Monday, October 3, 2022

Putin Supporters In US Becoming Desperate

 Latest reports have after Putin annexed four oblasts in Ukraine the Ukrainian military making numerous gains in several of those and simply on a major roll that seems very unlikely to be stopped or even slowed down all that much, short of Putin using nuclear weapons. First Lyman was taken, now the last town the Russians held in Kharkiv oblast was taken. Ukrainian troops appear to be closing fast on both Kreminna and Svatavoe in Luhansk (or Lugansk) oblast, with most of northern Luhansk likely to be conquered if those two are conquered, which now looks likely very soon.

Supporters of Putin have argued that losing territory in the northeast was one thing, and they have also claimed that the Ukrainians have suffered major losses in this run, although they fail to provide any evidence of that. But they have said that Putin is willing to fall back there as long as he holds clearly important Kherson in the south, where there has long been a standoff after Ukraine made some gains and long announced a major counteroffensive. Putin moved many troops from the northeast to Kherson to hold off that loudly advertised counteroffensive, and it seemed to be working. But apparently there has been a breakthrough there as well now, with a tank attack on the northern end of the Kherson front breaking through and the frontline pushed down about 25 miles and still moving, with movement also happening on the southern end of that front also.  

It seems that the only place on the whole front where the Russians can make any favorable claims involves the weird case of Bakhmut in Donetsk oblast. There the Wagner Group has been trying to conquer it for the last three months, although it seems not to have much strategic importance in and of itself. But while they have failed to conquer it, they have managed to move forward a few meters from day to day, and apparently are continuing to do so, the only place this is happening on the entire front. This allows local TV in Russia to report on "gains," even though these gains seem not to ever lead to much of anything. Some speculate this odd campaign continues partly due to the boss of the Wagner Group, Prigozhin, is trying to increase his power in Moscow.

So we have the Russian position largely collapsing with Putin being humiliated by all this in the wake of his annexation of these territories where he is now massively losing territory.  How are his supporters reacting to all this? Pretty badly, hysterically even.

I had not watched him for a long time, but I decided earlier this evening to watch one of his more prominent US supporters, Fox News's Tucker Carlson, whose show is the most watched on cable news I believe, even now.  He is full in on supporting Putin and was coming across as indeed nearly hysterical this evening. There was no mention of any of these military gains by the Ukrainians, not a whisper.

Instead, he was all in on the Nordstream pipeline incident, charging that it "is obvious" that it was carried by the US, citing statements by SecState Blinken that and end to the Nordstream pipeline would be a "strategic blow" to Russia, not to mention emphasizing that Russia owns the pipeline. As it is, the US and the nations that use the pipeline have avoided making any specific accusations as indeed it is very difficult to prove or establish who might have done such a thing. 

It is reported that the nearby nations suspect it was done by Russia. As it is, Nordstream I has been repaired. With that the Swedes were apparently about to investigate the sites of the explosions to look for evidence about what happened, but the Russians began pumping gas through it, which blocks that. Big surprise that Tucker Carlson had nothing to say about that.

His argument then segued into predicting that this supposed behavior by the US is going to lead to a nuclear war between the US and Russia, somehow never noting that it is Russia and Russia alone that is threatening to use nuclear weapons. He seems to accept that Putin's annexations are justified and that indeed Putin using nuclear weapons in Ukraine would be some justified self-defense. He reported with outrage on reports that the US might sink the Black Sea fleet if Russia uses nuclear weapons, with the US doing this without using nuclear weapons, although Carlson never noted this last point. This possibility of nuclear war is all due to the US, even as the US is not threatening the use of nuclear weapons at all, only Putin and various commentators in Russia.

I have to say that I was taken aback at the intensity of his outrage over all this, the US supposedly definitely responsible for the now all done pipeline incident, and this supposed danger of the use of nuclear weapons.  I now understand why I see local people commenting in my local newspaper, the Harrisonburg Daily News Record, to the effect that not only is Russia winning the war, they deserve to win the war.  This is a pretty astounding spectacle, but then most of these people also continue to believe the Big Lie of Trump that he actually won the 2020 presidential election, a lie Carlson also plays a major role in continuing to push.

Barkley Rosser 

Thursday, September 29, 2022

Report From Moscow

 My wife, Marina, has returned from a two and a half week to Moscow to visit her 93 year old mother.  She almost got bumped from her Turkish Airlines flight out of Moscow through Istanbul, but her travel agent managed to get her back on.  Very glad she is back. Anyway, a few first hand current reports.

Yes, in terms of living standards, in Moscow most things are operating and there are plenty of goods in the stores, although prices are high. There is a major effort to have things seem "normal," lots of cooking shows on TV.  It is true that a lot of foreign goods are not available, although there are odd exceptions. Thus apparently French and Italian wines are available. Also, KFC is all over the place, although this would appear to be a franchise. Apparently Marriott hotels have been bought "for a dime" by the Saudis, who are now badly mismanaging them.

Many things are either not reported or reported very differently than over here. So supposedly the referenda on annexation were "transparent." People lined up to vote were shown on TV and there were some international observers testifying to this "transparency," from Syria, South Africa, and Brazil. No guns being pointed at anybody supposedly.

Yes, it was a big freakout when the partial mobilization was announced. One of her best friends had her son conscripted.  Apparently there is a known going price to get out of being conscripted: 5000 euros, yes, euros, not rmb/yuan or USD, and definitely not rubles, with the ruble/euro rate much worse in practice than the official rate.

My wife reminds me that there are still many "good and wise people" there, but unfortunately they are not in charge or having much say with those who are.

Oh, and a festschrift is being organized by the Russian Economic Federation for our old friend Victor Polterovich, now 85 years old and probably the most eminent economist in Russia at this time.

Barkley Rosser

Monday, September 26, 2022

Pharoah Sanders Has Passed

 One of the greatest musical performances I ever saw live was in Spring 1966, sorry have not tracked down exact date, in the University of Wisconsin-Union theater. It was a live performance of the final group of John Coltrane. None of his great quartet from "A Love Supreme" were in it, but it still completely blew my mind. 

Somehow this group had another saxophonist besides the greatest of them ever, Coltane, this guy Pharoah Sanders. He was really intense, arguably more so than Coltrane himself. Now, at age 81, Sanders has passed, one of the greatest jazz saxophonists ever. 

Apparently his original name was "Farrell." He was born in Little Rock, Arkansas. When he got to New York in the early 60s, ne nearly starved initially. Eventually he got in to various groups such as Albert Ayler, Cecil Taylor, and then Sun Ra's group, with Sun Ra changing his name to "Pharoah," reportedly on Sun Ra not hearing the pronunciation of his name correctly, although obviously it was an apprporiate name change.

His work has been described as "spiritual jazz." This has been described in the Nation as providing "a frenetic blend of spiritual jazz that, through shrieking horns and loose rhythmic structure, was meant to summon higher powers. The idea, it seemed, was to blow the sax so hard that the music reached God's ears."

Not that I am particularly a theist.

His most commercially successful album was with the pianist of that group I sae in Madison, Coltrane;s last wife, Alice, with whom he produced "Journey in Satchidanda," which I used to play for my older daughters when they were young, a seriously great album

Barkley Rosser

Friday, September 23, 2022

Tom Schelling Is Rolling Over In His Grave

 Thomas Schelling got his Nobel Prize in economics for saving the world from global thermonuclear war in the 20th century, when many thought it was inevitable. Rival nuclear game theorist, John von Neumann, said to bomb the Soviets as soon as possible, like, tomorrow, preferably before noon 

Schelling won the debate in real time, being an advisor on "Dr. Strangelove..." bringing about as a result of that the installation of the "red phone," for immediate and direct communications on such matters between the then USSR and the US. I suspect that phone still exists in some form, bur I do not know

What Tom got his visit to Stockholm for, which I told him in person he would get before he got it, (yeah, really), was his formulation of how to find a socially beneficial game theoretic solution when many of those exist. He proposed finding a socially agreeable solution that all accept that is also socially good. This proposal he put forward and became accepted was no first use of nuclear weapons, period, even though, of course, the US violated that at the end of WW II. But while it did not become formally or officially accepted, this doctrine became accepted in practice, and we had no nuclear wars, and Tom was the most important person behind this, both intellectually, and in terms of policy in the 1960s.

So unfortunately before he died in 2016, he lived long enough to see the beginning of the unwinding of his rule. When Putin conquered and annexed Crimea in 2014, and much of the West put some pretty minor economic sanctions on him for this, one of his media flunkies (apologize I am not going back to dig up this immoral asshole's post or who is, let him die unknown), declared: "We can turn New York into ashes," or words to that effect. The moment I saw that media post, not shut down by Putin, I knew that Tom Schelling's hidden and implicit rule that had prevented the world from being destroyed in a global thermonuclear war, was over.

Needless to say, as he has become more desperate as his poorly functioning military is being defeated by the military of the nation he invaded without a shred of justification, Putin is making himself not only a world historical war criminal, but a total hypocrite. He actually reminded the world that Ukraine gave up what was then the world's fourth largest stash of nuclear weapons in 1992  He ludicrously complains that somehow now they regret that. No, he claims they are actively trying to get them back, which is another excuse for his invasion.

But, of course, in 1992, when Ukraine gave up its large stash of nuclear weapons, Russia along with US and UK signed the Budapest Memorandum/Accord that involved recognizing both the independence and the territorial integrity of Ukraine. Obviously Putin violated this in 2014, with both the US and UK failing to respond. That he now reminds of his violation of this agreement at this point is, well...

Barkley Rosser

Wednesday, September 14, 2022

Happy 155th Birthday to volume one of Capital!

In his 1965 farewell lecture at Brandeis University, Herbert Marcuse read a long passage from the Grundrisse's "fragment on machines" and then observed: “But Marx himself has repressed this vision, which now appears as his most realistic, his most amazing insight!"

In Time, Labor and Social Domination, published 28 years later, Moishe Postone addressed the same section from the Grundrisse and commented:

These passages do not represent utopian visions that later were excluded from Marx's more "sober" analysis in Capital but are a key to understanding that analysis; they provide the point of departure for a reinterpretation of the basic categories of Marx' s mature critique that can overcome the limits of the traditional Marxist paradigm.

Who was right? Did Marx repress his most amazing insight or is that insight from the Grundrisse a key to interpreting Marx's analysis in Capital? I would argue that both Marcuse and Postone are partly right and partly wrong. Marx didn't so much repress his realistic, amazing insight from the Grundrisse in Capital as hide it under bushels of supplementary illustrative material. You can find it there if you are patient and know what to look for. 

In that respect, passages from the Grundrisse are indeed a key to understanding and reinterpreting Capital. But what is the key to understanding and reinterpreting the Grundrisse? It is the 1821 pamphlet, The Source and Remedy of the Natural Difficulties, that Marx cited and quoted from repeatedly in the Grundrisse, that Engels claimed Marx had "rescued from its oblivion," that Marx was fascinated by in the notebooks published as Theories of Surplus Value, and that Postone, Marcuse and almost every other interpreter of Marx's thought has ignored.

I discussed this peculiar omission in an article published last year, "The Ambivalence of Disposable Time: The Source and Remedy of the National Difficulties at two hundred." In the last few weeks, I have completed a 21,000 word manuscript, "A shadow of things to come" that probes further into the backstory of the pamphlet and forward into the fate of disposable time in today's world. I'm sure it's not the sort of thing academic publishers would be interested in and thus am uncertain about how I will present my arguments to the public. 

Tuesday, September 13, 2022

How To Dismantle An Empire

 My late mother seriously admired the now late Queen Elizabeth II. Not only was she a conservative Anglophiliac with overwhelming British ancestry (all the "nations" of the UK) who had tea in the afternoon at the proper British time in more or less the proper British way, there was also the matter that the queen bore a son her heir only seven months after my mother had me. I was raised to see Charles as a   a sort of cohort.

Indeed, i came to view him with great sympathy, although in later years he would come to be highly embarrassing in many ways well and widely known. But in 1958, the second time I was in UK, on arriving I saw tabloids with front page stories about some ridiculous matter involving Charles, I think it was about him playing games in streets uncontrolled, or something like that. I felt total sympathy for this guy about my age whose every action, however trivial, ended up on the front pages of newspapers with all kinds of people weighing in censoriously.  I was horrified. But now, finally, he is King Charles III.

So the death of Elizabeth II is semi-personal, reminding me of the death of my mother at 97 in 2010, who really revered the late queen. But given this personal aspect, I wish to consider this appropriately seriously and substantively.

A takeoff for me, having just returned from my first trip to Europe in three years for conference on Nonlinear Dynamics in Economics and Finance in Urbino, Italy, is an FT Weekend piece by Simon Schama. He raises deeper historical issues, in particular the matter of QE II overseeing the dismantling of the British Empire. He notes that the main three earlier British monarchs who reigned for long times: Elizabeth I, George III, and Victoria, all who suffered various vicissitudes during their reigns, those reigns all ended with Britain (or still England Wales for QE I), the nation ended stronger and more powerful by pretty much any measure at the end of their reigns compared with their beginnings. For QE II, the outcome was quite the opposite. She oversaw the dismantling of the British Empire.

The extremity of how great the decline was needs to go back before her accession 70 years ago. Schama emphasizes as Elizabeth's ultimate promise and commitment she held to whole life, and probably more than anything else why so many mourn her personally, was made five years before her accession in February 1947, three quarters of a century ago, in of all places, South Africa. She famously declared: "My whole life, whether it will be long or short, shall be devoted to your service."

Now that time was even more full of British Empire than it was on her accession when the old imperialist, Winston Churchill, was the first of her 15 prime ministers, the last of whose accessions, Liz Truss, was her last Act of State, the day before she died at Balmoral, literally standing on her last legs. In Feb. 1947, her father was still Emperor of India, whose independence later that year Churchill would oppose, although ineffectually as Clement Atlee was PM. This was also while South Africa, although independent, still appeared to honor officially allying with UK in both of the world wars, with the victory of the apartheid-imposing National Party coming the following year of 1948, also the birth year of both me and her heir. 

Also, Britain still controlled the Palestine Mandate, without yet an independent Israel, also to come in that following year. The British Empire was as it had been at its peak in the immediate aftermath of WW I, only missing a few pieces out of the Middle East officially, such as Iraq, handed over to Lawrence of Arabia's old friend, as well, Faisal, whose son would be assassinate when he was overthrown in in 1958 by a Baathist coup. Ireland also was still held in that immediate aftermath, leaving a century ago, arguably the first piece to do so in this long dismantling.

Today it is pretty much gone. When she accessed, it was still true that "the sun never sets" over what UK officially ruled, although technically once the Indian subcontinent left in 1947it was no longer an Empire. There is still its ghost in the Commonwealth, which the British monarch still officially heads (along with lots of other things, including the Church of England). But she was the official Head of State of only 14 of those at her death, with several of those moving to change that soon such as Jamaica, Barbados doing so recently (those 14 include the core 5 Eyes nations of Canada, Australia, and New Zealand, but even they could go). Beyond that there are only odd scattered bits of direct British rule with English speakers on them, such as Gibraltar and the Falkand Islands, which Margaret Thatcher puffed herself up over by reconquering from Argenitna, although probably only because the US played in with its senior role in the Five Eyes of ultimate Anglophilia, a matter Charles de Gaulle of people was all too well aware of.

The gradual dissolution of this vast empire, probably the largest ever in world history, with the possible exception of that of Genghis Khan, which dominated the world for the century of the Pax Britannica, contrasts sharply with that of the more sudden dissolutions of the Austro-Hungarian and Ottoman empires at the end of WW I, with the delayed partial dissolution of the Russian Empire with the end of the USSR in 1991, although the successor Russian Federation still resembles a smaller version of it with its many sub-national units, with its possible dissolution in WW I undone by the Bolshevik Revolution that held most of it together, although Finland got out, while in WW II Stalin was able to absorb certain territories never part of it, such as western Ukraine.

The essentially sudden dissolution of those three empires led to conflicts that still plague the world. The worst probably came out of the dismemberment of the Ottoman Empire, which had been in long decline and shrinkage. But the problem of Israel and the Palestinians, of Syria and Lebanon and Iraq all come of that dismemberment, not to mention some of the problems in the Balkans, which triggered the beginning of that fateful WW I. And the Austro-Hungarian dissolution has left us also with those gnawing problems in the Balkans, not to mention the simmering resentments in Hungary ruled by Orban who supports Putin and Trump with his population still dreaming of lost sub-rule over parts of Romania, Serbia, Croatia, Slovakia, and sub-Carpathian Ukraine, where the dominant local group is the rather historically important Rusyns.

Well, I suppose the gradualism of the dissolution of the British Empire saved its former parts from such conflicts. Clearly the conflict between India and Pakistan is serious, and the British went along with the partition that arguably gave us that. The British themselves arguably aggravated one of the worst conflicts coming out of the dissolution of the Ottoman Empire, with them in WW I making promises to both Arabs and Jews regarding what would happen with Israel and Palestine. 

While it was gradual, for the first decade of Elizabeth's rule, the British government fought hard against various independence movements, such as the Mau Mau in Kenya, with slaughters in various places. Critics of Elizabeth II point out these events as reasons not to mourn her, that she did not somehow stop all this, or at least just resign in protest, or whatever. One of the more outspoken was Karen Attiah in WaPo today, who essentially says she should have resigned upfront over all this, although, frankly, Attiah completely destroys her own credibility by in the end taking QE II to task because after Nigeria won independence in 1960, when in the 1970s the Ibo tribe in Biafra tried to obtain independence from Nigeria, the British government supported the Nigerian government. It turns out that what Attiah is really worked up about is that she is an Ibo and her grandfather was forced to flee. Oops, talk about a complete collapse of credibility. Frankly, WaPo should not have published such a blatantly worthless piece of self-aggrandizement and hypocrisy, even as I was and remain sympathetic to the Ibo cause.

Certainly in the first years of her reign Elizabeth did nothing to assist in a peaceful end of the Empire. But her defenders point to her playing a role in the longer run of accepting that it was going to happen and making it do so with a minimum of violence, not fully avoided of course, and a maximum of broader acceptance and tolerance. A crucial sign many point to was in 1961 the year before the majority of British colonies in Africa gained independence. She danced publicly with Kwame Nkrumah, the first president of Ghana, which had gone out the door first in 1957. This symbolically set the course.

She famously never publicly questioned policy of any of her 15 prime ministers (she also had 14 US presidents, 13 of whom she met, all but Harry Truman). But one of the few moments there appeared to have been a hint of a disagreement involved the matter of sanctions against apartheid in South Africa in the early 1980s, when Margaret Thatcher was not enthusiastic and opposing supporting them. Somehow the Queen managed to get it out unofficially that she disagreed with Thatcher, which led to a major row with many criticizing her for going beyond her authority. But in the end she won, with her helping to push Thatcher to support the sanctions that in the end would help end apartheid, with her later meeting Nelson Mandela, who clearly appreciated her role in this world historical event, especially given the historical role of the British royal family's involvement with slavery in the past.

The change all this brought can be seen in Britain itself as well, where while there is certainly plenty of anti-immigrant sentiment and racism as there is in the US also, one finds the incoming Conservative government of Liz Truss, who models herself after Thatcher reportedly, having descendants of immigrants from former colonies holding the top three cabinet posts: Home, Exchequer, and Foreign Secretary.

One can criticize Elizabeth II for apparently never outright apologizing for any of the past, even as she bowed her head in certain locations where serious wrongs were done in the name of British rule as well as noting that indeed many people suffered in the past. According to Schama in his essay, her greatest single speech was one where she did this in Dublin in 2011, a speech she herself largely wrote against the wishes of many in her inner circle, in which she acknowledged the sufferings on all sides in Ireland in the past and supported the Good Friday Agrementof 13 years earlier that ended the Troubles in Northern Ireland. This was all the more important and difficult given that in 1979 the IRA had assassinated Lord Mountbatter, uncle of her husband and her own second cousin. Schama declared that this speech "put a period" on those peacekeeping agreements.

Barkley Rosser

Thursday, September 8, 2022

Will The Iran Nuclear Deal Ever Get Reestablished?

 It keeps looking like it might, but then ne obstacles seem to appear. President Biden promised to undo what I have long argued was the worst foreign policy mistake made by Donald Trump. He should have just done it right after he took office, but he made a bunch of extra demands and the negotiations went nowhere. Then the moderate Rouhani government was replaced by the hardline Raisi one, something some of us like me forecasted would happen if he listened to these people who thought he should make demand about missiles and foreign groups, none of this going anywhere.

Anyway, there have been fresh rumors of a nearly done deal, but it seems to be stalled out now on two items.  One is US demanding Iran let IAEA inspect some sites. The other is Iran demanding Biden promise no future president will undo the deal the way Trump did. But he cannot promise that, or maybe he can promise it, but he cannot deliver it, and they should know that.

A further complication is thr Ukraine war, with Iran now supplying Russia with drones. This is not directly a part of the negotiation, but it is souring the atmosphere, although Russia is pushing for the deal to be cut.

Another complication is that the Iranian leaders think that Biden is desperate for the extra 2 mbpd of oil production and exports that would probably come out of Iran with an end to sanctions. But they may have not notieced that gasoline prices in the US have been steadily declininb for nearly three months. Not quite so desperate, and also burned by MBS, who gave him a miniscul 100,000 mbpd increase in production for that fist bump, now withdrawn on request of V.V. Puting because of the ongoing decline in oil prices.

Anyway, the JCPOA should have been revived long ago, but here we are, and unclear if it ever will be.

Barkley Rosser

Thursday, September 1, 2022

Where Will M.S. Gorbachev Be Buried?

 Mikhail Sergeivich Gorbachev died on the same day as our daughter Sasha's 33rd birthday. Sasha herself noted that if it were not for him she probably would not exist. It was ultimately Gorbachev who decided that the USSR would obey the Helsinki Accords rules on letting people get married and so on April 4, 1987 let my wife Marina leave Moscow for the US, the top story on CNN that evening. For that we are personally grateful to him and respect him, despite other things he did that one may not support.

Some people do not support, him, only 8% of the Russian population according to a poll taken in 2017. President Putin has announced that he will not receive a state funeral, perhaps justifiable given that the USSR no longer exists, although Putin has regularly claimed to possess the powers for Russia that the USSR had as a part of continuity. But in fact Putin has all but said this decision follows his claim that the breakup of the Soviet Union was "the worst event of the 20th century," and he has blamed Gorbachev for it happening, arguably not entirely unreasonably.

Of course, views of Gorbachev in the 14 nations that were formerly republics of the USSR before it broke apart are almost certainly much better than they are in Russia, although I have not seen specific polls on the matter.  As it is, Gorbachev himself did nor seek to break up the USSR, even as he failed to prevent its breakup and many of his actions aided in its breakup, a complicated matter that was also brought about by things out of his control, such as low world oil prices after 1986 that tanked the Soviet economy.

While some of those nations remain as dictatorial or even more so than they were in the Soviet period, such as Turkmenistan and Belarus, most of the former USSR now has much greater freedom and democracy than it did in the Soviet period, this true even in Russia with Putin's backsliding back towards the way things were, including overturning some of Gorbachev's greatest achievements, such as the 1987 treaty on intermediate nuclear arms, although it must be noted the US has gone along with that as well.

There is much about Gorbachev that many do not realize. He was always a good Communist and Leninist, praising Lenin as late as 2006. He was initially brought to Moscow by Yuri Andropov, who was a tough guy hardliner, but sought to reform the Soviet economic system so as to improve the Soviet military and overcome the stagnation of the late Brezhnev period (Brezhnev curiously now rising in popularity). When Foreign Minister Andrei Gromyko provided the swing vote for him in the 4-3 Politburo election in 1985 that put him in power over Moscow Mayor Victor Grishin after Brezhnev sidekick Chernenko died, who had succeeded Andropov, Gromyko declared he did so because of Gorbachev' supposedly "sharp teeth." And until the disaster at Chernobyl, Gorbachev's policies looked a lot like what Andropov probably would have done, his anti-alcohol campaign and his "accelerationism" to catch up to the US economically within the Soviet model, which looked not to bad until oil prices collapsed.

After Chernobyl, Gorbachev's glasnost and perestroika policies, along with democratization, in effect involved pursuing for the USSR an ideal of a form of "liberal communism." Many have argued that such an ideal was (and is) impossible. But we have seen Communist parties operate within democratic systems in a democratic way, as in the Eurocommunism of Italy and also in India, although it was never in charge of the national government in either of those nations. But the city of Bologna was long considered to be the best run city in Italy for decades in the post WW II era under Communist mayors, and the state of Kerala in India has also been held up as having some of the best socioeconomic outcomes of all states in India, again reflecting years of rule by the Communist Party. Of course, arguably, what one sees in such cases is really just social democracy like what one sees in the Scandinavian nations.

The fundamental problem for the USSR was that once democratization was allowed, this led to the demands for independence by many of the republics, and this ended up with the USSR falling apart. Arguably this was inevitable. WW I brought about the breakup and end of the Ottoman and Austro-Hungarian empires, with the Russian one surviving out of the fluke of having the Bolshevik revolution.  But the long stagnation of the system that came out of that revolution inevitably set up that holdover of the Russian Empire to fall, even if Putin has been trying to undo that breakup.

A serious question is to what extent after Gorbachev lost power, and even to some extent before he did so, bad behavior by the US and other western powers undermined the chances of either the USSR or Russia having a successful economic and political transition to being prosperous and democratic nations.  Of course some of the former republics have managed it, with the Baltic states the most prominent examples, even as others are far from it such as Tajikistan. One area where the US probably blundered was in arming anti-Soviet Mujaheddin in Afghanistan with stingers and other more advanced weaponry once it became clear in 1986 that Gorbachev was planning to leave. This may have proven to be less important for Russia than for the US and the rest of the world with the subsequent strength of the Taliban, clearly evident in their return to power a year ago.

Besides some bad advice on economic policy in the early 1990s, probably the item Gorbachev himself has complained about the most, and in this has supported Putin at times, including as recently as late 2021, despite Putin mostly denouncing him, has been on the troubled matter of the expansion of NATO eastward. Gorbachev apparently believed that George H.W. Bush promised no such eastward expansion at the time of the 1990 reunification of Germany, although defenders of Bush note that the promise then made was specifically about no NATO troops in the former East Germany, which has apparently been kept. The Warsaw Pact still existed at that time, as did the USSR, and the idea that Poland or Estonia might be joining NATO seemed an absurdity. While indeed US neocons have pushed for NATO to expand eastward, the fundamental push for that came from the nations who wanted to join after indeed the Warsaw Pact and USSR did break up. The US resisted for some time the requests for it coming from Poland and the Baltic states. Perhaps George W. Bush should not have suggested that Ukraine and Georgia could join, which clearly aggravated Putin big time. But when Putin invaded Ukraine this year, it was not at all on the verge of joining NATO, and his invasion has led Sweden and Finland to join NATO.

Which brings us to the matter of a burial place for Gorbachev, with where somebody is buried a very big deal in Russia. We can see it with Stalin, who initially was put in the mausoleum on Red Square with Lenin. Then in 1956 after Khrushchev made his speech denouncing Stalin he got moved to some obscure location. Then later Brezhnev partially rehabilitated him by putting him in the row behind Lenin's mausoleum with a bust, along with people like Brezhnev himself and Andropov. The nest layer of the hierarchy down from that was being in the Kremlin wall itself, where people like Yuri Gagarin and John Reed are.

Now nobody is buried there, and the most prestigious cemetery is behind the Novodevichy monastery, where in fact Khrushchev is buried along with many famous Russian and Soviet cultural and scientific figures are buried.  Russian playwright Chekhov is there as is the Soviet aircraft designer Tupolev. Many of the graves are quite picturesque. Among those buried there is Gorbachev's wife, Raisa, who died in 1999, with some more recent Russian political figures getting themselves buried near there.  There is a pretty impressive statue over her grave, which happens to be just in front of where my wife's maternal grandparents are buried. 

So, the obvious place for Gorbachev to be buried is next to Raisa in the Novodevichy cemetery. But there is not enough room there for another monument, and more seriously, if Putin really wants to diss him, well, that is the most prestigious cemetery, and if he will not give Gorbachev a state funeral, he may not want to bury him in such a prestigious place.  We shall have to see just how down on Gorbachev Putin is, and where Gorbachev gets buried will be a substantial signal.

Addendum, 9/1/22: Apparently the memorial service for Gorbachev will be held tomorrow in the Pillar Hall of the former Soviet House of Unions the Tverskoye district of Moscow. Putin will not attend. Gorbachev supported the invasion and annexation of Crimea, but is reported to have opposed the current "special operation" in Ukraine, doing so in an interview on July 22 with Andrey Veneditkov.

Another addendum, 9/2: While he allowed cooperatives and foreign companies such as McDonald's, which opened its famous outlet on Pushkin Square in Moscow while Gorbachev was still in power, he did not substantially alter or undo the existing command socialist system of the USSR or decontrol prices. So, it continued dominating the economy with its problems until the end of the USSR at the end of 1991.

Barkley Rosser

Thursday, August 25, 2022

Will the Inflation Reduction Act (IRA) Reduce Intlation?

 Probably not, but it also will probably not increase it either. This is the judgment of the Congressional Budget Office and also the Penn Wharton Budget Model, as well as libertarian economist Tyler Cowen of George Mason, who is critical of much of its content.  It has inflationary and disinflationary elements, and it looks that they about balance out, although in the longer run it is hard to know.

The obvious immediate issue is its impact from its aggregate character.  So it increases spending on various things, although some of its health parts should lead to lower spending in the future.  But it also increases taxes on corporations and through its funding of the IRS should lead to greater tax collections from wealthy individuals. Indeed, it is projected to lower the budget deficit. These elements are clearly offsetting to some extent.

In terms of its components, the most important are probably those related to climate.  Certainly the subsidies for moving off fossil fuels are inflationary in the short run.  But reducing external costs from global warming, as well as encouraging the development of more efficient clean technologies should be disinflationary in the longer run. This is not so clear cut.

Then we have the health front. Here it seems to be mostly disinflationary.  Besides caps on how much people must pay for certain things, probably the most important item is allowing Medicare to negotiate with pharmaceutical companies over drug prices. This is something that should have been done long ago, especially given how high medical care costs are in the US.

I note that while many are pleased with the contents of the IRA, on many fronts it is much more limited than widely known. Thus it subsidizes electric cars only if they are fully produced in the US, this applying to only about 30 percent of them.  Also, apparently Medicare can negotiate with drug companies about only 10 drugs.  Obviously this law could have gone much further than it does.

Barkley Rosser

Thursday, August 18, 2022

Are Supporter Of Putin's Invasion Of Ukraine Suffering From A Neo-McCarthyism?

 Recently I have seen claims made on some blogs that those who support the invasion of Ukraine by Russia under orders of its president, V.V. Putin, are experiencing suppression and discrimination that resembles the McCarthyism of the late 1940s and early 1950s in the US. This is also supposedly applying not only to those who fully support the invasion, but also to those who merely oppose the US assisting Ukraine in resisting the invasion, with the US supposedly not justified in doing so because of all its own past bad behaviors from the War in Vietnam to the invasion of Iraq, to its supposed expanding NATO with a goal of supposedly adding Ukraine to that alliance.

It is certainly true that feelings are running high on this issue, and many who make these arguments are getting very strong pushback and even perfervid denunciations of their morality, much less their logic.  However, there are circles, especially among some of the stronger followers of Donald Trump, including quite a few GOP members of Congress, where such views are accepted and supported to varying degrees. But the question must be faced, not in terms of some whataboutism regarding past bad US behaviors in foreign affairs of which there have been many. But rather more directly this matter of a possible neo-McCarthyism.  Are at least some of those taking the side of Putin suffering egregiously for their views in ways that resemble the old McCarthyism? At least one similarity is that those who suffered under the old McCarthyism were accused of being pro-Soviet/Russian, and those supposedly suffering now are also accused of being pro-Russian, if not necessarily pro-Soviet.

I think, however, that if one goes back to look at what was involved in the old McCarthyism, what is going on now does not live up to the awfulness of that period. People suffered substantially more back then who faced accusations than do those now who are being criticized for supporting the invasion.

We must first recognize that McCarthyism, per se, what came about due to the activities of the late Senator Joseph McCarthy (WI-R) were a special subset appearing a few years after the initiation of a broader phenomenon. This was the general development of an intense anti-Soviet communism in the late 1940a in connection with the beginning of the Cold War between the US and USSR after the ending of their WW II alliance against the Axis powers. This initially came out of the House Unamerican Activities Committee (HUAC) along with the FBI, with Sen. McCarthy only getting in on the action in the early 1950s, although the dramatic nature of his activities became the driving force of the movement and basically took it over and drove it once he got going.

The initial HUAC hearings emphasized the matter of outright spying by alleged Soviet agents, this not having been viewed as much of a problem during the WW II alliance.  One of the most (in)famous cases was that of Alger Hiss of the State Department, with Richard Nixon initiating his national political career by going after Hiss.  At the time, most on the liberal/left viewed Hiss as innocent and Nixon as nasty bad guy.  Well, Nixon was a nasty bad guy, but it turns out that almost certainly Hiss really was a Soviet agent, this becoming clear after the declassification of the Venona transcripts in the 1980s. These were decryptions of Soviet messages sent during WW II that were made by the Army Signals Intelligence Service, a predecessor to the National Security Agency (NSA).

Another case from that period, which was aggravated during the McCarthy period, involved Julius and Ethel Rosenberg. They were convicted and executed for being "atom spies." As with Hiss, many defended them and argued and believed they were innocent. This included their two sons, one of whom I know and received a PhD in economics from the University of Wisconsin-Madison when I did, Michael Meeropol. He and his older brother, Robert, had to face that indeed their father was an atom spy for the Soviets once the Venona transcripts came out, although how important a spy hw was remains a matter of debate. But it remains clear that their mother was wrongly convicted, with her brother, David Greenglass, falsely testifying against her, claiming she typed materials for Julius that were typed by Greenglass's wife.  Many years later, Greenglass admitted doing this, saying, "you do not sleep with your sister." At most Ethel was aware to some extent of what her husband was doing, but it now appears she was not actively involved in it at all.

That they were convicted at the height of full McCarthyism in the early 1950s is certainly responsible for that they ended up being executed, not simply jailed.  Much more serious atom spy, Klaus Fuchs, was jailed and then traded sometime later to the Soviets, dying in East Germany eventually. It is not just that Ethel was outright innocent almost certainly, and they should not have been executed, but their execution was a botch, especially that of Ethel, one of those electrocutions that went awry and on and on in a horrible way. This was a horrible travesty, and their sons are fully justified in continuing to call for undoing the conviction of their late mother.

Another case that came out of HUAC before McCarthy got going involved the Hollywood Ten. They were not accused of spying for the Soviets, but it was viewed that as Communists, or "comsymps" close to Communists, they represented a noxious cultural influence that should be suppressed.  They ended up being blacklisted and prevented from working in Hollywood for an extended period, although eventually most of them would come to be rehabilitated.  We must note that at this time it became illegal to actually belong to the US Communist Party, although there was no obvious reason why that should be the case. Spying for a foreign power is one thing, but simply belonging to a party or saying things that people do not like is quite another. But this set the model that McCarthy would follow later: those accused of being Communists or comsymps would lose their jobs and otherwise be prevented from expressing themselves. I note that a major informant for HUAC in the Hollywood Ten case was Ronald Reagan.

McCarthy added some particularly obnoxious elements to all this, along with a much heightened publicity to all of it, with the atmosphere worsened during the Korean War of the early 1950s. Another element he added was outright falsification, accusing people who were not at all Communists or even particularly friendly to communism, some of them outright anti-communists, but who somehow or other knew or were associated with somebody who supposedly was.  His falsifications began with the event that first got him a lot of publicity, a speech he gave in West Virginia in which he claimed to have a piece of paper in his pocket with 44 names of Soviet agents in the State Department. He had no such list, and beyond Hiss only two more people there would be found to have been such spies.

In any case, McCarthy held long hearings in his Senate committee, making regular accusations against all sorts of people, with many of them indeed losing their jobs and otherwise facing ostracism and broader mistreatment. This was bad enough against people who merely held leftist views, but it extended to people who did not even do so.  Many suffered during this period until McCarthy was stopped and denounced by his fellow senators. He went to far when he went after the US Army.

So is what is going on now with those who support Putin's invasion equivalent to what I have just described? I do not think so. I am unaware of any of the defenders of Putin losing their jobs for doing so. I am unaware of any of them being prevented from expressing their views, although there may be some venues that have refused to publish or allow them to express them.  And within some circles they are receiving praise. They are simply not facing anything remotely resembling what happened back then.

Now there are people who are arguably suffering unreasonably at this time for all this. This is ethnic Russians, especially in the arts, who have been disallowed from performing and removed from positions, symphony conductors, musical peformers, and the like, although some prominent Russian sports figures seem to have escaped losing their positions.  One can argue that maybe those supporting the invasion deserve to lose their positions, but in some cases this has happened to ones who have publicly criticized the invasion.  Not enough.

A prominent example is Anna Netrebko, considerd by many to be the leading opera soprano in the world at the present time.  She is actually an ethnic Moldovan, not a Russian, but she first became famous performing in Russian opera companies. Furthermore, V.V. Putin himself is known to have been a great fan of hers. Nevertheless, she criticized the invasion after it happened. But that was not enough, and she has been effectively banned from performing in western opera performances, which leaves her in a full limbo as she is now also unable to perform in Russia.

I find this development to be unfortunate. But rather than McCarthyism, what it resembles is the anti-German hysteria that swept both US nd UK during WW I. That led to many families and organizations to Anglicize their German names to avoid persecution. Probably the most prominent such family was the Battenbergs in Britain who became the Mountbattens, the family of the late Prince Philip.

Barkley Rosser

Saturday, August 13, 2022

Russian Central Bank Head May Be Out (But Apparently Probably Not)

 This is the first English language report of this, as near as I can tell after some serious googling, but it is all over a lot of pretty serious Russian sources.

Reportedly, Elvira Naibiullina, Head of the Russian Central Bank, left her position this past Tuesday or thereabouts.  It is unclear if she resigned or was fired, although the hints seem to be the latter. The buzz is that she is going to be made a scapegoat for mounting problems in the Russian economy.  She had been very successful at propping up the value of the Russian ruble after it initially collapsed following the Feb. 24 invasion of Ukraine and initial imposition of financial and economic sanctions on Russia.  This involved a lot of capital controls in particular.  It was also helped by the price of oil rising, with Russia managing to expand sales in various markets, although reportedly at discount prices.

Well, crude oil prices have fallen quite a bit in the last two months, with Brent crude now trading at below $100 per barrel. Russia did miss an interest payment on foreign debts not too long ago, its first formal default since the days of the Russian Revolution, although not too much was made in the media at the time when this happened.  But while the ruble is officially at 63 per USD, a better that at the time of the invasion, reportedly the black market rate has fallen to 200 per USD, and things are very tight.

Of course, the irony is that in late March it was reported, including in western media, that Naibiullina had tried to resign from her position following the invasion, but she remained in her position on the orders of V.V. Putin, with her then carrying out her rescue mission of the ruble. There is little doubt that she has been an incredibly capable central bank head, pulling off something extremely difficult and challenging under ectremely difficult circumstances. I have the utmost respect for her capabilities and hope that she is not or will not be in trouble. It is my uncderstanding that her husband was removed or stepped down last year from his position as Rector of the Higher Economic School in Moscow.  I wish them both all the best.

Again, I note that as near as I can tell this is the first report of this matter in the English language media.  It may not be true, but there are multiple serious sources in Russian reporting on it and discussing it.  It is not true, it is a massive rumor.

Barkley Rosser

Addendum at 3:16: I have just been told that all the sites that had this report have had it removed.  It is now being claimed on these sites that this rumor was the work of "foreign agents" and that Naibiullina is still in office. Reportedly a strong supporter of hers is German Gref, head of Russia's largest bank, Sperbank. So there you have it, probably a big rumor from who knows where.

Further Addendum: What also strikes me as a possibility is that indeed she was out, ot about to be out, but that there was a backlash, perhaps from people like Gref, and the decision got reversed, with the sensitivity of this, especially in light of today's NY Times report on the Russian economy sharply contracting, that it became clear removing her would be very unwise.

Further Addendum: I think we shall not know. It might be foreign agents, most likely Ukrainian, wanting to mess with Russian markets. And they have been volatile in the past week. But then, given that unpleasant news was coming out about the economy, one would expect such market volatility.  As it is, I can imagine that if indeed it is that there was a move to get rid of her, and she has been publicly criticized for some time by people upset about Russia's high inflation, once it got crushed I can imagine authorities wanting to cover it up, given that indeed her leaving might well damage support for Russian financial markets.

Tuesday, August 9, 2022

Basques In America

 This is a bit of travelogue, as I mentioned previously I am on the road now at south end of Lake Tahoe on the Nevada side for the annual conference of the Society for the Advancement of Behavioral Economics (SABE). Earlier today I traveled east from the Tahoe area to Gardnerville, NV just east of the Sierra Nevada in the narrow area of the state where the first European settlers came in, a narrow strip that is not desert although pretty dry.  It is where Reno and the state capital, Carson City are, along with Genoa, the oldest town in the state. Gardnerville is near Genoa, just south of Carson City, along with Minden.  This is an agricultural area, green, but mostly given to grazing, cattle and sheep, with hay being grown.

The sheepherding brought Basque people from Spain and France in the late 19th century, and this little part of Nevada is one of the most intense concentrations of their population in the entire country, with Idaho, especially around Boise, its main rival. In Garnerville, where there is a monthly Basque picnic, I ate at what is considered to be the best Basque restaurant in Nevada and one of the best in the US, the J.T. Basque Bar and Dining Room. For $34.95 I had a family style lunch with soup, salad, beef stew with baked beans, sweetbreads, a small bottle of red Cal table wine, ice cream and coffee, and might good. This is a real country place, with dollar bills on the ceiling and cowboy hats on the walls along with all the pictures of Basque people wearing berets (they invented them) and pictures from the Basque lands. 

It is a super local place with local color. Most of the people who came in shook hands with most of the people who were there. I know a peculiarity about Basques: they almost all have straight noses, and everyone working there had those. The Basque language is distinct, unrelated to any other European languages, and they have nearly zero B blood type, showing little input from invaders out of Central Asia over the last 3000 years or so.

There are only about 57,000 Basques in the US officially  with 20,000 in California, but with Idaho and Nevada following and with greater concentrations. Downtown Boise has a "Basque block" with a museum and a cultural center. Winnemucca, NV has the highest percentage at 4.2%. In those two states the Basques are among the earliest of European settlers and certain families have become prominent, the Secretary of State of Idaho and the prominent Laxalt family in Nevada who have produced a governor and senator and the current GOP candidate for senate, Adam Laxalt. 

Anyway, this was a curious and most interesting in-depth run to Old Nevada and its roots, far from the gambling dens of Vegas or even Reno or Tahoe, to find remnants of an obscure group still persisting here in America. Oh, and the food at J.T. Basque is plenty good, especially for that price.

Barkley Rosser

Saturday, August 6, 2022

Pelosi's Visit To Taiwan

 I wish to present a view of Nancy Pelosi's visit to Taiwan that is different from what I have seen from others. Most commentary I have seen is either very for or very against her visiting there.  On the favorable side has been wide praise from across the political spectrum, with many Republicans joining in who almost never praise her for anything.  Many people support providing a positive message of support for Taiwan. There is also the matter of personal courage on her part.  There was an actual threat from the Chinese government that her plane might be shot down. Obviously it was not, but with this threat, it obviously did take some courage on her part to go ahead and do it.  For all that she is to be applauded.

On the negative are several views. There are those who strongly support the Chinese government's claim on Taiwan, which is widely recognized diplomatically and officially, even though since 1895 the only time the mainland government has ruled Taiwan was 1945-49, and the regime still ruling it is the extension of that government that fled to Taiwan when it lost control of the mainland to the Communist Party under Mao. Unsurprisingly strong supporters of the PRC taking control of Taiwan would not and do not support her visit. There are also various people in the US on the farther right and left who either want the US to withdraw from any or much activity in the rest of the world, either out of viewing such activity as violating an America First position or because they view US activities outside the US as being inherently or likely imperialistic, including supporting Taiwan. The pro-PRC people are likely also to take this latter position or some version of it.

So, my position is a bit more complicated. I note that i have been to Taiwan several times and have friends there.  Of the three Chinas, PRC, Hong Kong, and Taiwan, the latter seems to me the best governed and best in broader social terms. Hong Kong has a higher per capita income and also a higher life expectancy, as well as for those who admire such things, still greater identified economic freedom, although that is being cut back as PRC direct control increases in Hong Kong.  But on some other measures Taiwan looks better than Hong Kong, more democratic, more income and wealth equality, and also greater social freedoms, such as allowing gay marriage.  Indeed it is better than PRC as well on all those, as well as having higher per capita income and higher life expectancy than PRC. There is much to admire about Taiwan, with much of this likely to be lost if the PRC takes control of it.  

The PRC has long offered a "one country, two systems" model that is what supposedly is in place in Hong Kong. That had some credibility for quite some time. But the recent crackdown on dissent in Hong Kong and the imposition of more direct control on education and public expression in Hong Kong by the PRC government has seriously damaged the credibility of that model. Support for the more pro-independence party in Taiwan has increased since that crackdown, unsurprisingly.

What are my complications then?  Well, I am unhappy about the major increase in tension that has occurred, which I think serves no good purpose at all.  I think Pelosi should have realized this would happen, and I understand that the Biden administration tried to talk her out of going, even as they publicly supported her right to go, which was a reasonable position.  I know that she has long promised to go and has had a hawkish position towards the PRC. But it also seems to me that this has been motivated by a constituency within her Congressional district, many Chinese Americans who strongly support Taiwan.  I think this is a case where she should have thought about the broader national interest rather than fulfilling a longstanding promise to some voters in her district.  This is especially the case as we already have a major conflict going on in Ukraine, with the Chinese supporting Russia to some degree.

Now I get it that the Chinese should not be making such a fuss about it. Quite recently a bipartisan group of US senators quietly visited Taiwan, and there were no problems, no threats from China, no reactions.  If Pelosi could have snuck in and out without any publicity, that would have been fine. But somehow the fact that she was thinking about visiting, indeed apparently had planned to visit in April, but got delayed due to Covid or something, got publicized.  Then China began demanding that she not go.  It looked like maybe she would not after the Biden administration apparently appealed to her not to. But with China making these threats, well then it became a matter of principle, that she would not cave to these threats, something I understand. So, she and five other Dem House members (GOP members were invited to join her group, but all declined), did visit for 18 hours. It seems they were largely very well received, with a few negative protestors. But now we have the PRC making some very serious military responses that have fallen short of invading or taking an island, but that amount to a temporary blockade.  I hope that they end this soon and pull back.

Something that concerns me more broadly here is that we see warlike moves being politically popular.  Pelosi is now being highly praised.  The other example much on my mind is what is going on in Russia, which is especially why I think she should have just quietly shelved this trip before it turned into this big public confrontation.  It is in Russia. Putin's invasion is horrible and massively damaging the Russian economy, with many other negative effects, politically and socially. But all reports have Putin's popularity up. All of this worries me greatly.  I wish this had turned out differently, even as once the threats were made, I understand Pelosi felt she had to follow through.

Barkley Rosser

Friday, July 29, 2022

How Changes In Changes In Inventories Have Brought US The "Recession" That Is Probably Not A Recession

 Based on just announced preliminary results, it looks like the US will have experiences negative GDP growth for the first two quarters of 2022. Based on a "rule of thumb" introduced in a New York Times column in 1974 by then BLS Commissioner, Julius Shishkin, this could be an indicator of a recession happening. This rule of thumb got widely publicized, even showing up in some textbooks as well as being formally adopted as a defining criterion in some nations, such as Australia, for having a recession.

However, it has long been the case that in the US when recessions occur is decided by a committee of the National Bureau of Economic Research (NBER), which looks at a broader set of data to see widespread, deep, and persistent declines in general economic activity. Beyond just GDP these include employment, industrial production, and income. The committee has also traditionally waited for some time to make sure they are looking at fully adjusted and verified data before making their determinations.

Now it has usually been the case that these many variables tend to be highly correlated.  So, in fact, since 1947, it has been the case that when Shishkin's rule of thumb criterion was met, these other variables were also declining sufficiently for the NBER to declare that a recession had occurred. There have been some cases where recessions have been declared even when there were not two successive quarters of decline. The obvious and recent example was second quarter of 2020, when GDP declined very sharply, along with all those other variables, in connection with the first round of the Covid-19 pandemic.

The exception in the other direction was in 1947, when indeed there were two successive quarters of negative GDP growth, but no recession was declared.  Most notably at that time, employment did not decline, which may be the variable people really associate with a recession or deeper depression. But how could this come about, a negative GDP change while employment holds up? This in fact looks like what we are seeing now, as employment has steadily grown as has income over these last two quarters, even as it looks that GDP declined.

In both 1947 and this year it looks that the culprit has been that item labeled in the National Incone and Product Accounts, "changes in inventories." Negative numbers played a crucial role back then and this year as well for these negative GDP outcomes, even as employment and income held up. But in fact this item is not precisely what its label says it is.  It is actually the change in the change in inventories, not just the change in inventories, which enters into the calculation of GDP changes.

So in both Q1 and Q2 of this year, inventories have been rising, a situation of disequilibrium with a surplus, more goods being produced than are being bought. But what happened is that this rate of rise decreased. The change of inventories was positive, but the change in the change of inventories was negative, and that played a crucial role in bringing about the negative GDP performance. But this change in the change of inventories is something not obviously tied to either employment or income directly, which gives us this peculiar outcome where we might not have a recession, even though Shishkin's "rule of thumb" is satisfied.

While this may seem strange, it is in fact equivalent to private capital formation. The difference between the two is that while changes in inventories are often themselves negative, if not now, we basically never see negative private capital formation, with the exception maybe of massive destruction of capital stock during a war. But if we compare capital stock to the level of inventories. it can be seen how this operates. Private capital formation leads to a change in the capital stock and a change in inventories leads to a change in inventories.  Both add to GDP. But to see whether GDP is rising or falling one, must see if these items are rising or falling, the change in private capital formation, which is the change in the change of the capital stock, as well as the change in the change of inventories.  It is the second derivatives of the capital stock and of inventories that tell one whether or not GDP is growing positively.

Barkley Rosser

Sunday, July 24, 2022

The Grain Deal

 Finally we have something sort of hopeful happen in the war in Ukraine that might help alleviate problems it has generated for much of the world.  A deal has been struck to allow Ukrainian grain to be exported from Odesa and two smaller ports near it across the Black Sea and out into the Mediterranean to world markets.  With something like 20 million tons of grain, mostly wheat, sitting there for some time, with Ukraine responsible for something like 10% of world wheat exports, this has been a major problem, pushing up the price of wheat and fertilizer and sunflower oil, with this hitting especially hard several nations in the Middle East such as Egypt and in East Africa, such as Somalia. This holds the potential indeed to more generally ease global inflationary pressure in the food sector.

This is a very curious deal, with it in fact being two deals. One is between Ukraine, the UN, and Turkey while the other is between Russia, the UN, and Turkey. But they fit together. It seems the key people pulling it off are Turkish President Erdogan and UN Secretary General Guterres. They must be applauded for this. Crucial to it is how commercial ships will be allowed into and out of the ports involved and how they will skirt mines in the Black Sea that will apparently not be fully removed. Curiously a key part of the negotiation involved getting insurance companies to agree that it could be pulled off so they would be willing to insure the ships involved. 

While this is a hopeful development, there are some mysteries about it and some reasons to be concerned it will not really get fulfilled. Obviously Ukraine will gain from it.  Erdogan gains much prestige and Turkey will play a central role as all ships involved must pass through Turkish-controlled Sea of Bosporus, where apparently they will be inspected by both Ukrainians and Russians as well as Turks to make sure no arms are smuggled in. I gather Turkey will also get some financial compensation.

The mystery to me is what does Putin or Russia more broadly get from this and why was he willing to go along with it? A probable key event was Putin's recent visit to Tehran, his first outside of the former Soviet Union since the invasion of Ukraine started on Feb. 24. President Erdogan also visited Tehran at the same time, and he and Putin met there at that time. I am sure that this discussion must have played a crucial role in sealing the deal, which makes me think there are parts of this that have not been made public. After all, Ukraine gains a lot, but Russia is already able to sell its grain, and the price for it may fall with the Ukrainian grain getting out into world markets.  I really am unclear why Putin agreed.

And indeed, the lack of obvious clear gains, aside from perhaps publicity to look not so bad in a situation where he and Russia have been sharply criticized, may lead to a lack of enthusiasm about following through on it fully and some sandbagging of it in practice. One sign of this is that Russia has hit Odesa with cruise missiles since the agreement was signed, reportedly a grain storage facility in particular. That certainly is not in the spirit of things. It has also been suggested that Russian inspectors in Istanbul may act to slow and delay the ships coming through with Ukrainian grain, if they do not actually outright break the agreement by sabotaging the ships while still in the Black Sea.

So, this is a deal that provides some hope. But it also looks to face some serious possibilities of not really being properly fulfilled.

Barkley Rosser