Tag Archives: economy

Fear inequality, not terrorism

The annual meeting of the Illuminati/Bilderberger cabal in Davos has come up with a new motto: “Responsive and Responsive Leadership”. Sounds nice and timely, what with the inauguration of President Douche who has vowed to shake up the existing world order, whatever that’s supposed to mean.

So, the Davos smart-heads are unanimous that the main culprits for The Donald’s shocking rise are the key crises of the recent years: polarized society, income inequality, and many countries shutting themselves in and getting introvert. This years Global Risk Report (something like a Davos manifesto setting the priorities for the next year) outlines five factors that will determine world events from now on. 1) Slow growth plus high debt and demographic shifts that will increase inequality and give ammo to the anti-globalist camp and those who feel marginalized by the current capitalist model. 2) Smeared-out national identities, systematically undermined by globalization, and the subsequent emotion-prone decision-making process. 3) The Fourth Industrial Revolution having changed modern societies, economies, and ways of doing business. 4) The transition to a multi-polar world order that threatens stable global cooperation. 5) The need for urgent action on climate change that’s hanging like a sword over everybody’s heads with an ever growing menace.

This report has been focusing on the major global risks and the relations between them for more than a decade now. The years of growing tensions in various parts of the world have crystallized last year, in the form of strong public discontent against the status quo. Trump and the Brexit are the most obvious examples. Many populists have chosen to ride this wave of discontent for political gains. And this increases the global risks.

The first major challenge, the report concludes, is restoring economic growth and reforming market capitalism. Despite the unprecedented levels of prosperity and the emerging middle class in many countries, the feeling of economic strife is contributing to the anti status quo, populist and anti-globalist sentiments. It’s telling that the 1% in the US have gained 1/3 of income for the last decade, while the remaining 99% haven’t seen any significant progress in that respect. That’s why income disparity is definitely the most dangerous global trend, and it’s here to stay for quite a while. But encouraging economic growth alone won’t help heal the deep rift. Fundamental reform of the market model is also required, and we’re not only not seeing this happening any time soon, but we’re now seeing some major reactionary forces rearing their head and pushing back in the exact opposite direction.

Another big challenge is reinforcing the communities, because the yeas of fast social and economic change has opened up the generation gap even more. In result, issues like national identity and cultural values have become more acute, and now that politics is largely defined by the so called Post-Truth era, where emotion takes precedence over fact and rationality, this creates even more cracks in society. In Europe, this process resulted in the rise of various parties that focus on nationalist values and national sovereignty, their agenda being reinforced by the migration pressure from the Middle East. The question is, is there a way to narrow these deep divisions without hurting individual rights. It’s a delicate problem that no one seems to have a smart answer to.

Technological advancement is another issue. It radically changes the world. But we shouldn’t also forget the fact that 3/4 of all jobs lost in the US for the last decade or so, are due to automatization. The forecast puts almost half of all remaining jobs at risk due to technological progress. This partially explains the deteriorating prospects for some segments of the labor market (but also the emergence of new professions branching out in places unanticipated before). This naturally leads to a sense of distrust in progress as a whole, and the tendency of ordinary folk to vote for anti-establishment parties.

The next big challenge is to find ways to reinforce and reform the systems of global cooperation. Trump’s proposed isolationism isolationism and Britain’s eagerness to divorce with the EU are hardly unique, single events. The examples of countries that want to remove themselves from various international partnerships are increasing by the day. But the Davos experts believe a sharp turn toward a domestically orientated economy would be very risky. In many areas, including the Syrian crisis and the subsequent refugee crisis, international cooperation and multilateralism seem like the only viable option for finding long-term solutions. Everything else is just pouring more salt onto a wound.

Finally, there’s the risk of climate change of course. The last decade has seen a number of environmental challenges emerging: from extreme climate conditions to water shortages to failing attempts to curb carbon emissions. These have consistently featured in all previous analyses, and they bring along a myriad of collateral risks, including social unrest, political turmoil, armed conflict and migration crises. And this year the climate concerns will be more severe than ever, because the last 16 years have broken all temperature records, and the trend seems to be accelerating.

In conclusion, the smart-heads in Davos may be acknowledging all the problems, but the question is, will they move a finger about it this time, or they’ll just stick to talking. It’s evident that the rising political, economic, social, technological and climate tensions will only be increasing the danger of a systematic collapse, and this makes the global order ever more fragile, and puts the world’s collective prosperity at great peril – not to mention its chances for survival. What’s more, if 2016 is any guide, many challenges can’t even be remotely anticipated, let alone tackled. Which puts us in quite “interesting” times, indeed.

Russia might be in crisis; Putin, not so much

In late November, the canals of St. Petersburg, the so called Northern Venice, are covered in ice. The few hours of sunshine and the extremely low temperatures make these days quite an ordeal. The ambulances crisscross the city in search of hobos and drunken people, taking them off the streets to prevent deaths from frostbite. Every winter about 600 people die on the streets of St. Petersburg, and that’s not counting all those who’ve had their limbs amputated, and other victims of frost.

At the Nevsky Ave, in the center of the golden-clad city that was built by Peter the Great in place of some swamps next to the Gulf of Finland, posh shops are lining the sidewalks, alongside shiny restaurants and souvenir shops. St. Petersburg is not just a tourist hub and Russia’s primary Baltic port, but also the country’s second most important city after Moscow. It’s a huge economic center. But it still hasn’t managed to avert the crisis that has engulfed the whole country.

The recent news that from Jan 1, the ticket for the public transport would surge by 30%, was met as if it were the umpteenth treason against the people. But this painful change does have its reasons. In recent years, the Rouble has shrunken by 40%, mostly due to the dropping oil prices. The economic sanctions against Russia do have some role too, but it’s mostly about the oil. Because it makes up for nearly 50% of the government revenue. Which makes Russia very vulnerable to the fossil fuel prices. The banking crisis and the shrinking consumption have added to the perfect storm, thus causing a lasting recession. The World Bank assesses that Russia’s GDP has decreased by 3.7% for 2015, compared to a +0.7% for the preceding year. That’s some serious stuff. The effects of this can be felt everywhere.

The temporary stabilization of the Rouble after the initial shock from last year was no consolation though, because in the meantime the food prices kept skyrocketing (between 20% and 40% increase). The medicines, by 20%. The list could go on. (Just to remind that major political turmoil broke out in the Middle East mostly because of food prices – the best example is Tunisia, which kick-started the so called Arab Spring).

More than 15% of the Russian population lives below the poverty line as of now. That means 21+ million Russians make less than 125 euro a month. A significant drop in consumption in Roubles was registered in the first half of this year, 3.1%.

In order to deal with this predicament, the public and private enterprises are using such unpopular methods like freezing or cutting wages. The Russians’ real income dropped by 5.9% in October, compared to the same month of 2015. The crisis has opened up the income gap even more than before (and it had been pretty grim even before the crisis), unemployment has surpassed 6%, and private debt has jumped up to dangerous levels.

All that said, president Putin somehow still manages to remain immune to criticism, and preserve his aura of a protector of the realm. The recent arrest of the minister of the economy on charges of corruption, and the appointment of 34 year old Maxim Oreshkin, shows that there’s a new strategy for changing the guard at the tops. Thus the Russians can witness that their leader is “doing something”, instead of sitting idle aside and not working on the problems.

So we end up in the weird sitution where more than half of the Russians believe the economic situation has deteriorated, but no one believes the president is to blame for that. His ratings remain higher than 80%, and 2/3 of the Russians want him to run for a 4th term in 2018.

Most of the population believes that the EU’s and America’s policies toward Russia are to blame for her woes, as well as the corruption and incompetence of the Russian MPs and bureaucrats who “make decisions on things they know nothing about”, and “only care about lining their pockets”. But not Putin.

Next year is expected to be of crucial importance for Russia. The WB forecasts a 1.4% growth for the Russian economy. The OECD and OPEC deals for limiting the oil production and balancing the oil prices is also expected to contribute to the economic revival.

In his traditional State of the Nation address a couple of weeks ago, Putin didn’t focus that much on international policy, but mostly talked about the main measures his government was planning: addressing the banks, corruption, health-care, and education. He said the economy is starting to get back on its feet, and inflation won’t exceed 6% next year. He also said the Western sanctions and the corresponding counter-measures have “helped the domestic market and domestic producers, especially in agriculture”, and now “they are giving us more revenue than arms sales” (commendable).

Putin has seemed unimpressed by the sanctions, anyway. The general argument is that during the Nazi blockade in WW2, millions of people died in Russia – and mere sanctions cannot kill Russians. The expectation is that Trump’s ascent to power will mean a warming up with America, and consequently, with Europe. The sanctions are expected to be dropped some time next year if the logic of the events is to be followed. And then Russia will be back in the game. Which means, Putin will become even more assertive. And with a friend of Putin’s in the White House, there’ll be nothing to counter him. We in East Europe can brace ourselves for another Iron Curtain.

A Giant On Clay Feet

Since recently I’ve been hearing the talking points of some Russophiles both at home and abroad taking precedence over common sense, I’ve bothered to do some work in summing up some facts, which I hope would help put those Putinite talking points into perspective. Because the Russian propaganda ain’t sleeping for a minute, definitely not around these latitudes. Just a disclaimer: the lines below are not directed at the Russian people as a people. Indeed, they’re quite lovely people when taken individually. What I can’t approve of is the way that nation has allowed itself to be ruled for centuries, and the results that’ve come out of it. So do bear with my diatribe.

1. By various estimates, Russia ranks 8th or 9th in terms of GDP. However, the Russian economy is about 7 times smaller than those of the US and EU, 3.5 times smaller than the Chinese, 1.3 times smaller than the Japanese, and 0.73 times smaller than the German economy. But what’s more interesting, a country with 148 million people like Russia is producing GDP which is twice smaller than that of a country like Italy, and just barely bigger than Canada’s, which is many times smaller in population. If anyone claims this is a sign of an efficient economy, I’d recommend they re-read their economics study-books. Source: here.

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^ See? Doesn’t look that big now, does it? (No, Russia ain’t the huge green blob. Russia is the squashed blue stain that’s squeezed between the real players.

2. 95.7% of Russia’s national treasure is formed by natural resources, and 70% of the Russian exports are oil and gas. Whichever way we look at it, Russia is a mere supplier of raw materials for the more developed economies of the world. If we believe the Russian economy is capable of producing cheap products of good quality, we’d better think of how many Russian goods (affordable, and of good quality) we’ve bought anywhere for the last 5-10 years. Personally? I haven’t bought even one. And I live less than a thousand miles away from there. Source: here.

3. I’ve been hearing Russians spouting the narrative that Russia is some kind of defender and paragon of Orthodox values, as opposed to the rot of the godless West. Personally, I can’t wrap my mind around this notion – I don’t get what makes the Russian Orthodox “values” so different from the standard Ten Commandments, and how is Russia propagating these values, since the divorce rate in that country is 51%. The US divorce rate is comparable, 53%. What’s more, evidently even the most prominent “defender” of Orthodox values could himself be divorced, which is exactly Putin’s marital status. It’s a public secret that the reason for his divorce was his romance with Alina Kabayeva, a former Soviet gymnast. On top of all that, if the purported Orthodox traditions are so strong in Russia, then how come the words “Russian woman” have long been associated with “harlot” around here (especially along our coast, which is so full of temptations)? Source: here.

4. Russia has the highest documented abortion rates in the world (34.7 abortions per 1000 births). Yep, you heard me. The highest in the world! But that’s just one factor for the rapidly waning population of that country. Immigration is the other. People are voting with their feet, apparently. I suppose Western liberal democracy is to blame for that as well? Source: here.

5. Barring the African countries (with the exception of the Maghreb), Russia has the highest registered HIV-positive rate in the world – 1.2 million infected. Source: here.

6. Russia has hard drug use levels (1.8 million people) which are comparable to those of the Third World. Source: here.

7. The homicide rate in Russia is 9.2 per 100,000, while that in the US is 4.7. And the US is being criticized for being a violent place!? Mind you, Russia shares the same area in the ranking with such nice places like Pakistan, Kazakhstan, Burundi, Somalia, Burkina Faso, Iraq, Guinea-Bissau, The Philippines, Gabon, Kyrgyzstan, Mongolia, Angola, Djibouti, The Gambia, Haiti, Togo, Zimbabwe and Uganda. Among the more developed countries, only Mexico and Brazil are higher. Source: here.

8. The levels of corruption in Russia are staggering. And that, for a country that claims to be a leading economic powerhouse. The latest Transparency International ranking puts Russia at the 136th place (out of 174). Only Iraq, Afghanistan, Sudan, Libya, Venezuela, North Korea and a few former Soviet republics are worse than that. Quite a nice record indeed. Source: here.

9. Russia is ranked 152nd out of 178 in terms of freedom of the press. Again, quite a remarkable record. Again, Russia shares the company of such nice Third World countries like Sudan, Yemen, Somalia and North Korea in this respect. Source: here.

10. Despite the constant muscle-flexing, Russia isn’t the military juggernaut we usually see on the Red Square parades, either. The US spends between 581 and 610 billion dollars on defense, China follows with 129-216 billion. Russia is either 3rd or 4th with 70-84.5 billion. Saudi Arabia is somewhere there as well, then follows Britain, France, Japan, India and Germany. One must be very infected with confirmation bias in order to believe they’re the most badass force in the world. Source: here.

11. Russia ranks 10th in the world in terms of suicide rates per capita, with 19.5 suicides per 100,000. Only Turkmenistan, South Sudan, India, Burundi, Kazakhstan, Nepal, Tanzania, Mozambique, Suriname, Lithuania, Sri Lanka, South Korea and Guyana are worse. The US is 50th with 12.1 suicides. I don’t know, Russians must be killing themselves so much out of sheer happiness for living in such an awesome place – or something. Source: here.

12. Russia is 4th in the world in alcohol consumption per capita (over 15 years of age). Only Belarus, Moldova and Lithuania are ahead. I’ve mentioned what “Russian woman” is associated with; well, in the meantime, “Russian man” is associated with “drunkard” around these latitudes (and not only). Source: here.

13. Russia has one of the highest homeless populations in the world, about 5 million. In comparison, those are 3 million in the EU (with almost 3 times more population), and in the US that number varies between 0.6 and 2.5 million, depending on the estimate (with twice the total population). Source: here.

14. You’d think people in the Middle East and East Asia are slaughtering each other like flies on the roads? Wait and see what’s happening in Russia. Most countries that rank higher than Russia in that respect are in Africa and Latin America (excepting Saudi Arabia, China and India out of the more developed countries). On the other hand, the road victims in Russia related to the number of vehicles is 4 times that in any developed country. Source: here.

15. You’d think Russia is preaching to the West out of some sort of pride for its social achievements? Well, in terms of social inequality Russia isn’t much better than, say, the US (a Gini coefficient of 39.7 against 41.1). Mind you, the highest concentration of billionaires (read: fraudulent exploiters) is in the US (190), while the billionaires in Russia (read: generous, socially responsible folks) are 86. Given the population differences, their concentration isn’t that different. Source: here.

16. In terms of government budget, Russia is 12th in the world. The revenue part of its budget is 1/6 of the US one, 1/4 of the Chinese, and 1/3 of the Japanese. What’s more, Russia has a state budget that’s a tad smaller than Australia’s (16% smaller revenue), and just a bit bigger than the Dutch one (try to compare Russia to the Netherlands on the map). Source: here.

17. That said, about half the budget revenue in Russia comes from the sales of oil and gas. This makes Russia resemble the likes of Saudi Arabia and the Gulf states, rather than the US, Japan, China, Germany, Britain or France. No need to even begin discussing how the lack of diversification puts that budget in tremendous risk. Because it’s already happening (really: check the Rouble and compare its fluctuation to the movement of the global oil prices – noticing something?) Source: here.

18. The economic freedom index ranks Russia 139th out of 177. In terms of business climate, it’s 92nd out of 189 (although improving slightly in recent years). Source: here.

The list could go on for a while. The point is, the inconvenient truth for Russia, which too many Russophiles around here are willingly failing to see, is that Russia has turned itself into a country that’s a mere resource and energy appendix to the world economy. It’s got a un-free, corrupt and demoralized population, but meanwhile a large military and most importantly, aggressive, self-centered leaders. In many of the indicators for social, economic and political development, Russia rather resembles a Third-World country, only with a much colder climate, plus lots of nukes.

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I also don’t get the argument that Russia is somehow a paragon of something, an example to be emulated, hence superior to others in some way (except for size). A protector and champion of traditional values? Doesn’t seem to be the case, no. It remains a mystery how exactly these values are manifested, since Russia is among the worst in a number of negative rankings that are directly related to ethics, morality and the personal value system. I wonder how come at least part of the so loudly preached traditional Russian values haven’t been harnessed and channelled into creating more wealth and prosperity for the Russian people, as is the case in so many other more developed countries. Are Western liberal democracy and “tolerasty” to blame for Russia’s dire predicament? That doesn’t make sense.

Now looking at the facts and the data, I wonder which area of social life does the Russian state excel at, where exactly is it superior to the rest of the world – that’s important for me to know, if I am to be following the Russian model of governance and societal development, as some people are trying to convince me. What useful and important contributions has Russia done for the last few decades, which may’ve changed the world to the better? Apart from various forms of dictatorship, oppression, iron-fist governance, oil, and gas, I mean? Is there a product, a service, a technology, a model which the Russian society has offered to the world lately, which has made humankind’s existence easier, better, and all in all, more meaningful? And isn’t it a bit sad that such a huge potential is lingering dormant, useless, and utterly suppressed under a mountain of apathy and mediocrity? Hell, Russia could’ve become a truly prosperous country by now! After all, it’s not like it hasn’t given tons of amazing geniuses to humankind! Then what has happened? Where has all that gone?

Well, here’s what. The one thing that has been hindering the Russian people from unleashing their true potential, is the fact that they’ve always been stuck under the heavy boot of their own rulers, face firmly pressed against the mud. They’ve been oppressed, humiliated and used since time immemorial. They’ve been ruled by despots. And we’re seeing the results now. As for our very own Russophilia or Russophobia, they’re here to stay for quite a while. We East Europeans would always be divided on those issues. It’s inevitable, given our own complicated history. The real question we should be asking ourselves though, is: where do we go on holidays, what currency do we keep our savings in, where do we want our children to study, which foreign language do we want to learn, where would we rather immigrate, what music do we listen to and what books and movies do we read and watch? No need to give me an answer. I think everyone could easily answer this for themselves. And the answer they’d get would be the best proof which model we’d choose for ourselves.