Cold War

Miriam Pemberton: Russian collapse a lesson in need for diversification

After months of whispered warnings, Russia’s economic troubles made global headlines when its currency collapsed halfway through December.Amid the tumbling price of oil, the ruble has fallen to record lows, bringing the country to its most serious economic crisis since the late 1990s.

Topping most lists of reasons for the collapse is Russia’s failure to diversify its economy. At least some of the flaws in its strategy of putting all those eggs in that one oil-and-gas basket are now in full view.

Once upon a time, Russia did actually try some diversification — back before the oil and gas “solution” came to seem like such a good idea.

It was during those tumultuous years when history was pushing the Soviet Union into its grave. Central planners began scrambling to convert portions of the vast state enterprise of military production — the enterprise that had so bankrupted the empire — to produce the consumer goods that Soviet citizens had long gone without.

One day the managers of a Soviet tank plant, for example, received a directive to convert their production lines to produce shoes. The timetable was: do it today. They didn’t succeed.

Economic development experts agree that the time to diversify is not after an economic shock, but before it. Scrambling is no way to manage a transition to new economic activity. Since the bloodless end to the Cold War was foreseen by almost nobody, significant planning for an economic transition in advance wasn’t really in the cards.

But now, in the United States at least, it is. Currently the country is in the first stage of a modest military downsizing. We’re about a third of the way through the 10-year framework of defense cuts mandated by the Budget Control Act of 2011.

Assuming that Congress doesn’t scale back this plan or even dismantle it altogether, the resulting downsizing will still be the shallowest in U.S. history.

It’s a downsizing of the post-9/11 surge, during which Pentagon spending nearly doubled. So the cuts will still leave a U.S. military budget higher, adjusting for inflation, than it was during nearly every year of the Cold War — back when we had an actual adversary that was trying to match us dollar for military dollar.

Now, no such adversary exists. Thinking of China? Not even close: The United States spends about six times as much on its military as Beijing.

Even so, the U.S. defense industry’s modest contraction is being felt in communities across the country. By the end of the ten-year cuts, many more communities will be affected.

This is the time for those communities that are dependent on Pentagon contracts to work on strategies to reduce this vulnerability. To get ahead of the curve.

There is actually Pentagon money available for this purpose. Its Office of Economic Adjustment exists to give planning grants and technical assistance to communities recognizing the need to diversify.

As we in the United States struggle to understand what’s going on in Russia and how to respond to it, at least one thing is clear: Moscow’s failure to move beyond economic structures dominated first by military production, and now by fossil fuels, can serve as a cautionary tale and call to action.

Diversified economies are stronger. They take time and planning. Wait to diversify until the bottom falls out of your existing economic base, and your chances for a smooth transition decline precipitously.

Turning an economy based on making tanks into one that makes shoes can’t be done in a day.

Miriam Pemberton directs the Peace Economy Transitions Project at the Institute for Policy Studies. This piece, distributed via OtherWords.org, was cross-posted from Foreign Policy In Focus.

Tough flowers; facing Putin's fascist mobocracy

March 22, 2014 rwhitcomb51@gmail.com

The ground is mostly open, if brown, except for some old clumps of dirty snow. Last year's oak leaves crinkle in the big old ugly trees, waiting to be pushed out by the new crop. Anyway, if we get two days of 60 degrees, the greenery on the ground will explode. The stuff higher up will take longer, of course.

It never ceases to amaze me that even with it below freezing at night, the green shoots of bulb flowers keep pushing up. On a south-facing slope two weeks ago, I saw crocuses starting to bloom  even though it had been 10 above a couple of nights before.

The older I get, the more I like walking in the very early morning, not long after dawn. It's so quiet and unpeopled that the direction of one's life and even the world in general suddenly becomes clearer.

I think about geo-politics, and these days about how the Cold War never really went away (not that I thought it did) -- and that some countries, such as Russia, are run by gangsters who make plans with the assumption that nations that should be their forthright foes will put off a strong response to the gangsters with the always doomed hope that they can be satisfied.  For gangster leaders, no  quantity of power and money is ever enough.

More attention should have been  paid to Putin's statement a few years back that the collapse of the Soviet Union "was the greatest geopolitical catastrophe of the 20th Century.'' The Soviet Union was responsible for killing tens of millions of people. But then, there's little indication that former KGB man Putin has anything against killing, whatever the retention of power requires.

With Putin's promises not to invade more countries, I think of Hitler's vow at Munich in September 1938, as the British and French were giving him Czechoslovakia's Sudetenland -- "This is my last territorial demand in Europe.'' He marched into the rest of Czechoslovakia a few months  later and invaded Poland in September 1939.

Of course, as with Putin "rescuing Russians'' who didn't previously seem to need rescuing by  the mobster Russian regime, Hitler had to "rescue'' the German speakers in the Sudetenland and put them under the "protection'' of his psychopathic regime. Putin is eyeing the rest of the Ukraine and the Baltic Republics for similar rescues.

Because of  his vast narcissism, cynicism and power drive, Eastern Europe has much cause to be worried unless the soft European Union shows some backbone. But there is one thing that the current Kremlin has much more to fear from than the Soviet regime did. The Russian government and the billionaire oligarchs (but I repeat myself!) have far more investments in the West than the Soviets had.  And despite the oligarchs' claims of being Russian (or at least Putin) patriots (claims necessary to avoid being brought down, or even dumped in the river, by Putin's boys) they'd much rather have their money  in the vibrant West than under the current cold Russian fascist dictatorship where policies are set by the whim of Putin and his associates. Russian businessmen and pols (and they are often the same thing) can be squeezed hard if the West has the will to do so.

I also think that the Russian aggression should help pull European heads out of the sand on renewable energy. The Europeans import far too much gas and oil from Russia, which is so corrupt and inefficient, and so lacking in the rule of law, that extractive industry comprises most of  the profits in its economy. It is less and less an attractive place to do business.  Loyalty to Putin, not creativity, is what counts.

So the  more Western and Central European renewable energy the weaker the mobsters in Moscow.