In previous years, my tradition was to review the previous year before launching into new predictions. I find this boring and will now forego the exercise, though in passing I will note that many of the defining traits in 2010 - the secular rise of China and of “The Rest” more generally; political dysfunction in the US; growing fissures in Europe, in contrast to Eurasian (re)integration; the rising prominence of the Arctic - have remained dominant into this year. The major new development that neither I nor practically anyone else foresaw was the so-called “Arab Spring”, as part of a pattern of increasing political stress in many other states: Occupy Wall Street and its local branches in the West; the Meetings for Fair Elections in Russia; Wukan in China and anti-corruption protests in India. I don’t disagree with TIME’s decision to nominate The Protester as its person of the year. However, as I will argue below, the nature of protest and instability is radically different in all these regions. I will finish up by reviewing the accuracy of my 2011 predictions from last year.

1. There is little doubt that Putin will comfortably win the Presidential elections in the first round. The last December VCIOM poll implies he will get about 60%. So assuming there is no major movement in political tectonics in the last three months – and there’s no evidence for thinking that may be the case, as there are tentative signs that Putin’s popularity has began to recover in the last few weeks from its post-elections nadir. Due to the energized political situation, turnout will probably be higher than than in the 2008 elections – which will benefit Putin because of his greater support among passive voters. I do think efforts will be made to crack down on fraud so as to avoid a PR and legitimacy crisis, so that its extent will fall from perhaps 5%-7% in the 2011 Duma elections to maybe 2%-3% (fraud in places like the ethnic republics are more endemic than in, say, Moscow, and will be difficult to expunge); this will counterbalance the advantage Putin will get from a higher turnout. So that’s my prediction for March: Putin wins in the first round with 60%, followed by perennially second-place Zyuganov at 15%-20%, Zhirinovsky with 10%, and Sergey Mironov, Mikhail Prokhorov and Grigory Yavlinsky with a combined 10% or so. If Prokhorov and Yavlinsky aren’t registered to participate, then Putin’s first round victory will probably be more like 65%.

2. I will also go ahead and say that I do not expect the Meetings For Fair Elections to make headway. Despite the much bigger publicity surrounding the second protest at Prospekt Sakharova, attendance there was only marginally higher than at Bolotnaya (for calculations see here). So the revolutionary momentum was barely maintained in Moscow, but flopped everywhere else in the country – as the Medvedev administration responded with what is, in retrospect, a well balanced set of concessions and subtle ridicule. Navalny, the key person holding together the disparate ideological currents swirling about in these Meetings, is not gaining ground; his potential voters are at most 1% of the Russian electorate. And there is no other person in the “non-systemic opposition” with anywhere near his political appeal. There will be further Meetings, the biggest of which – with perhaps as many as 150,000 people – will be the one immediately after Putin’s first round victory; there will be the usual (implausibly large) claims of 15-20% fraud from the usual suspects in the liberal opposition and Western media. But if the authorities do their homework – i.e. refrain from violence against peaceful protesters, and successfully reduce fraud levels (e.g. with the help of web cameras) – the movement should die away. As I pointed out in my article BRIC’s of Stability, the economic situation in Russia – featuring 4.8% GDP growth in Q3 2011 – is at the moment simply not conductive to an Occupy Wall Street movement, let alone the more violent and desperate revolts wracking parts of the Arab world.

3. Many commentators are beginning to voice the unspeakable: The possible (or inevitable) disintegration of the Eurozone. I disagree. I am almost certain that the Euro will survive as a currency this year and for that matter to 2020 too. But many other things will change. The crisis afflicting Europe is far more cultural-political than it is economic; in aggregate terms, the US, Britain and Japan are ALL fiscally worse off than the Eurozone. The main problem afflicting the latter is that it suffers from a geographic and cultural rift between the North and South that is politically unbridgeable.

The costs of debt service for Greece, Portugal, Italy, and Spain are all quickly becoming unsustainable. They cannot devalue, like they would have done before the Euro; nor is Germany prepared to countenance massive fiscal transfers. The result is the prospect of austerity and recession as far as the eye can see (note that all these countries also have rapidly aging populations that will exert increasing pressure on their finances into the indefinite future). Meanwhile, “core Europe” – above all, Germany – benefits as its superior competitiveness allows it to dominate European markets for manufactured goods and the coffers of its shaky banking system are replenished by Southern payments on their sovereign debt.

The only way to resolve this contradiction is through a full-fledged fiscal union, with big longterm transfers from the North to the South. However, the best the Eurocrats have been able to come up with is a stricter version of Maastricht mandating limited budget deficits and debt reduction that, in practice, translates into unenforceable demands for permanent austerity.  This is not a sustainable arrangement. In Greece, the Far Left is leading the socialists in the run-up to the April elections; should they win, it is hard to see the country continuing on its present course. On the other side of the spectrum, the Fidesz Party under Viktor Orbán in Hungary appears to be mimicking United Russia in building a “managed democracy” that will ensure its dominance for at least the next decade; in the wake of its public divorce with the ECB and the IMF, it is hard to imagine how it will be able to maintain deep integration with Europe for much longer. (In general, I think the events in Hungary are very interesting and probably a harbinger of what is to come in many more European countries in the 2010′s; I am planning to make a post on this soon).

Maybe not in 2012, but in the longer term it is becoming likely that the future Europe will be multi-tier (not multi-speed). The common economic space will probably continue growing, eventually merging with the Eurasian Union now coalescing in the east. However, many countries will drop out of the Eurozone and/or deeper integration for the foreseeable future – the UK is obvious (or at least England, should Scotland separate in the next few years); so too will Italy (again, if it remains united), Greece, the Iberian peninsula, and Hungary. The “core”, that is German industrial muscle married to Benelux and France (with its far healthier demography), may in the long-term start acquiring a truly federal character with a Euro and a single fiscal policy. But specifically for 2012, I expect Greece to drop out of the Eurozone (either voluntarily, or kicked out if it starts printing Euros independently, as the former Soviet republics did with rubles as Moscow’s central control dissipated). The other PIGS may straggle through the year, but they too will follow Greece eventually.

I expect a deep recession at the European level, possibly touching on depression (more than 10% GDP decline) in some countries.

4. How will Russia’s economy fare? A lot will depend on European and global events, but arguably it is better placed than it was in 2008. That said, this time I am far more cautious about my own predictions; back then, I swallowed the rhetoric about it being an “island of stability” and got burned for it (in terms of pride, not money, thankfully). So feel free to adjust this to the downside.

• The major cause of the steep Russian recession of 2008-2009 wasn’t so much the oil price collapse but the sharp withdrawal of cheap Western credit from the Russian market. Russian banks and industrial groups had gotten used to taking out short-term loans to rollover their debts and were paralyzed by their sudden withdrawal. These practices have declined since. Now, short-term debts held by those institutions have halved relative to their peak levels in 2008; and Russia is now a net capital exporter.
• I assume this makes Russia far less dependent on global financial flows. Though some analysts use the loaded term “capital flight” to describe Russia’s capital export, I don’t think it’s fair because the vast bulk of this “flight” actually consists of Russian daughters of Western banking groups recapitalizing their mothers in Western Europe, and Russians banks and industrial groups buying up assets and infrastructure in East-Central Europe.
• The 2008 crisis was a global financial crisis; at least *for now*, it looks like a European sovereign debt crisis (though I don’t deny that it may well translate into a global financial crisis further down the line). There are few safe harbors. Russia may not be one of them but it’s difficult to say what is nowadays. US Treasuries, despite the huge fiscal problems there? Gold?
• Political risks? The Presidential elections are in March, so if a second crisis does come to Russia, it will be too late to really affect the political situation.
• Despite the “imminent” euro-apocalypse, I notice that the oil price has barely budged. This is almost certainly because of severe upwards pressure on the oil price from depletion (i.e. “peak oil”) and long-term commodity investors. I think these factors will prevent oil prices from ever plumbing the depths they briefly reached in early 2009. So despite the increases in social and military spending, I don’t see Russia’s budget going massively into the red.
• What is a problem (as the last crisis showed) is that the collapse in imports following a ruble depreciation can, despite its directly positive effect on GDP, be overwhelmed by knock-on effects on the retail sector. On the other hand, it’s still worth noting that the dollar-ruble ratio is now 32, a far cry from what it reached at the peak of the Russia bubble in 2008 when it was at 23. Will the drop now be anywhere near as steep? Probably not, as there’s less room for it fall.
• A great deal depends on what happens on China. I happen to think that its debt problems are overstated and that it still has the fiscal firepower to power through a second global crisis, which should also help keep Russia and the other commodity BRIC’s like Brazil afloat. But if this impression is wrong, then the consequences will be more serious.

So I think that, despite my bad call last time, Russia’s position really is quite a lot more stable this time round. If the Eurozone starts fraying at the margins and falls into deep recession, as I expect, then Russia will probably go down with them, but this time any collapse is unlikely to be as deep or prolonged as in 2008-2009.

5. Largely unnoticed, as of the beginning of this year, Russia, Belarus, and Kazakhstan became a common economic space with free movement of capital, goods, and labor. Putin has also made Eurasian (re)integration one of the cornerstones of his Presidential campaign. I expect 2012 will be the year in which Ukraine joins the Eurasian common economic space. EU membership is beginning to lose its shine; despite that, Yanukovych was still rebuffed this December on the Association Agreement due to his government’s prosecution of Yulia Tymoshenko. Ukraine can only afford to pay Russia’s steep prices for gas for one year at most without IMF help, and I doubt it will be forthcoming. Russia itself is willing to sit back and play hardball. It is in this atmosphere that Ukraine will hold its parliamentary elections in October. If the Party of Regions does well, by fair means or foul, it is not impossible to imagine a scenario in which accusations of vote rigging and protests force Yanukovych to turn to Eurasia (as did Lukashenko after the 2010 elections).

6. Russia’s demography. I expect births to remain steady or fall slightly (regardless of the secular trend towards an increasing TFR, the aging of the big 1980′s female cohort is finally starting to make itself felt). Deaths will continue to fall quite rapidly, as excise taxes on vodka – the main contributor to Russia’s high mortality rates – are slated to rise sharply after the Presidential elections.

7. Obama will probably lose to the Republican candidate, who will probably be Mitt Romney. (Much as I would prefer Ron Paul over Obama, and Obama over Romney). I have an entire post and real money devoted to this, read here.

The US may well slip back towards recession if Europe tips over in a big way. I stand by my assertion that its fiscal condition is in no way sustainable, but given that the bond vigilantes are preoccupied with Europe it should be able to ride out 2012.

8. There is a 50% (!) chance of a US military confrontation with Iran. If it’s going to be any year, 2012 will be it. And I don’t say this because of the recent headlines about Iranian war games, the downing of the US drone, or the bizarre bomb plot against the Saudi ambassador in the US, but because of structural factors that I have been harping on about for several years (read the “Geopolitical Shocks” section of my Decade Forecast for more details); factors that will make 2012 a “window of opportunity” that will only be fleetingly open.

• Despite the rhetoric, the US does not want to get involved in a showdown with Iran due to the huge disruption to oil shipping routes that will result from even an unsuccessful attempt to block of the Strait of Hormuz. BUT…
• While a nuclear Iran is distasteful to the US, it is still preferable to oil prices spiking up into the high triple digits. But for Israel it is a more existential issue. Netanyahu, in particular, is a hardliner on this issue.
• The US has withdrawn its troops from Iraq. In 2010, there were rumors that the US had made it clear to Israel that if it flew planes over Iraq to bomb Iran they would be fired upon. This threat (if it existed) is no longer actual.
• The US finished the development of a next-generation bunker-busting MOP last year and started taking delivery in November 2011. But the Iranians are simultaneously in a race to harden and deepen their nuclear facilities, but this program will not culminate until next year or so. If there is a time to strike in order to maximize the chances of crippling Iran’s nuclear program, it is now. It is in 2012.
• Additionally, if Europe goes really haywire, oil prices may start dropping as demand is destroyed. In this case, there will be an extra cushion for containing fallout from any Iranian attempt to block off the Strait of Hormuz.
• Critically, the US does not have to want this fight. Israel can easily force its hand by striking first. The US will be forced into following up.

The chances of an Azeri-Armenian war rise to 15% from last year’s 10%. If there is any good time for Azerbaijan to strike, it will be in the chaotic aftermath following a US strike on Iran (though the same constraints will apply as before: Aliyev’s fears of Russian retaliation).

From "The Oil Drum"

9. Though I usually predict oil price trends (with great and sustained accuracy, I might add), I will not bother doing so this year. With the global situation as unstable as it is it would be a fool’s errand. Things to consider: (1) Whither Europe? (demand destruction); (2) What effect on China and the US?; (3) the genesis of sustained oil production decline (oil megaprojects are projected to sharply fall off from this year into the indefinite future); (4) The Iranian wildcard: If played, all bets are off. But I will more or less confidently predict that global oil production in 2012 will be a definite decrease on this year.

If investing, I would go into US Treasuries (short-term) and gold to hedge against the catastrophic developments; yuan exposure (longterm secular rise) and and US CDS (potential for astounding returns once SHTF). Property is looking good in Minsk, Bulgaria, and Murmansk. Any exposure to Arctic shipping or oil & gas is great; as the sea ice melts at truly prodigious rates, the returns will be amazing. I do think the Euro will survive and eventually strengthen as the weaker countries go out, but not to the extent that I would put money on it. Otherwise, I highly agree with Eric Kraus’ investment advice.

10. China will not see a hard landing. It has its debt problems, but its momentum is unparalleled. Economists have predicted about ten of its past zero collapses.

11. Solar irradiation was still near its cyclical minimum this year, but it can only rise in the next few years; together with the ever-increasing CO2 load, it will likely make for a very warm 2012. So, more broken records in 2012. Record low sea ice extent and volume. And perhaps 100 vessels will sail the Northern Sea Route this year.

12. Tunisia is the only country of the “Arab Spring” that I expect to form a more or less moderate and secular government. According to polls, 75% of Egyptians support death for apostasy and adultery; this is not an environment in which Western liberal ideas can realistically flourish. Ergo for Libya. I can’t say I have any clue as to how Syria will turn out. Things seem strange there: Russia and Israel are ostensibly unlikely, but actually logical, allies of Assad, while the US, France, the UK, and the Gulf monarchies are trying their best to topple him. These wars are waged in the shadows.

I've got some ways to go before I reach Navalny's demagogic stature.

13. As mentioned in the intro, 2011 has been a year of protest. As I argued in BRIC’s of Stability, in countries like China, Russia, or Brazil they will remain relatively small and ineffectual. Despite greater scales and tensions, likewise in Europe (though Greece may be an exception); these are old societies, and besides they are relatively rich. They won’t have street revolutions. I do not think Occupy Wall Street has good prospects in the US. By acting outside the mainstream (as part of a “non-systemic opposition”, to borrow from Russian political parlance) it remains irrelevant – the weed smoking and poor sartorial choices of its members works against its attaining respectability – and municipalities across the US are moving to break up their camps with only a few squeaks of protest. (This despite the arrests of 36 journalists, a number that had it been associated with Russia would have cries of Stalinism splashed across Western op-ed pages). I say this as someone who is broadly sympathetic with OWS aims and has attended associated events in Berkeley.

The nature of protest in the Arab world is fundamentally different, harkening back to earlier and more dramatic times: Bread riots, not hipsters with iPhones; against cynical and corrupt dictators, not cynical and corrupt pseudo-democrats; featuring fundamental debates about reconciling democracy, liberalism and religion, as opposed to weird slogans like “Occupy first. Demands come later.” Meh.

14. The world will, of course, end on December 21, 2012.

What about the 2011 Predictions?

1) My economic predictions were basically correct: “Today I’d repeat this, but add that the risks have heightened… The obvious loci of the next big crisis are the so-called “PIGS” (Portugal, Italy, Greece, Spain), and Ireland, Belgium and Hungary.”

2) Neither the Iranian war (chance: 40%) or an Azeri-Armenian war (chance: 10%) took place. If they don’t happen in 2012, their chances of happening will begin to rapidly decline.

3) Luzhkov still hasn’t been been hit with corruption charges, but merely called forth as a witness. Wrong.

Prediction of 3.5%-5.5% growth for Russia was exactly correct (estimates now converging to 4.0%-4.5%).

With headlines this December cropping up such as “End is nigh for Russia’s ‘reset’ with US“, my old intuition that US – Russia imperial rivalry couldn’t be set aside with a mere red plastic button may have been prescient: “In foreign policy, expect relations with the US to deteriorate.”

4) Pretty much correct about the US and the UK, though I didn’t predict anything drastic or unconventional for them.

5) “Oil prices should stay at around $80-120 in 2010 and production will remain roughly stable as increased demand (from China mostly) collides with geological depletion.” Totally correct, as usual.

6) China will grow about 9.4% this year, well in line with: “China will continue growing at 8-10% per year. Their housing bubble is a non-issue; with 50% of their population still rural, it isn’t even a proper bubble, since eventually all those new, deserted apartment blocs will be occupied anyway.”

7) 2011 was the warmest La Nina year on record, so in a sense thermometers did break records this year.

“Speaking of the Arctic, as its longterm ice volume continues to plummet and sea ice extent retreats, we can expect more circumpolar shipping. I wouldn’t be surprised to see up to 10 non-stop voyages along the Northern Sea Route from Europe to China, following just one by MV Nordic Barents in 2010.” If anything, I low-balled it. 34 ships made the passage this year! Sea ice cover was the second lowest on record, and sea ice volume was the lowest. So in the broad sense, absolutely correct.

“Likewise, expect the Arctic to become a major locus of investment.” This year, plans were announced to double the capacity of the Port of Murmansk by 2015.

Wrong on the Wikileaks prediction. The insurance file was released by The Guardian’s carelessness (whose journalists, David Leigh and Luke Harding, then proceeded to mendaciously lie about it), not by Assange. And the extradition proceedings are taking far longer than expected, though my suspicions that his case is politically motivated is reinforced by US prosecutors’ apparent pressure on Bradley Manning to implicate Assange in the theft of the State Department cables.

9) On Peter’s enthusiastic reminder, I did get my Russia Presidential predictions for 2012 wrong. Or 75% wrong, to be precise, and 20% right (those were the odds that I gave for Putin’s return back in May). I did however cover it separately on a different post, here. That said, I do not think the logic I used was fundamentally flawed; many other Kremlinologists ended up in the same boat (and most didn’t hedge like I did).

While I don’t want to decry Churov, the head of the Central Electoral Commission, for making subjects many people gave up back in 8th grade fun and interesting again, I would like to insert a word of caution: lots of math and numbers do not necessarily prove anything, and in fact – generally speaking – the more math and numbers you have the less reliable your conclusions (not making this up: the research backs me up on this). Complicated calculations can be rendered null and void by simple but mistaken assumptions; the sheer weight of figures and fancy graphs cannot be allowed to crowd out common sense and strong diverging evidence. Since the most (in)famous of these models asserts that United Russia stole 15% or more of the votes, it is high time to compile a list of alternate models and fraud estimates that challenge that extremely unlikely conclusion – unlikely, because if it were true, it would essentially discredit the entirety of Russian opinion polling for the last decade.

In this post, I will compile a list of models built by Russian analysts of the scale of electoral fraud in the 2011 Duma elections. I will summarize them, including their estimates of aggregate fraud in favor of United Russia, and list their possible weak points. The exercise will show that, first, the proper methodology is very, very far from settled and as such all these estimates are subject to (Knightian) uncertainty; but second, many of them converge to around 5%-7%, which is about the same figure as indicated by the most comprehensive exit poll. This is obviously very bad but still a far cry from the most pessimistic and damning estimates of 15%+ fraud, which would if they were true unequivocally delegitimize the Russian elections.

The Magical Beard (16% fraud)

The long-time elections watcher and phycist Sergey Shpilkin (podmoskovnik) has probably written the most popular article on the use of statistical analysis to detect electoral fraud. The first piece of evidence of fraud is that as turnout increases, so does United Russia’s share of the vote; the effect is not observed for the other parties, whose share remains constant or even declines. Below is the graph for Moscow.

And below, courtesy of Maxim Pshenichnikov (oude_rus), is the same graph as a “heat map” for all Russia.

But that’s not all. A second problem is that turnout in Russia does not follow a normal, or Gaussian distribution. The laws of probability dictate that if you throw a coin 100 times, it is fairly unlikely that the “heads” will turn up exactly 50% of the time; however, as you repeat this experiment a dozen, a hundred, and then a thousand times, the average should converge to 50%. A graph of all these experiments should be in the form of a bell curve, with a peak at the midway point and falling away rapidly on either side. Theoretically, this should also hold for turnout, and this is in fact what we see in for elections in countries such as Mexico, Bulgaria, Sweden, Canada, Poland, and Ukraine. As we can see, there are suspicious peaks at 100% turnout in some of the less developed democracies like Ukraine, Bulgaria, and even Poland; and Ukraine’s Gaussian distribution breaks down beyond about 90% turnout altogether. Nonetheless, the overwhelming indications are that all these countries conduct almost fully free and fair elections.

But these laws do not seem to apply to Russia, including for the most recent Duma elections. Not only does the normal distribution break down on the right hand side of the graph, from about the 60% turnout point, but there begin to appear consistent peaks at “convenient” intervals of 5%, as if the polling stations with 70%, 75%, 80%, 90%, and 100% turnout were working to targets! Though the most recent election seems marginally better than the 2007 Duma election and the 2008 Presidential election, the overall indication is one of rampant shenanigans and fraud.

Graphing the number of polling stations, as done by Pshenichnikov, at which every party got a certain percentage of the votes, exposes United Russia as the black sheep of the political family. Regular spikes at 5% intervals begin from 50% onwards, at which point the Gaussian distribution breaks down and is stretched away into oblivion – producing what is now jocularly referred to as “Churov’s beard.”

And in Moscow, United Russia’s curve looks even more ridiculous. The twin peaks that Yabloko has are either because their vote was stolen at some places and not at others, or they did not have a proper Gaussian to begin with. (Note how practically all the Moscow polling stations with machines cluster at around 30% for United Russia, strongly indicating that the second, bigger peak at around 50% is falsified; see these two clusters in more graphic form here).

Then there’s the matter of abnormal turnout patterns. Cui bono? Quite clearly, United Russia. Returning to Shpilnikov’s work, as you can see below, the higher the turnout, the greater the relative discrepancy between votes for United Russia and the opposition parties.

The author then proceeds to “normalize” United Russia’s results, making the blanket assumption  that the correlation between high turnout and higher votes is entirely due to fraud and that it is valid to extend the correlation between votes for United Russia relative to the other parties observed for stations will turnout lower than 50% to every other polling station. Its adjusted results vastly differ from its official results, with the numbers of falsified votes soaring once turnout at any individual polling station exceeds 50% and rapidly converging to near total falsification once turnout rises to 70% and above.

At this point, it is possible to “integrate” the adjusted results curve, to calculate United Russia’s real result. The conclusions are devastating. According to Shpilkin’s final calculations, cited by GOLOS, out of 32 million votes for United Russia, only half of them – some 16.2 million – are “normal”, whereas the other 15.8 million are “anomolous.” This means that in reality it only got 33.7% of the vote, as opposed to the official 49.3%, implying a 15.6% degree of fraud.

This would clearly make the Duma elections illegitimate, as the will of the Russian electorate – a truly multi-party parliament – is not reflected. If the elections were fair, United Russia would lose its majority and have to rely on coalitions with other parties to pursue its legislative agenda. It would appear that the non-systemic opposition has a clear mandate to demand a rerun.

Not so fast. This claim of 15% fraud is contrary to the entirety of Russian opinion polling, which generally predicted United Russia would get 50%, and to the results of the most comprehensive exit poll, which gave it 43%. Furthermore, as other bloggers rushed to point out, Shpilkin makes many highly questionable assumptions that challenge the credibility of his estimates, for instance, he doesn’t back up his claim that the correlation of higher turnout with more votes for United Russia (and is in fact contradicted by electoral patterns in advanced democracies like Germany and the UK).

PS. You can read an alternate explanation of this method in English by Anton, a Russian blogger living in Finland.

What About Limey?

The mathematician Sergey Kuznetsov wrote a long piece at eruditor.ru attempting to rebut Shpilkin’s conclusions. He starts off by pointing out that the Gaussian distribution achieved by conducting multiple coin tossing experiments is artificial because conditions remain identical. The same cannot be said if some of the experimenters continue tossing coins, while others of their kind begin to favor using dice with “heads” on five of their faces. Likewise, in a country with many socio-economically and culturally idiosyncratic regions such as Russia, Gaussian distributions are not inevitable.

As for the peaks at 5% intervals, they are products of elementary number theory. There must be a jump at 50% because the fraction 1/2, among other fractions n/m, appears more frequently than any other. The same can be said for other “nice” fractions: 2/3, 3/4, 4/5, and so on. Not only fraudsters like these “beautiful” fractions; its an intrinsic property of number theory itself. This is demonstrated below by Ruslan Enikeev (singpost), who built a frequency distribution of the natural outcome of multiple elections with 600 participants; as you can see below, there are very prominent spikes at all the “nice” fractions.

And guess what? If we are to build Pshenichnikov’s graph in “The Magical Beard” but at much finer resolutions, like Kuznetsov did, we get the following. Note how the other parties also get their spikes at “nice” fractions!

So you say that a correlation between higher turnout and more votes for United Russia means mass electoral fraud? If that’s the case, Britain must be a banana republic. Below is the relation between turnout and votes for the Conservatives and New Labour in the 2010 general elections (and this pattern is common to every British region).

Nor are British voters big fans of the Gaussian distribution either.

PS. At this point, I should also note that I observed lots of small peaks for the 2007 Ukraine elections (i.e. after its Orange Revolution) in this blog post.

That said, it should be noted that Kuznetsov acknowledges that the fat tail, and some of the 5% intervals that cannot be explained by number theory – e.g., 65%, 70%, 85%, 90%, 95% – means that a lot of fraud probably did happen.

PS. This has been pretty much confirmed by bloggers such as gegmopo4 (“Happy Pictures“) and Dmitry Kobak (“Party of Scoundrels and Thieves and 10 Sigma“).

The Reichstag Is Burning Since 2002!

The programmer Sergey Slyusarev (jemmybutton) also gave his two kopeiki on election fraud. He pointed out that as in the UK, the turnout for the 2002 Bundestag elections did not follow a perfect Gaussian either; in particular, a lower turnout in East Germany contributed to a second, smaller peak to the left of the main one. He also notes that higher turnouts correlated with more votes for the conservative alliance and fewer votes for the social democrat / green alliance.

Just as Kuznetsov above, he also discussed how pure number theory can explain most of the peaks along 5% intervals. However, even after making adjustments for it, there remained peaks at 75%, 85%, and the fat tail in general that he could not explain as being natural.

I would add that that is understandably so, if we consider this graph of North Ossetia’s results from Pshenichnikov. The biggest irony is that they didn’t even HAVE TO do it to ensure a big United Russia win. The “natural” Gaussian for UR (from the few free and fair stations) seems to be only a few percentage points short of the artificial peak. There’s idiots and then there’s bureaucrats.

He goes into further really wonky elections stuff later on in his post. There are no firm insights or conclusions arising from it, so I’ll refrain from summarizing it.

Trust Me On Arabs In Israel

The blogger, and aspiring Sinologist Vitaly Shishakov (svshift) doesn’t have original models, but does have a lot of useful links. He gives further examples of countries where higher turnouts result in more votes for certain parties and of where turnout does not follow Gaussian distributions. One example is Israel, where Arab turnout in local elections is consistently, stunningly higher than in Jewish ones. As both are still in significant part traditionalist societies, one wonders if the same applies to the Caucasus states (a possibility I raised in my Al Jazeera article). Read him here and here.

Revealing The Real Israel

The blogger  levrrr does not believe that there is significant electoral fraud in Israel; and he agrees with Dmitry Kobak that this is patently not the case in Russia. Nonetheless, the curious patterns observed in the 2009 elections in that socio-culturally diverse society are a good reminder that just because it looks strange doesn’t necessarily mean surreptitious activities are afoot.

Unlike in many other countries, the distribution of voting stations by the percentage of votes each party obtained in them is most definitely not standard. Yisrael Beiteinu is log-normal; Likud is a Gaussian with two peaks (like Yabloko in Moscow); Kadima is kind of Gaussian but with a huge plateau; and the two fundamentalist parties (Shas and United Torah Judaism) have a weirdly long and fat tail. So no wonder Avigdor Lieberman is virtually the only foreign statesman to approve of Russia’s elections!

Comparing it to Pshenichnikov’s graph of Russia, there are striking comparative resemblances: Yabloko resembles Shas; the LDPR and Fair Russia resemble Yisrael Beiteinu; the KPRF resembles Likud; and apart from the spiked tail, United Russia looks like Kadima.

Like United Russia, the higher the turnout, the more votes Kadima gets, as in the graph below. The effect is neutral for Likud (as for the Russian opposition parties), and it is negative for Yisrael Beiteinu.

Nonetheless, Israel’s turnout is an indisputable Gaussian; there is no separate peak for the Arabs. (I would note that they have ultra-high turnouts only for local elections, not national ones). Less than 0.1% of polling stations saw a turnout of more than 95%, whereas this figure is more than 5% for the recent Russian elections. I assume that’s almost all fraud, as there are only so many barracks in Russia where everyone goes to vote en masse.

Dangerous Curves (5%-6% fraud)

The economist Sergey Zhuravlev (zhu_s) argues that the correlation between higher turnout and higher votes for United Russia is meaningless because of the “silent majority” effect. Voters for the opposition can be expected to turn out in full force, whereas people without any specific grievances against the “party of power” – who expect it to win with or without their participation – can turn out at varying rates in different regions, depending on their satisfaction with its performance and its success at mobilizing its supporters. As for United Russia’s unusually long tail, that can be explained by the very fact of its getting many votes. A party like Yabloko whose support base hovers in the lower single digits can be expected to have a very narrow peak at the beginning; a party like United Russia, which enjoys a great deal of supports with large geographic variation, will naturally have a far wider spread.

He outlines an alternative method that involves plotting the growth of each party’s share of the vote against the numbers of polling stations giving them a certain level of support. In a society where there are no regional differences in voting preferences and no falsifications, the graphs for each party can be expected to converge to a vertical center. In real life, regional differences flatten out this “ideal” vertical form, especially at the top and bottom. This is because both many stations with little support for a particular party, and the few stations with high support for a particular party, contribute only a small share of the votes to that party; most of its votes accrue to the many stations where support for that party is not far from the national average. This method eliminates the “flattening effect” observed in Shpilkin’s work where the mere fact of high popularity makes United Russia’s spread look unnaturally wide. As we can see below, all parties have substantial spreads in regional support; they are just on different scales.

From the graph above, United Russia is seen to enjoy an “S-effect”, in which stations where they got more than 70% – concentrated in the ethnic minority republics – contributed one fifth of its total vote; the kinks observed in that region are especially suspicious and indicative of mass fraud. This “S-effect” took away votes from the Communists and LDPR, creating an analogous “J-effect” at the bottom of their graphs. Yabloko too has an “S-effect”, if much lower in overall scale relative to United Russia, due to its relatively good performance in the two capitals; elsewhere, it is now just a forgotten relic of the 1990′s.

Whereas there is much evidence of fraud in Moscow, Zhuravlev has some of the strongest evidence against it as shown in the graph below. United Russia has a very natural curve, with no kinks observed at the at the top-right; instead, it has a “J-curve” at the bottom, presumably in the hipster Moscow districts with high support levels for Yabloko (a thesis corroborated by Yabloko’s prominent S-curve).

To resolve the possible falsifications arising from the S-effects and J-effects (with the caveat that they are not always indicative of fraud – e.g., Moscow with its Yabloko-friendly hipster districts), Zhuravlev suggests taking the median: i.e., the party voting shares such that half the polling stations have lower numbers and the other half have higher numbers. This effectively cuts out the S-effects and J-effects. The result is that United Russia loses 6% points relative to its official results, leaving it marginally below a Duma majority with 220 seats.

Of course, this approach too has its problems. It seems to me that kinks are only going to be observed where results are “drawn to plan” (as in some of the ethnic minority republics); where fraud is decentralized, the degree of fraud will itself be a wide spread, and as such not reflected in kinks or S-curves. His conclusion that fraud in Moscow was minimal contrasts with a whole heap of contrary evidence.

Zhuravlev expands on his thoughts on falsifications and the economics of political choice in a follow-up blog post.

Churov’s Defense (minimal fraud)

The Election Results: An Analysis of Electoral Preferences by Vladimir Churov. This isn’t the first time the head of the Central Elections Commission, a physicist with some Petersburg connections to Putin, has had to dodge incoming bullets from the election nerds and LJ malcontents. In response to criticisms of the last round of elections, in 2008 he co-authored an article in an attempt to rebut the critics.

His basic approach is to explain the idiosyncrasies of Russia election patterns in terms of voter behavior. At the beginning, he brings forth the standard criticism against the view that voter behavior must necessarily conform to normal distributions, i.e. it’s not a uniform series of experiments but the choices of a heterogeneous population we are talking about. The authors then proceed to build a model of electoral preferences for Russia’s different population groups in a quest to see how well it conforms with reality. Unlike everyone else on this list, he is analyzing the Presidential election of 2008, but that’s fine because according to Shpilkin it was one of the most falsified.

As shown in the graph above, rural polling stations and urban polling stations reveal starkly different voting patterns. I can see that the latter is described by an (almost internationally standard) log-normal curve; rural voters are the ones who create the fat tail. The other polling stations are various special ones, e.g. in closed institutions or the military, but only account for 1% of the total voters so their overall effect is small. The difference between turnout in the cities and the country is explained “deeper and stronger mutual relations” existing in the latter, whereas urban dwellers are a more amorphous mass. And I would remind the reader at this point that United Russia is more popular in the countryside.

At some level this does make sense – anybody who has lived in a Russian village (or even a small town) can confirm that people there know each other far better than in a big city or a metropolis like Moscow. I can easily imagine a social activity like voting will logically draw a higher participation. He makes a further interesting argument regarding the relation between turnout and the size of the voter list at polling stations (see “Size Matters, Baby” below for a nice graph by Pshenichnikov illustrating this). Basically, turnout at urban polling stations with smaller voter lists begins to converge to converge with results from rural polling stations with bigger voter lists; but unlike in towns, the vast bulk of votes in rural areas accrue to polling stations with small voter lists, where turnout is very high.

And though there are fewer rural voters than urban voters, the number of polling stations is about evenly split between the two – because the average rural polling station has a smaller voter list than the average urban polling station. Adding the results from city stations and rural stations together produces the fat tail on the turnout graphs.

In summary, the overall turnout distribution by polling station is merely the sum of how different Russian population groups vote: urban voters, rural voters, institutional voters (e.g. soldiers).

Worried about the “cragginess” of the graph? Just the result of ordinary fluctuations. It increases when you analyze it at higher resolutions and fades away to nothing at the lowest resolutions.

Plotting the voter turnout distribution not against the number of polling stations but against the number of voters voting in places at any particular turnout will naturally diminish the fatness of the tail (because as pointed out above the polling stations with small voter lists will have the highest turnouts).

As before, the same general turnout pattern is observed in terms of rural and urban voting patterns when plotted against voter numbers.

Churov further argues that the proportional votes for each candidate are NOT huge affected by the turnout. What tendency Medvedev has to win more votes relatively at higher turnouts is down to the increasing influence of the rural vote. A close up of the voting figures for the 75%-100% is presented.

As far as I can see, Churov makes an important point (and in large part convincing) point about the different voting patterns that describe rural and urban voters, and especially the effect of the size of the polling station’s voter list on the turnout. However, he patently fails to address the main concerns of his critics for one simple reason.

He only analyzed the results from 25 regions of European Russia. Which ones? They are not even identified (apart from Kaliningrad, Murmansk and Arghangelsk oblasts, and the Nenets autonomous region, which are mentioned in passing as included). If there is a link telling us what the other 21 are, I cannot find it. And the biggest problem is that, of course, fraud is highly variant by Russian regions. For instance, see Aleksandr Kireev‘s (kireev) map of his estimates of election fraud. Note that three of the four regions actually cited by Churov are green, i.e. indicating that they had little or no fraud in the 2011 elections. As Russian political culture hasn’t changed much in the past three years, they presumably looked similar in 2008.

I strongly suspect that for his analysis Churov merely handpicked the most electorally honest regions he could find and worked from there. Why else include only the 25 regions, with 21% of Russia’s voters and 23% of its voting stations, when he obviously has access to the Central Election Commission’s entire database just like any other blogger? These suspicions are further reinforced by the lack of spikes at regular 5% intervals that everyone else who compiled turnout distributions at the federal level found. He makes some good arguments but the overall conclusions that there is no or minimal fraud is not credible.

Separate The Wheat From The Chaff (5%-7%; 6.6% fraud)

The computer programmer hist_kai takes a relatively simple approach. He plots the number of people voting for United Russia under every 0.1% point interval to get the graph below.

Then he removed all voices for United Russia at 5% intervals, in a 0.5% swathe left and right. This gives a level of fraud of 0.7%. Then he removes all polling stations where United Russia got more than 75%. This gives a total fraud level of 7.3%.

This is highly unscientific, of course. Some polling stations where United Russia got less than 75% would have been dirty, and some where it got more than 75% would have been clean. Still, it’s a useful way to demonstrate that even removing all the places where it got huge amounts of the vote would have only modestly impacted United Russia’s total tally and would have still clearly left it as the biggest winner.

A group from Samarcand Analytics (Alex Mellnik, John Mellnik and Nikolay Zhelev) issued a study using the a similar method to hist_kai, though they cut off the top quintile of turnout as opposed to all stations registering more than 75% support for United Russia. They justified this on the basis that it was only the quintile with the highest turnout that voted for United Russia in a spectacularly non-Gaussian distribution.

Because of the aforementioned observations that higher turnout correlates with more votes for United Russia, its score after this adjustment is reduced to 42.7%. This implies a possible fraud of 6.6%. The adjusted results for all parties are as follows:

Despite the methodological problems with this relatively crude method, it’s worth noting that the adjusted results by party are highly congruent with the results of the FOM exit poll, the most comprehensive one.

Rise of the Machines (6%-7%; 17% fraud)

There are very significant and suspicious discrepancies between polling stations with machine voting and polling stations were counted by hand. The former, on average, are a lot lower.

According to graphs compiled by Sergey Shpilkin, the turnout looks a lot more Gaussian in polling stations equipped with machines; those without feature very fat tails, rising to a much sharper spike at 100%. Compare the turnout graph below for polling stations with machines with the average turnout graph in the section “The Magical Beard.”

Across the same territorial electoral commissions, United Russia got an average of only 36.6% at polling stations equipped with voting machines; this is compared to its 54.2% result elsewhere. This would seem to indicate huge fraud, as machines are harder to tamper with. But this is only assuming that there is no consistent difference between polling stations with and without voting machines.

But this may not be merited as urban, more accessible areas can generally be expected to have a higher likelihood of hosting voting machines, and they are also precisely the places where United Russia has done less well in these elections. On the other hand, if both machines and hand ballots are falsified – e.g. as seems to be the case in Karachay-Cherkessia - this indicator would be a false negative.

In a joint project, Maxim Pshenichnikov and Dmitry Kobak (kobak) compiled a list of disparities between machine and hand ballot results in each of Russia’s cities. They return substantially smaller estimates of overall fraud, albeit there are huge differences between regions. The average calculated by Pshenichnikov is 6.3%. This figure he termed “коибатость”, i.e. which we may translate as “machination.” As you can see in the graph below, the city with the highest measure of fraud – as measured by the machine / hand ballot discrepancy, which has its methodological problems – is Astrakhan, with more than 30% fraud in favor of United Russia. In third or fourth position follows Moscow, with slightly less than 20% fraud in favor of United Russia.

The average calculated by Kobak is 6%-7%. His method is slightly different from – and more rigorous than - Pshenichnikov’s, because whereas the latter calculated “global” machination he confined himself to “local” machination, i.e. he only used the statistics from those polling stations which had at least one voting machine for his comparison with the results from voting machines. Apart a histogram similar to the one above also produces this stunning map of machine and hand ballot voting in Russia’s urban regions: The “green meteors” are results from hand voting, the “red meteors” (which aren’t usually near as trail-blazing) are the results from machine voting.

Kobak is unsure as to why the big discrepancy with Shpilkin’s figures. He emphasizes that Shpilkin’s 37% figure for United Russia cannot be taken at face value because machines tend to be present in larger cities where United Russia does less well; but does consider the 17% figure (the federal average) an important estimate, despite its being much different from his own 6%-7% estimate (the average by region).

One theory he suggests is that in even in those regions where United Russia has a high results, there are few machines and many individuals sites are without them; there, the difference between hand voting and machine voting results is modest at 7%. But when counting up these results on the federal level, these high-United Russia support regions only contribute a little to the aggregate total at well below their true weight (because few of them have machines and can be counted); while contributing a lot to the hand voting totals. Hence the possible source of the huge (and “misleading”) 17% discrepancy.

Meteors of Mendacity (11% fraud)

Dmitry Kobak (kobak) is another big skeptic of the official results. Like Shpilkin, he considers the turnout / voting correlation in favor of United Russia damning, and has some nice graphs to illustrate it. For an election to be fair, the meteors have to be flying to the left and their trails have to be horizontal – a condition that United Russia fails to fulfill. See above for extensive criticism of this assertion.

He calculates the real result by cutting away all the data from polling stations with “suspiciously high turnout”, which he puts at anything bigger than 60% or 50%. Due to United Russia getting far fewer votes in places where turnout is low, that has the effect of reducing its result from 49.3% to 36% and 34%, respectively.

Needless to say his graphs look nice, but they hide a very crude method. Cutting off at 60% essentially dismisses half the entire electorate. He addresses this concern by taking the minimum of United Russia’s voting curve in relation to the turnout, then sums the results up to get a real score of 38%. This implies 11% fraud.

This seems more realistic than the 15%+ obtained by Shpilkin, which clashes so badly with the results of exit polls and opinion polls, if still towards their absolutely lowest margins of error. And needless to say the fairness of taking United Russia’s minimum – and assigning anything above it to fraud – is highly questionable. Using the regional turnout and voting data for the 2010 UK general election provided by _ab_, would the same method not “prove” massive fraud in favor of the Tories?

He also reproduces Shpilkin’s normalization method, producing a real result of 34% for United Russia and hence fraud of 15%. However, even he rejects the method as too harsh and simplistic, ignoring local specifics.

His analysis of the applicability of Benford’s Law to the Russian elections saw no interesting results.

Size Matters, Baby

Maxim Pshenichnikov points out that the larger the amount of voters at any polling station the lower a result United Russia tends to get there. Is it because fraud is harder when there are more people? Or is because smaller stations would probably tend to be in rural and more remote areas, which are usually more pro-United Russia? He doesn’t comment. You decide.

Questioning Russian Behavior

That the correlation between higher turnout and more votes for United Russia is indicative of fraud has two main arguments against it, as we saw above: First, the logic of the “silent majority”, and second, comparisons with other countries like the UK, Germany, and Israel. The blogger vmenshov attempts to prove that this “silent majority” thesis does not apply to Russia, and that the effect really is down to vote stealing on United Russia’s behalf.

So Is It Time To Get The Barber?

Back in 2007, Churov promised to shave off his beard if the elections were unfair. Should we send him the barber then?

It’s a hard question. That there is statistical evidence indicating some degree of fraud is beyond dispute. What’s at stake is the scale. Much like United Russia’s results in Moscow, there are two big clusters: I will simplify them to the 5% Thesis and the 15% Thesis. (There is also a 0% Thesis, as argued by Churov and Kremlin spokespersons; not as if they have much of a choice on the matter. But I think most of us can agree that just the results from Chechnya alone discredit this group).

The 5% Thesis is maintained by Sergey Zhuravlev and the aggregate regional discrepancies between districts with and without machine voting; it is also the figure suggested by practically every opinion poll and exit poll.

The 15% Thesis, most prominently advanced by Sergey Shpilkin and Dmitry Kobak, has become the banner figure of the opposition. If they are right the current composition of the Duma does not reflect the will of the Russian electorate and as such the elections have to be honestly rerun for the system to win back its legitimacy.

The problem with it is that it relies on three fundamental assumptions about Russian elections which. Kirill Kalinin, writing for Slon.ru, identifies these three assumptions thus:

1. The lack of a “normal” Gaussian turnout and voting distribution.
2. Suspicious spikes at regular intervals in the turnout and voting distribution.
3. A positive correlation between turnout and votes for United Russia.

The problem is that all of these assumptions have been argued to be invalid in the Russian context. That said, there are powerful counter-arguments too. By the numbers:

1. A heterogeneous population and examples of similar phenomenon from advanced democracies throw doubt on this argument, BUT none have tails quite as fat or spikes quite as sharp as does United Russia.
2. The spikes may, in part, be a product of number theory. But as turnout rises above 60%, they become too sharp to be attributed to number theory alone; and besides, number theory can only explain spikes at common fractions, not at places like 85% or 95%.
3. The thesis of the “silent majority” and myriad examples from other countries severely weaken this assumption.

It’s good that this election has inspired bloggers, activists and scientists to delve into the interesting and undeveloped world of electoral fraud analysis. They may well be truly groundbreaking original research on the subject lurking somewhere on Runet.

Nonetheless, there remain huge uncertainties; one must guard against the deceptive simplicity and aesthetic richness of most of these arguments. A further peril is that, understandably, this discussion is extremely politicized. As a rule, proponents of the 15% Thesis are liberals to whom United Russia really is a party of scoundrels and thieves and Putin is a cancer on the nation. Likewise, all proponents of the 0% Thesis and some of the proponents of the 5% Thesis are more politically conservative and sympathetic to the Kremlin’s viewpoint that things are basically alright.

My own view on the matter is that the 15% Thesis is extremely unlikely to be true because if it were valid, it would essentially invalidate the entirety of Russian opinion polling – and the work of hundreds of experienced professionals – for at least the last decade; prior to the 2011 Duma elections, only a single poll gave United Russia less than 49%. And we are expected to believe their actual result was 35% or even less? A claim this extraordinary needs truly extraordinary evidence to be credible, but the evidence that has actually been presented is full of questionable assumptions. Which is, in fact, quite ordinary in the world of social science.

Which is not a bad thing. Let the debate go on. Churov can keep his beard, but a web camera or three to let people know he ain’t hiding anything in it wouldn’t go amiss.

Though I’ve written a lot on technological, energy, and geopolitical futures, this has largely been to the neglect of ideology. Part of the reason is that making accurate predictions on this topic is far harder, because of the inherent intangibility of belief systems. Nonetheless, it is necessary, because of their overwhelming influence on the historical process; for instance, the 20th century would have been totally different had Communism, fascism, and Islamism failed to overtake major states such as Russia, Germany, or Iran.

Furthermore, I do not think it is an impossible endeavor. While forecasting specifics such as Stalinist central planning or the mystical millenarianism of Nazism would have been impossible for an observer in 1911, entertaining the possibility of the emergence of such regimes was entirely possible by drawing on the main strands of contemporary intellectual thought on new types of politics and society, which at the time resolved around Marxism, utopian socialism, Social Darwinism, and futurism.

What trends would a similar exercise reveal for today? I would argue that the equivalent themes, largely marginalized now but with the potential for explosive growth under the right conditions of socio-political stress, include: the Green movement (ranging the gamut from local sustainability activists to authoritarian ecosocialists); the technoutopians (include the open-source movement, Pirates, technological singularitarians, Wikileaks activists); and a revival of fascist, far-right thought in the guise of ethnic chauvinism and various Third Position ideologies. Bearing in mind the profound instability of today’s world order, we may be seeing some of these ideologies coming into political fruition sooner rather than later.

Ecotechnic Dictatorship

The foremost challenge of the 21st century is managing or adapting to the havoc that will be wrecked by accelerating global warming. Drought, heat, and flooding threaten to decimate crop yields in much of the global South (and in the worst case scenario, make them uninhabitable). As their carrying capacity shrinks, their political systems will fray, creating chaos and waves of “climate refugees”.

One ideological product of these development will be many different manifestations of what I termed “Green Communism“. In an age of diminishing resources and climate chaos, the political system with the best promise of offering both stability and fairness is authoritarian ecosocialism (or “ecotechnic dictatorship“). This would involve a ruthless drive towards a sustainable society and radical downsizing of the industrial system, but in such a way as to minimize the impact on human welfare. Popular resentment at the decline in consumer purchasing power will be tempered by greater equality and dedication to meritocracy and transparency. Advances in operations research and computer networks mean that the central planning needed to build ecosocialism can be far more viable and efficient than in the late USSR.

Since there will be enemies, both within and without, intent on sabotaging any embryonic Green Communist state, a certain degree of repression will be an inescapable condition of its early survival. Though the ideological foundations for a degeneration into unbounded chiliasm are admittedly present, the risks of that happening can be controlled by a system of universal two-way “sousveillance“, allowing for the early detection of corruption, free-riding, or tyrannical tendencies on the part of individuals.

Bearing in mind its current political system and ecological fragility, China may adopt something approximating ecotechnic dictatorship in the decades ahead (with a heavy nationalist tinge).

The Green Ideology

Ecotechnic dictatorships are a mere subset of a far larger emerging Green movement, which will have increasingly transformational effects across the entire political spectrum as every political system is forced to confront Limits to Growth. But amongst some countries and peoples, the manifestations of Green ideology will be much stronger than in others.

Consider the plight of climate refugees. Uprooted from their traditional communities, denied access to higher and cooler ground by anti-immigrant sentiment in the developed countries that were largely responsible for their predicament in the first place, and facing a profoundly uncertain future. These people will need a narrative. Hence, the inevitable Greening of anti-imperialism and Third Worldism.

Then there are their compatriots in the developed world. The restrictive practices of the US towards Latin American immigrants arouses resentment among Hispaniacs, both those in the US and in Mexico, Guatemala, etc. There is a similar situation with regards to Europe and Africans. But whereas today the southern peoples are merely denied economic opportunities, in the future it may become a matter of life or death. The collapse of Third World states, coupled with developed countries raising their moats, will enrage immigrant communities; some of their members may try to get back at the rich world-destroyers, e.g. through biological or ecological terrorism, and their sources of inspiration may include thinkers such as Derrick Jensen, the anarcho-primitivist who asks himself whether he should write or blow up a dam on waking up every morning.

There will be few countries where Green ideology is explicitly recognized as the bedrock of the state. One exception is Bolivia, which recently enshrined natural rights on an equal footing with human rights; there are whiffs of similar trends in Ecuador, Venezuela, Costa Rica, and Cuba.

Neo-fascism

In the wake of the economic recession, and the increasing visibility of Islam, there has been a far right resurgence in Europe. But today’s crop of neo-fascists are a different breed from the Brown Shirts and jack-booted militarists of the 1930′s. The far right politicians who actually come to power may be ethnic chauvinists, but they do not favor the military expansionism and slave empires dreamed of by wartime Germany, Italy, and Japan. Instead, they are intent on reasserting the “rights” of the “indigenous” population (read: whites), closing down the borders to poor countries, and deporting as many “unintegrated” immigrants as possible.

As mentioned above, global warming will produce failed states and climate refugees, stoking Third World resentment and radicalizing immigrant communities in the developed world. One general consequence is a further strengthening of already latent neo-fascist sentiments in Europe and the US.

However, outcomes will vary greatly country by country. Due to the stability of its two-party system and the very long-term survival of its liberal democracy, the US is unlikely to regress into far-right dictatorship (but a semi-authoritarian corporatocracy is entirely feasible). Prospects for Europe seem much bleaker. The ghettoed Muslim communities of the continent aren’t going away, and as economies falter under the pressure of debts and peak oil, they will make an ever more attractive target for demagogues yammering about imminent Eurabia and welfare state parasites. Even as they mount imperialist wars for resources, as France did in Libya, the Europeans will close off their borders and subject unwelcome minorities to repressions under the convenient guise of anti-terror laws. Deportations will also become prevalent, as with the recent expulsion of the Roma people from France.

Objectively, Russia has most of the prerequisites for neo-fascism: corporatism, ethnic chauvinism, unaccountable power agencies, an overweening executive, and the deference to hierarchy embodied in the power vertical. Almost 50% of Russians support the idea of “Russia for Russians”. For now, the Kremlin explicitly rejects nationalism; however, should its political legitimacy wane, e.g. on the back of economic stagnation or rising dissatisfaction with corruption, then it may bow to nationalist pressures if not lose power to them. And those nationalist revolutionaries aren’t necessarily going to be National Bolshevik brawlers or Young Guard fanatics; more likely, they would wear suits, and speak the language of liberalism, while taking the country into neo-fascism.

As a nation under rising Malthusian stress, any far right upsurge in China would logically hew to more historical lines. Countries like Russia, Germany, or France have more than enough land for all their citizens; they might just not want any more of them. But China will need more land, for food and minerals; a nationalist regime in Beijing would have no problems with traditional methods of territorial expansion.

There will be a strong ecological element to modern neo-fascism. Read most far right thinkers today, and you’ll find that they focus on zero population growth and land conservation; indeed, adoration of pre-industrial mores has always been a staple of the Third Position. Immigrants not only crowd out indigenous peoples, but accelerate environmental degradation; as such, they are not welcome.

The Pirates

The Pirates are the most solidified exemplars of modern anarchism, leading a Romantic resistance against the corporate state for information freedom. Closely aligned strands are the open-source movement, which stresses voluntary and collaborative work to produce free software; and the Wikileaks project, whose guiding philosophy is that authoritarian conspiracies rely on secrecy for their effectiveness and dissipate when revealed to the light of mass scrutiny.

It is hard to imagine a Pirate Party ever forming a hard political force, given their anarchic nature. Nonetheless, their ideology – in both theory and practice – will serve to undermine authoritarianism (be it a mild extension of today’s “anti-terror” climate, or full-blown Green Communist or neo-fascist constructs of a new kind).

In a more general sense, this counter-culture also stands for shortcuts and living smartly. They like concepts such as internationalist geoarbitrage or living off Internet “muses” as opposed to traditional employment and national loyalties, and are interested in things such as virtual reality, life extension, nootropics and psychedelic drugs, and the technological singularity. Obviously, few states like such folks, least of all authoritarian ones.

Myriads of Hybrids

Commenting on 20th century history, many observers have acknowledged that in many cases, it was difficult to tell where fascism ended and socialism began; likewise, the boundaries between authoritarianism and totalitarianism were always blurry. For instance, just what is the Libyan Jamahiriya?

Likewise, real world examples will inevitably diverge from the templates suggested in this post. For instance, take China. Most opponents of the Communist Party’s hegemony aren’t liberals as such, but either ecosocialists or nationalists. Now if the Communists were to falter, or open themselves up to a wider political spectrum, would they sooner embrace the ecosocialists or the nationalists? Or perhaps they’d try to accommodate both?

Perhaps a system of green socialism will develop in Russia (or Canada), but with exclusionary and ethnic chauvinist tinges. Immigrants may be allowed in, but only as long as they agree to be electronically tagged, pay a huge percentage of their incomes in taxes, and to be barred from free or subsidized social services. If this is the form that right-wing sentiment predominantly takes, then we may see the emergence of caste systems throughout the northern hemisphere by 2100.

In any case, one thing seems sure -the coming decades will provide no shortage of new ideological developments and struggles. Those despairing that we are at end of history are unlikely to remain disappointed.

1. The USA is still undoubtedly the world’s leading superpower. It has China’s (gross) economic size, matches Russia’s strategic military power, and is as technologically advanced as Japan with 2.5x its population. Meanwhile, its conventional military power, power projection capabilities and cultural influence remain globally hegemonic. But its Number One position isn’t secure. Political capture by special interests at home and “imperial overstretch” abroad has made its fiscal situation patently unsustainable. This in turn threatens its dominant military position, especially coupled with accelerating Chinese military modernization. Finally, the very globalization that underpins Pax America also users in developments that actually undermine it, e.g. the economic rise of the BRICs and the growing influence of non-Western media outlets (e.g. Al-Jazeera, Russia Today). CNP – 100.

2. China is rapidly emerging as the next global superpower, now boasting the world’s largest manufacturing sector and (arguably) the biggest economy in terms of real GDP. Furthermore, they have calculatedly taken a lead in many of the world’s most prospective and hi-tech sectors, e.g. renewable energy, hi-speed railways and supercomputers. China’s rapid military modernization has already yielded it the world’s biggest navy by warship numbers and advanced drones and stealth fighters. This is all founded on a literate, 1.3bn-strong populace driving 10% economic growth rates (and there’s no reason these should fall drastically any time soon, since average Chinese incomes have plenty of space left to catch up with the West). Now assuming unforeseen shocks such as political collapse or an abrupt peaking and decline in coal production don’t derail progress, it’s very likely China will supplant the US as the global hegemon as early as 2020. CNP – 75.

3. Though Russia‘s population and real GDP (c. Germany) are respectable, they are out of the Big Two’s league (in terms of raw power, it was probably overtaken by China in 2008 because of the depth of its recession and Chinese military catch-up). Nonetheless, it may deserve the title of “third superpower” by dint of its nuclear parity with the US, military-industrial strength, and vast resource base. Covering northern Eurasia, and informally dominating Central Asia, Russia is both self-sufficient in energy and minerals, and has the armed strength to defend them. The world’s increasing food and fuel supply challenges place Russia in an enviable position to exploit its strength. Furthermore, global warming is melting the Arctic, opening up shipping routes, energy sources and living space – a development Russia is uniquely positioned to take advantage of. CNP – 60.

4. In terms of power politics, France is a lot like the US, just 5x smaller in scale. It is influential globally and in the EU, has a self-sustained nuclear arsenal and MIC, and its own semi-satrapies in West Africa. It also has the healthiest demographic indicators in ageing Europe; its economy is versatile, productive and robust; and its nuclear power industry and links with the Maghreb nations make for a (relatively) secure energy future. Overall, it is likely that France will be the predominant West European power of the next decades. CNP – 35.

5. Germany has a powerful economy, and its fiscal rectitude and export competitiveness have made it the dominant influence in the Eurozone. In the longterm, however, Germany’s prospects dim: its demographic problems are the most intractable in the European continent (fertility rates fell below 1.5 children per woman back in the 1970′s and remained there since). Hence the reliance on exports to provide savings for its rapidly aging population. What would Germany do if the Mediterranean breaks from the Eurozone and the outside world becomes more protectionist? Its conscript army is obsolete and nuclear weapons non-existent, but these can be quickly fixed. CNP – 30.

6. Japan is similar to Germany, but with 1.5x its population, several times its problems (e.g. even more rapidly aging population; 220%-of-GDP debt) and without Germany’s key advantage (a continental market). It is militarily weak and utterly reliant on food, fuel and mineral imports, many of which pass through waters over which China claims preeminence. Though one of the most technologically advanced nations on Earth, it faces an uncertain future as the US wanes and China’s rise eclipses it. But like Germany, it’s theoretically capable of rapid transformation into a leading military power. CNP – 30.

7. The UK is ostensibly similar to France, but has critical weaknesses that now undermine its Great Power status. It has a fiscal hole little better than that of Ireland or Greece; the current government is disinvesting in the future (university education) and the military; suffers from a smaller version of US “imperial overstretch”; is falling into an energetic black hole; and the City of London, which is a giant source of tax revenue, has poor longterm prospects. CNP – 25.

8. Though at first glance India might appear similar to China, or at least following in its footsteps, the real situation is far gloomier. The (educational) human capital of Chinese youth is now equal to (or above) the OECD rich country average; India still hasn’t finished eradicating illiteracy. This is of great import since educational levels are the single biggest influence on growth prospects. China has 10x more manufacturing output, 6x more Internet users and 3x more infrastructure spending. Though India’s land forces are more than capable of crushing Pakistan, its navy is quantitatively and qualitatively inferior to China’s, a matter of some import given that both countries are dependent on fuel and mineral supplies from the Middle East and Africa. And the precariousness of India’s food situation in a warming world – and its inability to pay for imports or seize them – makes its longterm prospects decidedly glum. CNP – 25.

9. With its ample lands and resources, not to mention its successes with sugar cane-derived ethanol, Brazil is set to enjoy – much like Russia – a comfortable existence as a regional hegemon in a world of rising demand for food, energy and minerals. (Though its military is much weaker than Russia’s, it doesn’t need to be particularly strong given Brazil’s geographical isolation). It is also playing an increasingly visible global role, together with countries like Turkey and South Africa, as a representative of “The Rest” (as distinct from “The West”). But its future prospects for true superpowerdom are constrained by its low educational human capital. CNP – 20.

10. Though Canada or South Korea or even Italy could just as easily take this spot, in the end I decided it should go to Turkey. It’s not just that it has a rapidly developing economy, or that it has the most powerful conventional forces in the Middle East, or that its control of river headwaters gives it leverage over states like Iraq and Lebanon. It is the major Muslim country that is most comfortable with integrating religious tradition with socio-economic modernity. This makes it a role model – and possible future leader – for many Muslims in the Middle East; then it also has ethno-linguistic connections with Turkic peoples to the east, in Azerbaijan, western Iran, and even Central Asia. Its soft power and willingness to exercise sovereignty in the international sphere earns it the tenth place. CNP – 20.

There are other countries with a similar CNP of 20. These include Canada (a potential future superpower as the Arctic opens up – assuming the US doesn’t swallow it first); South Korea (vibrant economic base, but has many of Japan’s strategic problems and is preoccupied with the North); and Italy (a modern France-sized economy but not much else).

Further down the list, with a CNP of 15, we get Saudi Arabia (world’s swing oil producer but backwards, politically fragile and reliant on US support); Iran (most visible challenger to the current international order and has leverage over its capability to shut down the Strait of Hormuz); Mexico; Australia; Spain; Venezuela (soft power through ideas of 21st century socialism); and South Africa (mineral resources and informal spokescountry for sub-Saharan Africa).

Note – So I don’t have to cover this in the comments. Many “analysts” will jump on my back for neglecting to mention the salubrious effects of India’s democracy, or how corruption dooms Russia to eternal slippage. The reason – as I’ve endlessly argued on this blog – is that these kinds of arguments are frequently flawed even where only living standards and civil rights are concerned (e.g. I’m sure the 47% of Indian children who are malnourished have nothing but praise for their glorious democracy, as does the rights activist Binayak Sen given a life sentence for supporting Maoism), not to mention completely nonsensical when comparing and projecting national power (e.g. Russia’s corruption is fairly standard for middle-income countries, and the Chinese authoritarian system of state capitalism has arguably very much helped rather than hindered its development).

(1) Last year, I wrote: “World economy continues an anemic recovery, though there are significant risks to the downside.” Today I’d repeat this, but add that the risks have heightened. Many countries in the developed world, from Spain to the US, now run patently unsustainable fiscal policies. I don’t know when the bond vigilantes would strike (and even if I did I’d rather get rich than tell you), but sooner rather than later they will. The obvious loci of the next big crisis are the so-called “PIGS” (Portugal, Italy, Greece, Spain), and Ireland, Belgium and Hungary.

But obvious isn’t preordained. Iberia, at least, is covered by the EU’s €440bn rescue fund, while Italy’s 120%-of-GDP debt is counterbalanced with a 0.9 ratio of receipts to outlays (i.e. for every €1 it spends it collects €0.9 in tax). The UK has the worst budget deficit amongst the big European countries, but it’s insulated by an average debt maturity of 14 years. Japan has the most apocalyptic sovereign debt figure at 220%-of-GDP, but also has immense foreign savings. Finally, though the US appears to be in one of the worst positions all round, with an debt maturity of just 4 years, a 0.6 receipts to outlays ratio and an ideological rift that precludes a political solution, it is still buffered by the $’s status as the global reserve currency.

Which of these dominoes will fall first, and when, must remain a matter of speculation, and may ultimately be contingent on unforeseeable shocks and triggers. For instance, a damning Wikileaks expose of Bank of America? Iran blocking the Strait of Hormuz in response to an Israeli strike (as I speculated here)? It’s all possible.

[Michael Pollaro's collection of budget and debt metrics. Note that on aggregate, the US is in a worse position than the faltering PIGS.]

(2) Possible wars. My analysis remains the same as last year’s, with two changes: (1) The likelihood of a US/Israeli strike against Iran rises from 25% to 40% because the Stuxnet worm can not longer be relied upon to sabotage Iranian nuclear progress, the US development of the MOP, and Obama’s domestic weakness in light of the GOP’s resurgence; (2) The chance of an Azeri-Armenian war over Nagorno-Karabakh has risen from small to 10% in view of heightened rhetoric, skirmishes and exploding Azeri military spending.

(3) My Russia predictions. Back on October 8th, I predicted: “Within the next 3 months Luzhkov is going to get hit with corruption charges and will either go on trial or seek political asylum in the West.” Still more than three weeks to go!

Barring another catastrophic heatwave or natural disaster, Russia’s population should resume growth in 2011 (as in 2009, but probably will just miss out in 2010). The life expectancy should approach (or slightly exceed) 70 years; the total fertility rate will approach (or exceed) 1.6 children per woman; the birth rate will be in the 12.5-13.0 / 1000 and the death rate in the 13.5-14.0 / 1000 range. The justifications for these predictions should be well-known to S/O readers but for refreshers see here and here.

Symbol of modernization: Skolkovo

Consensus is that the Russian economy will growth by 3.5-5.5%. This will be lower if there is a second global financial crisis, but the results on growth are almost certain to be far less severe than in 2009 (-7.9% growth) because today’s Russia Inc. is much less dependent on foreign credit inflows. See Russia 2010: Growth but state-led recovery is bad news by Ben Aris.

In foreign policy, expect relations with the US to deteriorate, on account of the rise of hardline Russophobes amongst Republican Representatives. On the other hand, the France-German bloc – increasingly estranged from the Mediterranean South – will be more willing to engage Russia’s non-indebted, growing and expanding (see Kazakhstan & Belarus customs union) markets.

(4) US politics will be mired in domestic issues, with Republicans doing their utmost to hack away at the healthcare legislation, calling for cuts to social (but not security) spending, harassing the EPA, and perhaps even trying to shut down government around March. The joblessness of the recovery and dim economic prospects will dim Obama’s political prospects, but they may be just about rescued if the Republicans overreach themselves.

I think the ConDem coalition in the UK will last the year, albeit with a lot of acrimony and backstabbing. The Lib Dems have lost half their electoral support, the students whom they betrayed, so they’ll want to hang in with the Tories as long as possible.

(5) Oil prices should stay at around $80-120 in 2010 and production will remain roughly stable as increased demand (from China mostly) collides with geological depletion. If there is a second global economic crisis, I doubt we’ll see prices plummeting to $40 as we did in early 2009, when investors abandoned stocks and commodities for the perceived safety of bonds. But since the next big crisis will probably be a bonds crisis, the most attractive safe havens may well become commodities, and the government bonds of emerging markets (where commodity consumption is rising).

(6) China will continue growing at 8-10% per year. Their housing bubble is a non-issue; with 50% of their population still rural, it isn’t even a proper bubble, since eventually all those new, deserted apartment blocs will be occupied anyway. What is of concern is that China’s coal production – now almost 50% of global production - is close to plateauing. This is of some consequence given that coal is China’s primary energy driver.

Solar irradiance.

(7) Despite NASA reporting that 2010 may be the hottest year on record, the thermometers may break limits again in 2011. That is because, despite the unprecedented temperatures – manifesting in a great Russian heatwave that destroyed 40% of its grain crops and flooding in Pakistan that displaced millions – 2010 actually correlated to the end of a minimum in solar irradiance. Solar irradiance has a forcing effect on global temperatures, independent of the secular rise in atmospheric CO2. Based on the graph above, we can expect another peak in the next few years. Since greenhouse emissions continue unabated and are indeed joined by feedback emissions such as methane from melting Arctic permafrost, we can confidently expect several major climate events this year.

Speaking of the Arctic, as its longterm ice volume continues to plummet and sea ice extent retreats, we can expect more circumpolar shipping. I wouldn’t be surprised to see up to 10 non-stop voyages along the Northern Sea Route from Europe to China, following just one by MV Nordic Barents in 2010. Likewise, expect the Arctic to become a major locus of investment – if not in 2011, then in a few more years – as lucrative companies and ports are privatized in Arctic Russia.

(8) Wikileaks will not be “shut down”, as the Internet is too resilient. If Assange is successfully extradited to the US to face espionage or computer misuse charges – I’d give a 50% chance of that happening – then expect fireworks to go off as the “insurance file” is released.

What about the 2010 Predictions?

Consider this post on 2010 predictions and my prediction of the 2010 Ukrainian elections.

(1) “World economy continues an anemic recovery”: mostly true, though I should have clarified that I was referring to the developed countries. Though some, like Germany, did really well.

(2) “Republicans will carry the mid-term elections in 2010, but there is a strong mood of apathy and a sense that what is really needed is a new party, a new politics“: Bingo! Republicans won – check. Social disillusionment – check Gallup. A new party, a new politics – the Tea Party.

“Rising violence in Iraq… a false quiet in Afghanistan”: Got them wrong way round.

“In the UK, Gordon Brown (New Labour) will almost certainly lose to James Cameron (Conservatives) in the mid-2010 elections”: Totally correct.*

(3) None of the wars I mentioned happened, but I didn’t necessarily expect them to, as all of them were given as probabilities.

(4) “[Russia's demography will] continue improving further in 2010 and that the year will see the first year of positive population growth since 1994 (or 2009)… Birth rate = 12.5-13.0 (reasons), Death rate = 13.5-14.0 (a reason), Net Migration = 1.5-2.0, all / 1000.”: The Great Russian Heatwave of 2010, causing 44,000 excess deaths, threw many of my predictions off kilter. For now I’m basing it all on Jan-Nov 2010 stats, as December isn’t in yet. The birth rate during this period rose from 12.4 / 1000 to 12.6 / 1000, so I got that right. Unfortunately, the death rate rose from 14.1 / 1000 to 14.4 / 1000, due to an extra 28,300 deaths; if we exclude the 44,700 excess deaths accruing to the heatwave, the death rate would have been 14.0 / 1000, and so just within predicted range. A substantial falloff in net immigration, which I didn’t expect – surely more people should have left during the recession? – means that Russia’s population growth will almost certainly dip into negative territory this year.

“Economic growth of around 3-5% of GDP sounds reasonable.”: Most estimates are now converging at around 4%, so completely correct.

“Lots of privatizations and corruption investigations as part of the Surkov clan’s struggle against the siloviki and “their” state companies.”: True for the first part; not so much for the second, as most efforts have instead been diverted to ousting the last 1990′s-vintage regional barons.

“Yushenko will almost certainly (95%+) be kicked out of the Presidency in the coming Ukrainian elections… Ukraine under Yanukovych will join Eurasec or the Russia-Belarus-Kazakhstan customs union, but is yet unlikely to join the CSTO or give Russian 2nd language status.”: Correct; wrong & wrong; right & right. I still expect Ukraine to join a Eurasian common economic space. As George Friedman points out in his “geopolitical journey” (see the part “European Dreams”), the Kiev intelligentsia has little sense of national identity, and dream of a Europe whose foundations are in fact crumbling let alone considering further expansion. By far the most logical alternative for Ukraine, in the long-term, is something resembling what it has been since 1654.

In late January, 2010: “Adding up these figures, Yanukovych gets 50% of the votes, whereas Tymoshenko gets 46%… It is safer to say that Yanukovych will win with a gap wide enough that Tymoshenko will not have grounds to make a legal wrangle out of it – though that is just about possible if she’s very lucky and comes within 1-2% points of Yanukovych. But my prediction is a Yanukovych win by 5-10% points over Tymoshenko”: During the second runoffs on February 7th, Yanukovych got 48.95% and Tymoshenko got 45.47%, making a gap of 3.5%. My first, allegiance-tallying method was virtually perfectly correct (50%-46%); the one that involved factoring in opinion polls led me to miss my mark. But nonetheless, I still ended up predicting the correct result.

(5) “Oil production in 2010 will be around the same as 2009 – increased demand will collide with geological depletion to keep output stable. Oil prices in H1 will remain at 70-90$, and will rise to 90-110$ in H2″: More accurate to say $70-90 for the whole year with dips and rises, but you wouldn’t have lost money taking my advice (and that after making big bank in 2009: “…a rebound in oil prices from around 40-50$ per barrel in the first half, to 60-80$ in the second”).

(6) “No major AGW-related physical events (except for a heatwave or two), given that solar irradiation remains at an unusually long trough – expect the fireworks by 2012-15″: Well, and quite a few floods. But dead on about the “heatwave or two.”

“AGW skepticism will become more popular in the wake of Climategate“: Yes – see the Republican Party.

“China and its proxies will prevent any more significant action being taken at the next UN climate change summit in Mexico, than was “achieved” in Copenhagen”: Correct, though actually it was the entire world (save a few countries like Bolivia), not just China, that colluded in making a worthless agreement.

“By year-end the performance of the world’s top supercomputer will exceed 3 petaflop/s (repeat of 2009 prediction)”: Still not there, as the current top supercomputer, the Chinese Tianhe-1A, achieved a performance level of 2.57 petaflop/s. Next year for sure though.

(7) “China’s growth will slow from around 8% in 2009, to perhaps 5% in 2010… expect China to continue keeping a low profile as the US insists on shooting itself in the foot.” So wrong! Ouch.

* EDIT. A reader wrote in to tell me I meant David Cameron is the leader of the Tories, even though James (the film-maker) might be preferable. LOL. For me to get it wrong not once (when writing) but twice (when reading) there must have been some serious Freudian slippage going on!

BTW, the image above is of the Xue Long (雪龙) icebreaker in the Arctic. It represents the intersection of several major current trends: The multifaceted rise of China; the growing importance of the Arctic; climate change.

Year in Review: 2010

As usual, I will begin by reviewing the defining trends of this year (Part 1), before making predictions for the next and finishing up by reviewing the accuracy of my 2010 predictions (Part 2). The main global theme of 2010 is the continuing Rise of the Rest – led by but not limited to the BRICs (Brazil, Russia, India, China) – set against the background of the accelerating political, economic and above all institutional and soft power decline of the old Western order.

(1) China keeps getting stronger, on every facet of national power, at an exhilarating rate. A comprehensive overview is well beyond the scope of this post, but a few examples give an idea of the general picture. A country that first displayed its UAV’s in 2006, has now exhibited more than 25 different models. One of them, the WJ600 – boasting a jet engine, multiple missiles and stealth features – might even be more advanced than any US or Israeli model. Just as the year rolled to an end, leaked photos showed that the Chinese now have their own fifth-generation fighter, the Chengdu J-20. Bearing in mind that Russia also revealed its PAK FA this year (after around 25 years of development), I think it’s safe to say that the Chinese have now fully caught up with Russia in non-strategic military technology*.

However, unlike the USSR, China is not a largely one-dimensional military power. What’s far more significant is that in sector after sector it is investing massive resources into R&D and espionage to achieve qualitative near-parity with Western products (e.g. Japanese trains, German machine tools, etc) then seizing their market shares abroad through its lower labor costs. China now produces half the world’s wind turbines and solar panels, a hugely strategic sector given current energy prospects; it has the world’s most powerful supercomputer (and is now second overall to the US in supercomputing); and finally, PISA international standardized tests have confirmed that Chinese youth are now as skilled in reading, math and science as their (far richer) Western and Japanese counterparts.

One can stretch these examples almost indefinitely, but the main point is that “the rise of China” isn’t just 1980′s Japan-style hype; its tenfold larger population makes it the real deal. If you wish, dismiss it by referring to its aging problems (might be an issue by 2030) or its property bubble (when 50% of its population is still rural). But don’t be surprised by not-so-distant headlines such as “China becomes world’s biggest economy by GDP” or “RAND analysts claim PLAN has achieved military superiority in the West Pacific”.

(2) While China is its main champion, many other countries traditionally considered to be economically stagnant, politically unstable and socially backward are emerging as major regional Powers in their own right, and beginning to project global cultural influence. In its adroit PR handling of the flotilla incident, Turkey has staked out its claim to regional prominence by challenging Israel and appealing to global Muslim sentiment. Brazil and Turkey enjoyed blistering growth rates. Russia has resolved its differences with Belarus in recent weeks, and together with Kazakhstan has finalized the timetable for a customs union; with the election of Yanukovych to the Ukrainian Presidency and Ukraine’s (partial) reorientation towards Eurasia, it too may join in the next year or two. Non-Western outlets such as Russia Today and Al Jazeera are now major participants in the global media discourse along with the likes of CNN and the BBC.

(3) The ideological rift between pro-stimulus Democrats and pro-scrouging Republicans – and their mutual capture by special interests (the financial sector, the military-industrial complex, etc) – has become increasingly evident this past year. This now puts the probability of the US ever resolving its budget problems by choice, slim to begin with, at next to zero. At this point, the only realistic chance of returning to fiscal sustainability without unleashing massive social disarray is to increase taxes on the rich, cut security spending, reign in the financial and “homeland security” mafias and rule out future stimuluses (whose effects tend to be crude and non-lasting) in favor of targeted social spending. However, ideological factors preclude this (The Tragedy of Obama: “a corporatist centrist giving endless concessions to Republicans who (successfully) portray him as a radical leftist”).

(4) How not to close awning budget deficits: the UK (I regret to say that I blogged in support of the ConDem coalition). While any idiot can see that the UK is on a fiscally unsustainable path, the ways in which cuts are being made, with a sneering classism that hits the poorest and least-privileged; commercialization of state social functions; and dumping of state assets, is incredibly shorttermist, foments social disarray and undermines longterm prospects. From 2011, the UK will implement the highest university tuition fees in the world. The headlines say it all: “McDonald’s and PepsiCo to help write UK health policy”, “Students could boost marks by showing ‘corporate skills’”, etc.

(5) In Europe, the German corporatist model, the Swedish welfare state, and to a lesser extent French dirigisme, have acquired ideological supremacy over the UK and Irish neoliberal models and the bureaucratized Mediterranean states. In a low-key meeting at Deauville in October, Sarkozy appeared to agree with Merkel’s proposals that would penalize countries that require bailouts by denying them votes in EU councils and placing them under Brussels supervision. Will the Mediterranean accept these Diktats or will it fracture the EU? Is even Germany, with its own high debts and demographic problems, capable of guaranteeing them? In any case, one thing we can say for sure is that this development reinforces the trends towards a multi-speed Europe, with the power of the traditional Franco-German core reinforced further by their (relative) economic resilience.

(6) The posturing by North Korea is, as usual, a show meant to extract concessions. Not worthy of the alarmist headlines.

It appears that the main reason Israel has so far restrained itself from striking Iran – as I still think will happen, eventually – is the remarkable success of the Stuxnet worm at sabotaging its uranium enrichment processes. But in all likelihood – I give it 75% – this strike will come sometime in the next few years.

Afghanistan is as unwinnable as always, but ideological inertia and the “psychology of previous investments” conspire to keep the US there.

(7) If you want the single best example of declining US soft power, consider this: even as prominent US politicians called for the assassination of a controversial foreign journalist for “espionage” or “information terrorism” – and even better, while touting its plans for World Press Freedom Day in May 2011 (presumably Assange isn’t on the invite list) - and Britain imprisoned him on what are almost certainly politically-motivated rape charges from Sweden, the President of Ecuador offered him asylum and the Russians mooted giving him a Nobel Peace Prize. Now I certainly don’t mean this portrayal of Assange’s travails to demonstrate that countries like Russia are altruistic crusaders for transparency and journalistic freedom; to the contrary, its safeguards for leakers are not so much abysmal as non-existent. However, Wikileaks illustrates that when the Western power elite is challenged so openly, forced to go through the political version of the airport body scanners it foists on its own citizenry, all pretensions to lofty ideals such as “rule of law” are tossed out of the window**.

But Wikileaks is more than just a collection of political gossip, or revelations such as that the British train Bangladeshi death squads and US contractors traffic in children for Afghan warlords, or inspiration for national and regional leaker websites such as Indoleaks (Indonesia), Rospil (Russia) or Euroleaks (EU), or even confirmation of “radical” viewpoints such as that the political elites of most European countries take their marching orders from the State Department.

The Wikileaks Saga is a historical crossroads that will determine the future balance between privacy, freedom and security in the West. Down one road, the powers that be will clamp down on journalistic freedoms and the unrestricted Internet, and so confirm the dominance of the one-way “surveillance state”; down the other, the transparency virus unleashed by Wikileaks will destroy the effectiveness of state ”authoritarian conspiracies”, leading to citizen empowerment and “universal sousveillance“ (two-way surveillance). Since technological development makes increasing surveillance inevitable, and consequently serves to concentrate power in the hands of materially and legally privileged actors such as states and corporations, I think the kind of citizen sousveillance represented by Wikileaks is indispensable for preserving personal freedoms and people power in our cyberpunk future.

(8) In the hottest year on record globally, which saw a devastating heatwave in Russia and unprecedented flooding in Pakistan and Australia, AGW denialism claimed victories in the US Congressional elections and the inconsequential summit in Cancún (without verification or penalties, any targets or commitments aren’t worth the paper they’re on). The climate crisis is now so self-evident and imminently devastating that the only psychological option is to draw in the runaway train curtains and prosecute anyone who peeks out and points out the broken bridge ahead. Geoengineering it will be (attempted).

(9) On Russia, Nikitin has summarized the year with a report card. Swell job. (Apart from the bizarre Khodorkovsky apologetics – talk of teachers’ pets!).

In short. The economy is so-so: though 4% growth is respectable, it should be seen in the context of an 8% GDP decline in 2009. (On the other hand, updated Real GDP per capita calculations by the World Bank and OECD/Eurostat have indicated that Russia’s is around $20,000, higher than the previous estimate of c.$15,000. This makes it similar to Poland, Croatia or Estonia; and in overall size comparable to Germany, and far above France or the UK). Its demographic situation has remained mostly unchanged from 2009, a small rise in births being more than canceled out by a rise in death rates caused by the 44,000 excess deaths due to the heatwave. In the political realm, the biggest developments were: (1) the uneasy survival of the Reset with the US, in which Russia cooperates with the West in return for more technological access; (2) the huge $700bn rearmament program announced for the next decade; and (3) the increasing drive towards recentralization and technocratic management encapsulated by the ouster of Mintimer Shaimiev (Tatarstan) and Yuri Luzhkov (Moscow).

(10) The melting of Arctic sea ice and local warming is creating the foundations for a sustained economic boom. This year the MV Nordic Barents steamed into the record books as the first foreign flagged vessel to sail from Europe to China through the entire Northern Sea Route without stopping at any Russian harbor. With traffic through the North Sea Route expected to increase tenfold over the next decade, ports being expanded, and power and transport infrastructure built up at a furious pace, the Arctic represents the next investment El Dorado after the BRICs. Follow S/O’s sister blog Arctic Progress to stay on top of things at the top of the world!

* Of course, this isn’t to say that all Chinese military tech is now up to Russian standards. E.g. Russia is well ahead in air defense. On the other hand, China’s naval technology is now arguably better. On average, I’d say the qualitative level of conventional arms is now roughly equal.

** Just as they are with the Third World victims of Western imperialism, or its own repressed minorities in urban ghettoes, or Muslims, but when it happens to English-speaking white guys it’s far more serious.

Stay tuned for Part 2 in which I make predictions for 2011 and review those from last year. Meanwhile, please feel free to point out any major events or trends I missed out.

There are many reasons to dismiss these arguments, as I will try to show in this post. First, the very inventor of the BRICs concept, Jim O’Neill of Goldman Sachs (who has probably thought more about it than anyone else) dismisses the argument that Russia is ineligible on the basis that is was the only country amongst them to show (highly) negative growth during the economic crisis as “rubbish”. He goes on to add that “the only reason that Russia was hurt so badly was unlike the others, it borrowed heavily on the international capital markets and, of course, it is dependent on the price of oil.” ** Of course, the Russian economy’s dependence on Western intermediation for its credit is a structural weakness, and one that was exposed in late 2008. But potential faultlines like this are hardly unique amongst the BRICs – its most promising member, China, critically depends on exports for continued growth***, and its banks are saddled with bad debts.

Second, many of these arguments from demography (“dying Russia”), infrastructure (“crumbling Russia”), and institutions (“Zaire with permafrost”) are both 1) exaggerated in severity and 2) exaggerated in their influence on economic development.

Take Russia’s plummeting population… except that it hasn’t been plummeting or even falling since 2009! (It is now stagnant). True, Russia is going to see a substantial fall in its labor pool – according to the Rosstat medium scenario, from 62% of the total population now to a truly apocalyptic 55% by 2030****. (Yes, that was sarcasm). And though its population will age substantially in the next few decades, there probably won’t be any problems with paying pensions thanks to its resource wealth. Basically, Russia’s demography is neither as bad as it is usually portrayed in the Western media, nor will it negatively impact on its future economic development in any significant way.

Now what about Russia’s crumbling infrastructure? Though Russia having no roads, only directions may be cliché*****, it does undoubtedly have an element of truth. But look at this from another perspective. Russia might have plenty of crumbling concrete and rusting iron carcasses, interspersed with the occasional modern highway or recently-built gleaming showpiece – but does it really, really need better infrastructure, or are its resources better spent elsewhere? At least unlike India, or even Brazil or China, Russia has a complete industrial infrastructure. Its “Khrushchevki” prefabricated concrete tower blocs and disused railway stocks may give it a decrepit, even post-apocalyptic air, but the equivalent scene in India or China may well consist of a village of peasant huts with dirt paths meandering through it! In other words, Russia needs new infrastructure relatively less than the other BRICs (yet even so, Merrill Lynch predicted it would spend more in the next three years than either India or Brazil, despite its smaller population)!

Finally, yes – Russian institutions are corrupt and its state is illiberal and (semi-)authoritarian, though arguably it is democratic****** (of course the degree to which this is the case can be subject to endless debate). However, the evidence indicates that institutions have historically had relatively little impact on economic growth or “convergence”. A multi-author NBER study in 2004 on Do Institutions Cause Growth? was summarized thus:

We revisit the debate over whether political institutions cause economic growth, or whether, alternatively, growth and human capital accumulation lead to institutional improvement. We find that most indicators of institutional quality used to establish the proposition that institutions cause growth are constructed to be conceptually unsuitable for that purpose. We also find that some of the instrumental variable techniques used in the literature are flawed. Basic OLS results, as well as a variety of additional evidence, suggest that a) human capital is a more basic source of growth than are the institutions, b) poor countries get out of poverty through good policies, often pursued by dictators, and c) subsequently improve their political institutions.

Russia seems to fit the above model reasonably well. It has high human capital – far better than China or Brazil, let alone India. As I wrote earlier, “Around 70% of Russians go into higher education, compared with just 20-25% of Brazilians or Chinese… in the 2006 PISA science assessment, only 15.2% of Brazilians possessed skills beyond those needed for purely linear problem-solving, compared with 47.6% of Russian and 51.3% of American students”. Already resembling a developed country in human capital and having pursued reasonably effective economic policies under Putin, Russia may now slowly be moving towards surmounting that last institutional hurdle, with Medvedev now taking aim at the MVD (police) and bureaucracy.

Finally, it would be well to point out one area in which Russia has a decisive advantage over the other BRICs – it is already a much more developed economy and society. As of 2009, and despite the economic crisis, Russia’s real GDP per capita was 14,900$, far higher than Brazil’s 10,500$, China’s 6,600$, and India’s 2,900$ (not to mention that Russia’s Gini index of wealth inequality, at 41, is lower than both China’s 47 and Brazil’s 57). Really, the most convincing reason to leave Russia out of the BRICs is not that it doesn’t belong there, but that it won’t grow as fast as the others simply because it is already substantially richer than them and as such no longer has as much space to catch up! (And hence would not be as attractive to investors)…

That said, Russia in the next decade will probably grow relatively fast nonetheless – not only because it is a well-educated nation with substantial room left for “catch up” growth to developed world levels, but because of a very favorable external environment. First, the (probable) peaking of oil production and China’s ravenous growth******* means that oil and resource prices will remain high, bringing in the hard currencies that would help Russia buttress its fiscal position and buy the technologies it needs to modernize itself from the West.

Second, in a dramatic turnaround from 1998, Russia today is now in a much stronger long-term fiscal position than practically any Western developed country. The article Rerating Russia by Ben Aris is worth quoting in extenso:

Russia’s credit rating is way too low, as it boasts some of the strongest fundamentals in the world, but it’s still tarred by its increasingly irrelevant “emerging market” moniker… The world has been turned upside down by the global financial crisis. Nowhere is this clearer than in [Greece's and Russia's] bond offerings. While Greece is sagging under a heavy public debt burden, Russia not only has almost no debt to speak off (Capital Economics predicts 9.5% of GDP by the end of this year), but also has well over $400bn in hard currency reserves. That’s five times more than either the US or UK, making it the third-richest country in the world in terms of cash. …

Russia is enjoying a mirror image of the problems its more developed peers are facing up to. For example, the UK is one of the most indebted countries in Europe now after it borrowed a massive €257bn last year, ratcheting up its leverage to borrow about €2.80 for every €1 that the Bank of England is holding in its vaults as a reserve. The US is in similar dire straits.

… Currently, Russian sovereign debt has a ‘BBB’ rating, which is only two notches above junk bond status. At the same time the US and UK have (so far) kept their ‘AAA’ ratings despite their worsening finances. Most economists are predicting Europe’s external debt to rise from 100% of GDP to 130% over the next five years, while that of Russia is expected to continue falling. Indeed, analysts say that the ratings of developed countries’ have disconnected with reality, while countries like Russia are being penalised. “On the basis of our model, the [best possible] ‘AAA’ rating for the US and the United Kingdom cannot be explained, as these two countries are rated two to three rating notches better than countries with comparable fundamental data,” Ingo Jungwirth, an analyst with Raiffeisen International, wrote in a study in March.

His study found that based solely on the country’s finances, both the US and UK should be downgraded three notches to a ‘AA’. However, if the ratings agency actually went through with a downgrade, the cost of borrowing to both countries would spike and spark a financial global crisis, which would probably wreck the global economy for decades. Jungwirth suggests that these two countries earn a “bonus” for being too big to fail.

On the flip side, Russia is underrated given the strength of its financial position. Consider that on the day Iceland defaulted on its debt at the start of this crisis, it enjoyed higher ratings than Russia. Today Russia’s ‘Baa1′ rating from Moody’s Investors Service is still the same as bailout-dependent Iceland’s. Fitch Ratings and Standard & Poor’s currently class Russian debt as ‘BBB’ – even lower than Moody’s. …

There are already some signs that investors are cottoning on to the strength of the Russian bond offering. After US investment bank Lehman Brothers collapsed, the spreads on UK credit defaults swaps (CDS) … have soared by 281 basis points (bps). At the same time, Russia’s CDS have actually contracted by 17 bps over the same period, making it one of the few countries in the world deemed by investors to be a safer place to invest than it was before the start of the crisis. …

The US, Japan, and most of Europe have reached their limits to growth. Now faced with unsustainable budget deficits, ballooning debts, and intense (BRIC-centered) competition for remaining high net energy resources, the long era of Western hegemony is now coming to an end. It is thus with some skepticism and bemusement that I view the smug commentary in the Western media on the Russian Foreign Ministry leak published at Russian Newsweek********, which they claim show Moscow’s “planning to reorient its foreign policy in a more pragmatic and pro-Western direction”, in apparent acknowledgement of its failed policies of dirigisme within and confrontation without.

In reality, the Kremlin’s détente-for-modernization leak is more likely to be an Aesopian telegram that conveys Russia’s satisfaction with what it has already achieved and of the new world order that is emerging. In the past decade, the Russian state has consolidated and reestablished a sphere of “privileged interests” across Eurasia, decisively purging Ukraine and Central Asia of Western influence. Meanwhile, with the United States facing severe fiscal stress and geopolitical challenges on other fronts in the Middle East and the Far East, the West now has neither strength nor will to push back against Russia beyond Visegrad, and is beginning to lose its unity and cohesion. Russia’s security dilemma is retreating, as a new geopolitical equilibrium crystallizes along the marches between the West and Eurasia.

Since good fences make good neighbors, this paves the way for better relations between Russia and some Western countries, in particular Germany, Italy, and France (in the Russian leak, Britain is conspicuous in its absence). Take the former. What interest does Germany really have in sending soldiers and paying taxes to perform a doomed “civilizing mission” in Afghanistan for the US, or in subsidizing Mediterranean profligacy while imposing stringent discipline on itself in return for their (aging and shrinking) markets? On the other hand, there is great potential for synergy between the German and Russian economies. The Teutonic industrialists have technologies and capital that Russia now needs to modernize its manufacturing and hi-tech industries, while the Russians have the energy and mineral resources that could keep German factories humming well into the age of scarcity industrialism. Back in October 2009, I suggested that this economic relation could be the basis for a new German-Russian alliance; now the New York Times has caught on.

The American age of dominance is waning and will soon come to an end and a new constellation of Powers will take its place. Far from being a shunned BRIC in a world run by the West, Russia will be one of the main poles in the new world of the Rest.

* See Nouriel Roubini, Anders Aslund or Julia Ioffe for the standard spiel.

** See “The R of the BRICs Remains Solid” part of this post.

*** Of course there are arguments that the magnitude of these problems are overstated.

**** The irony is that the more Russia’s (abnormally low) life expectancy and (now fairly average by European standards) fertility rates improve, the worse its dependency ratio will get in the decades ahead! Yet another demonstration of the stupidity of simple-minded extrapolation of population trends to future economic prospects.

***** In any case, in an age of peak oil, the wisdom of expanding road networks further is open to question. Russia would be better served by modernizing its railway system, on which it plans to spend 390bn $ by 2030.

****** On the basis that it fulfills democratic norms on paper although not in spirit, and in the sense that most Russians believe Russia is free and democratic (as was not the case during the Yeltsin period). Both the Polity IV political database and Economist Democracy Index perceive Russia as a kind of hybrid regime that is neither liberal democratic nor fully authoritarian.

******* This illustrates another important point – the BRICs are greater than the sum of their parts; they are more of an idea and a concept, than some kind of ranking in which countries can be kicked out of for (perceived) lack of performance. Strong Chinese and Indian growth, for example, help pull along nations like Russia or Brazil that are more heavily based in resource extraction.

******** See the full “О Программе эффективного использования на системной основе внешнеполитических факторов в целях долгосрочного развития Российской Федерации” here.

Nonetheless, there were three theorists – a Communist, a Warsaw banker, and a Russian conservative minister – who did predict the future with a remarkable, even eerie, prescience. They were Friedrich Engels, Ivan Bloch, and Pyotr Durnovo.

Friedrich Engels

Way back in 1887, Friedrich Engels, the famous Communist theorist, wrote this remarkably accurate prediction of the next war.

… world war of never before seen intensity, if the system of mutual outbidding in armament, carried to the extreme, finally bears its natural fruits… eight to ten million soldiers will slaughter each other and strip Europe bare as no swarm of locusts has ever done before. The devastations of the Third Years War condensed into three or four years and spread all over the continent: famine, epidemics, general barbarization of armies and masses, provoked by sheer desperation; utter chaos in our trade, industry and commerce, ending in general bankruptcy; collapse of the old states and their traditional wisdom in such a way that the crowns will roll in the gutter by the dozens and there will be nobody to pick them up; absolute impossibility to foresee how all this will end and who will be victors in that struggle; only one result was absolutely certain: general exhaustion and the creation of circumstances for the final victory of the working class.

Engels was completely right on the “total war” aspect. The number of military deaths in the war, 9.7mn, was within his predicted range. And indeed by 1918 there was a severe epidemic, the Spanish flu, and a year later the crowns of Russia, Germany, Austria-Hungary, and Turkey were all rolling in the gutter. The working class only got their “final victory” in Russia (though they came close in Hungary, Slovakia, and Bavaria).

Ivan Bloch

Ivan Bloch was a Warsaw banker, railway planner, and campaigner against Russian anti-Semitism. In 1899, he wrote a book Is War Now Impossible?, in which he argued that its costs would be such that the inevitable result would be a struggle of attrition and eventual bankruptcy and famine. His hope was that by getting people to comprehend the vast costs and uncertainties of future war, he could forestall it. Though he was unsuccessful in that goal, he did at least get the muted privilege of being almost 100% right about its nature. For instance, see this direct extract from his book.

At first there will be increased slaughter – increased slaughter on so terrible a scale as to render it impossible to get troops to push the battle to a decisive issue. They will try to, thinking that they are fighting under the old conditions, and they will learn such a lession that they will abandon the attempt forever. Then, instead of war fought out to the bitter end in a series of decisive battles, we shall have as a substitute a long period of continually increasing strain upon the resources of the combatants. The war, instead of being a hand-to-hand contest, in which the combatants measure their physical and moral superiority, will become a kind of stalemate, in which neither army being willing to get at the other, both armies will be maintained in opposition to each other, threatening the other, but never being able to deliver a final and decisive attack… That is the future of war – not fighting, but famine, not the slaying of men, but the bankruptcy of nations and the breakup of the whole social organization… Everybody will be entrenched in the next war. It will be a great war of entrenchments. The spade will be as indispensable to the soldier as his rifle… All wars will of necessity partake of the character of siege operations… soldiers may fight as they please; the ultimate decision is in the hand of famine… Unless you have a supreme navy, it is not worthwhile having one at all, and a navy that is not supreme is only a hostage in the hands of the Power whose fleet is supreme.

This is, of course, a pretty accurate prevision of WW1. It was a stalemate of artillery and entrenchments. The German home front collapsed in late 1918 in large part as a result of dearth resulting from being cut off from global food imports and the requisitioning of the chemical fertilizer industries for munitions production. And the Kaiserliche Marine was indeed bottled up in port for most of the war. To further demonstrate Bloch’s predictive genius, I will quote from Niall Ferguson’s summary of his book in The Pity of War.

In Is War Now Impossible? (1899), the abridged and somewhat mistitled English version of his massive six-volume study, the Warsaw financier Ivan Stanislavovich Bloch argued that, for three reasons, a major European war would be unprecedented in its scale and destructiveness. Firstly, military technology had transformed the nature of warfare in a war that ruled out swift victory for an attacker. “The day of the bayonet [was] over“; cavalry charges were too obsolete. Thanks to the increased rapidity and accuracy of rifle fire, the introduction of smokeless powder, the increased penetration of bullets and the greater range and power of the breech-loading cannon, traditional set-piece would not occur. Instead of hand-to-hand combat, men in the open would “simply fall and die without either seeing or hearing anything“. For this reason, “the next war… [would] be a great war of entrenchments“. According to Bloch’s meticulous calculations, a hundred men in a trench would be able to kill an attacking force up to four times as numerous, as the latter attempted to cross a 300-yard wide “fire zone“. Secondly, the increase in the size of European armies meant that any war would involve as many as ten million men, with fighting “spread over an enormous front”. Thus, although there would be very high rates of mortality (especially among officers), “the next war [would] be a long war“. Thirdly, and consequently, economic factors would be “the dominant and decisive elements in the matter”. War would mean:

entire dislocation of all industry and severing of all the sources of supply… the future of war [is] not fighting, but famine, not the slaying of men, but the bankruptcy of nations and the break-up of the whole social organization.

The disruption of trade would badly affect food supply in those countries reliant on imported grain and other foodstuffs. The machinery of distribution would also be disrupted. There would be colossal financial burdens, labour shortages and, finally, social instability.

He pretty much nails it! Now yes, Bloch wasn’t 100% spot on. He was slightly wrong about alliances. His was wrong in his conjecture that “the city dweller is by no means as capable of lying out at nights in damp and exposed conditions as the peasant”, which coupled with her agricultural self-sufficiency, would give Russia the advantage in a war with “more highly organized” Germany. And most of all, he was wrong in predicting that social instability and revolution would doom all the belligerent states – after all, the key war objective would only be to remain the last man standing.

Pyotr Durnovo

While reading Secular Cycles by Turchin & Nefedov, I came across a reference to a truly, remarkably prophetic document called the Durnovo Memorandum. It was penned by Pyotr Durnovo, a member of the State Council and former Minister of the Interior in Witte’s cabinet, and presented to the Tsar in February 1914. A conservative Russian nationalist, he emphasized that it was not in Russia’s interest to fight a costly and uncertain war with fellow monarchy Germany, a war he saw as only serving to further Albion’s aims. His fears were all astoundingly prescient and eventually, tragically realized. More than anything, this discovery spurred me to write this post.

After digging around I found that Douglas Muir had already written about it in History: The Durnovo Memorandum at A Fistful of Euros. It is an excellent summary and analysis, and I recommend you go over and read it in its entirety. In this section, I will liberally quote and paraphrase Doug’s post.

Under what conditions will this clash occur and what will be its probable consequences? The fundamental groupings in a future war are self-evident: Russia, France, and England, on the one side, with Germany, Austria, and Turkey, on the other.

Italy, if she has any conception of her real interests, will not join the German side. … [Romania] will remain neutral until the scales of fortune favor one or another side. Then, animated by normal political self-interest, she will attach herself to the victors, to be rewarded at the expense of either Russia or Austria. Of the other Balkan States, Serbia and Montenegro will unquestionably join the side opposing Austria, while Bulgaria and Albania (if by that time they have not yet formed at least the embryo of a State) will take their stand against the Serbian side. Greece will in all probability remain neutral…

Both America and Japan–the former fundamentally, and the latter by virtue of her present political orientation–are hostile to Germany, and there is no reason to expect them to act on the German side. … Indeed, it is possible that America or Japan may join the anti-German side…

Right off the bat, in February 1914, Durnovo correctly sketches out the WW1 alliance system, despite that “Italy was still officially allied with Germany and Austria, Ottoman Turkey was firmly neutral, and Romania was ruled by a Hohenzollern”.

Are we prepared for so stubborn a war as the future war of the European nations will undoubtedly become? This question we must answer, without evasion, in the negative… [T]here are substantial shortcomings in the organization of our defenses.

In this regard we must note, first of all, the insufficiency of our war supplies… the supply schedules are still far from being executed, owing to the low productivity of our factories. This insufficiency of munitions is the more significant since, in the embryonic condition of our industries, we shall, during the war, have no opportunity to make up the revealed shortage by our own efforts, and the closing of the Baltic as well as the Black Sea will prevent the importation from abroad of the defense materials which we lack.

Another circumstance unfavorable to our defense is its far too great dependence, generally speaking, upon foreign industry, a fact which, in connection with the above noted interruption of more or less convenient communications with abroad, will create a series of obstacles difficult to overcome. The quantity of our heavy artillery, the importance of which was demonstrated in the Japanese War, is far too inadequate, and there are few machine guns…

The network of strategic railways is inadequate. The railways possess a rolling stock sufficient, perhaps, for normal traffic, but not commensurate with the colossal demands which will be made upon them in the event of a European war. Lastly, it should not be forgotten that the impending war will be fought among the most civilized and technically most advanced nations. Every previous war has invariably been followed by something new in the realm of military technique, but the technical backwardness of our industries does not create favorable conditions for our adoption of the new inventions. …

[A] war will necessitate expenditures which are beyond Russia’s limited financial means. We shall have to obtain credit from allied and neutral countries, but this will not be granted gratuitously. As to what will happen if the war should end disastrously for us, I do not wish to discuss now. The financial and economic consequences of defeat can be neither calculated nor foreseen, and will undoubtedly spell the total ruin of our entire national economy.

“Bang, bang, bang: too few heavy guns, not enough munitions production, inadequate rail network and rolling stock, too much reliance on imports, financial weakness. Durnovo doesn’t identify every problem Russia would have, but he’s hit about half of the top ten.” In particular, I was impressed with his negative assessment of Russia’s railways (which would break down later in the war resulting in food riots in the cities) and his gloomy perspective on the productivity and innovation potential of Russia’s military industrial complex. Obviously, he leaves out a set of other crucial factors – the administrative and political failings of the Russian state itself (the corruption and incompetence of many Russian ministers like Sukhomlinov, the personal foibles of the Tsar and the malignant influence of court lackeys, etc). Whether this omission was due to political considerations or Durnovo’s own blind-sidedness as a conservative stalwart is open to interpretation.

If the war ends in victory, the putting down of the Socialist movement will not offer any insurmountable obstacles. There will be agrarian troubles, as a result of agitation for compensating the soldiers with additional land allotments; there will be labor troubles during the transition from the probably increased wages of war time to normal schedules; and this, it is to be hoped, will be all, so long as the wave of the German social revolution has not reached us. But in the event of defeat, the possibility of which in a struggle with a foe like Germany cannot be overlooked, social revolution in its most extreme form is inevitable.

As has already been said, the trouble will start with the blaming of the Government for all disasters. In the legislative institutions a bitter campaign against the Government will begin, followed by revolutionary agitations throughout the country, with Socialist slogans, capable of arousing and rallying the masses, beginning with the division of the land and succeeded by a division of all valuables and property. The defeated army, having lost its most dependable men, and carried away by the tide of primitive peasant desire for land, will find itself too demoralized to serve as a bulwark of law and order. The legislative institutions and the intellectual opposition parties, lacking real authority in the eyes of the people, will be powerless to stem the popular tide, aroused by themselves, and Russia will be flung into hopeless anarchy, the issue of which cannot be foreseen. …

No matter how strange it may appear at first sight, considering the extraordinary poise of the German character, Germany, likewise, is destined to suffer, in case of defeat, no lesser social upheavals. The effect of a disastrous war upon the population will be too severe not to bring to the surface destructive tendencies, now deeply hidden. … there will be a revival of the hitherto concealed separatist tendencies in southern Germany, and the hidden antagonism of Bavaria to domination by Prussia will emerge in all its intensity.

Things went, as they say, to the letter. Not only does Durnovo seriously entertain the prospect of Russia’s defeat, but he spells out its consequences with an almost eerie accuracy. The Empire was indeed wracked by social revolution, as the railway system and food supply system began to disintegrate by late 1916 and popular resentment against the government was inflamed by court scandals. The soldiers in St.-Petersburg in February 1917, many of them recently drafted peasants who did not want to fight for a regime under which they were non-propertied and disenfranchised, would join the workers demonstrating for bread instead of dispersing them. Within another year, Russia was wracked by total anarchy. Likewise, following its defeat, Germany experienced political fissures between the far right and the far left, and even saw the emergence of the short-lived Bavarian Soviet Republic. If one were very generous, Durnovo’s mention of “destructive tendencies” could even be said to have hinted at the coming of Nazism.

“Durnovo glosses over a lot, and gets some details wrong. His contempt for intellectuals and the Duma is very clear in the last part of the memo, and it leads him down a couple of dead ends. But he’s so right about so many things that picking out his errors is really quibbling. In the last hundred years of European history, I’m not aware of any document that makes so many predictions, of such importance, so correctly. And I’m astonished that it doesn’t get more attention from western historians.”

The German General Staff

This is not to say that all European armies were infatuated with the offensive and the bayonet. In particular, certain thinkers from the elite German General Staff stand out for their prescience. They feared that rapid Franco-Russian military modernization meant Germany had to plan for a two-front war of attrition instead of a rapid, one-front campaign of annihilation. Thus Moltke the Elder foresaw that the convergence of social and technological trends would make the Prussian tradition of ‘total force applied in limited ways for limited objectives’ obsolete, or in his last Reichstag speech of 1890, that the “age of cabinet war” would have to give way to “people’s war”.

His disciple Colmar von der Goltz had expounded on these views in his influential book Das Volk in Waffen back in 1883, which advocated the mobilization of all human and material resources under firm military rule for the duration of the war. (Although, unlike Bloch or Engels he did not cover the impact on the civilian role in much detail, e.g. how to feed the population or maintain industrial production – on which total war would make unprecedented demands – under harsh conditions of blockade). Köpke , the Quartermaster of the General Staff, wrote in 1895: “Even with the most offensive spirit…nothing more can be achieved than a tedious and bloody crawling forward step by step here and there by way of an ordinary attack in siege style – in order to slowly win some advantages”.

Yet for all the brilliant foresight of a few members of the German General Staff, as a body it institutionalized the military philosophy of the past. The best proof is its fixation on the Schlieffen Plan, described by B.H. Liddell Hart as a “conception of Napoleonic boldness”, which aimed to knock out France early in the war so that Germany would not have to confront the geo-strategic horror of waging a two-front war against the Entente Cordiale. But while it may have worked a decade or two before WW1, by 1914 it suffered from a host of unwarranted assumptions that made its success highly uncertain – e.g., a lack of effective Belgian resistance, a slow Russian mobilization, the ineffectiveness of the British Expeditionary Force, and underestimation of French logistical capacities and overestimation of their own. So even an institution as brilliant as the German General Staff was trapped between the Scylla of past experience and the Charybdis of new technologies; they were just somewhat more aware of this trap than the other European armies.

What’s the point of this post? It is really a confluence of several interests – the history of WW1, history in general, and futurism. It might not challenge any existing “narrative”, but I do think it adds a bit of richness to the subject, and reinforces the theme that sometimes the “conventional wisdom” (amongst both masses and elites) can be very, very wrong, and only recognized as so by a few pundits coming from surprisingly varied, even opposed, ideological positions.

2. Some Westerners like to condemn Russians for their ambivalence towards Stalin, since he killed far more Russians than Hitler! (This is a constant theme of anti-Stalin* and general Russophobe propaganda). Quite apart from this being simply wrong according to all objective estimates, Russians themselves say they suffered far more under four years of the Nazi assault than twenty plus years of Stalinism.

According to polls, 50% had a close relative die in the Great Patriotic War (33% – injured, 16% – missing in action). Only 14% say that nothing particularly bad happened to a close relative during the war. These answers are in line with the statistics on wartime demographic losses – some 27mn Soviet citizens died in that war (13mn Russian), of them 8.7mn soldiers (5.8mn Russian). In contrast, in response to the question, “Did anyone in your family suffer from the repressions shortly before or after the war?”, 22% of Russians said “yes”, while 63% said “no”. (Furthermore note that “suffer” does not imply death, since contrary to the popular anti-Soviet mythology most Gulag inmates survived).

* And before some fanatical ideologue comes out with the cheap “You’re a filthy Stalinist!” card, I would note that it is quite possible to condemn Stalin on the basis of his real crimes, without resorting to neo-Goebbelsian propaganda about “62 million victims of Communism” or “Stalin killed more Russians than Hitler”. If anything such rhetoric actually encourages the rehabilitation of Stalinism.

3. Related: The illiberalism of anti-Putinism (Mark Adomanis). Now make no mistake – as of now, I think he is one of the best, if not the best, “popular” Anglophone bloggers on Russian politics. Of course, I don’t agree with everything he writes, sometimes quite forcefully. Such as the following:

In short, if you’re willing to believe that, by virtue of opposing Putin, Russian communists aren’textremely nasty and scary people, you’re the sort of person who will believe anything.

Myself, I find it arrogant, narrow-minded, and frankly presumptuous to label a major stratum of a population as “extremely nasty and scary”. As another commentator pointed out, this is very similar to the rhetoric of the Russian “liberals” whom Mark attacks as conceited and illiberal. But instead of hearing it from me, feel free to go to the discussion in question and make you own conclusion.

4. The Return of the Reich watch. Carrying on from Sublime News #6, more from Stratfor on how Germany is becoming a “normal country” and unsettling traditional European arrangements in the process. First, Germany is no longer willing to underwrite EU stability, i.e. see the punitive terms of the bailout offered to Greece. Down the road, this might result in acrimony over the Common Agricultural Policy (benefiting France and the new Visegrad members) and the UK rebate, since a resurgent Germany is unlikely to want to pay for them as before. Second, the traditional Bismarckian policy of Germany is to “make a good treaty with Russia”; together with Nord Stream, this should increase the distance between Germany and Poland. A future consequence may be to reinforce the Visegrad-US relationship at the expense of EU integration.

Timothy Garton Ash has a quite brilliant historical overview in Berlin has cut the motor, but now Europe is stalled which I can’t help but quote in extenso:

On Saturday Helmut Kohl, the “chancellor of German unity“, will turn 80. To mark the occasion the chancellor, Angela Merkel, and many others in Germany will deliver nice tributes to old king Kohl; yet his country’s current approach to Europe, and especially to the embattled eurozone, risks dismantling his European legacy. If you ask why the European project is faltering today, one of the main reasons is that the German motor has stalled. And if you ask why that has happened, the short answer is: because Germany has become a “normal” nation, like France and Britain. Assuming, that is, anyone in their right mind would call us normal.

In the steps of his mentor, Konrad Adenauer, Kohl tirelessly insisted that German and European unity were “two sides of the same coin”. That coin eventually became the euro. Kohl, like most of his predecessors, was committed to European integration for two reasons: because, out of personal wartime experience, he believed in it; and because he understood that it served the German national interest. Only by reassuring Germany’s neighbours that Germany had changed, and was utterly devoted to integrating itself into Europe, could the Germans hope to achieve their national goal: the reunification of Germany in peace and freedom. It worked. When the chance came, unexpectedly, in 1989, Kohl seized it with both hands – and all Europe has benefited. We could not have a Europe whole and free without a Germany whole and free in its centre. …

Had he been chancellor today, Kohl’s response would surely have been to take the next step: putting the long-term politics of European unity before the short-term cost, but also moving towards a stronger fiscal, and by extension political, union. In the meantime, however, this has become a different Germany. Until unification, Germany wanted to be super-European, for reasons of personal memory, idealism and historical responsibility; but it also needed to be, in its own national interest. After unification, at last a fully independent, sovereign country, it no longer needed to be. Everything would now depend on the inner power of wanting.

Students of Germany then watched with interest to see if it would continue the exceptional European commitment of the Adenauer-to-Kohl Federal Republic. Or would it become a more “normal” nation state, like France and Britain, pursuing its own national interests, through European channels for choice, but on its own account, even at the expense of others, when it considered that necessary? The special relationship it developed with Russia, including the bilateral securing of its energy needs, gave a clear indication which way post-unification Germany was leaning. Now its response to the first historic crisis of the eurozone makes the conclusion definite.

Some critics blame Merkel personally for this. The former foreign ministerJoschka Fischer quips that the one-time Ms Europe seems to have become Frau Germania. Indeed, this cautious, consensus-building “chancellor of the centre” does not have the strategic boldness of an Adenauer or a Kohl; but even a bolder leader could only go so far against the grain of domestic opinion. And from the shrieking headlines of the tabloid Bild newspaper to the costive judgments of the German constitutional court it is plain that the Germans are not prepared to make any more sacrifices for the sake of “Europe”. For preference, they would probably rather have the D-mark back. Or, failing that, a right, tight little north European “nordo” (or perhaps “neuro”), leaving the feckless south Europeans to cope with a weaker “sudo” (or “pseudo” – hat-tip to the former Barclays boss Martin Taylor for this coinage). The economic ramifications are complex and uncertain, but this spring may yet be seen as the beginning of the end of the eurozone – that final, most daring step of postwar German Europeanism. …

So instead of complaining I note this final irony. Twenty years ago Eurosceptic British Conservatives shrieked with alarm at the prospect of a united Germany imposing a federal European superstate upon us. Some even cried: “A Fourth Reich!” Today, as Eurosceptic British Conservatives edge back towards power, we can see that the unintended result of German unification has actually been the emergence of a more British Europe: dramatically enlarged to the east, inter-governmental rather than federal, with Germany too calmly pursuing its own national interests in its own national way, like Britain and France. Come to think of it, Margaret Thatcher is the one who should be posting a message of thanks on Kohl’s 80th birthday website. Whether the old man would appreciate it is another question.

5. Lou Grinzo of Cost of Energy offers a useful graph summarizing the estimated cost / effectiveness ratios of various geoengineering options.

See also Hacking the planet: who decides?

6. Energy & climate blast.

• Copper Peak (Jean Laherrère) projected at c. 2020. (Gold peaked in 2000).

• James Lovelock: Humans are too stupid to prevent climate change - ”Even the best democracies agree that when a major war approaches, democracy must be put on hold for the time being. I have a feeling that climate change may be an issue as severe as a war. It may be necessary to put democracy on hold for a while.” Welcome to the ecotechnic dictatorship! (But really, kudos to Lovelock for having the balls to state this obvious but unpalatable fact).
• How Close will the U.K. Come to Running Out of Natural Gas in Storage this Spring? Britain’s minimum natural gas storage levels have seen a steady pattern of decline since 2005, in large part due to the depletion of its indigenous gas sources. Soon there will have to be additional LNG and Russian gas imports to prevent Britain from freezing during late winter. See also Power crunch looms for Britain. It is important to note that the UK is not only one of the most fiscally overstretched European nations (10%+ budget deficits for the next two years assuming reasonable growth), but also has one of the most precaurious energy situations.
• Riddles in the Dark (John Michael Greer)
• Our Future and the End of the Oil Age: Building Resilience in a Resource-Constrained World – a presentation by Dmitry Orlov.
• It’s STILL the coal, stupid (Lou Grinzo), or in other words, the brouhaha over Obama’s loosening of restrictions on offshore oil drilling is somewhat misplaced.
• The Copenhagen Accord at Three Months: 110 Countries Now Support a New Global Effort to Achieve Climate Safety. With interactive map.
• Koch Industries’ diabolical 20-year campaign to discredit AGW.
• Climate-row professor Phil Jones cleared of charges as anyone familiar with the situation would have expected from a neutral jury (note the hysterical denier rage in the comments). See the detailed write-up by Climate Progress.

7. Pavel Podvig writes on the New START treaty in numbers. The main conclusion is that the reductions are in fact very modest. See reproduced table below.

Russia

The United States (UPDATED 02/29/10)

8. Military blast.

• All Raucous On Cyber War Front
• China buys air defense systems from Russia. Some 15 S-300 batteries for around 2bn $. This sale isn’t detrimental to Russia, since 1) the Chinese already have a similar system in the HQ-9 “adapted” from stolen Russian and American data anyway, and 2) Moscow has the S-400 with incipient anti-ballistic missile capabilities and is developing the S-500 which is supposed to be a full-fledged ABM system.
• China’s DF-21 “carrier killer” ballistic missile and US plans to defend against it.
• F-16 Beats The F-35 – Romania to get 48 F-16C’s over 4.5bn $ by 2020.
• Russia’s fifth-generation tank the T-95 may be outed in 2010.
• RAF jets intercepted Russian bombers flying in British airspace, an increasingly frequent occurrence. AFAIK this is a two-way game – Russians too have complained of NATO aircraft violating their airspace.
• Dam Busting Russian Bombers At Work – apparently Russia uses bombers to blow away ice dams to prevent flooding. Cute.
• Russia begins constructing the 4th Borei submarine.

9. It appears the emerging consensus on the sinking of the South Korean corvette is that it detonated an old North Korean mine, though the hostile torpedo theory isn’t ruled out. Things may become clearer in a month once the ship is recovered and analyzed. Meanwhile, many rumors indicate that the hermit kingdom is now suffering from severe turbulence in the wake of the failed currency reforms.

One of the more damaging stories to spread through North Korea recently was the one about the several billion dollars Kim Jong Il has stashed in foreign banks. Bank secrecy laws in Europe, particularly Switzerland, have been under attack by major world economic powers, and it’s been getting harder to keep money hidden. The fact that Dear Leader Kim has billions stashed overseas, while millions go hungry in North Korea, is not very good PR.

An increasing unstable, and perhaps dangerous, situation. But at least they’ve finally completed Pyongyang’s first skyscraper after 23 years.

10. Serbians say sorry for 1995 Srebrenica massacre.

Serbia’s parliament has apologised for the Serb massacre of 8,000 Muslims in Srebrenica in 1995 but stopped short of calling the killings genocide, after a debate showed deep divisions over the country’s role during the Balkans conflict.

A document put forward by Belgrade’s ruling coalition of democrats and socialists condemning “the crime” and apologising that “not all was done to prevent this tragedy” was narrowly carried as Serbia continued its bid to become a member of the EU and attract business investors. …

They denied western accusations of mass executions and one, Slobodan Samardzic, warned: “Serbia will sign its own guilt with this declaration.” Another, Velimir Ilic, said that in Srebrenica, “the crime was no greater than in other places”, citing Croatian moves against Serbs.

Why should Serbia apologize for the Bosnian Serbs who were clearly not even under its control? Why apologize for it at all when doing so implies taking responsibility for genocide? I can’t believe the Serbs are naive or stupid enough to do it out of altruism, so clearly short-sighted economic reasons connected to EU membership are the cause. And the funny thing is that this act of false contrition only got them more humiliation from the Europeans.

The European Union, which has been coaxing Serbia into a historical reckoning about its bloody role in the Balkan wars of the 1990s, gave a cautious welcome Wednesday to a declaration by the Serbian Parliament that condemned the 1995 massacre of 8,000 Muslims in Srebrenica. But it warned that what amounted to reluctant, latter-day contrition about the worst massacre in Europe since World War II was insufficient if Serbia wanted closer ties with the bloc.

I would venture to guess that Germany wants an admission of genocide from Serbia particularly badly. After all, it is weighted down by the unique guilt of the Holocaust, and getting another European nation – in particular the Serbs whom they tried to exterminate in WW2 – to explicitly admit to genocide would lessen the “uniqueness” of the Holocaust and help justify Germany returning to acting like a “normal nation” in the international sphere, as it is already beginning to do (see above).

11. Venezuela / “Rise of the Rest” watch. Putin will help us get nuclear power, says Chávez, causing Western chauvinists to squirm with indignation.

Russia has said that it will help Venezuela to set up its own space industry and develop nuclear energy, the Latin American country’s President announced yesterday. The two have also signed a new contract to exploit Venezuelan oil and are discussing a raft of further military and energy deals.

The deal will allow Moscow to entrench its foothold in Latin America through a deepening alliance with America’s main regional foe. As the Russian Prime Minister Vladimir Putin visited Caracas, Venezuela’s vocal, anti-imperialist leader, President Chávez, said that the allies were building “a new, multipolar world”. …

They discussed a range of military deals and a $2 billion (£1.3 billion) line of credit for weapons purchases secured by Mr Chávez during a visit to Moscow in September… Venezuela has spent more than $4 billion on Russian weaponry since 2005, including tanks, helicopters, Sukhoi fighters and the S300 anti- aircraft missile system. The deals helped Russia to oust the US as the No 1 arms supplier to Latin America. …

Mr Chavez took the opportunity of the anniversary of the Falklands war to demand the UK relinquish this “bastion of colonialism”, cheering: “Long live the Malvinas, they are Argentina’s”. He reiterated that Venezuela would stand beside Argentina in any war although he added “we don’t want conflict”.

A few comments. First, developing a nuclear industry would be highly beneficial for Venezuela. Though it theoretically has a lot of oil, most of it is unconventional heavy stuff locked up in the Orinoco belt that will probably never be exploited on a large scale because of the massive energy and water costs. Meanwhile, Venezuela’s current oil production is in slow decline. Second, Venezuelan arms acquisitions appear to be essentially defensive in nature, and perhaps partly aimed at buying off the conservative officer class. They certainly don’t constitute a real offensive threat to Colombia, whose terrain is unsuited for mobile armored warfare and is defended by a large, experienced army (not to mention 2,000 US troops).

Finally, one big, ongoing thing in Venezuela is the electricity crisis. This is due to a confluence of several factors: 1) a severe drought that has severely reduced water levels on the three dams that generate 70% of its electricity, – caused by this year’s El Nino and seen in China too, 2) the big rise in electricity demand during recent years, fueled by Venezuelans’ rising prosperity, while investment into the electricity-generating sector was slow to react. (Charmingly, one of the measures used to contain the crisis is to get soldiers to give out free energy-efficient light bulbs). This is all of course highly inconvenient for Chavez, but there is very little likelihood that it will topple him.

12. Interesting tidbit on Poland. In Sublime News 3, I referenced a discussion I had on Adomanis’ blog on Poland’s demographic and economic future. One of the major reasons for pessimism is that even if Polish fertility rates climb back up, labor demand from aging Western European states like Germany will only result in an accelerating exodus of young Polish workers, which will undermine any hopes of “convergence” to German levels of income. I disagreed with this:

I am not a big fan of the idea that West European labor shortages will prove an irresistible magnet to East-Central European laborers.

First, the economic disparity is no longer as big as it once was. Poland already has nearly 60% [AK edit: actually 52%] of Germany’s GDP per capita, and is more economically dynamic (because it is catching up). And Poland is one of the poorer Visegrad nations.

Second, migrants are drawn to economic dynamism – the highest inflows in the last ten years went to Britain, Ireland, Spain, etc, not Italy or Germany (which are demographically worse off). You say that Germany, Italy, etc will face labor shortages. But that assumes economic growth and growth of demand for labor can sustainably continue there. I think that assumption is questionable.

Why work in foreign nations who look down on you and where you pay a large chunk of your (stagnant) salary to support their elderly, when you can work in a still-growing Poland?

Article from March 22, 2010: Germans travel to Poland for work. “Unemployed Germans have begun travelling to Poland in search of jobs – in a dramatic reversal of the usual trend for immigrant workers.”

13. Russia watch. Detailed GDP stats revealed for 2010 (7.9% decline). In summary: agriculture 0%, extractive -3%, manufacturing -15%, construction -17%, retail -9%, finance 2% (!), government expenditures 2%. As shown in the graph below, the crisis essentially knocked Russia back to 2007.

Nonetheless, the emerging consensus is that it was a short-lived shock. Russia – Europe’s Bright Light of Growth. Not a headline you normally expect from CNBC, but with most commentators now predicting growth of 4-6% in 2010, there you go:

As the investment community gains confidence in the likelihood of a sustained economic rebound, Russia has emerged in far better shape than many other European markets. In fact, with low debt, inflation under control, a large consumer base primed to buy goods and services, and the price of oil recovering, Russia may well be the most dynamic place on the continent.

14. More on Eurasia.

• Russian Leader Meets Burjanadze: What is on Putin’s Mind? (Jamestown)
• Имя модернизации — социализм – Zyuganov, KPRF chief, on Medvedev’s modernization plans.
• Govt OKs Stalin Monument, Flirts With USSR 2 (Ukrainiana)

15. Ever wonder why Afghan insurgents love IED’s so much? The Weakness of Taliban Marksmanship…

16. Not often that I agree with Daniel Pipes, Iraq’s Cosmetic Election is an exception…

“It takes a cynical mind not to share in the achievement of Iraq’s national elections.” So writes the Wall Street Journal editorial board today. I’m no cynic, but my mood about Iraq could variously be described as depressed, despairing, despondent, dejected, pessimistic, melancholic, and gloomy.

That’s because the Iraqi regime (along with those of Afghanistan, Lebanon, and the Palestinian Authority) is a kept institution that cannot survive without constant American support. As long as Washington pumps money and sacrifices lives to maintain the Baghdad government, the latter can hobble along. Remove those props and Iranian-backed Islamists soon take over.

17. Floatsam and Jetsam.

• Я “живущий в США российский экономист”.
• Check out Alexa Meade’s art. Normally, paintings try to imitate photography. Here, photography tries to imitate paintings!
• Google Shows How HTML5 Can Run Quake In The Browser.
• Krugman: GOP taken over by nutters.
• I Was Colonel Schultz’s Private Bitch. “Pocket books called Stalags were practically the only pornography available in the conservative Israeli society of the early 1960s. Though it was claimed that the Stalags were translated from English, they were actually created and written by Israelis.”
• Briton recalls his risky view of Auschwitz horror
• The Sex Scholar: Decades before Kinsey, Stanford professor Clelia Mosher polled Victorian-era women on their bedroom behavior—then kept the startling results under wraps
• Pfizer ordered to pay up over ‘AIDS-like’ virus infections; creates dummy corporation to do it as to as not interrupt its relations with Medicare and Medicaid. Quoting a commentator, “Wow, I wish I could create a dummy corporation to take the rap for any illegal activity that I could get involved with.” (h/t eXiled Online)
• Welcome to Flatland! Way out of line…

18. Хрїстóсъ воскрéсе! Воистину воскресе! (My recommended Paschal reading: Three Versions of Judas by Jorge Luis Borges).

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).