Russian & Free Market Reforms

In what has to be good news in the world & especially Russian citizens, Russia appears to be moving forward towards free market reforms with help from former President Putin.

For Russia, the last 30 years has been marked by instability.  Russia in the 80′s was in a descent from crumbling Communism which limited real individual freedoms.  They moved from that, to a poorly implemented and corrupt form of cronyism, which also limited real individual freedoms.

Then to stabilize and reassert themselves to the international community, former President Putin worked towards a stronger central government.  In doing so, he too worked towards the removal of individual freedoms.  For example, having the government buy the the main press outlets, using the judicial system to attack  corporate heads who were against Mr. Putin’s reforms, changing election laws to reduce citizen say, and many other things.  All of which seemed a sure march back to Communism and the stage for a new global dynamic with Russia trying to be the main international opposition to the US.

However, in recent months Stratfor and other publications have been noticing changes inside the Russian government.  Many reformers have been pushing the new President and Mr. Putin to begin to make real free market reforms through privatization and it looks like they’ve won some ground (Stratfor Video below):

Since I have a strong belief in the morality and pragmatism of individual freedom, this is a good sign.  Let’s hope it continues.

Odd thing is – those without freedoms or with lesser freedoms around the world have been pushing for market reforms, including Germany, France, China, Russia… while the US is pushing centralized control over banking and health care (to name two things).

Proving once again, that the price of freedom really is eternal vigilance.

GM, Opel, US, Germany, Russia, & Iran

In a story that might have more than it appears, GM announced it will not go through with a deal it announced in early summer to sell their German division Opel.

The story really first appears as the auto company bail-out was in full swing in the US.  GM had pushed a reorganization plan that cut jobs in all countries.  With German Chancellor Angela Merkel getting pressure due to the global economic crisis and facing a re-election, Opel became more important than first assumed (@BusinessWeek):

….On Tuesday, though, German Chancellor Angela Merkel said Opel was not a “system-critical” corporation. “There are system-critical financial institutions,” she told her conservative party’s parliamentary group, according to the Rheinische Post newspaper. “But there are no system-critical industrial firms.” It was Merkel’s indirect way of saying that Opel is less important to Germany than its crisis-stricken banks. Her statements were intended to counter earlier comments made by the head of the left-leaning Social Democratic Party that Opel was indeed “system relevant.” She added, however, that Opel should be given a chance to survive and that like all companies, it has the “right to apply for state aid.”…

It not only became more important, but Chancellor Merkel started treating it as imperative to re-election (@France24.c0m):

Just five weeks before German elections, leading politicians are putting pressure on General Motors and the US authorities to choose a candidate to take over GM’s troubled Opel unit. Angela Merkel has called for an urgent decision….

As the German government and GM Opel executives worked hard to save as many jobs as possible, they looked for potential investors.  They had competing bids, but finally accepted a bid from Canadian auto-parts manufacturer Magna, using money from the Russians (@Bloomberg):

May 30 (Bloomberg) — German Chancellor Angela Merkel’s government chose Magna International Inc. as the buyer for General Motors Corp.’s Opel and confirmed a financing plan aimed at helping the money-losing unit avert insolvency….

…German state leaders and labor representatives have said repeatedly since bids were submitted on May 20 that they favor Magna’s offer, which includes as much as 700 million euros in investments in partnership with Russia’s OAO Sberbank. The plan also foresees a linkup with OAO GAZ, which said today it could produce 180,000 Opel cars a year at its main Russian site….

Now the simple truth is, that while Russia does have money, it has its own economic problems that would generally preclude it from loaning hundreds of millions of dollars for a fading industry.

But Russia’s decisions highlights aims that are well beyond helping GM’s European division.  Their goal was to use the split in US-German relations caused by, among other things, inflamed rhetoric from Ms. Merkel blaming US mismanagement on Opel’s problems, to increase its international influence.  It also lined up with Russia’s continued movement towards setting itself up as a competing power to the US and expand its control in the former Eastern bloc countries & Europe.

We can see Russia doing this in many ways, including Opel, but none as clearly as Russia countering any attempts from the US and other nations to help with sanctions on Iran (@USAToday):

MOSCOW (AP) — Russian Foreign Minister Sergey Lavrov said Tuesday that the threat of sanctions against Iran would be counterproductive, resisting U.S. efforts to win agreement for measures if Iran fails to prove its nuclear program is peaceful….

Russia has even gone so far as to state they will continue shipping fuel and anything else Iran needs if UN sanctions were passed.  Meeting with US Secretary of State Hillary Clinton, Russia called any discussion or implementation of new sanctions to be “counterproductive”.

So Russia sees it’s relationship with Iran as a point of leverage to use against the US while it tries to expand its influence throughout the former Soviet Bloc and Eastern Europe, while the US sees Iran as a potential source of instability in the middle east.  Sure, the US has no desire to see Iran with nuclear weapons, but Iran does not have the technology to end with a weapon capable of really harming the US anytime soon (probably two decades away).

So the US’s main desire now is to protect allies within the region and minimize Iran’s potential at gaining enough power to potentially affect world oil supplies other than it’s won & the US needs Russia’s help.  Indeed, the decision to remove a missile defense shield from Poland and Czechoslovakia was likely a carrot dangled towards Russia to increase their cooperation.

Enter GM & Opel and GM’s recent decision to forgo the sale (@NYTimes):

DETROIT — The new board of General Motors reversed course Tuesday on the planned sale of its Opel division in Europe and decided that G.M. would retain and reorganize the business itself….

Now, it’s completely possible all this is just many, many coincidences, but with President Obama’s administration hand picking GM’s board, and the international decisions we know of – there’s likely much more here than first meets the eye.

Crazy Uncle Joe

Is it just me or does Vice President Joe Biden actually appear to be a non-member of the White House staff?

I could be seeing patterns where they don’t exist, but it seems that each time Mr. Biden opens his mouth, the WH either ignores it completely or attempts to restate it.

Remember  the swine flu thing? (at NPR):

“I would tell members of my family — and I have — that I wouldn’t go anywhere in confined places now,” Vice President Joe Biden said today as he made the rounds of the morning TV news shows. “It’s not just going into Mexico. If you’re any place in a confined aircraft and one person sneezes, it goes all the way through the aircraft.”…

Followed shortly thereafter by WH clarification (LA Times):

…”I think the vice president misrepresented what the vice president wanted to say,” said White House Press Secretary Robert Gibbs….

Later in the day, Gibbs was pressed about the discrepancy between Biden’s original words and the White House’s.

“I understand what he said. I’m telling you what he meant to say,” Gibbs said…

After proving his immense knowledge of swine flu, he went on to call Russia a crumbling system (@ Washington Times):

…Secretary of State Hillary Rodham Clinton was forced Sunday to correct publicly Mr. Biden’s characterization of Russia as a crumbling country, a description that infuriated Russian officials and contradicted President Obama’s efforts to “reset” relations with the world power….

Just like that one crazy uncle, he’s the comedic gift that keeps on giving.  This week, as the White House has pushed hard to show how the stimulus has worked, Mr. Biden started using words like “depression” (@ ABC News):

In recent weeks, Vice President Joe Biden has said that the U.S. economy has been in what he calls “a great recession” and has stressed that it is not a depression, echoing the general consensus of the nation’s economists.

But today the vice president took some liberty with the economic terms to illustrate the continuing struggles of the unemployed in the United States.

For the millions of Americans without a job, “it’s a depression,” Biden said….

In fact, not only does Biden seem to misrepresent the curent administration’s positions, he isn’t even internally consistent (ABC News):

…Just two weeks ago, Biden said that he calls the current state of the economy “the great recession” because it’s “the single worst economic circumstance” the United States has been in, “short of a depression.”

On Oct. 2, Biden said that “fears of a depression have been replaced by forecasts of recovery” and on Sept. 3 Biden said that “instead of talking about the beginning of a depression, we’re talking about the end of a recession eight months after taking office.”…

Now it’s true that some statements made by VPs are seemingly stupid only because the VP is being pushed to say things the President can ‘t.  This is especially true during campaigns, but also during any actual administration.

Either way – I’m truly torn.  On the one hand, I honestly hope Mr. Biden starts getting invited to WH briefings in order to reduce his perceived idiocy on the world stage.  On the other hand – almost every time he talks, I get a good laugh.

Journalism & International Analysis

Over time I’ve come to the conclusion that where news entities fail miserably is in their analysis with international politics.  Most pundits, writers, journalists, etc, seem to be able to semi-grasp domestic policies, albeit still in the usual, overly simplistic, fits-to-the-narrative type of way, but lose all rationality with respect to international affairs.

Interestingly enough, I think their failures in both domestic & international analysis stem from the same basic cause, oversimplification.  But it would seem that the degree to which it effects each type of analysis differs due to the lack of incentives private interests have in resolving inaccurate reports on international issues.

Thinking about the counter thought to international policy, domestic policy, we see incentives existing to resolve press inaccuracies.  For instance, if the press pushes inaccurate opinions and analysis which oversimplifies a given topic, a special interest group or two, plus at least one political party, and finally non-profits everywhere will try to enlighten by showing the fallacy of the common narrative.

This is because people rightfully see domestic issues as more directly impacting their lives.  The corollary is that our politicians, our leaders, our special interests, and our non-profits tend to focus where we as a society focus.

The problem that can stem from this seems intuitive – inaccurate press on international issues should be held as highly suspect, but get printed without much serious disagreement.   Since very little counters popular wisdom, this gives the press a power to change opinions and as well as spread myths.

This leads to all kinds of odd conclusions, with large swaths of people all over the planet prone to believe in things without substantial proof nor any degree of rational logic.

For instance believing that western countries are somehow to blame for poor countries with constant internal strife and corrupt governments which inefficiencies and lack of resources.  Or said another way, people all over believe in a zero sum game.  This is true not only in the international sense, but also when dealing with immigration and free trade issues.

Mistaken assumptions such as zero-sum games also lead to beliefs about what one thinks a President can actually do, versus what reality tends to dictate what will actually be done.  This leads to politicians making believable, yet highly impossible claims about given international situations.  This has been done to all recent Presidents, including President Obama when pulling a missile defense shield out of Poland & Czechoslovakia was made to appear as a rash decision amounting to abandoning our allies, when in fact it wasn’t a bad decision when concluding what options were open and what were the greatest threats to our security and security in the region (wrote about it here, though Mr. Obama went and said it had nothing to do with Russia… which was just amazing… wrote about that here).

It leads to pundits everywhere snidely remarking how this action wasn’t “tough” or that action was going to anger others because it was “unilateral”.  With little recourse, journalists  print all sorts of things without taking into any account the actual framework through which any given action action was taken, under what circumstances, with what available options, or really they just leave out anything resembling actual analysis.

Unfortunately, it seems no organization is immune.  A recent piece published in the Economist titled  Even greater expectations discussing the idiotic Nobel Prize Committee decision, is a far cry from the analysis for which the Economist is known.

They rightfully begin with the question the world was asking, “Is it premature to give Barack Obama the Nobel peace prize, less than a year into his presidency?”, but delve quickly into non-international events dressed up to seem as if change had already happened:

…Most broadly, he has sought to engage with opponents, saying that America would “extend a hand, if you unclench your fist”, for example to those who were earlier dismissed as an “axis of evil”. Somewhat to the discomfort of Iran’s president, Mahmoud Ahmadinejad, who had bolstered his domestic support by vilifying America as an aggressor, Mr Obama has proposed holding talks about nuclear affairs, removing a precondition that Iran first abandon enrichment of uranium. Mr Obama made withdrawal of American forces from Iraq one of the main pledges of his election campaign and has since overseen a slightly quicker run down of troops than was envisaged by Mr Bush. Towards North Korea, too, Mr Obama has dangled the prospect of bilateral talks and closer engagement.

Regarding Russia Mr Obama has developed a policy of notably warmer ties, dubbed “hitting the reset button”. Relations had become especially frosty towards the end of Mr Bush’s presidency when war broke out between Georgia, an ally of America, and Russia…

Continuing with this as reasoning:

…Yet Mr Obama’s main achievement is a change of tone in foreign policy. A speech given in Egypt in June was an eloquent call for a new understanding between America and Islam. It was designed both to assure Muslims, now thought to number 1.6 billion around the world, that America is not set on a crusade. Similarly it was intended to convey to any Americans (and others) who believe in the notion of a “clash of civilisations” that friendly ties between religions is eminently possible.

Similarly, American policy towards small and repressive regimes, ranging from Myanmar to Cuba, has shifted in mood, if not yet substance, by offering the prospect of engagement if governments demonstrate progress towards democracy…

Which to date has not only done absolutely nothing to help international cooperation, but has made our interests tougher to protect.  In nearly every UN Conference on whatever, for instance the G-20 dealing with the economic crisis, the US asks for a lot of cooperation and everyone goes their separate ways.

In some ways this is to be completely understood.  American solutions for economic issues will differ from that of Germany or the UK.  Even though the same basic problem afflicts most countries during the global recession,  their banking industries are setup with much different regulations, making the solutions for one country not necessarily compare to another country.  The separate policies might even be attempting the exact same “type” of solution, for instance increasing capital requirements, but under different systems any one specific solutions will affect different countries differently.

When it comes to reaching our hand out to those regimes, we see that North Korea, Russia, and Iran have been openly hostile to any US intents.  Iran’s deadline of October the 1st to fess up or face sanctions has come and gone, even while it was precipitated by Iran admitting to an additional enrichment facility.

And all this, including that all important warming of US-Russian relations, Russia has stated publicly the will continue to trade with Iran, meaning they will back them, if the UN, lead by the US impose stricter sanctions against Iran.

Now these situations are fluid to some extent, especially between cautious friends such as US-Russia and most of the controversial moves taken by Iran & North Korea would likely have happened to test any new US President’s resolve.

The issue is that by glossing over the realities we end up believing in myths.  Think about all that talk about “unilateral” action as if it’s a huge negative due to the controversy surrounding the last semi-unilateral decision to be made, without understanding that this is exactly as we should expect it.

No country should do something the US requests if they know in the end the analysis states otherwise.  On the international stage, Europeans, Cechs, Persians, Africians, indeed every person deserves the same representation we deserve – for their representatives to look out for their interests.

Now this can and does lead to all kinds of international policies from all different governments that appear wrong or unseemly when in truth it’s a playing field for which no one actor controls the rules which leads to countries making decisions that seem antithetical to their stated morals or goals.

It also allows one country to look at another as particularly egregious, regardless of their country’s current international policies.   It should be obvious that while beating up on your own politicians on domestic policy makes sense, doing so on the international stage is just beating yourself up.  Even if well-deserved, it’s easier to beat up on other country’s policies than it is to self reflect.

In some ways, national feeling probably affects this as well.  When most countries populations have enough information to dislike a number of other countries, going against that grain can be seen as being unpatriotic.  You certainly wouldn’t see a major political figure like Tony Blair coming to the US to air Britain’s dirty laundry or Putin to do the same in the US against Russia.

It also allows for journalists to paint country X with any brush they choose.  This helps some countries as the press will like some allies, but can obviously hurts or diminish countries for which popular sentiment doesn’t exist.

In the end, what it does is allow for a type of international superiority by enhancing nationalistic feelings.  When only reviewing other countries’ by hand picking policies, self-selecting cultural attributes, last recent controversy, crazy politicians, one can get the opinion of their general greatness over all those “other” people.

Lastly, and in my opinion, the most unfortunate consequence of this misinformation, is our inability to actually analyze international issues.  In between these simplistic news stories real trade-offs on the international stage are being made and constantly simplified.  From a high-level view the policy might appear to be utterly wrong, but in reality  might not be so.  It might simply be the least bad of all the bad options.  & it might really be the policy itself which is wrong.

For real analysis however, historical context, actions taken versus realistic options available, trends, and a number of other data points are required.  Without honest sourced information cost/benefit analysis simply isn’t possible.

Missile Defense and International Politics Continued

I wrote last week about Mr. Obama’s decision to forgo plans to put ballistic missile defense systems in Poland.  At that time, I considered the Republican talking points to be more than excessive.

Sound bites about  appeasing Russia and abandoning our allies was disingenuous considering all the known facts.

As seems typical with this President however, is that each time I agree, he does something so stupid as to defy rational thought:

WASHINGTON — President Barack Obama sharply dismisses criticism that Russian opposition influenced his decision to scrap a European missile defense system, calling it merely a bonus if the leaders of Russia end up “a little less paranoid” about the U.S.

“My task here was not to negotiate with the Russians,” Obama told CBS’ “Face the Nation” in an interview for broadcast Sunday. “The Russians don’t make determinations about what our defense posture is.”…

This seems extremely hard to believe and if you analyze the situation while taking the President’s words at face value, you’re only left with one looming question, “If not for Russia, then why?”

Mr. Obama’s current position:

…In its place will be a different missile-defense plan relying on a network of sensors and interceptor missiles based at sea, on land and in the air. Obama says that adapts to the most pressing threat from Iran to U.S. troops and allies in Europe, potential attacks by short- and medium-range missiles….

Which, according to the CBO, will be more expensive and make us less safe overall.  From the report:

  • Defense of Europe. All of the alternatives CBO considered would provide defense of most of Europe roughly equivalent to the defense provided by MDA’s proposal against most types of ballistic missiles that Iran is thought to have developed or could develop in the future. Because the alternatives CBO considered would locate interceptors closer to Iran than MDA’s planned system, they would generally provide more extensive defense of southeastern Europe than would MDA’s proposal. Moreover, because they would be composed of mobile or transportable components, deploying the alternative systems would not require building permanent facilities—including missile silos—at European sites.
  • Extended defense of the United States. A second goal of MDA’s proposed European system is to give the United States an extra layer of defense against potential Iranian intercontinental ballistic missiles. CBO’s analysis indicates that by 2012 systems already in place at two bases in the United States would protect more than 99 percent of the U.S. population from this threat. MDA’s proposed European system would extend defensive coverage to the other 1 percent of the U.S. population. It would also provide redundant defense from a third interceptor site for all of the continental United States, giving system operators more flexibility by creating an opportunity to launch a second interceptor from the United States, if necessary. None of the alternatives considered by CBO provide as much additional defense of the United States.
  • Costs. For roughly the same cost as MDA’s European system—a total of about $9 billion to $14 billion over 20 years—the United States could deploy either of the ground-based alternatives. The ship-based alternative would cost almost twice as much as MDA’s proposal—a total of about $18 billion to $26 billion over 20 years—largely because CBO assumed that the Navy would need to buy additional ships to operate it.
  • Availability. The alternatives that CBO examined might not be available as early as MDA’s proposed European system.

So again Mr. President – if this wasn’t to sooth relations with Russia and the alternative path you’ve chosen is both more expensive and makes us less safe – then why?

Missile Defense and International Politics

Today, MO Congressmen Todd Akin – R (and I’m sure others) released a statement concerning a change the President is making in foreign policy arena:

“The President’s decision to back away from our plans to put missile defense sites in Poland and the Czech Republic effectively abandons two of our allies who had worked hard and taken political risks for the sake of European and American security. The Administration has sent a clear signal to our central and eastern European allies that the United States, under this President, cannot be counted on to stand by our commitments.”

“With the Iranian regime continuing its aggressive pursuit of nuclear weapons and Russia’s commitment to reassert its regional hegemony, the United States must strengthen, not weaken, their commitment to the safety of our friends and allies around the world. The technology changes proposed may be of some merit, but the Administration needs to fully brief the Congress and our NATO allies before proceeding with this dramatic change in course.”

“Given our desire and need for a stronger commitment by our NATO allies in Afghanistan, President Obama’s decision to abandon our Polish and Czech allies will only make that effort all the more difficult.”

Not to attack Mr. Akin directly on this view as he is ranking Member of the House Armed Services Subcommittee on Seapower and Expeditionary Forces, the rhetoric is simplifying a more complex issue.  As Russia tries to reassert itself within the region and the question of giving missile defense technology to Poland and Chech is tricky.  These countries are seen by Russia as inside their historical sphere of influence (Eastern Bloc).

Additionally, Russia has used these countries as a man made border to reduce any potential opponents ability to invade.  They do this and are concerned by it because they have no real natural borders such as the US with two oceans.

So while it’s true that this move strengthens Russia, what we need right now is Russia’s help to control Iran from building nukes.  When the UN passes embargo’s against Iran, but Russia and others continue to trade with Iran, we basically haven’t done anything that is likely to deter Iran from their current stated goal of obtaining nuclear weapons.

Realistically and by all known analysis, Iran isn’t anywhere near being able to build an actual weapon.  They are close to having the fuel required, but the technology to actually make that fuel into a weapon is very complex and not something with which they have experience.

Additionally, even if Iran could build a nuclear war head that could result in a very large explosion, they still don’t have good missile technology, circuits capable of withstanding the radiation, and many other technologies required to make all of it useful.

Having said that, Iran is a threat and as a proactive supporter of terrorism, remains a country we have to be cognizant of.

So my personal opinion is that our fear of Iran right this second might be overblown which would make this decision unnecessary, but I also know what I don’t know… like whether Russia has given us assurances of help with Iran, whether the existing publicly available analysis is correct, or any number of other factors which should be used in the calculus for deciding on any given action.

Either way, taking knowns & the unknowns together, the decision itself isn’t as easy as the “abandoning our allies” rhetoric would make one think.