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The World's Largest Dying Power
The World's Largest Dying Power | Opinion | The Moscow Times
As 2010 and the first decade of the 21st century wind to a close, the dominant social, political and economic trends of the year raise serious doubts about Russias future survival as a sovereign country. Chinese analysts, who have been closely observing Russia for the past 20 years, perhaps put it best: Russia is the worlds largest dying power.
If Russia continues down its current path of autocracy, monopolization, corruption and overall economic, political, cultural and technological degradation, it may prove the Chinese correct in their terminal diagnosis.
To be sure, the countrys degradation began before Vladimir Putins rise to power, but the nature and causes of this degradation are much different than under Putins degradation. During the 1990s, Russia found itself in complete political and economic ruins after the collapse of the Soviet Union and was hampered even further by low world oil prices throughout the decade. But during the 2000s, Russia enjoyed record-high oil prices. Nonetheless, the oil windfall was not used to modernize, diversify or reform political and economic institutions. Instead, the lions share of oil revenue was stolen or wasted on huge pork-barrel projects.
There are four main areas that made 2010 a record year for Russias degradation:
1. The country declined on the 2010 United Nations Human Development Index from 57th place five years ago to 65th place this year. This was because of the gap between the rich and poor widened and because the middle class has remained at only 10 percent to 12 percent of the population for the past decade. In addition, education dropped nine positions in the index to 41st place among 60 countries at a time when Russia plans to reduce its investment in education and human capital. The share of gross domestic product spending on science, education and health care will continue to decline, while spending for the military, police, intelligence services and other siloviki structures will increase.
2. The state has become more corrupt and criminalized. The most striking example was the Kushchyovskaya massacre in early November that unmasked the complete fusion of organized crime and the local government, including the regional legislature, the court system and law enforcement agencies. It is no surprise that Russia fell 12 places in the most current World Economic Forums Global Competitiveness Report from 51st to 63rd place among 134 countries. Russias state institutions were ranked among the very worst in the world at 118th place. While the Kremlin pronounces empty words and slogans about modernization and nanotechnology, Russia has fallen to 80th place in the ranking for innovation, 126th place in terms of protection of property rights, 125th place for development of the financial market and 128th place for the high burden of state regulation on business. As a result, Russia again had the worst economic performance among the BRIC countries in 2010, including indexes for direct investment and economic growth, with capital flight from the country reaching $29 billion over 11 months.
3. The economy has become more state-controlled and ineffective. The share of the raw materials sector in the economy continued to grow in addition to its already oversized share in the countrys export budget revenues. With the states share in the economy now at 50 percent according to government sources and even higher if you count businesses owned or controlled by state officials and with state workers now accounting for every second employee, the level of economic competition is woefully low, which means a rise in prices and overall inflation and a drop in quality, productivity and quality of goods.
4. Most Russians are overcome by cynicism and anger over their declining standard of living and the fact that the ruling elite abuse their power and continue to embezzle money and assets from the people and businesses with impunity. In short, Russians have lost all hope for the future under the current leadership. This is reflected in rising crime, xenophobia and violence. The most striking evidence of the peoples growing anger and intolerance and the disintegration of Russian society was the riot by ultranationalists on Manezh Square in early December.
To make matters worse, Moscows practice of appointing Kremlin-friendly yet highly unpopular governors from outside the regions only intensifies the provinces sense of alienation from the federal center. The Kremlin has taken an imperial approach to governing the regions, laying the foundation for an increase in separatist sentiments, particularly in the North Caucasus, Kaliningrad and in the Far East.
Putins desire to remain in power for another 12 years after the 2012 presidential election spells disaster for Russia. In the best case scenario, we can expect long-term economic stagnation and social decline. This will be coupled with a continued rise in corruption, drop in foreign investment and the flight from Russia of both capital and millions of its best and most talented citizens. In the worst case scenario, the continued degradation caused by corruption, monopolization and lawlessness could result in a total collapse and disintegration of the country, and if the countrys leadership doesnt change this happen in the next decade.
USSR (Russia) was once the big brother in Asia but now everything is just the opposite.
Will China fall into the footsteps of the former USSR ? (see below)
Lawrence Solomon: Chinas coming fall
Lawrence Solomon: China?s coming fall | Full Comment | National Post
Like the Soviet Union before it, much of Chinas supposed boom is illusory and just as likely to come crashing down
In 1975, while I was in Siberia on a two-month trip through the U.S.S.R., the illusion of the Soviet Unions rise became self-evident. In the major cities, the downtowns seemed modern, comparable to what you might see in a North American city. But a 20-minute walk from the centre of downtown revealed another world people filling water buckets at communal pumps at street corners. The U.S.S.R. could put a man in space and dazzle the world with scores of other accomplishments yet it could not satisfy the basic needs of its citizens. That economic system, though it would largely fool the West until its final collapse 15 years later, was bankrupt, and obviously so to anyone who saw the contradictions in Soviet society.
The Chinese economy today parallels that of the latter-day Soviet Union immense accomplishments co-existing with immense failures. In some ways, Chinas stability today is more precarious than was the Soviet Unions before its fall. Chinas poor are poorer than the Soviet Unions poor, and they are much more numerous about one billion in a country of 1.3 billion. Moreover, in the Soviet Union there was no sizeable middle class just about everyone was poor and shared in the same hardships, avoiding resentments that might otherwise have arisen.
In China, the resentments are palpable. Many of the 300 million people who have risen out of poverty flaunt their new wealth, often egregiously so. This is especially so with the new class of rich, all but non-existent just a few years ago, which now includes some 500,000 millionaires and 200 billionaires. Worse, the gap between rich and poor has been increasing. Ominously, the bottom billion views as illegitimate the wealth of the top 300 million.
How did so many become so rich so quickly? For the most part, through corruption. Twenty years ago, the Communist Party decided that getting rich is glorious, giving the green light to lawless capitalism. The rulers in China started by awarding themselves and their families the lions share of the states resources in the guise of privatization, and by selling licences and other access to the economy to cronies in exchange for bribes. The system of corruption, and the public acceptance of corruption, is now pervasive even minor officials in government backwaters are now able to enrich themselves handsomely.
This ethos of corruption is captured in a popular song in China, I want to marry a government official, whose lyrics explain why an official makes for a good matrimonial catch: He has power, a car and house; He only needs to drink tea and read the newspaper during work; He never spends his own money on cigarettes and alcohol; He can get free food every day; He can get promoted by only kissing his bosss ***.
If the corruption were limited to awarding contracts to friends and giving mines, power plants, and other public assets to relatives, the upset among the poor, who would realize some trickle-down benefits, would be constrained. In fact, the corruption deprives the poor of their homes, livelihoods, health and lives.
Take golf courses, a status symbol among Chinas new rich. To obtain the immense tracts of land needed near urban markets, developers have been cooking up deals with local officials that see land expropriated and typically tens of thousands of residents and businesses evicted per golf course, generally with unfair compensation. Although the construction of new golf courses is officially banned, thousands more are expected to be built in the next few years.
Golf courses aside, countless other real estate developments abetted by officialdom likewise wipe out entire communities. Then there are resource projects such as hydro dams that can displace numerous people and businesses the Three Gorges Dam alone displaced several million people.
The corruption extends to the enforcement of regulatory standards for health and safety, which few in China trust. In recent years China has endured a tainted milk scandal and a tainted blood scandal, each of which implicated corrupt officials in widespread death and debilitation. In a devastating 2008 earthquake, some 90,000 perished, one-third of them children buried alive in 7,000 shoddily built tofu schools that skimped on materials. Nearby buildings for the elites that met building standards, including a school for the children of the rich, were largely unscathed.
The government tries to tamp down the outrage over the abuses inflicted on the public by banning demonstrations and censoring the Internet. But it is failing. Year by year, the number of demonstrations increases. Last year alone saw 100,000 such protests across the county, directly involving tens and indirectly perhaps hundreds of millions of protesters.
China is a powder keg that could explode at any moment. And if it does explode, chaos could ensue as the Chinese are only too well aware, the country has a brutal history of carnage at the hands of unruly mobs. For this reason, corrupt officials inside China, likely by the tens of thousands, have made contingency plans, obtaining foreign passports, buying second homes abroad, establishing their families and businesses abroad, or otherwise planning their escapes. Also for this reason, much of the middle class supports the governments increasingly repressive efforts.
What might set off that spark? It could be high unemployment, should China be unable to control inflation or the housing bubble that now looms. It could be another natural disaster such as the 2008 earthquake which spawned outrage rapidly organized via cellphones and the Internet that the government had difficulty containing. It could be a manmade disaster many fear that a tofu dam might fail, leading to hundreds of thousands of downstream victims.
Whatever might set off that spark, it is only a matter of time. The government shows no interest in relaxing its grip on power if it did so, the officials in power might face retribution.
Meanwhile, we in the West see a China that by all measures is becoming stronger and stronger, not realizing that it is also becoming more and more brittle. The Soviet regime, when it fell, went out with a whimper. Chinas will more likely go out with a bang. No regime can contain the grievances of a billion people for long.
