Sublime News #6

1. My e-friend Eugene Ivanov participated on Peter Lavelle’s Crosstalk program at Russia Today, Lobbying: Who really rules America? Check it out!

2. Is Obama transforming America into Amerika? Let me explain. Take a look at the details of the healthcare bill, which was passed despite my pessimism (to be fair I think I had a good excuse). Essentially, it will eventually require everyone to buy a health insurance, but there will be subsidies for the poor / employers and continuing competition amongst insurance providers. Overall, could it even be said that the current administration is essentially transforming the American welfare state from one based on liberalism (in which markets are the primary guarantors of welfare with government only stepping in to restrict un-competitive practices, streamline market distortions, and assume only minimal relief obligations from private charitable and religious groups) to corporatism (in which the provision of welfare is tied to the imperative of maintaining social stability)?

Second, the US is developing a proper industrial policy in a bit to reverse deindustrialization. For instance, there are the plans to double exports by 2015, expand into foreign markets, and react strongly against currency manipulation by China. In other words, the US may be beginning to abandon its status as the world’s consumer of last resort – an important foundation of the current international system. These is also a higher focus on equality of opportunity, energy efficiency and greentech, closer ties between the state and the “commanding heights” (see Goldman Sachs, General Motors, Google, etc).

This is a suggestion, not a conclusion, and certainly not a moral judgment. Quite possibly, a “convergence to Europe” is inevitable as the US population ages and comes under increasing limits-to-growth pressures (e.g. peak oil). Incidentally, Matt Taibbi has a different take - his best line, ”The whole picture is strange: Democrats running as Republicans, Republicans running as Turner-Diaries conspiracy theorists.”

3. Climate change & energy blast.

• The Oil Drum celebrates its fifth birthday. I wish it well – it has been an invaluable resource on energy and sustainability issues. (I have two articles in the pipeline which I plan to submit to them).
• Tipping Point: Near-Term Systemic Implications of a Peak in Global Oil Production – Part 1 – Summary. This is an introduction to a 55-page paper (pdf) on the topic that sounds like a must-read, and I may write more about it in the next few weeks. ”We are living within dynamic processes. It matters little what technologies are in the pipeline, the potential of wind power in some choice location, or that the European Commission has a target; if a severe economic and structural collapse occurs before their enactment, then they may never be enacted.”
• The Logic of Abundance (John Michael Greer) – excellent piece debunking cornucopian myopia.
• Study: “It is clear … that the precipitous decline in September sea ice extent in recent years is mainly due to the cumulative loss of multiyear ice.” Physicist: “If temperatures change just a few tenths of a degree then this oh-so-thin ice cap is doomed.”
• Americans’ Global Warming Concerns Continue to Drop. No comment.
• UK Telegraph Reports, “Oil Reserves ‘Exaggerated by One Third’”–An Analysis – no kidding, “peakists” have been harping on about this for years!
• India-Bangladesh border dispute solved by island in question sinking due to global warming.
• James Cameron, director of Avatar, lashes out at the GW deniers.

4. Geoengineering watch

• 6 Ways We’re Already Geoengineering Earth (Brandon Keim) – draining the rivers; painting the Earth black; the infinite farm; wiping out reefs; the plastic revolution (note: will probably be mankind’s longest-lasting legacy); altering the atmosphere. (h/t Lou Grinzo)
• A Survival Guide to Geoengineering (James Cascio) – “despite its potential to trigger conflict, geoengineering will likely be part of the global response to climate change. Be prepared.”
• On terraforming the solar system, with pictures & What do you think of geoengineering (Randy McDonald) – in my huge post on the topic, I’ve described it as a “final gambit”. We will soon be so far beyond climatic tipping points that sacrificing prodigal resources into geoengineering, in the hope that it will provide a big payoff (e.g. avert the collapse of industrial civilization), will become both rational and inevitable.

5. Global Wellbeing Surveys Find Nations Worlds Apart – Gallup measured life satisfaction for 155 nations by “asking respondents to place the status of their lives on a “ladder” scale with steps numbered from 0 to 10, where 0 indicates the worst possible life and 10 the best possible life”.

The results? Dernmark 82%, Canada, Australia & Israel 62%, Brazil 58%, USA 57%, Britain 54%, Germany 43%, France 35%, Poland 28%, Russia & Ukraine 21%, Japan 19%, India & Egypt 10%, China 9%, Togo 1%. For some reason, only the the Americas, northern Europeans, and Anglo-Saxons consider themselves to be thriving, while most of Eurasia and Africa are heavily depressed.

6. In other news from Gallup, 49% of Americans believe that the healthcare bill is a “good thing”, whereas just 40% believe it is a “bad thing”. Some have critisized this as an outlier, however. Time will tell as passions die down and Americans get access to more affordable healthcare (and assuming the fiscal situation remains more or less under control – no certainty given the range of possible discontinuities).

7. Russia watch. Mark Adomanis does a good summary of the week’s main issues: START, pipelines, and economic growth. Now for my thoughts.

I agree with Mark that the agreement over START will not overspill into better overall Russia-America relations. What they have is a fundamental geopolitical clash of interests that simply cannot be resolved while both nation-states retain imperial mentalities. The deal to cut nukes is 1) a rational cost-cutting measure – though not an imperative one, ignore the talk that Russia can’t afford maintaining a massive nuclear arsenal, it can but would rather not, and 2) in any case the age of the ICBM is slowly drawing to a close with the proliferation of effective ABM systems covered on this blog.

PS. Nikolas Gvosdev on START.

So what do we have? Based on preliminary reports, the Russians will get language that recognizes that there are important linkages between offensive and defensive systems–acknowledging their concerns over how U.S. missile defense systems could impact the strategic balance–but that language is nonbinding, and does not prevent Washington from moving ahead, if it so chooses, with plans to deploy limited BMD systems in the Black Sea region. Both sides will have an upper limit of 1,675 warheads and may shoot for an even lower number of delivery vehicles than originally outlined in last year’s MOU–from 1100 to an upper limit of 800. Some of the Russian reductions are likely to occur from attrition and the retirement of aged systems. This will test the willingness of the Senate to accept a compromise, because it has been argued that Russia would have “no choice” but to bring down the size of its nuclear arsenal, to a size it can more effectively maintained–but now Russia will get binding limits on the size of the U.S. arsenal as well.

Russia’s potential buyout of the Ukrainian gas pipeline network in return for selling Ukraine gas at lower prices is potentially a huge deal that will further tighten its control over European energy supplies – agreed with Mark. (It would also in large part remove the need for South Stream). Note that Ukraine is now very strapped for cash and its implicit social obligations to provide subsidized gas to the populace are placing it between a rock and a hard place (popular unrest, fiscal collapse, and increased Russian influence).

World Bank predicts Russia will grow at 5.0-5.5% in 2010 (not news: most investment banks predict 4-6%, Citibank predicts 6.2%), but will slow to 3.5% in 2011 “as tight credit and unemployment constrain consumption”. Nonetheless, this means that by 2012, Russia will have regained its peak GDP level of 2008 (which in turn was roughly equal to its peak Soviet-era GDP in 1989 – excellent, a whopping 23 wasted years!). But anyhow, still better than common expectations during the crisis…

8. Military & hi-tech blast (no, I’m not a Sinophobe, I admire good spies).

• Cyber-attack on U.S. firms, Google traced to Chinese (Bill Gertz) – describes how 2000+ Chinese hackers infiltrate US companies to steal industrial R&D. Makes perfect sense for a country looking to leapfrog development, of course.
• Jihadism and the Importance of Place – free Stratfor article on the geopolitics of jihad. The jahidi movement is transitioning from being based on large organizations to clandestine cells and individuals, as country after country is “drained” of its ability to sustain Islamist militants.
• The people have been liberated. China no longer has a People’s Liberation Army, now it’s just the Chinese Army. I think they should go all-out and rename it to Ever Victorious Army!
• Has you Gmail been hacked by the Chicoms? Find out!
• Stratfor has a long, detailed history of Chinese espionage efforts (“mosaic intelligence”). Behind subscriber wall.
• Is Russia Google’s next weak spot? – the Kremlin to launch “national search engine” and give government e-mail accounts to every Russian to rationalize social services. (PS. Paranoiacs hold your breath, totalitarian Turkey already has a system. PSS. Apprecite deadpan humor).

9. This whole nonsense about the “Day of Wrath” and how the foundations of the Putin regime are crumbling in the recent wave of “protests” that are hardly large enough to even deserve the name! According to Barret Brown anyway, who believes that “it is worth noting that a poll conducted this month indicated that almost 30 percent of Russians are inclined to engage in protests of this sort, and that this percentage is higher than it was just a month ago”, hence spelling the apocalypse for the Kremlin. Erm, this is basically the same figure as in early 2005 (coinciding with protests over welfare reform), and LESS than two occasions in the 1990’s. Give me a call when it breaks 50%, then we might have something to talk about.

[Blue line = "yes I think protests are possible"; light blue line = "yes I will probably participate in protests. Opinion polls from Levada].

The fact of the matter is that most Russians if not happy, at least satisfied, with the political system, and 70% believe they are “free” today (this figure was much lower under Yeltsin and the early Putin years).

10. The Israel-US spat over settlements. Nothing will come of it as usual. The two countries are bound together by mutual geopolitical interests – the US needs its Middle East bridgehead, Israel needs its insurance policy.

11. What’s really wrong with Russia? by Ben Aris – (h/t poemless). An excellent article that I recommend very much. It points out Russia’s real economic weaknesses, without succumbing to Russophobia or hyperbole – a rare achievement in the mainstream Russia-watching community, regretfully. A few quick comments:

The big omission here on the Kremlin’s part is that while they are spending on power and trains, they have ignored badly needed investment into social infrastructure.

I agree, but it’s not quite accurate to say that social infrastructure has been ignored – at least, not after 2007-2008. E.g., there is a lot of investment in newly-equipped hospitals and clinics since 2007, and positive results are already showing.

Oil is heavily taxed, with the state taking 90 cents on every dollar when prices for oil are over $27. The extra revenue has been used to subsidise income and profit taxes (13% and 24% respectively) in an effort to boost economic diversification. Even this largesse can’t soak up all the petrodollars, so the excess cash is siphoned off into the “lockbox” of the Stabilisation Fund and kept out of the reach of free-spending MPs by Finance Minister Alexei Kudrin.

Good points, but note that some extreme free marketeers would decry the heavy taxation on oil (they’re incorrect of course, having never heard or serious studied lock-in or dependency theory).

The Kremlin’s solution is to lift struggling sectors up by the bootstraps by pouring enough money into them so that even if they can’t compete on price, they can compete on quality. The trouble is that state-led rescues of industry look intrinsically wrong-headed to almost everyone.

Katinka Barysch… spoke for many recently in a recent paper when she wrote: “A genuine modernisation alliance would have to be bottom-up and driven by the private sector. The Russian leadership is pursuing a model of modernisation that is state-centric and top-down. It throws money at new institutes to foster research, it nationalises big industries, it tells state-owned banks which sectors to lend to. It does not do the things that would be required for genuine economic diversification. … Barysch assumes there is a foundation of business that will flourish if the shackles of government are removed, but the Kremlin is facing an economy where rafts of products and services are simply missing and can’t get started.

State spending is inherently wasteful, but as Russia has the money thanks to oil, the issue at hand is not the efficiency of state spending, but rather its effectiveness: can the spending create sectors that don’t exist now or upgrade those that can’t compete now? “As there is no vibrant [small and medium-sized enterprise] sector, the only option left is heavy state spending. The Kremlin is doing this not because they want bigger versions of the existing state-owned behemoths, but because how else are they going to change the nature of the Russia economy?” says Plamen Monovski…

Head. Nail. Railing about how a large degree of state involvement is necessary for Russia to develop has been one of S/O’s common themes.

More worryingly, these nascent attempts to remake the system have already led to an increase in political risk. Up until now Russia has grown by first putting bums in empty seats, and then building new factories when the Soviet-era capacity was fully used. To go to the next stage, the system itself has to be liberalised, as it is efficiency not volume that counts now. This means cutting into the vested interests and they are already fighting back. In March, Medvedev told ministers that they had to obey orders “or take a hike” – a rare visible sign of the growing tension.

Conventional wisdom has it that Putin is a virtual dictator, but bne’s sources in diplomatic, business and government circles say that Putin is visibly under an increasing amount of strain, frustrated by the government machinery’s failure to implement his plans. On top of this, bringing in Medvedev has considerably weakened his position. “Two camps have formed around Medvedev and Putin. The first wants to see Medvedev go further with the liberalisation of the economy and politics, whereas the people close to Putin want to keep things as they were prior to the crisis – where they were making money,” says an economist who has been advising the government at a top level. “Putin is visibly stressed, as some people are starting to ignore him and others are openly calling for him to leave.”

1) Demonstrates how the anti-Putinistas have no appreciation for nuance or the institutional intricacies of the system Russia’s leaders have to operate in.

2) The more portentous conclusion one could possibly draw from this is that at times when plans for reform ran into heavy vested opposition, what followed was either a) a period of conservative retreat and stagnation or b) the opposite – an upping of the tempo and increase in coercion, centralization, mobilization. It will be interesting to see what will happen this time round.

PS. One major thing Aris leaves out is Russia’s awfully low level of energy efficiency. Not that it matters for now, given that it is so well-endowed with resources, but nonetheless all good things come to an end. Furthermore, improvements in energy efficiency can translate into higher foreign export earnings or domestic saving (in the form of resources-left-in-the-ground).

13. Germany: Mitteleuropa Redux (Peter Zeihan) from Stratfor (free article) – an interesting take on the rise of German power in Europe in the wake of the financial crisis – and the possible responses of its neighbors.

All this and more has happened. We saw the 2008-2009 financial crisis in Central Europe as particularly instructive. Despite their shared EU membership, the Western European members were quite reluctant to bail out their eastern partners. We became even more convinced that such inconsistencies would eventually doom the currency union, and that the euro’s eventual dissolution would take the European Union with it. Now, we’re not so sure. …

Back-of-the-envelope math indicates that in the past decade, Germany has gained roughly a 25 percent cost advantage over Club Med. … The implications of this are difficult to overstate. If the euro is essentially gutting the European — and again to a greater extent the Club Med — economic base, then Germany is achieving by stealth what it failed to achieve in the past thousand years of intra-European struggles. In essence, European states are borrowing money (mostly from Germany) in order to purchase imported goods (mostly from Germany) because their own workers cannot compete on price (mostly because of Germany). This is not limited to states actually within the eurozone, but also includes any state affiliated with the zone; the relative labor costs for most of the Central European states that have not even joined the euro yet have risen by even more during this same period.

It is not so much that STRATFOR now sees the euro as workable in the long run — we still don’t — it’s more that our assessment of the euro is shifting from the belief that it was a straightjacket for Germany to the belief that it is Germany’s springboard. In the first assessment, the euro would have broken as Germany was denied the right to chart its own destiny. Now, it might well break because Germany is becoming a bit too successful at charting its own destiny. And as it dawns on one European country after another that there was more to the euro than cheap credit, the ties that bind are almost certainly going to weaken.

14. Liberast & Russophobe watch.

• Mark Adomanis in epic blog fight with Barrett Brown.
• A Good Treaty on Ilya Yashin’s escapades.
• Clinically insane Russian “liberal” Yulia Latynina writes about Why Putin Isn’t Afraid of a Free Internet because unlike the industrious Chinese, “Vanya the tractor driver will never vote for a liberal opposition candidate [because] deep in his soul, he understands that he doesn’t deserve anything more in life than his beloved bottle of vodka”. And equally insane or ignorant Westerners wonder why most Russians despise their liberals… (h/t Carl Thomson).
• The Economist’s criminally awful Russia coverage – Mark Adomanis revelas the obvious, kind of like I did with Paul Goble recently. Still, Mark Ames’ The Economist: The World’s Sleaziest Magazine remains the defining pinnacle of the Economist-bashing genre.

15. Odds and Ends.

• Greg Palast on the dispossession of New Orleans by the connected rich (1, 2, 3, 4, 5, 6). Whoever says corruption and social injustice are limited to Third World countries and Russia?
• Full Text of Human Rights Record of the United States in 2009 – China hits back at Western cultural imperialism and double standards! As for Russia, it “indignantly dismissed U.S. criticism of its human rights record on Friday, saying the United States was guilty of its own abuses from Afghanistan to “the streets of America”.” Really, I’ve no idea why the State Department insists on bringing out these ridiculous human rights assessments. Nobody likes being lectured, least of all by a black pot.
• Some anti-healthcare bill protesters are racists, thugs.
• La Russie n’a pas à rougir de son passé – “Russia doesn’t have to be ashamed of its past”, a (very rare) “Russophile” article from the French media (Le Figaro in this case). I particularly liked one comment, “Cet article peut nuire a la santé de A.Glucksman…” (“this article may hurt the health of A. Glucksmann” [a famous Russophobe, in fact the denizens of inoSMI.ru have designed a "Russophobe scale" in which a "Gluck" (глюк) is the basic unit!]). (h/t Alexandre Latsa)
• Obama Derangement Syndrom – Republicans are the Party of Stupid: 67% believe Obama is a socialist, 57% a Muslim, 45% a non-US citizen, and 24% the Anti-Christ.
• All the ‘Nuance’ That’s Fit to Print – The New York Times relaxes taboos about Nazi Germany. Probably a natural development as the Holocaust fades from first-hand memory to history.
• Report: Current Knesset most racist of all time
• A lot of fuss about Russian Blackjack bombers invading Scotland. NATO “buzzes” close to Russian airspace all the time too.
• Ukraine’s Yanukovich to repeal Bandera hero decree – about time!
• @ those losers who loved criticising Russia for its below-usual performance in the Winter Olympics because it is not a “a good global citizen” (whatever that is) - Russian Paralympians at Top With 38 Medals!
• A New Human Relative from the Siberian Mountains. (h/t Ali Novruzov)
• CIA, State Department Apparently Acting on Plan to Destroy Wikileaks (Barrett Brown) – I found him through his exchanges with Mark Adomanis. What do you think of this article?
• Russian propaganda poster in Washington Times about why Saakashvili is a madman. (h/t Dmitry Rogozin)
• Journal of Hate Studies founded. (h/t Ali Novruzov)
• Contrary to stereotypes, the Brits have pretty good teeth (best in Europe).
• US states ranked by “size”.

16. Happy Earth Hour Day! (Personally, I think it’s a ridiculous and meaningless gesture that does absolutely nothing except assuage the guilt feelings of green-washy liberals for fucking up the planet).

Related posts:

1. Sublime News #5
2. Sublime News #8 – #9
3. Sublime News #1
4. Sublime News #3
5. Sublime News #4