My newest article on Pajamas Media, “The Short Happy Life of a Russian Anti-Corruption Investigator,” is now up.
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By Sean — 3 years ago
Over at the NYT, Paul Krugman has written some interesting posts on Russia’s economic woes: Putin on the Fritz; The Ruble and the Textbooks; Notes on Russian Debt, and Putin’s Bubble Bursts. Essentially, Krugman notes that falling oil prices and the collapse of the ruble have combined to add stress on the “terms of trade stock.” He explains:
What’s going on? Well, it turns out that Putin managed to get himself into a confrontation with the West over Ukraine just as the bottom dropped out of his country’s main export, so that a financing shock was added to the terms of trade shock. But it’s also true that drastic effects of terms of trade shocks are a fairly common phenomenon in developing countries where the private sector has substantial foreign-currency debt: the initial effect of a drop in export prices is a fall in the currency, this creates balance sheet problems for private debtors whose debts suddenly grow in domestic value, this further weakens the economy and undermines confidence, and so on.
Krugman fleshes this out in a longer column:
The proximate cause of Russia’s difficulties is, of course, the global plunge in oil prices, which, in turn, reflects factors — growing production from shale, weakening demand from China and other economies — that have nothing to do with Mr. Putin. And this was bound to inflict serious damage on an economy that, as I said, doesn’t have much besides oil that the rest of the world wants; the sanctions imposed on Russia over the Ukraine conflict have added to the damage.
But Russia’s difficulties are disproportionate to the size of the shock: While oil has indeed plunged, the ruble has plunged even more, and the damage to the Russian economy reaches far beyond the oil sector. Why?
Actually, it’s not a puzzle — and this is, in fact, a movie currency-crisis aficionados like yours truly have seen many times before: Argentina 2002, Indonesia 1998, Mexico 1995, Chile 1982, the list goes on. The kind of crisis Russia now faces is what you get when bad things happen to an economy made vulnerable by large-scale borrowing from abroad — specifically, large-scale borrowing by the private sector, with the debts denominated in foreign currency, not the currency of the debtor country.
In that situation, an adverse shock like a fall in exports can start a vicious downward spiral. When the nation’s currency falls, the balance sheets of local businesses — which have assets in rubles (or pesos or rupiah) but debts in dollars or euros — implode. This, in turn, inflicts severe damage on the domestic economy, undermining confidence and depressing the currency even more. And Russia fits the standard playbook.
Except for one thing, he adds, corruption.
The reason why Russian companies have so much debt is because elites have cannibalized the companies they run by skimming off the top and shipping that money abroad.
Where does the elite get that kind of money? The answer, of course, is that Putin’s Russia is an extreme version of crony capitalism, indeed, a kleptocracy in which loyalists get to skim off vast sums for their personal use. It all looked sustainable as long as oil prices stayed high. But now the bubble has burst, and the very corruption that sustained the Putin regime has left Russia in dire straits.
Basically, Putin’s kleptocracy worked fine and dandy as long as there were enough petrodollars to sustain the theft. Now that the price of oil has plummeted, those accrued foreign currency debts are coming back with a vengeance. So this economic crisis is no blimp, but based on the very structure of the Putinist economy. There’s no quick remedy for this.Post Views: 216
By Sean — 10 years ago
Russian Communists don’t like Indiana Jones and the Kingdom of the Crystal Skull, reports the Associated Press. But the communists in question are not the Communist Party of the Russian Federation (KPRF), as the report implies. There are several communist parties in Russia and the one that has began a campaign against Indy is a small 500 member sect called Communists of the St. Petersburg and Leningrad Region (KPLO).
According to their website, KPLO have no official affiliation with the KPRF. Rather they, “are communists, like the KPRF, only better: more modern, younger, lively, and creative.” They forgot to add freakier. Just check out the accompanying photo. I’ve seen a lot of things but never communist vestments. And what’s up with that Young Pioneer? He looks like should adorn someone’s lawn.
And what has the good Dr. Jones done to get the KPLO all hot and bothered? As the Ideological Committee of the TsK KPLO explains in a letter to the film’s stars Harrison Ford and Kate Blanchet:
Your role in the film Indiana Jones and the Kingdom of the Crystal Skill offends all the Soviet and Russia people, all who remember the difficult 1950s, when our country finished the reconstruction after the Great [Patriotic]War, and didn’t send to the United States merciless terrorists.
A bunch of ranting and attempts at historical corrections follow. The film’s plot centers around Indy battling Soviet agents trying to get their hands on some skull with secret powers that, I assume, will aid them in world domination. Maybe someone should let the KPLO know that it’s just a movie, and probably not a very good one in the first place. Also, maybe someone at AP should do their homework and realize that in Russia, not all Communist parties are the same.Post Views: 119
By Sean — 1 year ago