Thursday, October 22, 2009


It means “comrade” in Russian, and its use harkens back to the days of Soviet communism in the U.S.S.R. But we all know that the communist system shuddered and fell just two years have the collapse of their Afghani offensive in 1989 (and the collapse of oil prices in the mid-1980s). Since Soviet Premiere Mikhail Gorbachev’s attempts at reform ended in his ouster in 1991, when Boris Yeltsin took the reins of the new nation, it sure looked like the same old same old leadership splitting the spoils of regime change – privatizing into their pockets the wealth of a once-great super-power.

Members of the dreaded KGB (the abusive and terrifying Soviet equivalent of the FBI merged with the CIA) and the highest inner circle of the destroyed Communist Party wound up mega-billionaires as they now controlled vast pools of resources (like oil), huge tracts of real estate and massive production facilities and factories without paying a dime for these assets. The notion began to be politely described as “state capitalism,” particularly as mega-billionaires (notably oilman Mikhail Khodorkovsky who was prosecuted for fraud and tax evasion) were brought to heel under Vladimir Putin’s reign. Putin had managed to push all of his rivals aside (sometimes a push can be fatal, I am told) and has been Russia’s leader (as President or Prime Minister) since 1999. They were indeed the “young invincibles.”

Putin longed to recapture the global power of the once-great Soviet empire and denigrate his old nemesis, the United States. He rose into the role of cult-hero to the masses, and even watched a terrifying youth movement, the Nashi (literally “ours”), grow in 2007 to worship Putin… some comparing this organization to the infamous Hitler Youth. He challenged U.S. policy everywhere. When the U.S. wanted to isolate Iran, Russia signed a treaty with them. When American pushed to contain North Korea, Russia made it clear that nothing could be done without them. As oil prices rose to fuel a new military to replace the once-powerful Soviet machine, Russia’s weapon systems, notably missiles, rockets and planes, began to be rebuilt into a cutting-edge technologically superior force of arms.

The financial meltdown and collapse of the price of oil brought all of this “progress” in Russia to a grinding halt. There was talk of a dilution of Putin’s power, but this relatively young man (he is still in his fifties) tightened his grip and held on long enough so that when oil prices began to rise again, he knew his reign would hold. But that moment of financial pain that threatened his political power created a clear vacuum in the Russian leader’s strategy of retaining power that had to be filled. Something had to change.

Putin and his retinue noted that the one superpower that seems to drift relatively unscathed through the financial morass was China… a “communist” nation, but for all practical purposes, in China anyway, “communism” was relegated to the status of just being a word for a system that was clearly capitalist with a profoundly centralized, one party, leadership in control. The October 18th New York Times: “Like an envious underachiever, Vladimir V. Putin’s party, United Russia, is increasingly examining how it can emulate the Chinese Communist Party, especially its skill in shepherding China through the financial crisis relatively unbowed… In truth, the Russians express no desire to return to Communism as a far-reaching Marxist-Leninist ideology, whether the Soviet version or the much attenuated one in Beijing. What they admire, it seems, is the Chinese ability to use a one-party system to keep tight control over the country while still driving significant economic growth.”

Putin’s government has studied the Chinese system, and his policies appear to be moving the Russian leadership increasingly into that model. “Today, both countries govern with a potent centralized authority, overseeing economies with a mix of private and state industries, although the Russians have long seemed less disciplined in doing so… Corruption is worse in Russia than China, according to global indexes, and foreign companies generally consider Russia’s investment climate less hospitable as well, in part because of less respect for property rights… Russia has also been unable to match China in modernizing roads, airports, power plants and other infrastructure. And Russia is grappling with myriad health and social problems that have reduced the average life expectancy for men to 60. One consequence is a demographic crisis that is expected to drag down growth.” The Times.

The Russian economy is profoundly (and to many Russians, embarrassingly) dependent on the price of oil; China is more diverse and built on an exceptional powerful manufacturing sector. The Russians appear to be directly emulating the Chinese growth machine. “‘The accomplishments of China’s Communist Party in developing its government deserve the highest marks,’ Aleksandr D. Zhukov, a deputy prime minister and senior Putin aide, declared at the meeting with Chinese officials on Oct. 9 in the border city of Suifenhe, China, northwest of Vladivostok. ‘The practical experience they have should be intensely studied.’”

In the end, Russian cold-hearted pragmatism really doesn’t care about the labels (how completely opposite what most in the U.S. feel – once Americans can attach a label, muddy issues appear to be crystal clear and the solution then proffered dispositive!); they want something that works and keeps those in power… well… in power. This should be a most interesting political movement to watch.

I’m Peter Dekom, and I thought you might be interested.

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