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One of the key events that precipitated the demonstrations in Ukraine that eventually led to the ouster of President Yanukovych was his cancellation of an association agreement with the EU which carries with it an arrangement for loan funds from the IMF. An alternative arrangement was negotiated directly with Putin and Russia. The IMF agreement carried with it the market reform/austerity measures that are typical of IMF bailouts. In the case of Ukraine subsidized energy prices were one of the targets. In discussions about the complexities of the Ukrainian crisis on Daily Kos and elsewhere there is on strain of opinion that sees Russia as offering some sort of alternative to the harsh neoliberal policies of the IMF and the EU. This diary is an attempt to explore that notion by examining some of the present trends in economic and social policy in the Russian Federation.

Neoliberalism is a complex historical movement and it is often difficult to draw a bright line as to what is and is not neoliberal policy. A while back I did a diary series on the history of neoliberalism. Anyone wanting an explanation of what I mean by the term is referred to those diaries. Conceptually the opposite of neoliberal economic and social policy is socialism. There is very little in the way of formal socialism on offer in the world of the 21st C. Cuba and Venezuela are about as close as it gets. Russia and China have both morphed from Marxist communism to arrangements that are probably best described as state capitalism.

I would like to examine two issues of social policy in contemporary Russia, pension reform and energy subsidies in an effort to see if they represent more personal economic security than is typical of the situation inside the EU.

Russia has had a pension system that looks SOMEWHAT like the US combination of Social Security and 401K. There is a combination of a state run pension fund and private investment defined contribution accounts. The state was responsible for collecting all of the money through payroll taxes and then allocating it between the two funds. The money going into the defined contribution accounts had been regarded as the personal property of the employee. New legislation to "reform" the system was recently passed.

New Russian pension reform fuels nationalization fears

Russia's government approved a pension system overhaul on Thursday that will give it tighter control over savings accumulated by private funds while reducing the burden of an ageing population on the state's budget.

Changes to the law will prevent private funds from collecting payroll contributions until they have changed their legal status and been vetted by the central bank, a process that is expected to take at least a year.

The move has raised concerns among market participants about nationalization of pension savings - often a tempting measure for cash-strapped governments looking to plug holes in over-stretched state pension systems.

The share of Russia's working age population is expected to decline by the end of Putin's third term in 2018 to 56.8 percent from 60.1 percent in 2013, Russian Federal Statistics forecasts show, adding to the burden of paying pensioners.

This legislation was presented to the public as an interim measure. Russia, like every other industrialized nation, is dealing with the problem of rising pension costs associated with an ageing population. One could interpret this change as a move away from the privitization associated with neoliberalism toward a state controlled system. One could also view the appropriation of private funds as another instance of Kremlin kleptocracy. It would be necessary to see how the process unfolds over the next couple of years before making conclusive judgments about purpose and outcomes. However, it seems to me that there is strong reason to question whether this represents an improvement in retirement security for ordinary Russians.

The economics and politics of energy have been fundamentally central to post Soviet Russia. Under the Yeltsin government the state owned industrial enterprises were turned over to the ownership of the workers by the distribution of individual shares. In the economic chaos that prevailed at the time the workers were willing to sell their shares for modest prices. That made it possible for a new breed of capitalist robber barons to rapidly acquire control of the industries in key economic sectors. They became known as oligarchs. When Putin assumed the presidency from Yeltsin he set about exerting control over the oligarchs in a not especially gentle manner. He managed to wrest control of the major energy enterprises and consolidate them in a nominally state owned corporation called Gazprom.

Russia's natural gas dilemma

"Russia produced approximately 510 billion cubic meters (bcm) of natural gas in 2011, and approximately 60% of it was sold on the domestic Russian market. Russia has one of the highest domestic consumption rates per capita of natural gas - understandably so, since Russia is one of the world's coldest countries, and heating and electricity use is high. Russian industry also depends heavily on natural gas.

Russia uses a four-tier pricing system for natural gas: two tiers for domestic prices, one for the former Soviet states and one for its European customers. Russia has long capped domestic natural gas prices, a practise left over from the Soviet era. Currently, Russia charges between $75 and $97 per thousand cubic metres (tcm) on the domestic market, with households and municipal entities, such as schools and hospitals, paying the lower price and industrial entities paying more. Most of the former Soviet states pay in the mid-$200s and Europe pays $350 to $450 per tcm.

Russia's natural gas firms - primarily Gazprom - are suffering financially because of measures that let domestic users pay a fraction of the price Russia's foreign customers pay. In the past decade, the Kremlin has permitted Gazprom to increase its price by 14 to 25% a year. This gradual increase has prevented a massive backlash from natural gas consumers in Russia because it has been accompanied by improving economic standards in the country. However, Gazprom says this increase is insufficient.

The Russian government is trying to reduce the energy subsidies to domestic consumers without creating a political backlash. At the same time it wants to use energy supplies to Europe as a tool to exercise control over foreign policy. Putin and his government claim to be prepared to face economic sanctions from the west and to absorb the domestic economic shocks that they would likely create. If they attempt to curtail energy exports as a means of retaliation that would add more pressure to accelerate the increases in domestic gas prices.

The present incarnation of Russian state capitalism does not appear to be making an effort to reconnect with the socialist past. Their present efforts at "reform" don't look all that different from something that might have been concocted by the IMF. It seems to me that smaller countries lacking in wealth and power like Ukraine face rather dismal prospects in the present world. Whether one is looking at Ukraine, Greece, Sudan, Bolivia or Bangladesh none of them are likely to find a lot in the way of aid and comfort from their more powerful neighbors. The notion that the people of Ukraine would fair better economically by dealing with Russia instead of the EU and IMF doesn't seem to hold up very well. The painful reality seems to be that they are seriously broke and caught between the devil and the deep Balck Sea.  

Originally posted to Richard Lyon on Tue Mar 25, 2014 at 10:32 AM PDT.

Also republished by Community Spotlight.

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Comment Preferences

  •  But you ignore the negative alternative (6+ / 0-)

    Russia may not be moving to the left, but there is nothing to indicate that it would impose draconian austerity as a condition of aid, as the IMF will.

    "When dealing with terrorism, civil and human rights are not applicable." Egyptian military spokesman.

    by Paleo on Tue Mar 25, 2014 at 10:56:44 AM PDT

    •  They seem to be imposing austerity (7+ / 0-)

      on the people in Russia by what looks like a reduction of pension benefits and an increase in gas prices. Why should people in Ukraine expect to get a better deal than what Russia is giving its own citizens?

      •  The salient question is would the IMF (17+ / 0-)

        offer better outcomes than Russia, since that's the option they faced.

        We have the IMF/Western Bankers effects on Greece, Spain, Italy, Portugal, etc. Would Russian austerity be worse than the IMFs?

        On Russia's fuels and selling it: they've signed what's been called a 'mega-deal' with China and are seeking even more ties since the recent trouble, and they are about to do the same with India.

        That's the two most populous nations in the world. Brazil and Russia have also signed trade agreements, and Iran is about to agree to giving Russia oil in exchange for goods. Which DC fears, and with good cause, may presage the world getting off the petrodollar.

        The West might be playing 11-dimensional chess, but it seems to me the rest of the world is playing non-fictional chess; 11-D chess being merely an alternate name for the game 'Risk.'

        PS: btw, the agreement rejected by the deposed Ukrainian leader, although repeatedly referred to as if purely a Trade Agreement, had a very strong 'Ukraine incorporation into EU military framework' section in it, as one can read the PDF for themselves, particularly Title II, Article 10. The reason he stated it was being rejected, in fact. Although the military aspect has never been mentioned in our press coverage nor by our officials.


        Real fixes, outside the coffin fixes, ain't ever pragmatic says DC Bubble Conventional Wisdoom.

        by Jim P on Tue Mar 25, 2014 at 02:01:15 PM PDT

        [ Parent ]

        •  The relationships between Russia (6+ / 0-)

          and China and Russia and Brazil are more those between equals with things to trade. Ukraine is in a dependent position. It is not possible to run two counterfactual scenarios in parallel like a lab experiment and determine actual outcomes. Yes we have lots of historical examples of dependent countries dealing with the IMF and the results aren't pretty. We don't have much to look at in terms of Russia in its present configuration bailing out other countries. That is why I was trying to extrapolate from what they are doing with domestic policy to provide data about how they might treat Ukraine in practice. Since the proposed agreement between Russia and Ukraine is not going to happen we will never know for sure. It is my opinion that there isn't a lot of evidence that the results would have been much better than dealing with the IMF.

          I think that what we have here is an instance of making the assumption that my enemy's enemy must be my friend. There is no guarantee that that will work out in practice.  

          •  The point of bringing up the BIC in BRICs (13+ / 0-)

            was to address your musings on whether Russia is boxed in; it was not intended as a comparison with Ukraine.

            The Russians, as we see now in Crimea, are paying double and triple what officials used to get in pay as part of Crimea. It's a bit hard to imagine that they'd do worse by Ukraine, even with Russian-style austerity, than the IMF would do.

            It isn't like the IMF doesn't have a decades long history of pillaging their clients. In fact, an almost invariable history.

            After all, this was written 30 years ago:

            IMF dirty M.F.
            Takes away everything it can get
            Always making certain that there's one thing left
            Keep them on the hook with insupportable debt

            See the paid-off local bottom feeders
            Passing themselves off as leaders
            Kiss the ladies shake hands with the fellows
            Open for business like a cheap bordello
            And they call it democracy


            Real fixes, outside the coffin fixes, ain't ever pragmatic says DC Bubble Conventional Wisdoom.

            by Jim P on Tue Mar 25, 2014 at 02:33:00 PM PDT

            [ Parent ]

        •  The military aspect (5+ / 0-)
          Recommended by:
          Jim P, Wreck Smurfy, Sunspots, Alhambra, J M F

          Exactly.  Nary a mention.

          "When dealing with terrorism, civil and human rights are not applicable." Egyptian military spokesman.

          by Paleo on Tue Mar 25, 2014 at 03:14:22 PM PDT

          [ Parent ]

        •  That PDF is worth reading (0+ / 0-)

          Since all it calls for is dialogue and a vague commitment to cooperation.  I dare say article 6 on respect for human rights and democratic institutions was rather more problematic for Yanukovitch, given the restrictive laws he had enacted

          •  I can see how a person ignorant of diplomatic (7+ / 0-)

            language would be unable to see that there is a serious commitment in the Treaty.

            Article X.

            1. The Parties shall enhance practical cooperation in conflict prevention and crisis management, in particular with a view to increasing the participation of Ukraine in EU-led civilian and military crisis management operations as well as relevant exercises and training activities, including those carried out in the framework of the Common Security and Defence Policy (CSDP)....

            3. The Parties shall explore the potential of military-technological cooperation. Ukraine and the European Defence Agency (EDA) shall establish close contacts to discuss military capability improvement, including technological issues.

            (c)regular meetings both at the level of high officials and of experts of the military institutions of the Parties;
            (d) any other means, including expert-level meetings, which would contribute to improving and consolidating this dialogue.

            And what is the CSDP?, an honest person might well ask themselves. Since Ukraine would be agreeing to work within that framework. Well, let CSDP speak for itself, in the latest iteration of their agreement, the Lisbon Treaty:
            For its part, Permanent Structured Cooperation is an agreement for ‘Member States whose military capabilities fulfil higher criteria and which have made more binding commitments to one another in this area with a view to the most demanding missions’ (TEU Art. 42.6). It is designed to contribute to a new stage in the development of the CSDP and a more assertive role for the EU in the realm of security and defence.
            Although the lax reader may see this as a casual, 'hey, what do you wanna do next Tuesday, if you feel like it' kind of thing, it's actually a very firm commitment to integrate with Western European military forces.

            Again, the reason the overthrown president of Ukraine gave as his reason for rejecting the Treaty (though Russian bribes undoubtedly played its role), and again, entirely

            entirely

            buried by the Western Press beyond the one day where his reason was quoted.


            Real fixes, outside the coffin fixes, ain't ever pragmatic says DC Bubble Conventional Wisdoom.

            by Jim P on Tue Mar 25, 2014 at 05:52:57 PM PDT

            [ Parent ]

            •  Oh yeah (1+ / 0-)
              Recommended by:
              wilywascal

              That is super enforceable.  

              Exactly. "Shall enhance" with a view to closer cooperation.  Not "will more closely cooperate". Those with actual training recognize what words actually say and what they don't.

              I am curious.  Where did you do your legal training?  Because treaties aren't diplomatic statements.  They're legal documents laying out obligations.

              The meat will be in the protocols specifying what this actually means but the reality is that this language about cooperation and contact reflect what Ukraine already does.   Ukraine has partnership with NATO now and particpated, for example in the NATO mission in Afghanistan.  Maybe it didn't get reported because there is less here than meets the eye

              •  "Shall" in a treaty means... but can you guess? (3+ / 0-)
                Recommended by:
                Sunspots, brooklyngal, Alhambra

                But you can pretend that the specific provisions of coordinating and integrating Ukraine into EU military structures as far as placing themselves under the framework of the Lisbon Protocols, general strategy, self-defense, obligations to aid, close consultations, tactics, etc mean that Ukraine would not be required to do anything at all.

                Doubtless the Economic parts of the Treaty were also just suggestions, and nobody took them seriously. Because, after all, treaties don't really mean anything. Sign it, don't sign it, not one nation in the West or East gave a fig about it, because it's all just kind of a joke in the end.

                I'm curious, how recently did you acquire English as a language?


                Real fixes, outside the coffin fixes, ain't ever pragmatic says DC Bubble Conventional Wisdoom.

                by Jim P on Tue Mar 25, 2014 at 07:14:20 PM PDT

                [ Parent ]

            •  That said (1+ / 0-)
              Recommended by:
              wilywascal

              I can see how someone seeking to distance himself from Europe would want to see less of that.  Also, as I said before the language about supporting democratic institutions can't have gone over very well either

              •  I'm mainly interested in distancing myself (2+ / 0-)
                Recommended by:
                Alhambra, S M Tenneshaw

                from racial-eliminationists being given key ministries in a government. Especially the agency to control the makeup of security forces, the justice system, and the right to purge 'undesirables' from government.

                But I understand how someone would be in full support of nazis and 1%ers in quasi-democratic garb because otherwise that would mean the US is making a mistake. And the US can't ever make a mistake, as the 21st Century has proven.

                You know, you really have to stop making up shit about other people's beliefs. It's creepy and pathetic. If you can't win on the evidence, you've lost. Lying doesn't change that, and nobody is fooled except people who want to be.


                Real fixes, outside the coffin fixes, ain't ever pragmatic says DC Bubble Conventional Wisdoom.

                by Jim P on Tue Mar 25, 2014 at 07:22:11 PM PDT

                [ Parent ]

      •  and why should people in Ukraine (14+ / 0-)

        expect to get a better deal than what the EU is giving its own citizens?

        If your point is that there are no good choices for Ukraine, I agree. If you're wondering what's the better choice between the Scylla of Russia and the Charybdis of the EU, I'd say it's almost surely Russia.

        This is a sample of what can be expected if Ukraine deals with the EU and the IMF:

        Spanish prime minister Mariano Rajoy on Wednesday announced sweeping cuts and tax increases totalling €65bn (£51bn) in austerity measures...

        In a spectacular U-turn, Rajoy raised sales tax by three percentage points, contradicting his government's insistence that this would damage consumer spending, strangle growth and punish the poor.

        He also cut unemployment payments, pledged to bring forward a move to retirement at 68 years old and reduced civil service pay. Promised changes to energy laws looked likely to increase electricity tariffs.

        The measures came the day after a leaked memorandum of agreement between eurozone countries and Spain revealed strict conditions for a banking bailout of up to €100bn.

        That memorandum insisted that Spain comply with the recommendations made by Brussels to cut a deficit that reached 8.9% of GDP last year.

        Those recommendations included the sales tax rise, pension changes and the only stimulus element included in Rajoy's measures – reduction of social security contributions over the next two years.

        It remained unclear exactly how much money Spanish savers who invested billions of euros in preference shares issued by savings banks will lose as a result of the bailout agreement. The memorandum insisted that they shoulder considerable losses…

        Rajoy, who came to power pledging tax cuts, admitted he did not like the measures…

        Opposition politicians reminded him that he and his ministers had previously warned that a sales tax hike would damage consumer spending and do further damage to the economy...

        Other measures he announced included further cuts in government spending, closures of state-owned companies and the privatisation of ports, airports and rail assets. While Rajoy spoke, thousands of coal miners marched on the industry ministry in Madrid to protest against a 63% cut in subsidies to mining companies.

        So let's recap: Russia will raise energy prices and passed a law that has an unknown effect on pensions.

        In Spain, in the center of supposedly prosperous Western Europe, they are raising energy prices and cutting pensions--and hiking a regressive sales tax, increasing retirement age, cutting civil service salaries, unemployment benefits, and social security tax, wiping out peoples' savings in order to rescue big banks, shuttering state-owned companies and privatizing public infrastructure, slashing subsidies to key industries by nearly 2/3, and making other spending cuts of an unspecified nature.

        And despite the ostensibly democratic nature of the EU, this government ran on undoing austerity but broke every promise it made in order to come to power.

        Which of the two bad choices is better?

        It may be that Russia represents not socialism, but a form of capitalism closer to what the West engaged in during the postwar era--a non-predatory capitalism based on trade and economic development. The West, ironically, now sees that form of capitalism as a threat to the predatory model it's adopted. "There is no alternative", insisted Maggie Thatcher, the original queen of trickle-down economics. And what that really means is that any alternative must be instantly discredited.

        Russia's economy, as far as I know, has not been dominated by the financial sector the way the US and Europe are--or at least, the banksters have been chased out. So there is less chance, at least, that the Russian leadership will demand the cannibalization of the 99% to line the pockets of the 1%.

        Russia's explicitly nationalistic economic policy also sticks in the craw of our 1%. The West's financial oligarchs like to deride all nationalist economic measures as protectionism, a barrier to progress. What that really means is that they are not allowed to move capital in and out of the country as they please to manipulate the economy and boost their speculative activities, and are prevented from asset-stripping the country's resources and labor force.

        It remains to be seen how beneficial this nationalistic economic policy is to Russians, let alone Ukrainians. But there is some chance that it could at least not be harmful.

        "In America, the law is king." --Thomas Paine

        by limpidglass on Tue Mar 25, 2014 at 02:03:10 PM PDT

        [ Parent ]

        •  The last paragraph of my diary (3+ / 0-)
          Recommended by:
          Don midwest, chuckvw, koNko

          presents the opinion that for countries in Ukraine's position there are no good deals on offer anywhere.

          •  Why do they need a deal? (0+ / 0-)

            Ukraine is second largest country in Europe by size and seventh largest by population.  It is blessed with mild climate, best soil in Europe and access to Black Sea for easy transport.  It has its own currency.

            Why not do that Paul Krugman recommends for the country in this situation?  Run up the deficits, invest in infrastructure (which is in sorry state by all accounts), other national projects, which will propel economy much higher and faster than any loan would.

            The only problem I see is rampant corruption.  But even here, Ukrainians have to help themselves.  No amount of external loans/grants will help if the money are siphoned off by corrupt oligarchs.

        •  Perhaps not AS harmful (2+ / 0-)
          Recommended by:
          Richard Lyon, ozsea1

          But that is quite speculative and assume good faith and good intentions by Russia not in evidence. And then there is the question of what Russia can afford.

          I'm no fan of IMF kleptocrats, but having looked in Putin's eyes, I'm not sure I found the soul of an altruist down that dark hole.

          Ukrainians of Russian decent my find that an attractive alternative but the rest are unlikely to.

          No one is coming to save us, the future is in our hands.

          by koNko on Tue Mar 25, 2014 at 04:17:57 PM PDT

          [ Parent ]

          •  What could you afford if you created Rubles (3+ / 0-)
            Recommended by:
            limpidglass, ozsea1, Alhambra

            out of thin air?

            The world is on fiat currencies.

            Of course Europe gave up it's ability to create it's own state currencies, and now rents the Euro.

            But Russia is fully sovereign, and has a large and strong enough economy to use it's monetary sovereignty in such a way as to be able to afford anything denominated in Rubles, which it creates out of thin air.

            Like the U.S. and our dollar.

        •  Actually (1+ / 0-)
          Recommended by:
          wilywascal

          Given that Ukraine's 1% stole billions from the government and left publicity spending in ruins, I doubt that closer ties to Russia in ways that support that ongoing pillaging can be fairly claimed to be any better

          For what it is worth I recall having read that Ukrainians have also considered how well Russian leaning countries like Belorus and Ukraine have done compared to EU leaning ones like Poland and Lithuania. The comparison makes the EU a rather better bet, austerity included   How fair a comparison that really is I won't venture an opinion

          •  That is the comparison being made. (0+ / 0-)


            Poland was poorer than Ukraine.  Now it is richer.  Poland underwent some serious shock therapy, but provided a basic social net and learned from the disaster of Russia's privatizations.  On the other hand, Poland's growth is aided by remissions from emigrants to the EU and the rise of nativism in richer European countries makes it very unlikely that Ukraine will ever get into the Schengen Zone.

            Beyond all of this economic talk, the fact is that Russia's predecessor, the Soviet Union, behaved in a beastly manner to Ukrainians under Stalin.  Russia's grab of Crimea opened that old wound.

             

            "Politics should be the part-time profession of every citizen who would protect the rights and privileges of free people and who would preserve what is good and fruitful in our national heritage." -- Lucille Ball

            by Yamaneko2 on Tue Mar 25, 2014 at 11:56:36 PM PDT

            [ Parent ]

    •  It doesn't matter anymore (2+ / 0-)
      Recommended by:
      Don midwest, wilywascal

      Once Russia seized Crimea the bridges were burnt. For Ukraine there is only the IMF now.

      None are so hopelessly enslaved, as those who falsely believe they are free. The truth has been kept from the depth of their minds by masters who rule them with lies. -Johann von Goethe

      by gjohnsit on Tue Mar 25, 2014 at 02:45:18 PM PDT

      [ Parent ]

  •  Thoughtful post, interesting points. (4+ / 0-)
    Recommended by:
    Richard Lyon, riprof, Valatius, koNko

    On reading this, it seems that EU & US economic sanctions might be used by Putin's govt. to use nationalist rhetoric ('Russia is under siege by the west') to justify an essentially neoliberal policy of upward wealth distribution by raising domestic prices on gas and other commodities. Do you think that is a fair reading of the situation?

    "Trust me... I've been right before." ~ Tea party patriot

    by Calvino Partigiani on Tue Mar 25, 2014 at 11:14:20 AM PDT

    •  There is no doubt that Putin (6+ / 0-)

      is using the threat of the enemies from the west as a trump in domestic politics. If he finds himself in a prolonged economic conflict with the west then he will definitely have to find means of getting the Russians to accept an economic squeeze.

    •  Classic (6+ / 0-)

      What you describe is a fairly classic response of authoritarian rulers in response to international sanctions.  

    •  Putin's Russia has less income inequality (1+ / 0-)
      Recommended by:
      Sunspots

      . . . than Obama's U.S.A. Of course, that doesn't present the complete picture, specifically that the U.S.A. has a much higher g.d.p. per capita than Russia. But one characteristic that most (though not all) authoritarian regimes tend to share is that their rulers understand the importance of spreading the wealth, at least a little bit. It's curious as to why so many democratic regimes have forgotten this, though in the U.S. & E.U. it seems to be all about ideology. Considering that Putin's political standing is based almost wholly on the narrative that he has reversed Russia's national decline & restored it to prosperity, for him to impose E.U.-style austerity on his people would be tantamount to political suicide.

      •  EU austerity is not spread evenly. (3+ / 0-)

        Germany has made bargains with its labor unions that have controlled wages and costs but that everybody seems to be prepared to live with in the interest of being a highly competitive exporter. The austerity has been much more heavily imposed on the countries of the periphery in need of a bailout. I would expect that Russia would be likely to take a similar approach.  

        •  But why? (2+ / 0-)
          Recommended by:
          katiec, Sunspots

          Russia has a positive balance of trade & has paid off its foreign debts. It is by no means on the verge of collapse. Yes, its overall economic health is dependent to a large degree on resource extraction. Yes, subsidies can distort markets & consumption patterns & can drain a state's coffers, & arguably there are better ways to distribute wealth downward & to lighten the burden on ordinary working people. But there's no reason why Putin would impose austerity on the Russian people for austerity's sake.

          •  It isn't likely a matter of anything like (0+ / 0-)

            neoliberal ideology. In terms of the gas prices the article I linked makes a pretty good economic argument that the effort to use exports to subsidize domestic consumption is out of balance. They need to bring in money from Gazprom to do more that just provide domestic energy. It is a principal source of balance of payments and state revenue. There is also the issue of the hands in the Gazprom till. Even though it is nominally state owned, the general picture seems to be that the original energy oligarchs have been replaced by new oligarchs who are Putin cronies.

            I have not immersed myself deeply in the economic realities of contemporary Russia. Researching the issue in relation to a bailout for Ukraine was a first venture for me. If this crisis continues, I expect that I will have occasion to delve deeper into the subject.

        •  the eurozone is really a dysfunctional federation (6+ / 0-)

          structured so that one state of the federation (Germany) has effective control over the sovereign currency of that federation (the euro). This allows it to export austerity to other EU countries to maintain its own standard of living, by demanding austerity as a condition of being bailed out in euros.

          This means that Germany has power over the other eurozone state governments without any corresponding legal responsibility for or obligations towards the citizens of those other states.

          Nor do those other states have any electoral representation in making these decisions. Spain may want less austerity, but they can't really vote against it because they can't vote in German elections.

          Sure, they can vote in Spanish elections, but whoever they vote for will have to knuckle under to German demands for austerity, and this is precisely what happened in 2011, when they got rid of an austerity government only for the new government to do a volte-face and impose even harsher austerity measures.

          This is a profoundly anti-democratic situation; it's a form of tyranny, really. Germany can make these decisions unilaterally, without any participation from the citizens of other eurozone states, and just wash its hands of the consequences.

          In the US, the governor of California doesn't have effective control of the printing press and so he cannot go to the governor of Alabama and demand that he sell off Alabama's infrastructure on the cheap to Silicon Valley oligarchs if he wants to get bailed out in dollars. Control of the printing press rests with the Treasury (constitutionally, anyway) and operationally with the Fed. Only those entities are allowed to alter the money supply.

          The Russian Federation is sovereign in its own currency--there is a central bank which has sole control of issuing the ruble.

          Hence no such form of extortion of one state of the federation by another is possible. If austerity on one Russian state were imposed, the decision would have to be taken at the federal level. The federal government would have to take responsibility, they'd have to be the target of public ire, and presumably there would be protests, etc.

          Of course, all this rests on how much validity the Russian constitution has besides the will of Vladimir Putin. And no one really knows.

          Will the Russian Federation outlive Putin? He's unquestionably an able man who's managed to order Russia (more or less) according to his vision, but the jury is out on whether Russia has built lasting institutions of governance that will survive beyond Putin. That's the real test, in my view.

          "In America, the law is king." --Thomas Paine

          by limpidglass on Tue Mar 25, 2014 at 03:50:32 PM PDT

          [ Parent ]

          •  Do you know if Russia has a central or a national (1+ / 0-)
            Recommended by:
            limpidglass

            bank?

            I can't remember.  Guess I'm off to google, but like to get your take, if you have one :)

            BTW:  Certainly the CB or National Bank (whichever it was/is) understood that it created Rubles out of thin air when it decided to wipe out the Ruble right about the time of the White House Bombing and all that mess.

            So, yeah, I'd be interested to know how much Putin has been able to clean up Russia from criminals.  And whether these institutions are strong enough (if indeed improved) to survive him.

      •  This is a curious claim: (1+ / 0-)
        Recommended by:
        Richard Lyon
        But one characteristic that most (though not all) authoritarian regimes tend to share is that their rulers understand the importance of spreading the wealth, at least a little bit.
        Are you saying that, on the whole, authoritarian states have greater income equality or a more equal distribution of wealth compared to formal democracies?  

        "Trust me... I've been right before." ~ Tea party patriot

        by Calvino Partigiani on Tue Mar 25, 2014 at 01:39:41 PM PDT

        [ Parent ]

        •  I based my observation about income inequality (0+ / 0-)

          . . . on the Gini coefficient. All I stated as hard fact was that the U.S. has greater income inequality than Russia. But politics, whether in an authoritarian regime or a more-or-less democratic regime, is still about delivering the goods. It is certainly true that many authoritarian regimes base their claims of legitimacy on bringing higher living standards to their people. It's equally true that many governments in places where the economy is heavily dependent on resource extraction - whether authoritarian or democratic - provide either generous subsidies or direct handouts to people for the expressed purpose of spreading the wealth, or as Thomas Friedman so contemptuously puts it, "buying off the poor". Places like Iran, Norway, Venezuela, Mexico & Alaska.

  •  Gazprom's selling gas to EU for 5x domestic prices (5+ / 0-)

    so, if the EU imposed strong sanctions, and managed to wean itself down to needing far less Russian gas, that would be a huge blow to Russia's economy. I sure hope that happens, and Putin and Russia find it harder to bully their neighbors.

    Thanks for the information and insight, Richard Lyon.

    "Every man has a right to utter what he thinks truth" Samuel Johnson

    by Brecht on Tue Mar 25, 2014 at 11:46:05 AM PDT

    •  Any significant weaning (3+ / 0-)

      is going to be a fairly long term proposition.

      •  EU should start - just like the US needed to start (0+ / 0-)

        weaning off gasoline, 40 years ago when OPEC tightened their spigots.

        "Every man has a right to utter what he thinks truth" Samuel Johnson

        by Brecht on Tue Mar 25, 2014 at 11:59:37 AM PDT

        [ Parent ]

        •  If nobody learned from OPEC (3+ / 0-)

          they aren't very likely to learn from Russia.

        •  people don't learn because the fossil fueligarchy (0+ / 0-)

          has a death grip on every political system in the world. There are countries where the Washington Consensus doesn't hold sway and alternative economic ideologies flourish, but there are no countries whose economies are independent of fossil fuels. For instance, Venezuela is attempting an economic alternative to neoliberalism--but it's a petrostate dependent on oil revenues.

          The fossil fueligarchy is a multi-billion dollar industry that has bought off nearly all the politicians in the world. It's a global octopus that has its tentacles wrapped firmly around everyone. It will be extremely difficult to pry it off.

          Climate policy is, incidentally, one area in which Russia is lagging (although pretty much everyone is), because Russia depends so much on exploiting its natural gas resources. Putin has publicly joked that climate change would be good for Russia. Apparently their government did reactivate a climate change task force last year, so perhaps they are looking into it more seriously. But I don't think they can so easily quit using natural gas exports as a source of power. That's too valuable a bargaining chip to give up.

          "In America, the law is king." --Thomas Paine

          by limpidglass on Tue Mar 25, 2014 at 04:19:11 PM PDT

          [ Parent ]

          •  Hope Putin realizes that Russia isn't as dependent (1+ / 0-)
            Recommended by:
            Alhambra

            upon it's exports as the West keeps claiming.

            What does Russia need to buy in currencies other than the Ruble?

            Sure, some stuff:  rare earths, maybe.  Copper - but Brazil would accept the Ruble.....

            I don't know.

            But if Russia were smart, it would realize that internal stability and the atomic bomb backs the Ruble more than it's exports.

    •  a new poll in Germany (8+ / 0-)

      reveals this reality.

      77% of Germans are against sanctions and 93% are against the the thought of severing diplomatic relations with Russia.

  •  I don't accept your premise that (0+ / 0-)

    our choice is between "socialism," identified with Cuba and Venezuela, and it supposed "opposite" of "neoliberalism," not specifically identified with any particular country.

    Even were I to concede the appellation "socialism" to an outright dictatorship (Cuba) and a highly authoritarian regime with little respect for freedom of speech, political opposition, and the rule of law (Venezuela), which I do not, I would not agree that our choice lies between that dystopian future and "neoliberalism." There is, after all, social democracy (a/k/a democratic socialism or, for those of us for whom there can be no socialism without democracy, simply socialism).

    To quote from Shayn McCallum's article inSocial Europe Journal, It’s Time For Social-Democracy To Exit The Twentieth Century:

    To illustrate this point: freedom without equality ends up a grotesque lie, equivalent to the observation of Émile Zola that the law forbids rich and poor alike from sleeping under bridges. Without equality, there is no means of exercising formal freedoms. Likewise, equality without freedom can only ever amount to the equality of prison inmates who resemble each other in the misery of their condition. Yet, in a prison (or a Soviet-type state) this “equality” must be enforced by guardians or commissars who are empowered to do so, thus, there can be, in this case, no true equality at all. True equality can emerge only under conditions of freedom just as freedom can only be meaningfully enjoyed when it is available equally to all.

    Social-democracy is perhaps the only political tradition which can claim a history of pursuing both freedom and equality as part of its most fundamental values and raison d’être. The future success of social-democracy lies in how well it learns to speak to the human heart and imagination. Once upon a time, socialists were renowned as dreamers and story-tellers rather than policy-wonks and say-anything-to-get-elected spin-doctors. It’s about time we re-learned the art of inspiration through a political narrative capable of capturing the public imagination, if only because this story was based on the finest, most beautiful values of humanity. These may still, even now, be summarised in the old French revolutionary slogan of “liberty, equality and fraternity” which, somehow, still manages to express everything most essential about a “good society”.

    And just for the record, my understanding of "neoliberalism" follows, for example, that of Simon Wren:
    Neoliberalism wants to minimise the role of government, and in particular is naturally against all forms of state interference in markets. Its attitude to markets is essentially laissez-faire: leave market participants alone.
    In economics, then, Keynesianism may be as much the "opposite" of "neoliberalism" as anything else.

    Also, one might consider Frank Nullmeier's argument regarding (what he calls) A Second Stage of Neoliberalism.

    Shalom v' salaam; peace and wholeness

    by another American on Tue Mar 25, 2014 at 12:39:22 PM PDT

    •  I did not pose that as the only two choices (1+ / 0-)
      Recommended by:
      Don midwest

      in the world. I just said that socialism is the conceptual opposite of neoliberalism. Between those two poles there are various permutations of social democracy. Keynes was looking for a means of managing capitalism. He wasn't particularly committed to the notions of a welfare state nor was he opposed to it.

      This diary is specifically about the situation of Russia and Ukraine. If you want to know my understanding of neoliberalism in general, follow the link at the beginning to the diaries that I wrote on the subject.  

      •  You chose to counterpose Cuban "socialism" (0+ / 0-)

        and "neoliberalism" as opposites. You don't get to declare part of your diary a comment-free zone.

        Before we agree to your opposition of Cuban "and Venezuelan socialism" and, e.g., Pinchot's "neoliberalism," you need to come to grips with Shayn McCallum's point, quoted in my comment, that, while "freedom without equality ends up a grotesque lie,"  " equality without freedom can only ever amount to the equality of prison inmates who resemble each other in the misery of their condition."

        I would argue that social democracy entails commitments to both freedom and equality. Looking at "democracy" more conventionally, however, we see social democracy at one end with Cuban "socialism," for example rather closer to Pinochet's "neoliberalism," except that, unlike the Castro bothers, Pinochet eventually allowed a free vote on his continued rule and left office when he lost.

        And btw, I have looked at your "neoliberalism" diaries. I found them reductive and simplistic (and also lacking a coherent account of "neoliberalism"). For example, in your first diary, your casual lumping together of Karl Popper and Friedrich Hayek overlooks their substantial differences of opinion. See, to look at just two examples, a review in The Economist of Masters of the Universe: Hayek, Friedman, and the Birth of Neoliberal Politics, stating:

        Hayek and Mises wanted their message to be radical. Popper sought to woo as many as possible, even liberals and socialists. No hardliner, Popper later saw flaws in market ideology, comparing it to a religion.
        At greater length, consider Dag Einar Thorsen's Ph.D. thesis, The Politics of Freedom: A Study of the Political Thought of Isaiah Berlin and Karl Popper, and of the Challenge of Neoliberalism (a book you mention in your fourth diary), stating:
        . It is especially his [Popper's] view that one should minimise avoidable human suffering, an idea Popper called ‘negative utilitarianism’, which links his theories together so that they become parts of a philosophical system. Because ignorance, unfreedom, and economic exploitation in Popper’s mind lead to much avoidable suffering, it was his view that the state should actively protect the freedom and integrity of all. I therefore
        described Popper’s political thought, using a concept originally developed by the German political theorist and politician Eduard Bernstein to describe his own version of democratic socialism, as a form of ‘organised liberalism’.

        Shalom v' salaam; peace and wholeness

        by another American on Tue Mar 25, 2014 at 01:31:54 PM PDT

        [ Parent ]

    •  I Think It's a Reasonably Minor Distinction (2+ / 0-)
      Recommended by:
      Richard Lyon, Calvino Partigiani

      For purposes of the diary.  There's more to economic theory than a single continuum.  If you were to take neo-liberalism to the extreme (an economy in which the state exerts zero influence) then the opposite (IMO) would be an economy that is entirely planned by the state... which would be communism.

      But again--for purposes of the outline Richard did above--I don't think the premise of what the "opposite" of neoliberalism is really matters.

      In economies that have markets that can reasonably described as "free," the big battle is typically between a neoliberal and Keynsian approach, as you say.

  •  Social Democrats can be as corrupt as anyone (0+ / 0-)

    The Nazis gained political traction in the 1920s when Weimar politicians were caught up in the major  Barmat corruption scandals at the same time they were destroying the life savings of the German middle class with hyperinflation.  Which led to starvation.

    http://en.wikipedia.org/...

    Aristotle argued over 2000 years ago that any form of government --rule of the One, rule of the Few , or rule of the Many -- can become corrupt and then tyrannical to sustain the corruption.   Corruption being defined as using political power to unfairly benefit/transfer wealth to  the few at the cost of the many.

  •  It is also hard to argue from the facts given our (3+ / 0-)
    Recommended by:
    Calvino Partigiani, Azazello, Lepanto

    crooked news media.   We would probably hit closer to Reality by quoting from Tolstoy's War and Peace.  

    We think we know what US oligarchs are doing several thousand miles away --but we often don't.   At least not until years have passed.

    Look at Argentina today after our tender care, for example.

  •  Interesting diary. I'd say, however, that the (1+ / 0-)
    Recommended by:
    Publius2008

    USSR has had a system of state capitalism since at least Stalin.

    Also, while neo-liberals/market fundamentalists claim that they want the state to stay out of markets, the smart ones know that's impossible.  Some even conceding that markets are the creature of the state.  Freidman, for instance, realized that the state had to set conditions for the existence of markets.

    So what neo-liberals really want are laws that are good for them, and no laws that aren't good for them.

    Different point:  I really don't have much to back this up, it's more a feeling than a thought, but I suspect Putin would return to "Communism" (however he conceives of it) if he was able to.

    And if he had been Pres instead of Yeltsin, things would have turned out quite differently.

    •  I basically agree with much of that. (1+ / 0-)
      Recommended by:
      katiec

      In the material I did on neoliberalism I presented the idea of the two faces of the neoliberals who claim one thing and actually pursue something different.

      One of the problems for the US in dealing with Russia is the effort to try to see it as being all about ideology. Stalin's only ideology was power and control. Putin would like to return to the imperial glory of the past. He wouldn't care much whether he was playing tzar or commissar.

      •  Agree about Putin. However, I've seen him say (2+ / 0-)
        Recommended by:
        Richard Lyon, limpidglass

        stuff that leads me to believe he would have chosen commissar in a heart beat, if that were still an option -- and one that would keep him in power.

        Power first, state capitalism second  -- is how I see it.

        BTW, a long time ago I read a speech by him lamenting the Russian central bank crashing the Ruble in order to re-lauch one.  He thought it was criminal.

        Since this is what caused the massive deflation which forced the average person to sell their shares on the cheap, and thus the rise of the oligarchy in it's extreme form, it seems to me that he wouldn't have allowed this to happen.

        If the public really had retained some shares, things would look different.  Maybe very different.

        The one thing I wonder about Putin, especially considering other things he's said about the central bank is this:  Does he have a decent grasp of the fact that Russia  1)  Creates Rubles out of thin air   2)  Has a strong enough economy that other states would accept Rubles  and   3)  Has big guns to further back up the value of the Ruble?

        Don't know.  But we might find out in the coming months, depending on how the sanctions affect Russia's economy.

        Finally, I suspect that there's a nationalization effort in regard to pensions in part because Putin really does have some longing for the good old days of the Soviet Economy.

    •  I agree that the USSR had state capitalism since (1+ / 0-)
      Recommended by:
      Richard Lyon

      at least Stalin

      I doubt that Marxist socialism could ever be realized in anything more than an economic entity not much larger than a small village, and certainly never was in the USSR

      We're shocked by a naked nipple, but not by naked aggression.

      by Lepanto on Tue Mar 25, 2014 at 02:35:34 PM PDT

      [ Parent ]

    •  OpenDemocracy had one of the better takes (0+ / 0-)

      where it still seems to come down to who controls the resources.

  •  we need to remember that neoliberalism is of its (3+ / 0-)
    Recommended by:
    Publius2008, limpidglass, bmastiff

    nature transnational in its aspirations, at such it must appear a threat to any economy (and the national/state suprastructure which encloses it) that wants to go at it on its own and keep control over its resources

    I suspect that Russia feels this threat very much, particularly after all the financial shenanigans that went on after the collapse of the USSR

    We're shocked by a naked nipple, but not by naked aggression.

    by Lepanto on Tue Mar 25, 2014 at 02:31:38 PM PDT

    •  That is a question that interest me (0+ / 0-)

      very much. It's well beyond the scope of what I was trying to tackle here. There are all kinds of signs that Russia has become unhappy with the path to full integration to into a global regime. To the extent that that regime is most certainly dominated by noeliberal orthodoxy they are resisting it. What I am trying to explore is whether Russia is interested in providing some sort of coherent alternative to it or is just pursing historical Russian isolationism.

      •  It may be a war between (1+ / 0-)
        Recommended by:
        chuckvw

        different oligarchs/financiers, international/western ones v. russian/eastern ones.

        Still, Russia has embraced some neoliberal themes, like the pretense of elections, democracy and free choice generally when such rights are either highly limited or otherwise unreal.  

        There, like here and elsewhere, the reality is shown when people come out to protest.

        "So listen, oh, Don't wait." Vampire Weekend.

        by Publius2008 on Tue Mar 25, 2014 at 03:12:54 PM PDT

        [ Parent ]

        •  There was an article in today's NYT (0+ / 0-)

          along those lines.

          http://www.nytimes.com/...

          It is something that I want to explore more.

          •  US Accused of "Trying to Destroy Russia" (0+ / 0-)

            was title of a March 6 news article in UK's Financial Times.

            The charge and quote came from  Vladimir Yakunin, Putin buddy and head of Russian Railways.  

            Vladimir is quoted in the article as saying:

            “We are witnessing a huge geopolitical game in which the aim is the destruction of Russia as a geopolitical opponent of the US or of this global financial oligarchy,” Mr Yakunin said in an interview on Thursday.

            “A CIA analysis . . . described three possible scenarios for the development of the geopolitical situation. The most acceptable scenario was considered to be one in which a certain world government is created – and the realisation of this project is in line with the concept of global domination that is being carried out by the US.

            “We saw this in Iraq, we saw it in Afghanistan, we saw it in Yugoslavia and in North Africa. Today, the borders of carrying out this doctrine have moved to Ukraine.”

            http://www.ft.com/...

            (If link doesn't work due to FT's subscriber firewall, trying googling on title of this comment)

            More recently, Vladimir was on Obama's sanctions list.  Even crazy paranoids sometimes have enemies, heh heh.

      •  I think there are at least some people in the (1+ / 0-)
        Recommended by:
        Alhambra

        Russian Gov who are at least "Keynesian"  -- or maybe Veblenarians.

        Considering the state of the Russian economy when Putin came to power, Russia has done a remarkable job in raising living standards (starting with reversing the crash in life expectancy).  Not to say it's great.  But it seems to me that Russia is on the way up, while we're on the way down.

    •  its reliance upon the pretense/rhetoric re: (1+ / 0-)
      Recommended by:
      Richard Lyon

      free markets and democracy

      "So listen, oh, Don't wait." Vampire Weekend.

      by Publius2008 on Tue Mar 25, 2014 at 03:14:11 PM PDT

      [ Parent ]

  •  Depends on the situation (1+ / 0-)
    Recommended by:
    Richard Lyon
     The notion that the people of Ukraine would fair better economically by dealing with Russia instead of the EU and IMF doesn't seem to hold up very well.
    It seemed to me that Russia was bribing Ukraine with cheap gas and cheap loans to maintain them in their sphere of influence.
       Of course once they seized the Crimea, those days were over. Bridges were burned.

     Now Ukraine is thrown to the IMF dogs.

    None are so hopelessly enslaved, as those who falsely believe they are free. The truth has been kept from the depth of their minds by masters who rule them with lies. -Johann von Goethe

    by gjohnsit on Tue Mar 25, 2014 at 02:40:28 PM PDT

  •  The larger issue is how will citizens of the West (1+ / 0-)
    Recommended by:
    Alhambra

    fare if Russia falls to Washington and NATO.

    I think Republicans criticisms of Obama are idiotic.   If Putin stops with Crimea, then Obama has conquered the world.   It is only a matter of time for Russia if she loses Ukraine to a hostile power.   And China is very vulnerable to a blockade by the US Navy if she doesn't have Russian/Iranian/Caspian oil supplies as backup.

    But back in 1776 Edward Gibbon pointed out that a European regime of many independent states promoted freedom --if a tyrant arose in your country you could emigrate to someplace better.   But when Rome ruled the world, there was no escape if you annoyed the Emperor.  And any global government that gets established will have an Emperor --initially the veiled dictatorship of Augustus pretending to obey the Senate but then Caligula.

    After the Atomic spy rings gave Stalin the design of the plutonium bomb, US oligarchs were scared shitless and started giving the US middle class a decent break to keep our loyalty (and siccing pit bull McCarthy on a few object examples.)  

    But since the Soviet Union fell, US corporations have gone back to the personnel policies of  predatory Robber Barons and real median household incomes have falled about 16% for middle aged workers.

  •  Fantastic (2+ / 0-)
    Recommended by:
    Richard Lyon, katiec

    Quite informative.  The economics of the Ukraine's position is harder to get a handle on, especially since the nature of future loans and, potentially, the status of payments to Russia are uncertain.   My understanding is that Ukraine is saying it won't suspend payments on Russian debt and I suppose there is zero chance of any reparations so Ukraine seems unlikely to take any of the actions that might improve the balance sheet because of external threats of one kind or another.   There are also issues of whether closer ties would have worsened Ukrainian kleptocrats in a way EU requirements would undermine them

    This is a murky area. Many thanks

  •  Straw Man set up. Straw Man torn down. (0+ / 0-)

    Way to go. The valid comparison isn't between Russia and Russia. It's between Russia and the IMF. We have historical knowledge of how the IMF destroys countries in the name of saving them. Would Ukraine be better off destroyed by the IMF or saved by Russia?

    If you don't watch news, you're un-informed. If you watch Fox news, you're mis-informed. (paraphrasing Mark Twain)

    by edg on Wed Mar 26, 2014 at 01:31:38 PM PDT

  •  Subsidizing a Boom (0+ / 0-)

    If the Russian building stock is anything like ours they should subsidize better insulation. They could do that by shifting some of the subsidy they put into gas prices from the domestic price of gas to providing insulation for poorly insulated homes and other buildings.

    This would have several good consequences. One is that the people getting better insulation would get a permanent savings on their energy costs.

    Another is that it would create demand for both insulation materials and installers. This would increase that industry, providing more and better jobs.

    It would also allow them to increase supplies to Europe, if they wanted to, or use those supplies for expanding their own economy.

    And, of course, to the extent it permanently lowered the use of fossil fuels to heat buildings there it would reduce global warming.

    By "insulation" I mean not just what you put in the walls, but windows and window frames with lower heat transfer, better sealing of the building envelop against air infiltration, and other energy saving measures.

    Is Putin powerful enough to make Gasprom bend to his will? Or does the fossil fuel industry control Russia, too?

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