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Murilo Otávio Rodrigues Paes Leme on "Have I betrayed the Russian economy?"

Murilo Otávio Rodrigues Paes Leme — Sun, 29 Mar 2009 07:05:47 +0100

At times of crises we shouldn't help the state, for two reasons. Firstly, the state is responsible for economic crises - there is no way to explain an economic crisis without state interventionism. So, helping the state would amount to promote incompetence and intervention. Secondly, depending on the crisis, it is even more difficult to demand something from the government - at a time of war, for example, even a war of aggression.

Zygmunt Dzieciolowski on "Crisis and discontent in Russia’s regions"

Zygmunt Dzieciolowski — Thu, 19 Feb 2009 08:51:00 +0000

Andrei Illarionov, former economic advisor of Vladimir Putin has published in his blog updated statistics on the decline of the industrial output in the Russian regions (December 2007 to December 2008). In Russian it can be found at http://aillarionov.livejournal.com/68993.html?#cutid1 .

According to Illarionov the present leader is Khabarovski region in the Russian Far East - 51.5 %

Next ten regions are following

Vologda - 38,4

Orel - 37,4

Novgorod - 30,2

Lipetsk - 28.9

Bryansk - 28,8

Kursk - 28,0

Sverdlovsk - 27,6

Ivanovo - 27,4

Chelyabinsk - 23, 6

Moscow (city) - 21,1

airy72 on "Crisis and discontent in Russia’s regions"

airy72 — Thu, 12 Feb 2009 01:41:01 +0000

Andrei,

Great article.

michaelcalder on "Crisis and discontent in Russia’s regions"

michaelcalder — Wed, 11 Feb 2009 20:06:13 +0000

Andrei,

Thank you for the illumination.

You will forgive me if I am a touch less than gracious; the necessity of having to learn so much more geography at my advanced age. Can I not go back to thinking of Russia as a monolith with a few unpopulated provinces? It seems not.

Clear skies!

Jeff Mowatt on "Could the Soviet economy be re-established in Russia?"

Jeff Mowatt — Tue, 18 Nov 2008 07:06:56 +0000

The subject of information technology is interesting for me too. Our efforts began with my colleague's paper recommending an economic development project in Siberia to the Clinton administration. In his earlier work, suggesting a more inclusive form of capitalism, he'd made the point that information was key to lifting people out of poverty, a point picked up by economist CK Prahalad in the aftermath of Bill Gates pitch on Creative Capitalism.

The Tomsk regional initiative and microfinance bank created 10,000 new businesses with more than 99% repayment and survival rate over the 4 year pilot and set the scene for the Russian Microfinance Centre in 2002.

This bottom up or microeconomc strategy was proposed as a total inversion of what had gone before in the Harvard (HIID) implementation of the Defense Enterprise Fund.

Back then there was no way anyone was going to let an outsider into the internet business and obstruction was effective. As others will know the mandatory installation of SORM-2 at one's own cost renders any small service provider economically non-viable.

Interestingly, now the web archive facility has become available, the initiative in Tomsk may be seen as obliterated text.

The Tomsk initiative website archives

People-Centered Economics

Introduction to Tomsk

Dmitri Travin on "Could the Soviet economy be re-established in Russia?"

Dmitri Travin — Fri, 14 Nov 2008 17:23:27 +0000

John’s commentary is very interesting, and quite correctly points out the importance of the development of communication technologies in the 21^st century. However, it seems unlikely to me that technological changes can make the administrative economy function more effectively. In the 1960s-80s there was a popular idea among economists in the USSR that computerisation (or as they said back then, the use of electronic data processing machines) would raise the quality of planning. However, the brilliant Hungarian economist János Kornai, in his book “Economics of Shortage”, showed that the problems of the administrative economy lie very deep. These are primarily caused by the fact that the state, in trying to prevent market competition, bankruptcy and unemployment, uses budgetary funds to support inefficient enterprises. As a result, the managers of these enterprises have no incentive to work efficiently. Let me give just one simple example. When there is a shortage of goods, which is characteristic of the administrative economy, managers try to acquire the maximum amount of raw products, materials and equipment. Saving money is of little interest to them. In this situation, the demand for resources significantly exceeds production capacity. But the state does not raise prices (this is pointless, as the state is supposed to cover the losses of enterprises from the budget). The state distributes the existing resources, providing each enterprise with only part of what it wants. Managers know that their demand will only be partially satisfied. So they ask for as much as possible from the state body responsible for supply. Accordingly, demand exceeds supply to an ever greater degree, and officials are forced to place ever greater restrictions on the resources supplied to enterprises. Thus, planning and supplying are completely divorced from reality. In this situation, enterprises manufacturing high-quality products which consumers need may have a much worse supply of resources than enterprises which work badly, but have strong lobbying powers. The economy begins to function less effectively, and the deficit becomes incurable. Kornai goes into a profound analysis of this problem in his book, offering numerous examples besides the one I have given.I believe that for all the importance of new communications technologies, the administrative economy will not be able to solve the problem of deficit. This problem is not technological, but purely economic in nature. A deficit only disappears when the state stops supporting inefficient enterprises, allows unemployment, stimulates competition and takes a tolerant attitude towards private enterprise.

John Swainson on "Could the Soviet economy be re-established in Russia?"

John Swainson — Mon, 10 Nov 2008 23:18:49 +0000

Dmitri's assessment is valid in may areas but nevertheless falls into the common trap of failing to assess the impact of the improved communications and commodity management capability afforded by the internet and the benefit gained from improved transportation systems on 21st century Administrative Economies. I remember being surrounded by many 'experts' in the 1990 who insisted that Russia would not be able to make consumer goods in military factories, yet I know from own business experience in Russia that 'military' factories now produce a considerable volume of non-military products. It is easy to be dismissive of an economic system that failed in the pre-internet/computer and poor transport era but the Administrative Economy model should not be dismissed now until it has been robustly assessed against the momentous management and communication improvements facilitated by the internet and Russia's much improved transport capability. While it is true that uncontained public servant corruption is an ever-present risk, that same corruption is equally all pervasive in Market Economies, with cartels being just the tip of the iceberg. We should not dismiss an economic system that might be better suited to meeting the needs of a 21st Century population unless it can be shown that the alternative model is dogged by insuperable problems, rather than by problems that hitherto we have been unwilling to fix because they serve some so well in the present preferred economic model.

We should not forget that some men say 'why' but wiser men say, 'why not?'

Jeff Mowatt on "Surgut without its gilding of “black” gold. Some anti-myths about the “oil Eldorado""

Jeff Mowatt — Mon, 03 Nov 2008 21:36:32 +0000

Well, that's certainly a mixed picture. It's been nearly a decade since I visited Siberia, Novokuznetsk in my case. Then it was true, that miners made most money and spent it, because the economic crash had left most wary of banks, when the rouble devalued by 1000 times. In those days, not so long ago people were sometimes paid in electrical goods, or fertiliser.

Young people would tell me then that Russians have no rights, they meant economic rights as I now understand. There were single mothers a plenty, and they needed state help because bribing a notary to declare unpaid alimony was all to coomon.

Just after, before I knew him, my colleague now, had been in Tomsk, to leverage an economic development project called the Tomsk Regional Initiative and Microfinance Bank. An unqualified success for the morel colatteral style of microfinance and 10,000 small enterprises as a result.

He saw a few things, a dark skinned man beaten to death in the streets for being just that. he tried to intevene but it was too late. Later someone wanted a relative to gain an important postion in one of the Universities, police were procured to round up female students and threaten repeated rape unless they were willing to bear false witness against the incubent jobholder.

You'll hear little about Tomsk because, for one it worked as a bottom up approach where Harvard and trickle-down had failed, and an incoming Putin allowed it replicated but later local FSB didn't get what they wanted. He was blacklisted for Russian visa renewal.

There was a website for this initiative in Tomsk, but it's now in web archives and all text obliterated. Here's what's left of the story.

http://www.p-ced.com/projects/russia/

Next stop was Crimea but that's another story.

Sefton Darby on "EITI: a new global standard for lying"

Sefton Darby — Fri, 03 Oct 2008 05:09:16 +0100

Dear Editors,

Julia Gouseva’s article EITI: A new global standard for lying deserves a response. But first some up front disclosure of interests, some transparency so to speak: I am a former World Bank “functionary” and continue to act as a consultant for a number of governments, international organisations, and civil society groups involved in supporting and promoting the EITI. Ms Gouseva might wish to also be more upfront about her interests here – in 2006 she was a member of a team from an audit firm which felt unable to complete the EITI reconciliation which they had been hired to carry out. Just as I have a strong self-interest in defending the initiative; she has a strong self-interest in attacking it – so let’s be open about those interests.

Firstly, I am concerned at Ms Gouseva’s claims of World Bank ownership of the EITI process. She claims that the Bank has a “KPI” to maximise the number of countries signed up to the Initiative. In my time with the Bank it was certainly encouraged to promote EITI and was provided with funds from member states to do so, but at no stage did I encounter some sort of target which prioritised quantity over quality.

Moreover Ms Gouseva chastises the World Bank for failing to develop a “common methodological approach” for EITI reporting. Such a statement shows a lack of understanding of the governance of the EITI, in which policy and standards have been set by EITI conferences; the International Advisory Group on EITI (from 2005 – 2006); and the EITI Board (from 2006 onwards). The Bank has acted as an observer on all of these groups but not as a permanent voting member. The Bank’s role in the Initiative does not include the right to dictate global EITI policy.

Secondly, Ms Gouseva has concerns about the role of an American consulting company in the EITI process in Nigeria (NEITI). Again some disclosure: I have a consulting relationship with that firm - Goldwyn International Strategies (GIS). The NEITI secretariat ran an international tender for a consultant to deliver six products: terms of reference for an audit tailored to Nigeria’s specific goals, a communications strategy, an IT (fiscal monitoring) strategy, a roadmap for sector change management, a roadmap for local content policy, and advice on a NEITI law. Goldwyn International Strategies were the low bidder. All of the products are available on the NEITI website. The terms of reference were for financial, process, and physical audits which included the verification of thousands of transactions. These measures uncovered significant flaws in the basic systems of operating the sector.

Ms Gouseva’s insinuations regarding the role of Goldwyn International Strategies are similar to her insinuations about a fictitious World Bank KPI – she is looking for conspiracy where there is none, and where she has no evidence to the contrary.

Thirdly, Ms Gouseva seems to have misread EITI policy. She claims, for example, that EITI aspires to be an audit standard. This is not the case. EITI policy requires that individual company reports submitted as part of an EITI process should already have been audited to international auditing standards not that auditors hired as part of the EITI process should be responsible for re-auditing all companies engaged in the process.

But beyond the what-is-and-what-is-not-policy debate let’s get to the fundamental point here: Ms Gouseva, like any good auditor, is looking for a rigid and consistently applied standard, and EITI is not that. EITI is about producing transparency and accountability – and the latter cannot be created by inventing a standard in London or Washington D.C. and inflicting it upon countries without any consideration for each country’s unique circumstances. EITI includes countries as diverse as Peru, Nigeria, Ghana, Kazakhstan, and Timor Leste – to attempt to use a rigid standard in countries as varied, and with very different industries, as these, would be a pointless act. That’s because the real revolution of the EITI – and one which Ms Gouseva completely ignores in her article – is that it seeks to create greater accountability through multi-stakeholder management and oversight of the EITI process. This means that in each country implementation of the Initiative is managed collectively by a group of government officials, company representatives, and civil society organisations. Having worked in many EITI countries I’ve yet to come across such a group that thinks that the best way to create accountability is to meekly swallow a standard thought up by someone else in a country far far away – hence the diversity of EITI reports.

EITI at its heart is a political process; anything that attempts to inject a drop of transparency and accountability in oil and mineral rich countries which are often very corrupt is inherently so. Ms Gouseva admits as much when commenting on why Russia has not adopted the EITI. I would be exceedingly happy if every government and every oil and mining company in the world were content to throw open its books for a full audit which meets international auditing standards. But the reality is that they won’t, and thus EITI seeks to create a space in which all stakeholders are able to build as much transparency as is possible without the initiative itself being killed off by those who would naturally be against such disclosure. It has been my experience that this iterative confidence-building approach works well – an imperfect EITI report often creates demand for a higher standard. In Kazakhstan, for example, the first EITI report did not include the largest oil producer in the country. The furore created by this was so great that said company signed up to EITI less than a week after the publication of the report.

Furthermore, EITI’s international guardians are not without teeth. I would strongly recommend that Ms Gouseva make herself properly familiar with the EITI Validation Guide. This guide sets in place a process by which all countries implementing the EITI will have the entirety of their EITI programmes (not just the reports) independently reviewed. In the next one-and-a-half years all EITI countries will go through this validation process, and I am extremely confident that many countries – some for the reasons pointed out in Ms Gouseva’s article – will be found to be not EITI compliant.

If Ms Gouseva has a magic solution up her sleeve for creating more transparency and accountability in these often challenging countries – then let’s hear it. But for her to declare EITI to be a “standard for lying” based on conspiracies which don’t exist, based on its disappointments to her sensibilities as an auditor, and based on an analysis that ignores political reality, does a great disservice to the immense amount has been achieved by governments, civil society groups, and companies involved in the Initiative.

Regards,

Sefton Darby

alarus on "Russia: the opposition that melted away "

alarus — Thu, 11 Sep 2008 23:54:19 +0100

I am wondering why nobody ever mentions Yabloko led by Georgyi Yavlinksii? Whatever became of that group? I was always a strong follower and a big fan of his proposals that never came through but were alluring and inspiring to a big part part of Russian intellectuals. Gaidar was too far to the right in his approach, a suicidal policy in a post-communist society. Russians pride themselves in being liberals and libertarians (one may argue but it's a different story). Righ-wing ideas are doomed to succeed. Putin's government survives on selling expensive oil. People like the money. Just like Alaskans like $1,200 bucks energy credits Sarah Palin has given everyone. Heck, for a redneck it's a fortune. Look what a following she has there! Why wouldn't Putin? The premise for such popularity is essentially the same.

Not logged in on "Russia: where are the petrodollars going?"

Not logged in — Sun, 06 Jul 2008 18:36:09 +0100

does the petro dollar strengthen it's hold as a reserve currency as oil sky rockets? more $ central banks hold to pay their bills= dollar demand right? And also as a result more inflation is created by foreign banks (non u.s) to keep their currency's from appreciating and hurting their manufactuing base.

Not logged in on "Russia: where are the petrodollars going?"

Not logged in — Tue, 01 Jul 2008 02:27:21 +0100

Corruption began centuries ago we can call it the beginning of capitalism. However capitalism exist thanks to the precious resources such as uranium, petrol, and the many other goods we find in the nations that do have large amounts of petrol, such as Iran, Iraq and Venezuela, brazil, and Canada. However, corruption of interpretation stands for the fact of confusing the fact. Why not call corruption terrorism, sense the terrorist nations often are located were the natural resources that are vital for the capitalistic economy exist on abundance. Therefore, the reason of colonisation was not in fact culture but petrol, uranium and the many other goodies that Russia has today. However, those that complain of injustice on a two party systems should look elsewhere such as a socialist democracy, more like the blend of both worlds. AB

opendemocracy on "Russia: where are the petrodollars going?"

opendemocracy — Thu, 26 Jun 2008 11:01:22 +0100

Welcome to Dutch disease! There are, I think, 2 aspects to this: one real and one financial. Russia has a huge comparative advantage in extractive industries; so it is not surprise that people and capital are attracted there; the way this happens is precisely by making other activities - like manufacturing - relatively unprofitable and unable to attract the inputs it would need. This is a real effect - you can't get away from it given the natural endowment. Indeed, you probably shouldn't try.

The article describes very well the consequences of combining this real effect with a refusal to let the ruble rise ... that is avoidable, and does create all that inflation that you point to. Norway is exemplary in these matters --- extract your resources at, say 5% of reserves per year; invest the cash in projects that are expected to yield more than 5% per year; distribute income --- and only income --- from your Sovereign Wealth Fund --- in a largely egalitarian way.

Of course, the politics of getting to a Norwegian solution are another order of difficulty.

Tony