Russia: A Failed State?

Ivan Suhkov writes in the Moscow Times:  Crimea symbolizes revenge — in the Soviet, political and negative sense of the word. A more accurate word is “restoration” — a restoration of the state and its rights that were allegedly violated.

By reinstating the Soviet anthem, imposing a power vertical, giving greater social and political importance to siloviki structures — particularly the secret police — and reintroducing Crimea into the country’s daily weather forecasts, Yeltsin’s successor, Vladimir Putin, has symbolically restored the Soviet Union.

However, advocates of restoration tend to miss one important point: both the Russian Empire and the Soviet Union ended in failure and collapse — the former in 1917, the latter less than a century later in 1991.

The search for a new doctrine did not end unsuccessfully because it never really began.

To appreciate that this process did not begin with the absurd ban on the “falsification of history” or the “new historiography” trumpeted by Culture Minister Vladimir Medinsky, just peruse the preamble of the Russian Constitution.

It speaks of “historically established state unity,” “revering the memory of ancestors who have passed on to us their love for the fatherland” and “reviving the sovereign statehood of Russia.”

On Nov. 19, an Investigative Committee task force teamed up with riot police in an attempt to detain a citizen allegedly involved in the criminal withdrawal of a huge sum of money. The person’s name is not as important as the fact that the police staged the operation in the center of Moscow in broad daylight against the backdrop of an unprecedented level of excitement over the revival of the Russian state.

The police operation was a complete failure.

To better understand the circumstances, note that the figure sought by police is Ramzan Tsitsulayev, whom Chechen leader Ramzan Kadyrov named one year ago as that republic’s envoy to Ukraine. The men who managed to thwart the sting operation were Chechens, and the region where Tsitsulayev is hiding out — and from where he mocks the Moscow police — is, of course, Chechnya.

That is the same republic where Moscow began operations 20 years ago to “restore constitutional order.”

Two weeks ago Moscow police detained and drove off with Magomed Aliyev, a young native of Dagestan who had come to visit his sister.  Aliyev resurfaced at a detention center in Stavropol, a regional center and a sort of outpost of the federal authorities in the North Caucasus. Aliyev was urgently hospitalized on Nov. 26 after he was repeatedly beaten and someone jabbed a pen in his eye.

Regardless of any crime the young man might have committed, the actions of the siloviki far overstep the bounds of legal procedure. It might seem that Stalinist terror and a failed state are at opposite ends of the spectrum. But terror, by definition, is an act that bypasses the rule of law and so indicates the failure of the state.

In one way or another, former Soviet leader Josef Stalin is the focus of many current leaders’ ideas concerning “restoration.” They erroneously quote Churchill — namely, that “Stalin came to power when Russia had only a wooden plow, and left it in possession of atomic weapons.”

It so happens that the world has never had to cope with a failed state holding a nuclear arsenal large enough to destroy all of humanity several times over. The world barely managed to avoid such a threat in 1991, but only with some intense diplomacy, significant financial outlays and a whole lot of nail-biting.

Russian fans of “reconstruction” would like a replay of those times. And despite blithe assurances from the Defense Ministry that the command and control structure of the country’s nuclear arsenal has been fully modernized, there is no guarantee that the final act in this dark drama will end as peacefully as it did the first time.

Putin

 

To Buy, To Sell, To Hold?

The function of an investment bank is to get people to buy and sell securities, Matt Levine suggests. Should the clients accept the recommendations or question them.

Of course, in order for a security to change hands, one party has to buy and the other has to sell.  Can the same person perform both functions full-heartedly?

The Financial Regulatory Aurhority fined Citibank $15 million for mixed behavior.

For example, at an idea dinner that occurred in July 2011, a CGMI equity research analyst identified a stock as a “short” pick. Before the dinner, however, the analyst had upgraded that stock from Sell to Hold and reiterated his Hold rating on the company in the last report that he published prior to the dinner. Thus, the analyst’s characterization of the company as a “short” pick was inconsistent with his published research on the company at the time. Moreover, the analyst identified other companies, on which he had Hold or Neutral ratings, as “short” picks at six subsequent idea dinners between October 2011 and June 2013. These picks were therefore inconsistent with the ratings identified in the analyst’s published research.

Analysts have to certify in writing that they believe what they are saying.  Is this possible?  To Buy, To Sell or To Hold, That is the Question

Recommendations

Charm Offensive in Globalization

The US deal with China asks a lot more of the US than it does of China.  Cina is only commited to reverse the growth of their admissions in 2030.   The Chinese now emit more than 7 tons of CO2 each year.  The Ameircans emit 16 tons.  Up until now, Americans appear to have been only interesed in reducing China’s oil consumption.

At the recent APEC summit in Beijing, America and China agreed to iberlize trade with deals on visa, security, and currecy as well as the environment.

China and Canada agreed to $2.5 billion in trade deals and currency exchange.

The Wrold Trade Organization dropped requirements for India on food security.

Russia, China and the Germans have worked hard to drop sanctions against Iran and enable Iran to enter the world market.

Th world has restarted, led by emerging natons.  It is multipolar, peaceful and open.  Even the West has a place.  Globalization Restart

Free Trade for the Asia-Pacific Region?

Gao Yuan and Li Xiang write:  A well-functioning global value chain evaluation mechanism will create the foundation for a “high-level” economic free trade zone and benefit all economies, Chinese officials and researchers said.

Minister of Commerce Gao Hucheng called for the Asia-Pacific region to deepen economic integration and to push forward the process of creating the proposed Free Trade Area of the Asia-Pacific at the upcoming APEC meetings.

Gao said the Asia-Pacific region, as the engine of global economic growth, has achieved remarkable progress. There is still room for improvement of communication and connectivity in the areas of industry, human resources, infrastructure and information exchange among the APEC members.

Global economies started to sign regional free trade deals as the WTO’s Doah Round hit a dead end in 2008.

Shen Danyang, spokesman for the Ministry of Commerce, said China is actively participating the establishment of new world economic order to help all APEC members boost trade.

China is considering a series of new trade policies to fit the nation’s position in the global value chain, Shen said.

China, the world’s second-largest economy and manufacturing hub, is still on the lower end of the international value chain, according to Yang Cuihong, professor of economics at the Chinese Academy of Sciences.

“As China climbs up the chain, its trade partners will benefit from higher added values created from bilateral trade,” Yang said.

China is actively promoting the Free Trade Area of the Asia-Pacific, which can include most economies in the global value chain, including the world’s leading powers that export products with high added value and the emerging economies that contribute raw materials and cheap labor.

“A modern multilateral free trade proposal should give every economy a fair chance to trade equally, not just be a playground for developed economies,” said Lin Guijun, an economist and vice-president of the Beijing-based University of International Business and Economics.

Researchers suggested that emerging markets and exporters of natural resources should work together to reach a free trade deal that can protect the interest of economies at the lower end of the value chain.

Free Trade in the Asia-Pacific Region

 

The Masai May Prefer Internet Explorer

The Tanzanian government seems to be moving ahead with a deal to sell 600 square miles of land to a UAE luxury safari company, but that land is currently home to thousands of Masai pastoralists.

The land on which the Masai peoples’ cows can graze is under threat of shrinking – again.

A UAE-based luxury safari company’s proposal for an extensive wildlife corridor that would border the Serengeti National Park, which was called off last year, appears to be under consideration by the Tanzanian government once more. Government officials have ordered that the pastoralists vacate the land by the end of the year.

The Tanzanian government is offering one billion shillings – a little more than half a million US dollars – to go towards socio-economic development projects as compensation, but the Masai are intent on keeping their land. Representatives from the ethnic group were scheduled to meet with Prime Minister Mizengo Pinda in Dodoma, the Tanzanian capital, on Tuesday.

The Masai, a pastoralist people that have resided for centuries in East Africa, herd cows as a central part of their existence. They rely on moving around semi-frequently to allow grazed land to regenerate during their absence. Masai herders’ attachments to their land also come in the form of maintaining ancestral heritage.

Colonization of the region by the British in the 19th century forced the Masai into smaller parcels of land and in 1959, British colonialists persuaded the Masai to sign an agreement that evicted them from the Serengeti, but provided them living space in the Ngorongoro highlands.

The development proposal, which would allow access of the area exclusively to the Ortello Business Corporation, requested that the land be used to build a 600-square-mile corridor through the Loliondo region. In order to do so, the government would have to evict 30,000 Masai from the land before handing it over to the corporation that has close connections to the Dubai royal family. Members of the Masai tribe argue that the eviction would impact the lives of closer to 80,000 people.

The Tanzanian government first leased land in Loliondo, which was used for commercial hunting camps, to OBC more than two decades ago. And while government officials have argued that the Masai’s pastoralist behavior threatens endangered wildlife, members of the ethnic group and researchers alike claim that government interests lie elsewhere.

 

Masai

 

 

Ukraine: Punishment Should Not Fit the Crime?

As nations have freed fhemselves from their tormentors, should they punish them or move on?  Hundreds of government employees in the Ukraine have been dismissed or banned from public service for ten years in a policy called ‘lustration,’ or cleansing.

Ukraine wants to distance itself from its past, join Europe and put Russia behind them. There is a baance to be struck between national reconciliation and retribution.  Laws should not cause further ruptures.  Iraq is an example of how wholesale justice without lenciency can sow the seeds fof future conflict.

A positive example is South Africa where people who told the truth were essentially forgiven.

Ukraine is correct to punish the irredeemable, but they must over compassion to those who admit their past transgressions.

Can Ukraine Fly?

US Trade: Win Win for Both Parties

If Congress and the President can agree on anything it is trade.  The President has two pacts, the Trans-Pacific Partnership Agreement and the TransAtlantic Trade and Investment Partnership.

To complete the agreements, the President needs Congress to agree on only an up-and-down vote.  If Congress refuses, the agreements are dead on arrival.  Countries simply won’t negotiate complicated deals full of compromise if Congress cannot give the President this vote of trust.

Will this happen?  It is one area where it might and it is an important one.

Trade Deals

Deflation: Hope Does Not Spring Eternal

Central banks in the US, Europe and Japan have been pouring new dollars, euros and yen into the system in an effort to “nudge” consumers to buy.  People must be encouraged to act against their ‘irrational’ selves which can’t count on the future.

Bankers worry too that consumers may create ‘deflation’ by deferring their purchases and driving prices down.  Deflation is the opposite of inflation and its downward spiral is harder to stop.  The US Federal Reserve succeeded in doing this by the policy of quantitative easing.

Japan has tried to effect ‘reflation.’  The Bank of Japan governor will push about $720 billion into the economy.  WIll it work?  The Japanese are more skeptical than Americans.  They see themselves as just as rational if not more rational than bankers.

Draghi in Europe prefers to state things as they are and tell the truth.

Soft paternalism is complicated.  Are people really not capable of reasoned reflection?  Do they really need to be governed by careful ‘choice architecture?”  Answers to these questions are being given by the actions of central banks across the world.

Central Banks Nudge with QE

 

 

 

 

White is the New Color of Money in Art

Leonid Bershidsky writes:  In a record month for New York art auctions, one standout was an all-white work that sold for $15 million. Even if one lacks Tom Wolfe’s courage to doubt the value of contemporary art, the multi-million-dollar price tag for some white paint on canvas cannot but raise existential questions.

White paintings are something of a philosophical tradition. Kazimir Malevich started it in 1918 with “Suprematist Composition: White on White”:

white on whiteHere’s what he had to say about it in the catalog for the Moscow exhibition where the cool white square on a warmer white background was first shown:

I have overcome the lining of the colored sky, torn it down and into the bag thus formed, put colour, tying it up with a knot. Swim in the white free abyss, infinity is before you.

American artist Robert Rauschenberg created five “White Paintings” in 1951. He went further than Malevich in his rejection of substance, simply rolling white house paint onto smooth surfaces.

rauschenberg
Composer John Cage, author of the famous piece of silence known as 4’33”, described the paintings as landing strips for invisible motes and shadows. Rauschenberg called them clocks:

 

 

If one were sensitive enough that you could read it, that you would know how many people were in the room, what time it was, and what the weather was like outside.

Weisberg’s work was too strange for the Soviet Union’s tame official art scene, and his first big exhibition took place three years after he died, in 1988. One white-on-white painting, with just a hint of shyly glimmering shapes, sold for $139,280 at Sotheby’s in London in 2006. A stitched-together white canvas by Australian-born Lawrence Carroll was valued at between $23,200 and $32,200 at a Sotheby’s auction in Milan. It failed to sell.

So what is so special about the 1961 work by American conceptualist Robert Ryman that fetched $15 million in New York? Or the nearly identical one below, also by Ryman, which sold for $5.2 million?

ryman
 

White has a tendency to make things visible. With white, you can see more of a nuance; you can see more. I’ve said before that, if you spill coffee on a white shirt, you can see the coffee very clearly. If you spill it on a dark shirt, you don’t see it as well.

The most probable reason for the price lies outside the realm of art, even defined broadly as a symbiosis of painting and explanation. Alexander Rotter, co-head of the contemporary art department at auction house Sotheby’s, simply decided that Ryman needed a push. “I thought there was really something to be done with the market, that’s why it’s been priced so high.”

If one wanted to be poetic about this piece of marketing wisdom, one could say Rotter is talking of the same sky whose lining Malevich claimed to have overcome.  In the end, the value of art is in the emotions it conveys, its power of holding one’s eye and occupying one’s thoughts. A white canvas may have had the requisite powers in 1918 or even in 1951, because it made a radical statement. In 2014, it’s meaningless. The business decision behind the insane price is the only true piece of art in the case of Ryman’s works.

Even in the highly unlikely event that certain art lovers are moved by the spectacle of unadulterated whiteness, there’s no need to pay millions of dollars for the pleasure. They can simply follow Rauschenberg’s advice: “Want one? Paint one.”