What happened to Russia after the Cold War?
I have been reading a book where the following report was cited and discussed. I finally got around to taking a look at it. Interestingly, the report describes what happened in/to Russia after the collapse of the Soviet Union and the ‘end’ of the Cold War. (I say ‘end’ because it really appears that Russia was pretty well dismantled by U.S. interests and so this could be also viewed as economic warfare and, hence, the continuation of the Cold War but by different means.)
Yeltsin and Clinton in 1995. U.S. National Archives.
So what replaced Communism in Russia after the U.S., initially under the guidance of Clinton administration, took on the mission to convert the former U.S.S.R. to a modern, democratic and capitalistic country? It appears that what replaced communism were good, ol’ fashioned corruption and plundering o’ the economy. So, I guess that means that the major tenets of capitalism must then be corruption and economic plunder by certain well-placed individuals and corporations. Given the recent events over the past couple of years, there seems to be more data to support that conclusion. Hmmm.
Anyway, the details about the report are:
RUSSIA’S ROAD TO CORRUPTION: How the Clinton Administration Exported Government Instead of Free Enterprise and Failed the Russian People. Speaker’s Advisory Group on Russia. United States House of Representatives 106th Congress, Hon. Christopher Cox, Chairman. 19 September 2000.
I have just skimmed it over but it looks very interesting. The contents of the report are summarised in the overview:
The manifold failures of both Russian and U.S. government policy are surveyed: the early corruption of the non-market “privatization” to insiders; the spread of organized crime; the eventual complete collapse of the Russian economy in 1998; the rise of weapons proliferation as a means of generating hard currency; and the increasing estrangement of Russia from the United States, essentially reversing the trends that existed in 1992.
Who would have imagined that the triumph of capitalism over communism would have led to such unfortunate events.
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Beware the economists among us…
OK, I should not generalize. I know there are many good, intelligent economists out there but something every citizen should be aware of are those economists who cling to political parties, financial corporations and think tanks as they tend to be idealogues rather than true analysts. Case in point:
This is a rather pithy article probably written more for political/ideological reasons that out of economic analysis. Perry states:
For an economy that depends on energy reliability and wants greater energy independence, there’s only one realistic solution: adopting government policies to boost production of America’s oil and natural gas resources.
No, there is only one ideological solution. Realistic solutions would be to expand U.S. production (but with at least some discussion of preserving some for future generations) and active and drastic conservation. Currently, the U.S. consumes a quarter of the world’s petroleum output even though it represents something like 4 or 5% of the world’s population. But, of course, ideological economists tend not to like conservation because that takes away from the zealous belief that the natural state for any economy is that it must expand every year. Such growth is needed to fuel Wall Street/Bay Street it should be added and the few people whose pensions and retirement investments that Wall Street/Bay Street does not steal. Then he goes on to say:
Recently, drilling began from far off the Gulf coast, drawing oil from a wellhead nearly two miles below the water’s surface, the deepest in the world. Remote-operated vehicles controlled by technicians at the surface do everything from welding to connecting pipelines in thousands of feet of water.
Credit goes to American innovation and technology. Despite some “peak oil” theorists who believe energy supplies are fast running out, we have seen steady upward revisions in U.S. recoverable hydrocarbon reserves as energy companies invent new ways to find and pump oil and natural gas.
The industry has become remarkably efficient. A technique that combines hydraulic fracturing and horizontal drilling is being used to reach huge amounts of natural gas locked in shale rock. Experts believe that shale gas could meet the nation’s natural gas needs for 100 years or more. In fact, shale gas now accounts for 40 percent of domestic gas production, reversing years of decline. (emphasis added)
Nowhere does Perry discuss what this kind of oil production actually means. “The deepest in the world”? Shale Oil? These are extremely difficult and costly methods of extraction which means that the resulting oil likely consumes more energy than it actually yields and that it will be some of the most expensive oil to produce. You’d think an economist might be interested in those details (and if he even read “some ‘peak oil’ theorists” like Matthew Simmons (who is an investment banker to the petroleum industry and not some granola munching protestor), he might understand the implications of this). But Perry also says that this new, unconventional production will revese “years of decline.” Again, there is more fiction than truth here. Sure it will help in slowing the decline of U.S. domestic production but the decline rate is huge. Expensive, difficult-to-extract petroleum sources will have difficulty replacing the easy-to-access and easy-to-refine oil production of the past, especially if it actually consumes a lot of energy to produce. What does this mean? energy from fossil fuels is going to get more and more expensive and there are major questions (again, posed by those in and around the industry) whether some of these unconventional sources will ever be truly economical to exploit. Note to Perry: Peak Oil theorists are not saying we are running out of oil, only that the production will not be able to meet demand and as an economist he should know what that will entail. In fact, far off in the future (and if we don’t discover some new, miraculous energy source to replace fossil fules), our decendents are likely to be sitting on top of a lot of oil, but they will not have the resources to extract it.
Then there is this interesting statement:
The success with new drilling technology has made western oil shale, another vast energy resource, much more appealing. Oil shale in western states is estimated to hold 800 billion barrels of oil, double the proven reserves of Saudi Arabia, though new techniques still need to be developed to bring down the drilling costs.
Bring down the drilling costs? I am not sure if Perry knows how oil shale is extracted. Generally, it is similar to a mining operation where the the shale then must be heated in order to extract the usable petroleum products. In some cases the shale is heated below ground and then the petroleum is pumped out. At any rate, the extraction process is not the simple drill-then-pump process of the past. What is more, it tends to yield lower grade petroleum that requires a lot of energy to refine and produces a lot of toxic elements.
I hate to pick on this author (I don’t know him personally or what he is like in real life, I am sure he is a nice person). So I am just ranting that his argument is more ideological than analytic… and, therefore, more propagandistic than informative. And with the U.S. and World economies in the state they are and the end of the era of cheap energy upon us, we need more of the latter and less of the former in both cases.
As I said: beware the (ideological) economists among us….
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