Sunday, December 11, 2011

Russia and China on Tenderhooks?

Those who know Russia the best are the most eager to get themselves and their money out.
Money is flowing out of Russia faster than it is flowing in. The net outflow is expected to reach $70 billion by year-end, and the figures suggest that the bulk of that will be from large investors.

Yaroslav Lissovolik, chief economist for Deutsche Bank here, notes that “the scale of capital flight has more than compensated for the rise of oil prices.”

Even if oil output is maintained and crude prices stay relatively high, according to Russian finance ministry estimates, the nation’s current account will slip into deficit by 2014. Then Russia’s economy, like that of the United States, will depend on an inflow of investment, economists say. _NYT

Russia faces a political crisis as well as an economic one. And underlying it all, is the crisis of the shrinking demographic -- the vanishing away of the ethnic Russian.
After a decade of “stability”, Russia now looks as vulnerable to shock as the Soviet Union was at the end of its days. The big difference, however, is that the Soviet Union had a clear structure and, in Mikhail Gorbachev, a leader who was not prepared to defend himself with force. Today’s circumstances are very different.

Mr Putin is unlikely to follow the advice of Mr Gorbachev and cancel the results of the rigged election. He may instead resort to more active repression, thereby making the country look a lot more Soviet. This would only make the crisis worse. _Economist

China's situation is somewhat different from Russia's, although there are a few parallels in terms of movement along the spectrum from totalitarianism to partial liberalisation. But China's demographic is in no danger of shrinking to nothing. Instead, China's demographic is dangerously close to asserting itself against the government by revolutionary means.
When China's leadership saw how Moammar Kadafi was shot in the street, how Saddam Hussein was marched onto the scaffold and how Hosni Mubarak was tried as he lay in a cage — when they saw, as those autocrats lost power, how their families lost everything too — they must have sensed, I think, that it is not democracy they should fear but revolution. As the relatives of our high officials grow more wealthy, they emigrate to democratic countries (never to dictatorships); they know that the possibility of revolution in China is growing by the day. They know that revolution is never reasonable, that it drips with blood. _LATimes
When comparing the serious financial and political problems present in advanced nations such as Germany or the United States, with the problems facing Russia and China, the salient thing to remember is this: We expect that the Germans and the Americans understand, by and large, what is wrong and what will eventually have to be done to fix it. That is far from true for the Russians and the Chinese, who are sailing far from charted waters.

Of course, even in the more prosperous west, with its traditions of order and rule of law, the coming disruptions of growing debt and massive demographic change may prove to be too much of a shock for the governmental infrastructures of some nations to bear. Uncertainty about the future is not limited to "the coming anarchy" nations of the third world and nations trying to emerge from a recent totalitarian past.

Hope for the best. But keep your eyes open, your gas tank full, your boots oiled, your powder dry, and your knives sharp.


kurt9 said...

China has a future. Russia does not.

al fin said...

Yugoslavia had a future once.

All artificial empires eventually dissolve.

Tribalism and natural xenophobia will see to that.

The question for China is whether the coming war will be against the outside world or against itself.

tomerickson said...

American policy against Russia since the end of the Soviet Union has been to try to capture its significant resource rents and to hollow it out by extracting its capital and skilled labor. The aim is to dismantle any significant industrial, manufacturing base and any potential significant military challenge. The US increasingly depends on extracting capital and skilled labor from outside to sustain itself as it has eroded its native population and produces mainly financial graduates.

al fin said...

Tom: What you are asserting is rather general and sweeping. It is a simplifying description of American policy toward Russia, which could be true, false, and irrelevant all at the same time.

As for the US dependency on outside labour and capital, that has been true since the founding of the republic.

The difference in the tragedy of the US and the tragedy of Russia, is that the US started with immense promise, and followed a predictable (by Ben Franklin and others) trajectory downward to a democratic tyranny of the manipulated majority.

Russia, on the other hand, has always been tyrannical, and her people -- the ones who stay in Russia, that is -- seem to prefer it that way.