as Bihar or Uttar Pradesh. China and India are both truly exceptional in educational attainment for dynamically developing emerging markets, but only the former is exceptional in a good way.

Many Indians like to see themselves as equal competitors to China, and are encouraged in their endeavour by gushing Western editorials and Tom Friedman drones who praise their few islands of programming prowess – in reality, much of which is actually pretty low-level stuff – and widespread knowledge of the English language (which makes India a good destination for call centers but not much else), while ignoring the various aspects of Indian life – the caste system, malnutrition, stupendously bad schools – that are holding them back. The low quality of Indians human capital reveals the “demographic dividend” that India is supposed to enjoy in the coming decades as the wild fantasies of what Sailer rightly calls “Davos Man craziness at its craziest.” A large cohort of young people is worse than useless when most of them are functionally illiterate and innumerate; instead of fostering well-compensated jobs that drive productivity forwards, they will form reservoirs of poverty and potential instability.

Instead of buying into their own rhetoric of a “India shining”, Indians would be better served by focusing on the nitty gritty of bringing childhood malnutrition DOWN to Sub-Saharan African levels, achieving the life expectancy of late Maoist China, and moving up at least to the level of a Mexico or Moldova in numeracy and science skills. Because as long as India’s human capital remains at the bottom of the global league tables so will the prosperity of its citizens.

* One other thing I noted in amusement is Georgia’s horrendous performance on the PISA: 379 in math, 373 in science. From being one of the most literate and urbane nationalities in the USSR to hanging out with Indonesia and Panama near the bottom of the international numeracy league tables, Georgians have sure come a long way under Saakashvili.

(Republished from Sublime Oblivion by permission of author or representative)
 
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Pomeranz, Kenneth – The Great Divergence: China, Europe, and the Making of the Modern World Economy (2001)
Category: economy, history, world systems; Rating: 5*/5
Summary: Brad DeLong’s review; The Bactra Review; Are Coal and Colonies Really Crucial?

great-divergence-pomeranz It’s a rare book that not only vastly informs you on a particular issue, but in so doing overturns many prior conceptions you had on the general subjects. Now, Pomeranz is not a good writer. The text is slow and turgid, and readable only by dint of my interest in the subject. Many potential counter-arguments go unanswered (which is not to say that they sink the overall theory, as I will try to prove in this review). All that said, I have little choice but to give it a 5*/5, as this a truly counter-intuitive and deeply contextualizing work that overturns many of the triumphalist post hoc narratives of Western chauvinism.

This book attempts to answer the big question of world economic history: Why Europe? It does this by systematically comparing Europe with other leading world regions in the pre-industrial age such as Qing China, Tokugawa Japan, and India. The first big finding is that – contrary to the conventional wisdom – there were far more similarities than differences, at least between Britain and the most advanced Chinese region, the Yangtze Delta.

Essential Similarities Between Old World Cores

It is sometimes argued that special European demographic patterns, such as marrying late and a celibate clergy, had the effect of lowering its fertility and mitigating the Malthusian impoverishment held to be prevalent elsewhere. Another, often complementary, view is that European consumption markets were already far more developed than in China, which allowed it to hit the ground running (so to speak) once the preconditions for industrial revolution were fulfilled. However, China also saw fertility postponement, and there is ample evidence that at least until the mid-19th century the average quality of life in China as measured by life expectancy, median incomes, availability of consumer goods, etc. was at least as good as in Europe, probably higher, and as good as Britain in its most advanced region, the Yangtze Delta.

Although Europe was technologically ahead in some spheres – most visibly, guns, clock making, optics – China had a clear lead in irrigation, soil preservation and land management, and medicine (yields per acre in Europe only approached Chinese levels by the late 19th century). This is of no small consequence in pre-industrial societies hewing to the laws of Malthus. As in China, per capita food and fuel availability declined in Europe up until the mid-19th century century; only in Britain was this in significant part mitigated from 1800 by the windfall of “coal and colonies” (much more on this later).

Finally, there’s the argument that European capitalist institutions and markets were better developed and thus kick-started its growth. But again, the evidence Pomeranz marshals convinces that, if anything, China was substantially more “capitalist” (in the laissez-faire sense) than Europe. There were far fewer monopolies, and no internal trade barriers – contrast this, for example, with ancient regime France – and as a consequence, the volume of trade flows (in grains, sugar, timber, etc) were far higher within China than in continental Europe. The civil service was professional and meritocratic, whereas in Europe this only came to be in the 19th century. Markets for labor and products were freer in China; guilds had much less political influence than in Europe. Bound labor and feudal obligations remained prevalent far longer in Europe (and India) than in China, where it had long ago become marginal; for instance, the settlement of Taiwan for the cultivation of sugar – China’s equivalent of the Caribbean islands – was done by free labor. Though credit was cheaper in Europe – or, at least, in Holland and Britain – but to cut a long story short, there is (1) no evidence that this made crucial industrial activities unprofitable or impeded further pro-industrial mechanization, and (2) the credit system was more developed in India relative to China and Japan, although it was far more backward in general.

One major factor that Pomeranz glosses over is the impact of the Scientific Revolution. Though Chinese scientific achievements are under-appreciated – for instance, it matched Western mathematical achievements up to and including those of 16th century Italy – it is undeniable that Europe took a commanding lead from about the mid-16th century. There was to be no Chinese Kepler or Newton. But impressive as it was, you do not need calculus or laws of planetary motion to produce coal and iron (“as late as 1827 and 1842, two separate British observers claimed that Indian bar iron was as good or betterthan English iron”), and you certainly don’t need them to more efficiently produce textiles. As first textiles, and then coal and iron, constituted the first stages of the Industrial Revolution – up to the 1860′s or so – the European scientific base was almost entirely incidental to the initial industrial takeoff. Now obviously this scientific base did become vastly more important by the late 19th century, which saw the flowering of the electric, chemical, and international combustion engine industries; and those countries with particularly powerful research establishments, such as the US and Germany, did very well, catching up to Britain. However, by then China was already hugely behind.

Addendum 7/31: I almost forgot to mention this. This is probably obvious, but Pomeranz says nary a word about the contribution of cultural differences to the Great Divergence (in contrast to people like Landes who make it a centerpiece of their analysis, waxing poetic on the influence of the Renaissance, the Reformation, distinctive Western values of separation of church and state, etc). And rightly so. Culture is an intangible, and has very little explanatory power; furthermore, such explanations are frequently contradictory in time and place (for instance, whereas “Confucian values” may be cited as holding Chinese society back, they are now frequently invoked to explain the meteoric rise of the Asian tigers; you can’t have it both ways, folks).

The European “Miracle”: Coal and Colonies

Why then did Europe, and more specifically Britain, industrialize while China fell into an ecological impasse in which food production barely kept up with population growth? Pomeranz argues (convincingly, IMO) that the crux of the matter was a fortunate conjunctures and contingencies that overwhelmingly favored Europe.

First, colonies. Many recent scholars have dismissed their contribution; according to one article, overseas coercion could not have been responsible for more than 7% of gross investment in late 18th century Britain (and far less in Europe). But this neglects the vital role of the New World colonies – with their near endless land and natural resources – at relieving ecological bottlenecks in Europe, and in particular Britain. These included sugar (which acted as an additional source of calories as well as a hunger suppressant) and cotton (for clothing, and indirectly relieving pressure on pastures and timber for heating), and later in the 19th century, massive grain exports. All this “ghost acreage” allowed the British isles to support a far larger population than its existing carrying capacity could have, a highly urbanized one and relatively comfortable too (hence no Malthusian stress as in late Qing China, with its debilitating effects on political and social cohesion).

(Furthermore, even the aforementioned 7% figure could have been significant in a pre-industrial world. Due to high rates of capital depreciation, the net accumulation in capital stock then was only a small fraction of the overall savings rate. For instance, according to one calculation, that hypothetical 7% in “super-profits” – an increment to gross savings not purchased at the expense of consumption – could have significantly increased an otherwise minimal rate of net capital accumulation.)

And these goods – cotton, sugar, etc. – could be imported at very favorable terms of trade, because of another set of favorable conjunctures. The decimation of Native Americans due to European epidemiological superiority cleared the way for settlers, who supplied the Caribbean colonies with food and Britain with timber (thus relieving its Malthusian stress). Furthermore, the slave labor on the Caribbean islands – apart from the implicit coercion (and “super-profits” it enabled) – prevented them from developing their own proto-industrial sectors that could undercut British exports.

This is in contrast to what happened naturally in China, largely by dint of its free labor markets (as opposed to New World slavery or East European serfdom). The inner provinces began to expand their handicrafts and textiles industries, thus undercutting the (more advanced) proto-industrialization of the Yangtze Delta. This was a form of “import substitution,” and economically natural in those times because of far higher transport costs than is the case today. This was accompanied by a growing population in the inner regions. Unable to increase its industrial exports, and facing declining imports of rice, timber, etc., the most advanced Chinese regions, the Yangtze Delta and Lingnan, had to increase the labor intensity of their agriculture so as to keep food production abreast of their own population.

Obviously, the conditions did not exist for a Caribbean turn towards import substitution. The slaves themselves had no choice, and neither did the owners; they needed to produce commodities for export in order to pay for replacing slaves. And this all provided a growing (as opposed to declining) demand stimulus for British industry.

One additional New World advantage covered in some length by Pomeranz is the windfall of New World silver – which was, in large part, a free gift to Europe on account of the slave labor and monopolies used in its extraction. This allowed it to easily balance the books with trade in China for silk, porcelain, etc., which in turn could be used to pay for African slaves and New World resources. And Chinese demand for silver was huge, since it was remonetizing its economy to run on silver during the early modern period. Indirectly, it contributed to the formation of the Atlantic economy.

The second great British advantage was coal – that is, as an alternative to wood, located close to its main industrial centers (China too had coal, but it was far away from its main industrial centers, and transport costs were prohibitive). Coal relieved pressure on woodlands, which were in rapid decline, and – due to its virtually limitless nature – unbound the production possibilities of iron. Steam power was crucial to this expansion, not only by powering other processes but by permitting a huge expansion of coal-mining itself. “The Chinese had long understood the basic scientific principle involved – the existence of atmospheric pressure – and had long since mastered (as part of their “box bellows”) a double-acting piston/cylinder system much like Watt’s, as well as a system for transforming rotary motion to linear motion that was as good as any known anywhere before the twentieth century. ll that remained was to use the piston to turn the wheel rather than vice versa.” So the relevant technical skills were not unique to Europe. In fact, northern China had a huge coke and iron complex as early as the 11th century under the Song dynasty, though it was brought low by the multiple perturbations of the 12th-15th centuries (Jurchen and Mongol invasions, etc). The rest is worth quoting in extenso:

However, a number of factors militated against widespread Chinese (re)adoption of coal as a major fuel source. First, the reorientation of the center of Chinese development to the east and south meant by the Qing dynasty meant that its industrial cores were now located far from the big coal deposits in the north-west; the advantages of linking these regions by transport are only evident ex ante. Second, the best artisans were concentrated in the (low coal) Yangtze Delta or along the south-east coast, and serving a huge public demand for clocks and other mechanical toys. Third, “even if mine operators had seen how to improve their mining techniques, they had no reason to think that extracting more coal would allow them to capture a vastly expanded market.” Finally, and most importantly, the technical nature of extracting Chinese coal was profoundly different from that of extracting British coal; in fact, it made the deep extraction that enabled Britain to boost its output all but impossible.

English mines tended to fill with water, so a strong pump was needed to remove that water. Chinese coal mines had much less of a water problem; instead they were so arid that spontaneous combustion was a constant threat. It was this problem – one that required ventilation rather than powerful pumps – that preoccupied the compiler of the most important Chinese technical manual of the period… Even if still better ventilation had ameliorated this problem—or if people wanted coal badly enough to pay for this high level of danger – ventilation techniques would not have also helped solve the problem of transporting coal (and things in general) as the steam engines that pumped out Britain’s mines did. Thus, while overall skill, resource, and economic conditions in “China,” taken as an abstract whole, may not have been much less conducive to a coal/steam revolution than those in “Europe” as a whole, the distribution of those endowments made the chances of such a revolution much dimmer.

In contrast, some of Europe’s largest coal deposits were located in a much more promising area: in Britain. This placed them near excellent water transport, Europe’s most commercially dynamic economy, lots of skilled craftspeople in other areas, and – to give the problems of getting and using coal some additional urgency – a society that had faced a major shortage of firewood by 1600 if not before. And although timber and timber-based products were imported by sea, this was far more expensive than receiving logs floated down a river, as the Yangzi Delta did; the incentives to use (and learn more about) comparatively accessible coal were correspondingly greater.

Much of the knowledge about how to extract and use coal had been accumulated by craftsmen and was not written down even in the nineteenth century… Harris shows that French attempts to copy various coal-using processes foundered, even when they reproduced the equipment, because the production of, say, a heat-resistant crucible required very detailed knowledge and split-second timing acquired through experience – and the financial losses from making a mistake could be very large… Only when whole teams of English workers were brought over (mostly after 1830) was the necessary knowledge effectively transferred.

Thus we see that technological expertise was essential to Europe’s coalbreakthrough, but the development of that expertise depended on long experience (and many failures along the way) with abundant, cheap supplies. This experience was possible because artisan skill, consumer demand, and coal itselfwere all concentrated near each other. Without such geographic good luck, one could easily develop lots of expertise in an area with a limited future (e.g.,in using and improving wood furnaces) and not proceed along the track that eventually led to tapping vast new supplies of energy.

Furthermore, the adoption of the steam engine – whose synthesis with coal was what really generated the Industrial Revolution – was also highly contingent. It was the result of 200 years of use on British coal fields, which was both economical (free coal due to zero transport costs) and proximate to mechanics-minded artisans which could offer improvements. Nonetheless, it took until 1830 for the costs of energy per unit of power for steam-run textile machinery to decline precipitously; until then, water remained competitive with steam engines!

Take away some of the incremental advantage conferred by skill transfers from nearby artisans in other fields, the learning by doing made possible by the application to nearby coal fields, and the low cost of coal itself, and – as incredible as it seems to us today – the steam engine could have seemed not worth promoting.

So, in conclusion, Britain enjoyed two major advantages that the Yangtze Delta, the Lingnan region, and Japan did not: (1) a colonial system that allowed it to massively increase its effective carrying capacity while simultaneously stimulating its industrial production, and (2) conveniently located coal reserves in damp places.

Apart from Britain, Europe as a whole was nowhere close to an industrial takeoff at the dawn of the 19th century; and though the relative inefficiency of its land usage – and the gains from ameliorating that – allowed it to avoid a crisis for a few decades after 1800 (what Pomeranz calls the ecological “advantages of backwardness”), it was nonetheless approaching an an ecological bottleneck as in China (the 1840′s in particular are known as a time of dearth). This was at a time when the Industrial Revolution had scarcely began on the mainland, and if it had continued it would have required the diversion of more and more labor to working the land intensively, instead of industry. Could industrialization then have been sustained without coal, New World surpluses, and the already existing industrialization of Great Britain?

The general impression one gets is that not only was the “European miracle” in fact just a matter of fortunate conjunctures and contingencies, but that there was nothing especially preordained about the Industrial Revolution. No colonial surpluses; no easily-reachable coal or mechanical culture; perhaps, even no slavery (to enhance the efficiency with which colonial surpluses were extracted) – no industrial revolution. At least, not a few more centuries.

Additional Thoughts for Consideration

(1) Needless to say, I now largely reject my previous theory Walled Off By Complexity: Did China Stagnate Because Of Its Writing System? I don’t think the hieroglyphics system did China any good, but they certainly can’t explain The Great Divergence.

(2) One important factor that I didn’t see Pomeranz mention – the Atlantic is much narrower than the Pacific! China was building ships as advanced as that of the European Golden Age of Navigation as early as the 15th century, and in huge numbers far exceeding the capacity of any single European state. Navigation itself wasn’t a problem either (note that it was China that invented the compass, topographic maps, etc). But it didn’t practice overseas slave-trading, and those Chinese that settled new lands – be they in Taiwan, or the inner provinces – tended to develop their own proto-industrial economies, which in the presence of conditions of free trade and free markets for labor and products eventually undermined the volume of trade.

(3) The “rise of the West” was in large part built on systems – mercantilism, military-fiscal competition, etc. – that universal Western ideology now condemns. Ironically, the BRIC’s (including most prominently China) are the ones using mercantile strategies to catch up to the West.

(4) What’s even more curious is that it wasn’t only Britain, and then the rest of Western Europe that overtook China; so did Russia. Now Russia was undoubtedly far, far behind both China and the West practically since its inception until (relative to China) about the late 19th century. It had serfdom, very small urban class, a very de-commercialized economy, with luxury consumption being indulged in by a tiny elite, etc. Nonetheless, despite this backwardness – an inevitable one, due to ecological reasons I have written a lot on this blog about – the state did nonetheless successfully leverage what meager surpluses it had to maintain a rough military parity with the West and play the role of a Great Power. So, yet more evidence that strict adherence to neoclassical economic development isn’t all that it’s hyped up to be.

(5) An interesting counter-factual to consider – what if there had been no easily accessible coal in Britain or the Rhineland, and if Columbus had found no New World and instead sunk somewhere in the middle of a globe-spanning World Ocean? Could there have been an industrial revolution? Is industrial revolution contingent on “coal and colonies”?

Or would Europe instead have become something like Qing China in the 19th century, increasingly politically debilitated, and economically stagnant – any improvements in land management and increasing labor intensity swallowed up by an inexorably growing population? Could it, indeed, have collapsed, perhaps after it grew critically weak and was invaded by the Russian Army much like China was by the Jurchens, the Mongols, the Manchus, etc., and pillaged by British pirates much like Japanese pirates preyed on a weak China in the 17th century Ming twilight? Indeed, could it eventually have collapsed into yet another Dark Age as followed the Roman Empire, in which much of the vaunted knowledge of the Scientific Revolution would be lost to memory, with the 18th century to early 19th century coming to be seen as a bygone “Golden Age”?

PS. H/t to Doug M. for bringing this book to my attention in the first place.

(Republished from Sublime Oblivion by permission of author or representative)
 
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Иn the wake of the 2009 recession, declinist rhetoric has come to dominate discussion of Russia’s economic prospects. Jim O’Neill, the founder of the BRIC’s concept, has his work cut out defending Russia’s expulsion from the group in favor of Indonesia, Mexico, or some other random middle-sized country. Journalists in the Western media claim its economy is “not growing”, as do liberal Russian newspapers such as Vedomosti. Comparisons between Putin and Brezhnev (who presided over the Soviet Union’s period of stagnation, or zastoi) are piling up. Even President Medvedev isn’t helping the situation, telling a forum of international businesspeople that Russia’s “slow growth” hides stagnation (good job promoting your country, DAM! not….).

I don’t want to exchange rhetorical barbs in this post (which you may note is not tagged as a “rant“), and my skills at mockery and picking apart tropes aren’t nearly as well developed as those of Mark Adomanis or Kremlin Stooge, so I’ll do what I do best and go straight to the statistics. And so we have Fact #1: what is described as stagnation for Russia is a growth rate of 4%. It grew 4.0% for 2010. It was 4.1% in Q1 2011, and the government predicts it will be 4.2% for the whole year. The World Bank predicts 4.4% in 2011, 4.0% in 2012; the OECD expects 4.9% in 2011 and 4.5% in 2012; and the IMF forecasts 4.8% in 2011, 4.5% in 2012, tapering off to less than 4.0% in the “medium-term.”

This does not strike me as being particularly bad by global standards. This is obviously no miracle economy of Chinese-like 10% growth rates, but Russia (4.4%; 4.0%) does not compare badly to the World Bank’s projected growth for other typical middle-income countries such as Turkey (4.1%; 4.3%), Thailand (3.2%; 4.2%), Brazil (4.4%; 4.3%), Mexico (3.6%; 3.8%), or South Africa (3.5%; 4.1%). Facing real stagnation, many countries in the developed world such as the UK could only wish for Russia’s growth rate; though this is an unfair comparison, because Russia is poorer and can therefore find it easier to grow faster (see economic convergence), it is not less unfair comparing Russia to countries such as India (8.4%; 8.7%) or Indonesia (6.2%; 6.5%) because the latter are so much poorer than Russia in their turn.

This discussion suggests that CONTEXT is vital when discussing the degree of stagnation in a country. One of the two major factors here is the current GDP of the country in question; real GDP, that is, because that is what growth refers to (i.e. if a country devalues its currency by half but output remains constant, then nominal GDP will fall by half but real GDP will remain constant; as such, real GDP per capita is also the better proxy for living standards and economic sophistication). Now there are two major estimates by international organizations of Russia’s real GDP. The IMF estimates it at $15,800 as of 2010, whereas the World Bank believes it is $19,800 (relying on recent joint research by OECD-Eurostat-Rosstat). There are grounds to believe that the latter is more accurate because the international price comparison data that goes into real GDP estimates is much more recent for the World Bank*. But regardless of which one you use, Russia’s GDP is still much higher than the other emerging markets or BRIC’s with which it is so frequently compared to – Brazil has $11,100, China has $7,500, Indonesia has $4,400, and India has $3,600.

This is extremely important for two reasons. First, it is much harder to grow quickly when you are already a mostly developed country (like Russia, Poland, Korea) than when you are a mid-level developing country (China, Brazil) or a poor developing country (India, Indonesia). The most important reasons are: (1) The potential to achieve rapid growth by transferring your population from rural agriculture to urban industry and services becomes exhausted; (2) the services sector, where productivity can’t be improved as fast as in industry, assumes a bigger share of GDP; (3) most importantly, those countries are far closer to the technological frontier or “best practice”, and hence must increasingly innovate their way to growth instead of reaping low-hanging fruit by adopting and copying from elsewhere. All this isn’t debatable – there is a ton of economic literature on this, it passes the common sense test, and it is basically a given.

Second, when your starting base is low, fast economic growth is far more necessary to achieve real improvements in living standards and catching up to the West. 5% growth in the US would be remarkable and unprecedented for decades. 5% growth in a country like Egypt, with a GDP per capita of $6,000, will not transform it into a developed or even mostly developed country for the foreseeable future. Not only that, but it will be significantly swallowed up by a population growing at nearly 2%. This is no different from the growth rates in most fiscally healthy developed nations and so in effect virtually no “catch up” happens whatsoever.

This brings us to a second point, the importance of accounting of adjusting for population growth. India’s 8% growth rate in the last decade seems remarkable, prompting talk of “Shining India” and how it is the next big superpower. But considering its very low starting base, and the fact that its population was growing by nearly 2% per year, and you have the far less impressive figure of 6% per capita growth. This is still respectable, but it is barely higher than (much wealthier) Russia, and probably doesn’t warrant the glowing accolades heaped on its “tiger” economy.

At this point, I think it will be a good idea to consolidate all these statistics into a single graph that illustrates the arguments. GDP figures are taken from the World Bank’s 2010 estimates (there is reason to believe China’s GDP is underestimated, hence it has two estimates). GDP growth refers to the mainstream consensus on how fast these countries will be growing in the medium term (e.g. Russia “stagnating” at 4% a year; China following in the historical footsteps of Korea; India growing at the realistically highest rates projected by its proponents; Brazil and Mexico continuing to conform to both their historical rates and medium-term predictions; etc). Population growth is subtracted from the GDP growth to give a per capita figure. The last column are the projected totals for 2020. Figures are rounded off.

2010 GDP /c GDP % gr. Pop % gr. 2020 GDP /c
Brazil $11,000 4% 1% $15,000
China (1) $7,500 8% 0.5% $16,000
China (2) $12,000 7.5% 0.5% $25,000
France $34,000 2% 0.5% $39,000
India $3,600 8.5% 1.5% $7,000
Indonesia $4,400 6.5% 1% $7,500
Korea $29,000 3% 0% $39,000
Mexico $15,000 3% 1% $18,000
Russia $20,000 4% 0% $30,000

The results, as you can see, are fairly stunning. A low population growth and relatively high base – Russia’s GDP per capita of $20,000 is equivalent to that of Poland, Hungary, and Estonia – means that as soon as 2020 Russia will be where Italy is today, with a GDP per capita of $31,500. Now granted Italy may have grown as well, but given its dismal record for the past decade and the growing financial tremors in the Eurozone even this is far from certain. In other words, even at “stagnant” growth rates of 4% per year Russia will have converged to the lower ranks of Western Europe’s rich countries (having overtaken Greece and Portugal outright).

But this isn’t that surprising when you consider that 4% is equivalent to the trend rate at which Korea has grown from 2003, when its GDP reached Russia’s today; the IMF predicts that by 2013, a decade later, it will hit $35,000.

(Excuse the minor digression from the main topic of this post, but the graph also convincingly demonstrates why my Sino Triumphalism is not misplaced. Even under fairly rosy assumptions for India, it will have have barely converged to China’s 2010 level in a decade’s time – and that assuming that China’s GDP isn’t underestimated. The real question isn’t why Russia isn’t growing as fast as China, but why is China growing so damn fast? See other posts for answers).

Now what about unexpected downsides? Objectively, Russia has solid macro fundamentals – far better than the over-indebted, over-leveraged Western economies (with the partial exceptions of Canada and Scandinavia). This is a trait it shares with the other BRIC’s and many other emerging markets in what is truly an amazing and perhaps unprecedented reversal of places in the last decade. This isn’t grounds for complacency – the 2009 recession is argument enough for that.

Nonetheless, the main facts remain intact: (1) It is growing from a relatively high base; (2) In an environment of approximately zero population growth; (3) The strength of state finances preclude any fundamental economic cataclysm as happened/is happening in Ireland, Greece, Latvia, etc. Taking into account these adjustments, a growth rate of 4% is entirely respectable and better than many if not most countries in the same general income bracket.

* Those interested in the details can read here and here.

EDIT: This article has been translated into Russian at Inosmi.Ru (Российская экономическая «стагнация» в глобальной перспективе).

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Not really arguing anything in this post, just sharing some interesting stats I found about the affluent class in Russia (as compared with BRIC’s and others).

First, as we know Russia is (in)famous for the opulence of it oligarchy. But according to the research firm Wealth-X, despite a relatively high number of billionaires, its overall share of Ultra High Net Worth Individuals (UHNW) is far more modest as you can see in the table below. As a percentage of GDP (caveat: this is comparing apples and oranges, but still instructive since national wealth is correlated to yearly output), the wealth of the Russian UHNW’s is equal to 43% of a 1.5tn GDP in 2010 (as compared with 28% in China, 43% in Brazil, 44% in the US, and 55% in India).

So, same picture as with income inequality – as I’ve noted before on this blog, Russia’s levels of inequality are in fact quite modest by world standards – with a Gini index of about 40, it is higher than most European countries (25-35) but lower than the US and China (45) and most Latin American countries (50+).

Now what’s really distinctive about Russia’s ultra-rich is that billionaires comprise a high percentage of all UHNW individuals – some 7% of them, as opposed to about 1% in the other countries; and those same billionaires control 84% of that group’s total wealth, as opposed to 33% in Brazil and China, 25% in the US, and 20% in India.

Is Russia’s concentration of wealth at the very top of the top good or bad? It’s hard to say. It ultimately depends on your view of the merits of the upper middle class and their values. If you believe it reinforces social stability and creates economic dynamism, then this is a weakness. If on the other hand restricting the emergence of a class system and enhancing state power are held to be important, then Russia’s structure is better (after all, it’s easier to influence 100 odd billionaires than keep track of thousands of multimillionaires).

One interesting (and puzzling?) thing I’ve noticed is that Sweden seems to have a similar structure of wealth ownership. This country of 9 million has 10 billionaires – that is almost as many as France (12) or Italy (13), whose populations are six or seven times bigger, and almost as many per capita as the United States. Considering that it’s one of the most equal countries in the world, this leaves very little room for the millionaire class (which I guess makes sense on account of its high income tax rates).

Second, I was trolling Forbes’ list of Russia billionaires for 2011 and counted up the wealth of those known to be friends of Putin (Gennady Timchenko of Gunvor, oil transport and Yury Kovalchuk, banking – through the Ozero dacha coop; and Arkady Rotenberg, of construction, inc. of the controversial Khimki route – through judo). It came up to around $8.1 billion of the total $432.7 billion.

That is a very comfortable sum, of course, but doesn’t really support the oft peddled line that friends of Putin are corruptly buying up most of the Russian economy. Little doubt that Timchenko et al. got by some or most of their wealth “unfairly” (and I assume they’ll be expected to return some of the favors to Putin & Co. once they retire) but that’s just really existing capitalism most places in the world for you.

* Kudos to those who got the Pelevin reference.

(Republished from Sublime Oblivion by permission of author or representative)
 
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As we’re now approaching mid-2011, I suppose its time to give my traditional update on Russia’s demography. So here’s the lay-down:

1. In February, I predicted a population decline of c. 50,000 in 2010 (after a 23,000 rise in 2009). This was due to the excess deaths of the Great Russian Heatwave of 2010, and a substantial fall in immigration. The latest figures confirm it: population declined by 48,300. As of January 2011, it stood at 142,914,136 people (this is by the new Census estimates).

2. Three years ago, I predicted – going against 90%+ of “experts” – that the medium-term future of Russia’s demography is stagnation or small increase. In late 2009, I wrote that even under undemanding assumptions, “the population size will remain basically stagnant, going from 142mn to 143mn by 2023 before slowly slipping down to 138mn by 2050.” To give an example, the 2008 World Population Prospects of the UN Population Division predicted Russia’s population would fall to 132.3mn in 2025 and 116.1mn in 2050. As of their 2010 Revision, Russia’s population is projected to be 139.0mn in 2025 and 126.2mn in 2050 (High: 144.5mn in 2025; 145.3mn in 2050). What a difference two years make! In any case, “official” predictions are now beginning to converge with my own (not to mention Rosstat’s).

2010 UN population projection for Russia.

2010 UN population projection for Russia.

In large part, the pessimism of the earlier projections had a lot to do with the fact that the “experts” were slow to react to real-life trends, such as the improving healthcare and rising confidence that began reversing Russia’s demographic decline. For instance, going back to that same 2008 UN Population Division report – I’m not even going to talk of professional doomers such as Nick Eberstadt – note that they assumed a TFR of 1.47 for 2010-15 and 1.53 for 2015-20 (when it was already 1.49 in 2008, and 1.54 in 2009), and a life expectancy of 67.9 for 2010-15 (when it was already at that point in 2008, rising to 68.7 in 2009 and 69.0 in 2010). Though its effect was pretty minor, their assumptions for infant mortality were truly hilarious: they predicted it would only drop to 7.3/1000 by 2045-50, whereas in fact it is already below that level at 7.1/1000 for Q1 2011.

3. Speaking of 2011, the outlook is mixed. Net immigration in the first quarter slightly increased from 52,000 in 2010 to 61,000 in 2011 (but below 2009). According to the latest data for January-April, births fell from 572,000 to 557,900 (-2.5%) but deaths fell from 679,000 to 658,700 (-3.4%). This carries a number of implications. First, is the fall in births a blip or a trend? Quite possibly, it’s now the latter. The effects of the big post-Soviet fertility fall-off are now being felt in rapidly decreasing numbers of women entering their childbearing years – in 2010, there were 1.68mn 17-year olds, 1.84mn 18-year olds, 2.23mn 20-year olds, and 2.56mn 22-year olds which means that there will be a growing downward pressure on birth rates (though to some extent this is dampened by the rising average age of motherhood). OTOH, the continuing fall in mortality is encouraging; in fact, it will in all likelihood – barring a repeat of last year’s apocalyptic drought with its 44,700 excess deaths – accelerate in summer due to the effects of a higher base. According to my back of the envelope projections, it is basically a coin flip as to whether Russia will see slightly positive or slightly negative population growth this year.

4. A roundup of demography news from the rest of the former USSR (use this post as reference). Reflecting its economic crisis, births fell and deaths increased in Belarus for Jan-Apr. In Ukraine for Jan-Mar, deaths fell slightly and births remained stagnant (after falling in 2010). Those pundits who keep focusing on Russia’s imminent demographic apocalypse may find better targets elsewhere. The recent Lithuania Census indicated that the Baltic country’s population declined by about 10% in the past decade. But even that’s normal news compared to Latvia…

In the wake of its economic crisis, Latvia has seen a faster collapse in its demographic indicators than even in the years following the Soviet Union. In the first four months of 2011, a quarter fewer Latvians were born relative to the same period in 2008. That year marked the post-Soviet peak of its TFR at 1.45 children per woman, meaning that it is now at around 1.1 children per woman. In the meantime, deaths only fell by 5%. As a result, the rate of natural decrease rose from 7,100 in 2008 to 10,000 in 2010, and may register a small rise again this year. And that’s not all. Net emigration rose from 4,700 in 2009 to 7,900 in 2010, and has already reached 4,400 as of this April. From this February, more than a thousand Latvians have been leaving their country each month.

5. Check out Russian Demographics – Something Stirring in the East by Claus Vistesen at demography.matters and related discussion.

6. The past two years have been good ones for censuses. India’s population rose to 1.21bn in 2011 (181mn increase since 2001), with a worsening in the child sex ratio to 109 boys per 100 girls and a rise in literacy from 65% to 74%.

China’s population rose to 1.34bn in 2010 (74mn increase since 2000), a less than expected increase that implies its fertility rate has shrank to about 1.4 children per woman in the last decade. Furthermore, the continually big child sex disparity – there are 118 boys to 100 girls – means that the effective fertility rate is even lower. Literacy is now practically universal at 96%, the share of the population with a college degree doubled to 8.5%, and there is now an even divide between rural and urban inhabitants.

The 2010 US Census had no surprises or matters of particular interest, you can read about it here.

(Republished from Sublime Oblivion by permission of author or representative)
 
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Every so often there appear claims, not only in the Western press but the Russian one, that (rising but overpopulated) China is destined to fight an (ailing and creaking) Russia for possession of its resources in the Far East*. For reasons that should be obvious, this is almost completely implausible for the next few decades. But let’s spell them out nonetheless.

1. China regards India, Japan, and above all the USA as its prime potential enemies. This is tied in to its three geopolitical goals: (1) keep the country together and under CCP hegemony – an enterprise most threatened by its adversaries stirring up ethnic nationalism (India – Tibetans, Turkey – Uyghurs) or buying the loyalties of the seaboard commercial elites (Japan, USA), (2) returning Taiwan into the fold and (3) acquiring hegemony over the South China Sea and ensuring the security of the sea routes supplying it with natural resources. The major obstacles to the latter two are the “dangerous democracies” of Japan and India, with the US hovering in the background. In contrast, the northern border is considered secure, and more generally, Russia and Central Asia are seen as sources of natural resource supplies that are more secure than the oceanic routes.

2. But let’s ignore all that. It’s true that in a purely conventional war, it is now very likely that Russia will not be able to defend its Far East possessions thanks to China’s (mostly complete) qualitative equalization, (very substantial) quantitative superiority, and (huge) positional advantage. Short of the US and Japan interfering – which is unlikely, if not impossible if Russia were to make big concessions (e.g. on Kuriles ownership, rights to the Siberian resource base) – defeat and occupation are assured. BUT…

This ignores the all-important nuclear dimension. In the wake of post-Soviet demilitarization, it has become clear that any war with either NATO or China would likely end up going nuclear. The official military doctrine allows for the use of nuclear weapons against other nuclear powers in defense against conventional attack; post-Soviet military exercises explicitly model usage of tactical nukes to blunt enemy spearheads as Russian military formations beat a scorched-earth retreat. Though the quantity of Russia’s tactical nukes is now substantially smaller than their 16,000 peak, there are still probably thousands of them remaining (unlike strategic platforms these are not subject to inspection and verification procedures), and it’s difficult to see how a Chinese invasion could effectively counter them.

(But why would the Russians use nukes on their own territory, one might ask? The Russian Far East is very lightly populated, and in any case air bursts – which is presumably what they’ll be using against the enemy divisions – produce little radioactive fallout).

3. Aleksandr Khramchikhin goes on to argue that:

… Unfortunately, nuclear weapons don’t guarantee salvation either, since China also has them. Yes, at the time we have superiority in strategic forces, but it’s rapidly diminishing. Furthermore we don’t have medium range missiles, but China has them, which almost makes null their inferiority in ICBM’s… What concerns a strategic nuclear exchange, then the Chinese potential is more than enough to destroy the main cities of European Russia, which they don’t need anyway (it has a lot of people and few resources). There’s a strong argument to be made that, understanding this, the Kremlin will not use nuclear weapons. Therefore nuclear deterrenece with respect to China is a complete myth.

This is wrong on most points:

(A) As far as is known, China maintains a position of limited deterrence, its nuclear forces being constantly modernized but remaining small in comparison with those of the US and Russia (this may or may not change in the future). The big post-Soviet decline in Russia’s arsenal has largely run itself out and on recent trends is unlikely to resume. This shouldn’t be surprising, since Russia no doubt realizes that it is precisely its nuclear forces that do most to guarantee its current day security.

(B) Apart from the fact that China’s medium-range rocket forces still can’t reach deep into European Russia, even accounting for them it is still very much inferior to Russia: “In July 2010 the Russian strategic forces were estimated to have 605 strategic delivery platforms, which can carry up to 2667 nuclear warheads.” As of 2010, China is estimated to have (non-MIRVed) 90 intercontinental ballistic missiles (i.e. can reach European Russian cities) and a few hundreds of medium and short range ballistic missiles. The latter will comprehensively devastate the populated regions of the Russian Far East, and to a lesser extent east of the Urals, but these aren’t core Russian territories and have relatively small concentrations of population and industry. In any case, if anything these are likely to be used not against Siberian cities, but against Russian military and strategic objects.

(C) One must also include ballistic missile defense, civil defense and geography into the equation. Though China has more S-300 type missile systems and has recently demonstrated an ability to shoot down ballistic missiles in controlled tests, there is little doubt that Russia is still ahead in this sphere. The S-400 now replacing the S-300 has intrinsic anti-ICBM capabilities, and the A-135 system around Moscow – with its nuclear-tipped interceptor missiles – makes it better than even odds that the capital would survive intact.

Both China and Russia have substantial civil defense measures. The USSR in 1986 had shelter space for around 11.2% of its urban population, according to CIA estimates. As of 2001, it was estimated to be 50% in Moscow, and construction of bunkers continues. China too has a large-scale civil defense plan of building bunkers in its larger cities.

At first glance, it would appear that geography-wise, China has an advantage in its huge population, large size, and greater rural population as a percentage of the whole. In contrast, Russia’s population is largely urban, and seemingly more vulnerable. This however is misleading. Most of China’s population, fertile land and industry is concentrated on its eastern seaboard and along its great river valleys. Agricultural productivity will plummet in the years following a large-scale exchange, resulting in famine, and as so often in Chinese history, perhaps anarchy and the end of political dynasties – in this case the CCP. Even if the Russian Far East is “won” in time, it is unlikely that it could alleviate the suddenly critical population pressures, for building up the infrastructure for mass human accommodation in that cold, barren and mountainous will take decades. Since Russian agriculture happens over a greater area, is less intensive / reliant on machinery and fertilizer inputs, and generates a substantial export surplus in most year, it isn’t as likely as China to dip into all out famine.

(D) As things stand, the real result of a nuclear war between Russia and China would be (1) a crippled Russia with 20-30mn fewer people, with many tens of millions more at the edge of subsistence, shorn of its Far East territories, but with an intact state still endowed with a nuclear deterrent, and (2) a collapsed and c.90% deindustrialized China rapidly descending into mass famine and anarchy and knocked out of the Great Power game for the foreseeable future. Two tragic, but nonetheless distinguishable, postwar environments, as Herman Kahn would have said.

4. Obviously Chinese strategists comprehend these arguments, and as such cannot have any serious medium-term designs on Russian territory. This is not the case for Taiwan and the South China Sea, where Chinese interests are greater, and don’t fundamentally infringe on US security to the extent that it will contemplate using its far superior nuclear arsenal against China, as that would risk Los Angeles and San Francisco and a dozen other cities on the West Coast getting annihilated. This fulfills the main purpose of China’s long-range “minimal deterrence” strategy.

5. The strategic balance isn’t fixed in stone, and future developments may make the situation more precarious by 2030-50: (1) The development of truly effective ABM systems, (2) growing sustanance pressures in China due to climate change and the depletion of coal reserves, and (3) the opening of the Russian Far East and Siberian interiors to intensive settlement thanks to global warming. But this remains speculation, and the facts are that since both Chinese and Russians are more or less rational actors, the chances of large-scale war between them in the next few decades is very close to zero – no matter what the sensationalists claim.

* Their other major claim is that Russia is already facing a “demographic invasion” and that Siberia is rapidly becoming Chinese. This is completely wrong, as I’ve pointed out in my old post on The Myth of the Yellow Peril.

EDIT: This article has been translated into Russian at Inosmi.Ru (Почему Россия и Китай не будут воевать друг с другом).

(Republished from Sublime Oblivion by permission of author or representative)
 
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How will the global South fare in our likely future of energy shortages, climate change and resource nationalism (and wars)? India has China’s population mass, but lacks its industrial dynamism and human capital. Africa has Russia’s energy and mineral wealth, but not the military power or social coherence to defend it. South America’s prospects appear brighter – it at least may have the crucial degree of strategic isolation, industrial infrastructure and energy and agricultural wealth to eke out a comfortable (if not luxurious) existence in the turbulent times ahead. In the next few posts, I will assess the future prospects of these three regions in the post-peak oil world, starting with India.

A 2007 Goldman Sachs report estimated India’s GDP growth potential at about 8% until 2020, reinforcing the hype of recent years over “India shining” and the vigorous IT industry springing up in oases like Bangalore. This may well be realistic, even despite India’s manifold social problems (low human capital, creaky infrastructure, caste-based inequalities, an unwieldy bureaucracy, sluggish courts, etc), under a global “business-as-usual” scenario. That however is highly unlikely, for the hard numbers suggest that India will be economically and geopolitically squeezed out of the resources it needs to prosper or even survive by its massive eastern neighbor, China. There are limits to growth on our planet and no guarantees that they will be distributed fairly or equitably in the coming age of scarcity industrialism.

Why India is not China

The two countries share fundamental similarities. Both have more than a billion inhabitants, sustained by great rivers like the Ganges, Huang He and Yangtze that are fed by the (melting) Himalayan glaciers. Both rely on coal to meet the bulk of their primary energy needs and will need to import ever more hydrocarbons, metals and food products from abroad to power future growth. Both are ancient hydraulic civilizations that got left behind during the Industrial Revolution and are now determined to make up lost time. But to realize these dreams, they must compete with each other – directly or indirectly – for the same global energy, mineral and water resources.

Unfortunately for India, its Chinese competitor is dominant across practically all indices of national power one cares to compare.

India China
GDP / capita 2009 2900$ 6600$
Literacy rate 1995-2005 66% 93%
Manufacturing sector (current prices) 2008 190bn $ 1800bn $
Internet penetration 2008 5% 22%
Planned infrastructure spending 2008-11 240bn $ 725bn $
Naval tonnage 164,000 346,000

[Sources: GDP per capita; literacy; manufacturing; Internet penetration; infrastructure; naval].

Let’s now look at the significance of each of the above. First, the average Chinese is now substantially richer than the average Indian. This matters because state power is tied to the surplus it can extract in taxes from a recalcitrant citizenry. There is no better proof of the importance of technological advancement and per capita productivity than 19th century Qing China, which although still the world’s largest economy during the Opium Wars got casually trounced by British gunships with modern artillery and steam power. We aren’t talking about that kind of gap between India and China, of course, but it does exist. The Chinese are now simply better able to actualize advanced industrial and military technologies that they buy (or steal) from the developed world into forms of power that matter – renewable energy, supercomputers, naval C&C, etc…

china-india-growth

China leapfrogged India despite the ruinous economic legacy of Maoism, which was surely far worse than that of the “License Raj”. The best way of explaining this puzzle is in terms of China’s better educational profile. The main determinant of long-term economic growth is a country’s human capital (see 1, 2, 3), which for the most part consists of the educational attainment of its population (which in turn is strongly correlated with its level of national IQ). Not only has China implemented basic schooling far more comprehensively than India (see the literacy rates), but in the past decade it has also charged ahead in tertiary enrollments. And there is some evidence that the Chinese have a big structural advantage in IQ over Indians; if that is truly the case, then convergence will be nigh impossible in principle.

As a result of its huge pool of well-educated workers, China enjoys an almost total industrial supremacy over India. China’s manufacturing sector was worth nine times India’s in 2008. This is reflected in practically any sector one cares to survey. Last year, China produced near half the world’s steel and almost ten times India’s output, and 13.8mn automobiles to India’s 2.6mn. In the most fundamental industrial sector, machine tool building, China was global first with 15bn $ of output, relative to India’s insignificant 268mn $. In summary: China is charging past America; India lingers at the level of France, Brazil and Russia.

No matter the hype around IT services off-shoring to India, its eastern rival is more “informatized” (despite the debilitating effects of China’s Great Firewall). Not only is China’s infrastructure already leagues ahead of India’s, it continues to spend three times as much on expanding it further.

Finally, China has a military edge over India – not only in numbers, but also qualitatively in crucial sectors such as naval, space, strategic nuclear and cyberwar. The PRC has a third of the world’s shipbuilding capacity (India has the world’s biggest shipbreaking industry) and some projections indicate the PLAN could have more warships than the USN by 2020. India does not have the industrial strength to embark on such an ambitious enterprise. Plus, a significant part of its military budget is tied up in maintaining military superiority over Pakistan on land; as a result, resources get diverted from the all-important Navy.

India in the Age of Scarcity Industrialism

Though both Asian giants are essentially world-islands (that is, civilizations so deep and self-contained as to constitute their own worlds), they are increasingly tied to the larger world system of capital and resource flows. Their economic progress and rising affluence has to be supported by outside energy sources. Meanwhile, trends such as climate change and urbanization are slated to suppress their agricultural yields, necessitating more imports of “virtual water” in the form of food from abroad. As such, it is vital for both China and India to develop both ways of paying for these life-giving imports (e.g. selling goods, accumulating foreign currency) or if necessary seizing them by force (using gunboats and expeditionary forces). Thus it is their common geopolitical prerogative to safeguard the sealanes carrying their bulk commodity inflows from the Middle East, Africa and South America.

Chinese naval modernization is proceeding in tandem with a far-sighted “string of pearls” strategy of naval base construction on its outlying coastal islands and friendly nations such as Myanmar, Sri Lanka, Bangladesh, and Pakistan (they will host radar stations, anti-ship batteries and logistics hubs for naval operations). India has no such project at sea, while on land it is constrained by the hilly jungles of Indochina to the east, the impenetrable Himalayas to the north and a hostile Pakistan to the west. Though it does have a thin slice of access to chaotic, mineral-rich Afghanistan and Russian-dominated Central Asia, it is hard to see how India can marshal the political will and capital resources to build the necessary infrastructure to exploit them.

It should not be forgotten that India faces severe challenges managing its own subcontinent. Contrary to popular opinion, the Pakistani military is not the foremost strategic threat to India – even the worse-case scenario, a full-scale nuclear exchange, will not kill more than 1% of the Indian population. Far more worrying is the specter of the collapse of the Pakistani state. The region contains a 168mn strong population, growing at more than 2% a year, in a desert only made habitable by canal systems drawing on the Indus River, which is dependent on Himalayan glacial runoff for 90% of its water volume. Perpetually capital-poor, indebted and overpopulated, Pakistan faces the specter of a drying Indus by the 2040′s (if the more pessimistic studies are correct)… after that come the climate refugees, the collapse of the Punjab breadbasket, the raids from the Baloch highlands and general nuclearized anarchy. Bangladesh, most of whose 160mn people live just one or two meters above sea level in an area the size of England, could literally find itself underwater as the 21st century grinds on. No wonder India is pouring 1.2bn $ into a border fence sealing it off.

(Incidentally, the prospect of failed states spilling mass columns of refugees into India would make a great leverage point for China. By supporting Pakistan and Bangladesh just enough to prevent them from collapsing, they would become its vassals…)

India too will experience diminished river flows because of melting glaciers, but not to a critical extent like Pakistan, because the Ganges and Brahmaputra are far more monsoonal. (Nonetheless, like China, India has some very ambitious water megaprojects on the cards). In an abrupt reversal from the earlier successes of the Green Revolution, the rapid depletion of the fossil aquifers used for irrigation in India is contributing to stagnating food production. Though China also suffers from the same problem, it is better equipped to weather it by virtue of its economic strength (foods for goods deals) and strategic foresight (e.g. buying foreign farmlands).

India’s best strategy now is to push the Japan-Korea-Russia-India strategic alliance concept beyond mere rhetoric. If these countries remain splintered in the face of a waning American superpower, Chinese hegemony in the Pacific and Indian Oceans becomes near inevitable. On the other hand, Japanese and Korean capital and knowhow, Russian energy and military technology and Indian manpower and potential economic dynamism could balance out China (and their foreign policy experts worry at the prospect). This diplomacy should be pursued in conjunction with increased spending on ballistic missile defense (to neutralize the Pakistani strategic threat), buying back Sri Lanka (to break China’s string of pearls) and most importantly naval expansion (to exert control over the Indian Ocean littoral).

Conclusions

Some commentators believe India has a long-term advantage over China because of 1) its vibrant liberal democracy and 2) younger and more fertile population. I disagree on both counts.

First, there is no empirical evidence showing that democracies develop faster than authoritarian regimes; indeed, the converse is often true, since the latter can often suppress living standards to squeeze out more resources for investment (on the other hand democracies tend to be freer of the megalomaniac delusions indulged in by some autocrats and hence experience fewer absolute train-wrecks). There may well be a case to be made that a more authoritarian Indian government could have provided mass education and infrastructure better and earlier. Or maybe not: as Amartya Sen theorized in The Argumentative Indian, they do have a traditionally open and discursive culture, one that seems far closer to the West than “Oriental despotism”. Regardless, I think it is safe to say that at least until both Asian giants become fully developed – which will take decades if it ever happens at all – democracy won’t give India any significant advantages.

Second, the idea that China will grow old before it will grow rich is one that should die already. If you don’t want to read this Goldman Sachs report, consider that China’s current development level is the same as South Korea’s in the late 1980′s; its fertility transition lags by only a decade or so (Korea’s fertility fell below replacement level rates in 1983 and is now at 1.19 children per woman; China’s in 1993 and is now at 1.77 children per woman*). Doesn’t exactly sound like the makings of a demographic apocalypse. Meanwhile, India’s huge (and still growing at 1.3% per year) population will sooner be a liability than an asset.

In the final analysis, demography and democracy count for little in the hard, cold (or should that be hot?) world of the post-peak oil future. What matters is India’s capacity to build a modern, sustainable society, solve its environmental challenges and overcome its geopolitical dilemmas. So far it has been largely unsuccessful on all three fronts. Development is largely confined to urban oases, at the cost of further environmental strains and geopolitical dependencies. Its policy-makers do not appear to be pursuing a coherent grand strategy. And when it comes to the manifold impacts of scarcity industrialism – diminishing energy and food sources, climate change, failed states – India is subject to forces beyond its control. It is hard to avoid the conclusion that India faces an increasingly bleak future in a world of limits to growth.

* Adjust down to 1.60 to take into account the male-female gender imbalance.

(Republished from Sublime Oblivion by permission of author or representative)
 
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In the wake of the economic crisis in which Russia’s GDP fell by a stunning 7.9% in 2009, its status as a BRIC economy – with its connotations of promise and progress – was brought into question. After all, isn’t it a dying nation with rapidly degrading infrastructure? Isn’t it amazingly corrupt? Wouldn’t its contempt for liberal democratic values doom it to stagnation? And what happens now that oil production, the main locomotive of the Russia economy, has stalled thanks to the politicized persecution of “brilliant entrepreneurs” like Mikhail Khodorkovsky? Indeed, was not its economic collapse in 2009 a portent of things to come? And so on*.

There are many reasons to dismiss these arguments, as I will try to show in this post. First, the very inventor of the BRICs concept, Jim O’Neill of Goldman Sachs (who has probably thought more about it than anyone else) dismisses the argument that Russia is ineligible on the basis that is was the only country amongst them to show (highly) negative growth during the economic crisis as “rubbish”. He goes on to add that “the only reason that Russia was hurt so badly was unlike the others, it borrowed heavily on the international capital markets and, of course, it is dependent on the price of oil.” ** Of course, the Russian economy’s dependence on Western intermediation for its credit is a structural weakness, and one that was exposed in late 2008. But potential faultlines like this are hardly unique amongst the BRICs – its most promising member, China, critically depends on exports for continued growth***, and its banks are saddled with bad debts.

Second, many of these arguments from demography (“dying Russia”), infrastructure (“crumbling Russia”), and institutions (“Zaire with permafrost”) are both 1) exaggerated in severity and 2) exaggerated in their influence on economic development.

Take Russia’s plummeting population… except that it hasn’t been plummeting or even falling since 2009! (It is now stagnant). True, Russia is going to see a substantial fall in its labor pool – according to the Rosstat medium scenario, from 62% of the total population now to a truly apocalyptic 55% by 2030****. (Yes, that was sarcasm). And though its population will age substantially in the next few decades, there probably won’t be any problems with paying pensions thanks to its resource wealth. Basically, Russia’s demography is neither as bad as it is usually portrayed in the Western media, nor will it negatively impact on its future economic development in any significant way.

Now what about Russia’s crumbling infrastructure? Though Russia having no roads, only directions may be cliché*****, it does undoubtedly have an element of truth. But look at this from another perspective. Russia might have plenty of crumbling concrete and rusting iron carcasses, interspersed with the occasional modern highway or recently-built gleaming showpiece – but does it really, really need better infrastructure, or are its resources better spent elsewhere? At least unlike India, or even Brazil or China, Russia has a complete industrial infrastructure. Its “Khrushchevki” prefabricated concrete tower blocs and disused railway stocks may give it a decrepit, even post-apocalyptic air, but the equivalent scene in India or China may well consist of a village of peasant huts with dirt paths meandering through it! In other words, Russia needs new infrastructure relatively less than the other BRICs (yet even so, Merrill Lynch predicted it would spend more in the next three years than either India or Brazil, despite its smaller population)!

Finally, yes – Russian institutions are corrupt and its state is illiberal and (semi-)authoritarian, though arguably it is democratic****** (of course the degree to which this is the case can be subject to endless debate). However, the evidence indicates that institutions have historically had relatively little impact on economic growth or “convergence”. A multi-author NBER study in 2004 on Do Institutions Cause Growth? was summarized thus:

We revisit the debate over whether political institutions cause economic growth, or whether, alternatively, growth and human capital accumulation lead to institutional improvement. We find that most indicators of institutional quality used to establish the proposition that institutions cause growth are constructed to be conceptually unsuitable for that purpose. We also find that some of the instrumental variable techniques used in the literature are flawed. Basic OLS results, as well as a variety of additional evidence, suggest that a) human capital is a more basic source of growth than are the institutions, b) poor countries get out of poverty through good policies, often pursued by dictators, and c) subsequently improve their political institutions.

Russia seems to fit the above model reasonably well. It has high human capital – far better than China or Brazil, let alone India. As I wrote earlier, “Around 70% of Russians go into higher education, compared with just 20-25% of Brazilians or Chinese… in the 2006 PISA science assessment, only 15.2% of Brazilians possessed skills beyond those needed for purely linear problem-solving, compared with 47.6% of Russian and 51.3% of American students”. Already resembling a developed country in human capital and having pursued reasonably effective economic policies under Putin, Russia may now slowly be moving towards surmounting that last institutional hurdle, with Medvedev now taking aim at the MVD (police) and bureaucracy.

Finally, it would be well to point out one area in which Russia has a decisive advantage over the other BRICs – it is already a much more developed economy and society. As of 2009, and despite the economic crisis, Russia’s real GDP per capita was 14,900$, far higher than Brazil’s 10,500$, China’s 6,600$, and India’s 2,900$ (not to mention that Russia’s Gini index of wealth inequality, at 41, is lower than both China’s 47 and Brazil’s 57). Really, the most convincing reason to leave Russia out of the BRICs is not that it doesn’t belong there, but that it won’t grow as fast as the others simply because it is already substantially richer than them and as such no longer has as much space to catch up! (And hence would not be as attractive to investors)…

That said, Russia in the next decade will probably grow relatively fast nonetheless – not only because it is a well-educated nation with substantial room left for “catch up” growth to developed world levels, but because of a very favorable external environment. First, the (probable) peaking of oil production and China’s ravenous growth******* means that oil and resource prices will remain high, bringing in the hard currencies that would help Russia buttress its fiscal position and buy the technologies it needs to modernize itself from the West.

Second, in a dramatic turnaround from 1998, Russia today is now in a much stronger long-term fiscal position than practically any Western developed country. The article Rerating Russia by Ben Aris is worth quoting in extenso:

Russia’s credit rating is way too low, as it boasts some of the strongest fundamentals in the world, but it’s still tarred by its increasingly irrelevant “emerging market” moniker… The world has been turned upside down by the global financial crisis. Nowhere is this clearer than in [Greece's and Russia's] bond offerings. While Greece is sagging under a heavy public debt burden, Russia not only has almost no debt to speak off (Capital Economics predicts 9.5% of GDP by the end of this year), but also has well over $400bn in hard currency reserves. That’s five times more than either the US or UK, making it the third-richest country in the world in terms of cash. …

Russia is enjoying a mirror image of the problems its more developed peers are facing up to. For example, the UK is one of the most indebted countries in Europe now after it borrowed a massive €257bn last year, ratcheting up its leverage to borrow about €2.80 for every €1 that the Bank of England is holding in its vaults as a reserve. The US is in similar dire straits.

… Currently, Russian sovereign debt has a ‘BBB’ rating, which is only two notches above junk bond status. At the same time the US and UK have (so far) kept their ‘AAA’ ratings despite their worsening finances. Most economists are predicting Europe’s external debt to rise from 100% of GDP to 130% over the next five years, while that of Russia is expected to continue falling. Indeed, analysts say that the ratings of developed countries’ have disconnected with reality, while countries like Russia are being penalised. “On the basis of our model, the [best possible] ‘AAA’ rating for the US and the United Kingdom cannot be explained, as these two countries are rated two to three rating notches better than countries with comparable fundamental data,” Ingo Jungwirth, an analyst with Raiffeisen International, wrote in a study in March.

His study found that based solely on the country’s finances, both the US and UK should be downgraded three notches to a ‘AA’. However, if the ratings agency actually went through with a downgrade, the cost of borrowing to both countries would spike and spark a financial global crisis, which would probably wreck the global economy for decades. Jungwirth suggests that these two countries earn a “bonus” for being too big to fail.

On the flip side, Russia is underrated given the strength of its financial position. Consider that on the day Iceland defaulted on its debt at the start of this crisis, it enjoyed higher ratings than Russia. Today Russia’s ‘Baa1′ rating from Moody’s Investors Service is still the same as bailout-dependent Iceland’s. Fitch Ratings and Standard & Poor’s currently class Russian debt as ‘BBB’ – even lower than Moody’s. …

There are already some signs that investors are cottoning on to the strength of the Russian bond offering. After US investment bank Lehman Brothers collapsed, the spreads on UK credit defaults swaps (CDS) … have soared by 281 basis points (bps). At the same time, Russia’s CDS have actually contracted by 17 bps over the same period, making it one of the few countries in the world deemed by investors to be a safer place to invest than it was before the start of the crisis. …

The US, Japan, and most of Europe have reached their limits to growth. Now faced with unsustainable budget deficits, ballooning debts, and intense (BRIC-centered) competition for remaining high net energy resources, the long era of Western hegemony is now coming to an end. It is thus with some skepticism and bemusement that I view the smug commentary in the Western media on the Russian Foreign Ministry leak published at R ussian Newsweek********, which they claim show Moscow’s “planning to reorient its foreign policy in a more pragmatic and pro-Western direction”, in apparent acknowledgement of its failed policies of dirigisme within and confrontation without.

In reality, the Kremlin’s détente-for-modernization leak is more likely to be an Aesopian telegram that conveys Russia’s satisfaction with what it has already achieved and of the new world order that is emerging. In the past decade, the Russian state has consolidated and reestablished a sphere of “privileged interests” across Eurasia, decisively purging Ukraine and Central Asia of Western influence. Meanwhile, with the United States facing severe fiscal stress and geopolitical challenges on other fronts in the Middle East and the Far East, the West now has neither strength nor will to push back against Russia beyond Visegrad, and is beginning to lose its unity and cohesion. Russia’s security dilemma is retreating, as a new geopolitical equilibrium crystallizes along the marches between the West and Eurasia.

Since good fences make good neighbors, this paves the way for better relations between Russia and some Western countries, in particular Germany, Italy, and France (in the Russian leak, Britain is conspicuous in its absence). Take the former. What interest does Germany really have in sending soldiers and paying taxes to perform a doomed “civilizing mission” in Afghanistan for the US, or in subsidizing Mediterranean profligacy while imposing stringent discipline on itself in return for their (aging and shrinking) markets? On the other hand, there is great potential for synergy between the German and Russian economies. The Teutonic industrialists have technologies and capital that Russia now needs to modernize its manufacturing and hi-tech industries, while the Russians have the energy and mineral resources that could keep German factories humming well into the age of scarcity industrialism. Back in October 2009, I suggested that this economic relation could be the basis for a new German-Russian alliance; now the New York Times has caught on.

The American age of dominance is waning and will soon come to an end and a new constellation of Powers will take its place. Far from being a shunned BRIC in a world run by the West, Russia will be one of the main poles in the new world of the Rest.

* See Nouriel Roubini, Anders Aslund or Julia Ioffe for the standard spiel.

** See “The R of the BRICs Remains Solid” part of this post.

*** Of course there are arguments that the magnitude of these problems are overstated.

**** The irony is that the more Russia’s (abnormally low) life expectancy and (now fairly average by European standards) fertility rates improve, the worse its dependency ratio will get in the decades ahead! Yet another demonstration of the stupidity of simple-minded extrapolation of population trends to future economic prospects.

***** In any case, in an age of peak oil, the wisdom of expanding road networks further is open to question. Russia would be better served by modernizing its railway system, on which it plans to spend 390bn $ by 2030.

****** On the basis that it fulfills democratic norms on paper although not in spirit, and in the sense that most Russians believe Russia is free and democratic (as was not the case during the Yeltsin period). Both the Polity IV political database and Economist Democracy Index perceive Russia as a kind of hybrid regime that is neither liberal democratic nor fully authoritarian.

******* This illustrates another important point – the BRICs are greater than the sum of their parts; they are more of an idea and a concept, than some kind of ranking in which countries can be kicked out of for (perceived) lack of performance. Strong Chinese and Indian growth, for example, help pull along nations like Russia or Brazil that are more heavily based in resource extraction.

******** See the full “О Программе эффективного использования на системной основе внешнеполитических факторов в целях долгосрочного развития Российской Федерации” here.

(Republished from Sublime Oblivion by permission of author or representative)
 
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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.