Tag: Russia

The Fall of the USSR

On June 25, 2017

The best book on both successes and failures of the Soviet Union is Mancur Olson’s Power and Prosperity. If you haven’t read it, you should. The second best is Randall Collins’ Essay in Macrosociology.

The great problem with most critiques of the USSR is that they do not explain its successes. In the 20s and 30s, it did far better in most respects than the West. In the 40s and 50s–and even into the early 60s, it was still doing very well. They put the first satellite in orbit, produced tanks that were as good as the West’s, and produced the most successful assault rifle in history. As late as the early eighties, there were points at which Russia’s best tanks were better than the West’s.

The USSR was one of the few nations larger than a city state which had industrialized through a process other than the use of mercantilist policies. During the Great Depression, the USSR vastly outperformed the West.

So, why did it fail? There are two perspectives. I believe both have a lot of truth to them. Let’s start with Olson’s: The failure of the USSR was a feedback problem. At the beginning of the USSR, local cliques and power groups had not formed. The central planners knew exactly how much was being produced, as well as exactly how much could be produced, and were thus able to coerce people into producing what they knew was possible to make.

As time went on, this became increasingly impossible. Put simply, the locals controlled the information flow to the center, and lied about what they could produce and what they did produce. Workers worked less than they could have, local bosses appropriated production to themselves, and the secret police couldn’t keep up, or became corrupted themselves. Absent accurate information, the central planners lost control. Everyone slacked off, corruption soared, production dropped, and the products produced were crap, especially the consumer goods. (The USSR remained able to produce some of the best military equipment right to the end.) Food production tumbled.

The second perspective is the geopolitical one. The USSR had less population than the Western alliance. It was faced with enemies on every side, while the US was isolated by sea from any possible assault and Europe only had to worry about attack from one direction. It had a smaller economy than its enemies. To keep up with its enemies militarily, it had to spend a larger percentage of its economic production than the West did. With a central position and a smaller economy, why would you think it wouldn’t crumble under the strain? I will note that Collins made this argument BEFORE it crumbled. By every normal “Great Power” metric, the USSR was weaker than its enemies. Fiscal strain is normal in such a situation, and it is to be expected that the economically weaker power will eventually lose. From a pure power perspective, and ignoring nuclear weapons, the USSR should have launched an all-out attack on Europe no later than the 70s.

This is basic guns-and-butter economics, understood by Adam Smith. The more you spend on your military and your security apparatus, the more your civilian economy suffers, especially as the most brilliant scientists and engineers are hived off from civilian production. The longer this goes on, the more you suffer. If you’re facing economies that are much larger than yours, you’re screwed. And the US economy was the largest in the world starting in the late 19th century, let alone a recovered European one.

As the USSR failed under these twin problems, exacerbated by the bleeding ulcer of the Afghan war, they also suffered ideological decay: They stopped believing in their own form of government, and became less and less willing to kill for it. When push came to shove, rather than use the Red Army to maintain control (something it was still capable of doing), they didn’t believe in the USSR and the Warsaw Pact enough to do so.

Now let us turn to capitalism. The advantage of capitalism v. central planning, is that information is sent through prices, supply and demand. This information feedback, however, is still gameable by power blocs. The exact strategies are different than in a command economy, but the end result is the same. The West and the US are currently undergoing this exact problem. The entire financial crisis was about inaccurate feedback and broken feedback loops–it was about the financial and housing industries deliberately damaging the feedback system. Then, when it finally went off a cliff, they destroyed the capitalistic feedback system (which, when properly operating, forces companies into bankruptcy) by obtaining bailouts due to owning western governments.

There are myriad other problems with feedback in the developed world right now, from massive subsidies of corn and oil, to oligopolistic practices rife through telecom and insurance, to the runaway printing of money by banks, to the concealment of losses by mark to fantasy on bank books, to the complete inability and unwillingness to price in the effects of pollution and climate change.

The great problem with humans is that we lack time perspective. In a hundred years, when historians and whoever deals with economic issues look back (hopefully not economists as we understand them), they aren’t going to be that impressed that Western Capitalism outlasted Soviet Communism by forty or fifty years. Instead, they are going to look back and say that both were doomed, in large part, by their inability to manage the exact same problem. In both cases, the feedback systems which controlled economic production were so perverted by various internal power blocs that the societies were unable to reproduce the material circumstances necessary for their continuance.

(This piece was originally published February 2014. I think it still says some important things, and many new readers will not have seen it, so back to the top. Ian.)

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Is Russia About to Send a Thousand Troops to Syria?

By Ian Welsh

On September 5, 2015

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Perhaps:

Russia is building a military base in Syrian president Bashar al-Assad’s heartland, according to American intelligence officials, in the clearest indication yet of deepening Russian support for the embattled regime of Bashar al-Assad.

The anonymous officials say Russia has set up an air traffic control tower and transported prefabricated housing units for up to 1,000 personnel to an airfield serving the Syrian port city of Latakia.

Why would they do that?

Syria is already home to Russia’s only base outside the former Soviet Union – a naval station in Tartus.

The humorous part is that Russia is claiming that they want to expand their role to “fight terrorism” and “ISIL.” Everyone claims whatever they’re doing in Syria is to fight ISIL and terrorism, of course, including the Turks, who are bombing the Kurdish forces who are the only people to consistently win against ISIL.

Of course what Russia is really doing is supporting its interests, which don’t include allowing a loyal client state to be overthrown by Islamic forces which are hostile to Russia and supported by Saudi Arabia and Turkey.

Or to lose a warm water port it cannot easily replace.

Or to be shown to let down a loyal ally.

Everyone else seems to think they have the right to bomb Syria in the guise of “bombing ISIL,” why not the Russians?

As for the morality of it, well, I see no “good” actors in Syria. However, it is a simple fact that Syria was a better place to live before the civil war and those who have encouraged that civil war either: a) shouldn’t have, or; b) should have applied the necessary force to end it quickly. (At which point, Syria would have probably become a failed state, like Libya.)

As anyone was unwilling to do either, and then rebuild properly (which, again, no one is willing to do), perhaps Assad, as nasty as he is, should have been left alone?

Just a thought.

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This Ukraine Stuff Writes Itself

By Ian Welsh

On February 27, 2014

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Gunmen seize parliament and the main administrative building in the Crimea and NATO’s Secretary General says:

Rasmussen, NATO’s secretary general, described the seizure of the regional government administration building and parliament as “dangerous and irresponsible.”

Wait? Weren’t other government buildings seized by gunman in Kiev, just recently?

Meanwhile:

International Monetary Fund chief Christine Lagarde said Thursday that her organization was ready to respond to a request for assistance from Ukrainian authorities and would send a fact-finding team to Ukraine to assess the situation and begin discussion of reforms the country needs. “We are also discussing with all our international partners — bilateral and multilateral — how best to help Ukraine at this critical moment in its history,” she said.

Reforms, eh? Remind me of the occasions on which IMF reforms have been beneficial to the average citizen of any country?

Then there is this:

A senior U.S. official familiar with the most recent administration assessment told CNN that now that the Russians “have brought troops out of garrison,” they could potentially move “quite quickly” once an order comes.

At that point, the official says, the U.S. assessment is that its “warning time” that Russian forces were on the move might be so short, it would be difficult for the United States to move diplomatically to try to stop it.

I—I, what? If you don’t want them to, the diplomacy is done now, and it involves threats and carrots. But the problem is that Ukraine is in Russia’s sphere of influence. Do you think that the new, IMF funded, Western supported government will be asking for NATO membership? I would be if I were them. Do you think Russia finds that, in any way, acceptable? Have you looked at a map?

The Ukraine in NATO is a strategic threat to Russia. It is of no value to NATO except as a threat to Russia. Russia knows that.

The strategic situation is such that Putin has many reasons to find an excuse and annex both the Crimea and Eastern Ukraine (which contains most of Ukraine’s industry, by the way.) The rest can do whatever they want. And if Europe doesn’t like it, well Gazprom can sell its natural gas to the Chinese and Europe can go dark. As for the US, bluster all they want, they aren’t going to fight a war against Russia for the Ukraine. Russia’s still a real country; it has nukes.

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The World Through Vladimir Putin’s Eyes

By Ian Welsh

On February 17, 2014

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The Sochi Olympics have put the spotlight on Russia, and there has been great excorciation of Russia for its discrimination against gays, and much mockery for the problems with the Games, such as one of the five Olympic rings not opening, Wifi that doesn’t work, bathrooms with two toilets in the same room and so on.

What is interesting about this is that there are so many minor problems. Do you remember these issues during the Beijing Olympics?

No.

And, if you’re older, like me, do you remember them from the Moscow 1980 Olympics?

No.

In 1980 USSR, the Russians could still put their fingers down and make things work. Oh, to be sure, wherever the Politburo and the best of the KGB wasn’t watching, it was a mess, but if they concentrated their efforts on one place, things got done.

Whatever problems the USSR had by 1980, let alone by the time it fell, for many Russians, it was better than what came after. Putin believes this:

When Igor Sechin was working as President Vladimir Putin’s deputy chief of staff a decade ago, visitors to his Kremlin office noticed an unusual collection on the bookshelves: row after row of bound volumes containing minutes of Communist Party congresses.

The record stretched across the history of the party and its socialist predecessor — from the first meeting in March 1898 to the last one in July 1990, a year and a half before the Soviet Union collapsed, Bloomberg Markets will report in its March issue.

Sechin regularly perused the documents and took notes, says Dmitry Skarga, who at the time was chief executive officer of Russia’s largest shipping company, OAO Sovcomflot.

“He was drinking from this fountain of sacred knowledge so that Russia could restore its superpower status and take its rightful place in the world,” Skarga says.

Sechin’s back-to-the-future fascination with his country’s communist past is something he shares with Putin, who, soon after coming to power in 1999, restored the music (though not the lyrics) of the Soviet-era national anthem and later described the collapse of the USSR as the greatest geopolitical catastrophe of the 20th century.

Why does Putin believe this? It seems like nonsense to most Westerners. But if you’re Russian, and you remember the 90s, you remember a time when rapacious oligarchs seized control of the country, the population went into sharp decline, where there wasn’t enough food and where hot water was a luxury denied to many.

You remember constant humiliations at the hands of the West, as they carved up Russia, the USSR and the Warsaw Pact, and you remember that NATO kept expanding East even though Bush Sr. had promised Russia that wouldn’t happen.

The 90s were terrible. As bad as the late USSR was, the 90s were worse.

The sardonic joke was “everything the Communists told us about Communism was a lie. Unfortunately, everything they told us about Capitalism was true.”

To put it simply, privatization, known as shock doctrine, was a huge failure in Russia. It led to control over the economy being in the hands of a few rapacious oligarchs, none of whom didn’t routinely use coercion and violence to get their way, it led to a collapse in population, life span, of oil production… of everything.

If this was capitalism… why would the Russians be impressed?

And meanwhile, in Chechnya, the Russian military couldn’t even put down an insurrection. The Red Army may have failed in Afghanistan, but in the provinces of the USSR, well, no.

So Putin gets in charge, and he looks at what privatization; what shock doctrine has done to the country, and he think that the USSR is better. So he makes examples of some of the oligarchs, re-nationalizes the key parts of the economy, including oil and high tech production, as well as those parts which can’t compete.

Peskov says, “for example, in shipbuilding it’s absolutely pointless to carry out privatization,” he says. “You can privatize enterprises, but they won’t be competitive; they will be doomed to failure. So consolidating the assets under the state’s wing is the only way to preserve key sectors of the economy.”

Next he turns on Chechnya and he wins his war, he crushes the Chechens, then he pours billions into rebuilding their capital. Bear in mind, this is sold as an “anti-terrorist” war, just like Iraq and Afghanistan were sold to Americans. Remember how popular Bush was as a “war president”?

Putin starts bringing countries which were once part of the USSR under the Russian umbrella again, and tries to slow the advance of NATO and the EU East towards Russia’s border.

So what Putin has done is look at the results of the collapse of the USSR: the economy trashed, population declining, oligarchs stealing, Russia humiliated, a major insurrection in the South, and he’s reversed them. The economy may not be brilliant, but it grows fast for most of the 2000s. Oil production grows and exceeds USSR production, and pays for more than 50% of the government’s budget. Population stops declining. Unemployment drops, and is lower than in some European nations.

Perhaps state capitalism, which is what Putin is doing is “inefficient”, but it’s supplying jobs and it’s paying the government’s bills.

And Putin is genuinely popular. In the last few years there have been demonstrations, but while Putin’s reelection wasn’t fair, it doesn’t appear to have been stolen.

Why? If you remember the 90s, and most people do, Putin has demonstrably made most Russians better off and strengthened Russia. And very few Russians are crying tears for what he’s done to the oligarchs, all of whom are little better than Mafia dons themselves.

If you’re Vladimir Putin, you think you’ve done a great job. You think that the West are a bunch of flaming hypocrites who hate Russia, as well. Look at all the screaming about human rights during these Olympic Games. While there was some about China in 08, it was magnitudes less. And if China doesn’t discriminate against gays, well, they certainly are at least in the same league as Russia when it comes to human rights abuses.

Besides, who can take the US, which invaded Iraq based on lies, which tortured, which has the world’s largest assassination program and whose NSA runs a surveillance state which in certain respects would make the Stasi blush, while imprisoning much of its black male population, and bailing out private actors to the tune of trillions of dollars to lecture anyone else?

To Putin, Western lectures look like sheerest hypocrisy. The West, in its banking scandals, proved itself as corrupt as Russia, and on a much larger scale. In Iraq it proved that it would brutalize non-Western populations for no reason. In Greece it has driven its own population into penury, and all through the West the surveillance state rises, and people continue to lose their rights.

Meanwhile Russia’s unemployment rate is better than most Western nations.

None of this is to deny that Putin is not an evil man, and though I don’t know if he’d put it that way himself, I doubt he has any misconceptions about the fact that he’s a strong man; a man on horseback and a man who has committed innumerable war crimes, while ruling through fear and intimidation as well as popularity.

Russia’s got problem, big ones, and Sochi has highlighted them. Putin has failed to transition the economy from resources, and he has not kept corruption under limits: corruption is one thing, that the system can’t be made to work in high profile circumstances like Sochi, is another.

But when your economy is more than 50% reliant on oil, it’s almost impossible to stop corruption or to transition off of resources. Resource economies are corrupt, period, because whoever has control of the resources makes so much more money than everyone else, and people will do anything to get near the money spigot, while those who do control it can buy anyone they want.

In this resource economies are similar to financialized ones. In both cases, there is a money spigot, and you are either attached to it, or you aren’t. If you are, life is great. If you aren’t, well, not so much.

So, if there is a money-spigot, do you want it controlled by oligarchs, or by government? Which devil is worse? The Russian answer, Putin’s answer, is government. Right now the West’s answer is oligarchs.

Neither is right, of course, but that’s another essay.

For now, look at Russia, and the world, and try to see them through Putin’s eyes.

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