On Russian economic and financial policy 2014

In “On Economics Putin is on the Defensive. Spending Personal Political capital”, the Saker, who blogs at http://vineyardsaker.blogspot.ru/, criticises Putin’s economic and financial policies. His blog has fervently pushed Mikhail Khazin’s views on the necessary future direction of Russian economic and financial policy. A summary of these views was run by Russia Insider in article “US Consumes Far More than it Produces. Threatens Global Division of Labor”.

Khazin’s views on the global economic situation are broadly correct, in that, immediately after the 2008 crash and at the very beginning of his first term, Obama said “… the world should not expect the American consumer any longer to drive world economic growth”. This was a reflection of the fact that the American consumer was “maxed-out” on debt. Since the 1970s industrial overcapacity has led to “financialisation” of the US and European economies, to try to drive consumption forward on the basis now of credit.

We  reached the end of the effects of this restructuring by the 1990s, with financialisation principally growing through the mortgage and real estate markets, in order to push consumption through a “wealth-effect”, with borrowing encouraged through the method of “equity-release”. As increased monetisation of the resulting financial pyramid became necessary through “Quantitative Easing” (QE), interest rates have fallen, totally disabling monetary policy as an effective policy tool in the current environment. Indeed, Western governments have racked up debt on their Central Bank balance sheets through this process to such a extent that any future interest rate rises would be extremely costly, if not destructive events, for them.

Given this impasse, and given that no social restructuring in the form of debt forgiveness to the consumer lies on the horizon, the world economy, which once revolved around the US consumer, has now to enter a phase of reconstruction such that different regions begin to seek self-sufficiency. This is what Khazin means by the end of “global division of labour”. Regionalisation is the only way that consumers from other parts of the world can begin to take over from the US consumer in order to drive the world economy forward once again. Local/regional surpluses now have to start being generated and the resulting wealth, which is currently is being sucked into the vortex of the massive pile of US/UK/Japanese debt, has to be somehow retained “locally” for re-investment.

The US/UK/Japan offer no fundamental economic opportunities to the world and are forced to either use political/military means to command a surplus from the rest of the world by force, or promote new technologies (such as fracking) that are unprofitable, wasteful, and environmentally disastrous, for the same type of short-term survival on the industrial side, that QE seems to be providing on the monetary side. There is no getting away from the fact that US/UK/Japanese consumers urgently need consumers in the rest of world to experience a rise in living standards to get themselves out of the impasse they are in. The only problem is that the governments of these populations are getting in the way of such potential developments, because the few in those countries see themselves as losing political power in the process. Just as they don’t want to redistribute wealth domestically through debt forgiveness, they don’t want to submit to an international version of this via a collapse of their currencies.

So far so good as far as Khazin’s analysis is concerned. The problem comes in regard to what policies Russia should follow in this context. Khazin sees (and the Saker agrees with him) that there should be greater control of the banking system by the state, that capital controls should be imposed to strop ruble depreciation on the one hand, and that there should ruble monetisation i.e. ruble QE to push local Russia investment to take advantage of ruble depreciation through import substitution, on the other. However, I believe you can still achieve the local investment and growth – which would presumably be the goal of such a strategy – in the context of “free” markets, so long of course as “free” is defined not as the “free-for-all” of the Russian 1990s, but in the context of sensible regulation.

To go back to 100% state control I think Putin sees as a mistake which would take Russia back to the economic situation of the Soviet Union. In fact, it would would be a serious economic error – one that the West is trying to goad Russia into making, and that I think Putin is highly conscious of trying to avoid. Such a policy on the part of Western governments is the analogue on the economic side of them goading Russia into overt military action in the Ukraine on the political side. Overt ill-considered military action on Russia’s part would immediately lead to massive militarisation in the West and a very dangerous situation. If there were many causes for WWII, we must remember that, woven through most of them, was the fact of economic depression.

So just as caution is necessary on the political side, caution is necessary on the economic side. The reason for this is that the modern state, whichever state it is and wherever it is, is not as all powerful as we think it is. The state needs to work on economic matters with the help of and through the private sector, which, after all, is supposed ultimately to be the beneficiary of state policy – not (incestuously) the state itself. The state thus needs to set out frameworks which make the private sector feel confident. What would make the private sector (not specifically either the Russian or the Western private sector, but a mixture of both) feel confident in Russia, is the sense that there is the rule of law. Sudden changes now of the statist type would completely undo all those painful gains that have been notched up since the 1990’s in making Russia an open economy with a responsible legislative that moves rationally in its law-making and always considers the business climate.

The fact that the US/UK/Japan are badly managed open economies, doesn’t mean that an open economy is a bad thing per se. The US prides itself on being a capitalist country, but capitalism is a vague (and actually useless) term which comes in many varieties. We find for instance that in the US,  the military is the largest employer, and is a “cradle-to-grave” employer not unlike any socialist organisation. Also weapons production and development in the US is driven by corruption and greed factors in the relationship between corporate bosses and politicians, and has nothing to do with “effective competition”: quantity is not quality. As far as Europe is concerned, we have a collection of open economies, but they are now saddled with an unelected government in the EU which has a bureaucracy not dissimilar to that which used to function in Russia in Soviet times, and again the EU will always make decisions that will on the whole favour the few rather than the many, against the very idea of an open economy.

Thus having an open economy means particularly not pandering to oligarchs, because a responsible legislative running an open economy would need to enforce proper payment of taxes, a proper progressive tax system which is fair (unlike the US), and one where real estate gains are taxed more than income or sales. This would ensure that there isn’t a bias in the economy (as in the US and the UK) towards real estate speculation and away from productive investment, with the associated disincentive to work rather than speculate. Most importantly, avoiding speculation through a balanced tax system reduces the amount of the economy’s surplus which is siphoned off into seignorage gains for bankers and for the few. In return for taxes, the state is also responsible then to use its power and it resources to create a level playing field for everybody to succeed in business, especially with regard to the provision of free universal high-quality education and free internet, and to protect the vulnerable, especially with regard to free health.

Russia is in the good position now of having a much more open economy than any of the other BRICS, including China, and although the short-term cost of that is a falling ruble at the moment, the long-term gain of toughing this period out, as Putin is doing, will be enormous. This is especially the case since Russia has such enormous economic potential in all kinds of markets (both consumption and investment markets) in terms of potential high returns – much higher returns than in Western economies. It is these high returns that will attract investment in the future from the private sector and will encourage the Russian private sector to stay at home, as long as they are confident. If they know the government is committed to freedom of exchange, why should they take their money abroad, especially if economic returns in Russia are amongst the highest in the world? If the investment scenario improves in this way, then future profits will be also continue to be reinvested.

All this doesn’t stop the Russian state from controlling certain key sectors, as long as it does so efficiently. Privatisation isn’t a panacea. We find for instance William Waldegrave, a key minister in the Thatcher government, admitting that in the Thatcherite ideological drive to privatisation, their policies went too far. For instance, the concept of “internal markets” in organisations that are natural monopolies (energy, health, railways, education) is a mere mirage of profitability. It only creates gains for management consultants at the cost of the organisations involved in a repeat of the worst excesses of Soviet management. The state, after all, represents the people at large and should do their bidding in this respect, instead of simply handing all the country’s assets to rapacious accountancy firms and financial organisations, as in the case of the UK government, which has sold everything off which could have contributed to a reduction of its unmanageable debts. Further, in the technological field it is clear that major developments have always begun within government research programmes, and the private sector (as in the example of route 66 companies in the US) always developed technology for the marketplace which was initiated in government research facilities. It is a fallacy that the majority of technological development comes from private sector R & D.

In conclusion, Khazin’s broad economic views, while correct, don’t lead to specific policy conclusions, and the Saker’s analysis is wrong. Putin isn’t “being strong” politically and “being weak” economically, he is being cautious and long-term in both cases: he is not responding to the military provocations of the West politically, except within the bounds of reasonableness, and he is not responding to the currency provocations of the West economically, except within the bounds of reasonableness.

What about supporting Nafeez Ahmed? What do you think?

In various posts, I have shown what a dangerous newspaper the Guardian is – a wolf in sheep’s clothing. I first noticed its extreme neo-liberal bias in its long-term reporting of Venezuela, not once mentioning what the Bolivarian revolution has done for the poor of the country, and continually putting what bad news out that it could over the years. It has also been consistently pro-Israeli in a subtle way.

This has never been so clear since it closed down Nafeez Ahmed’s blog. Nafeez Ahmed (open link: http://en.wikipedia.org/wiki/Nafeez_Mosaddeq_Ahmed) has been a long standing columnist at the Guardian, and he recently wrote a piece which, based on sound sources, showed how Israel’s latest aggression on Gaza was really a play for the country’s resources: “IDF’s Gaza assault is to control Palestinian gas, avert Israeli energy crisis”.

Read this by opening link: http://www.theguardian.com/environment/earth-insight/2014/jul/09/israel-war-gaza-palestine-natural-gas-energy-crisis

In this piece Ahmed showed that the Israel government wanted to get rid of Hamas for two reasons (i) because they knew that so long as Hamas was there they would never give control of their gas fields to Israel (ii) because they wanted a pliable Palestinian government to use to export this gas to other needy Arab countries for their own profit, which would be politically impossible to do directly.

Ahmed was fired by the Guardian the very next day and his blog closed down overnight.

Ahmed didn’t have to write that piece to make it plain that Israel is no longer a bankable proposition for the West, that in fact it is a country in serious trouble in more ways than one, and that the failure of this last ditch attempt to grab Gaza’s resources, associated as it was with innumerable and unbearable war crimes, has finally driven Western governments to despair. Don’t get me wrong Frau Merkel and the Germans are bound to keep up appearances with a continuation of their guilt-trip, despite the fact that Israel is mistaken in its belief that it is any longer the representative of the victims of the Nazis. Also the US will not overtly back the new Palestinian UN resolution (open link: http://www.aa.com.tr/en/headline/437622–us-will-not-support-palestinian-draft-un-resolution). But both Germany and the US are also not stopping the EU from essentially getting on with the task of recognising Palestine (and making peace with Hamas); in fact, they are pushing it to do so**.

But what is clear from the events surrounding Ahmed’s blog, is that all the friends of Israel in Western capitals are smarting from the blows of all these recent political developments. Closing Ahmed’s blog so summarily is clear evidence of this.

But Nafeez Ahmed is not to be cowed, he is starting a new crowd-funded investigative journalistic entreprise:



He is looking for patrons for $1 a month each – to be his readers and contributors, or his in words , his “patrons”. The idea is not to have any millionaires as part of the outfit, in order to keep it totally free. What do you think?

** see earlier note on the “non-congress US establishment”

Recognising Palestine: the changing dynamic, Part II (Hamas are now classed as freedom-fighters)

In an earlier post, “Recognising Palestine: the changing dynamic” (open link: http://different-traditions.com/?p=1987), I noted how suddenly the European nations, one after the other (Sweden, then the UK, France, Spain, Portugal, and Ireland…) were lining up behind the idea of recognising Palestine.

Now, we have further developments in that not only is Palestine recognised as a state “in principle” by the European Parliament (open link: http://www.independent.co.uk/news/world/middle-east/palestine-recognised-as-a-state-in-principle-by-european-parliament-in-symbolic-vote-9930981.html), but an EU Court has ruled that Hamas is not a terrorist organisation (open link: http://www.aa.com.tr/en/headline/436516–eu-court-likely-to-take-hamas-off-of-terror-list).

It was clear that Western élites had moved to change policy towards Palestine during the last Gaza conflict, when in an earlier post, “The Guardian newspaper’s liberal imperialism” I had contrasted the naked imperialism of the supposedly “liberal” Guardian with the more balance approach of the Murdoch press, extraordinary as it may have seemed. In the10th August 2014 edition of the Sunday Times, the Murdoch press did two important things:

(i) It was more open to justifying Hamas’ actions (open link: http://www.thesundaytimes.co.uk/sto/news/article1444832.ece)

(ii) It led with frank coverage of Sayyeda Warsi’s resignation, giving space to her loud condemnations of the Conservative Party over their stance on Gaza, together with reporting about the Conservative Party’s frankly bleak prospects at the next election (open link: http://www.thesundaytimes.co.uk/sto/news/uk_news/article1445052.ece)

None of the gyrations of Netanhayu and the other fascists in the Israeli cabinet, declaiming the recognition of Palestine as every turn during recent events, seem to have bothered anybody in Western governments. Netanhayu is railing on about “European hypocrisy” today, but no-one is listening. Just as no-one is listening to Israeli Intelligence Chief calling an “act of war” a Palestinian draft submitted to the UN Security Council to end Israeli occupation by the end of 2017.

Neither does the driveling submission of the US Congress to Israeli bullying have any bearing on the matter. The US non-congress establishment** has decided both that Congress has sold-out and is irrelevant, and that Israel is a dangerous ally that must be contained. As is often the case now, the EU is doing its work for it.

**more on the non-congress establishment in future posts

But the US government is still not transparent

In the post below “US has always shown Britain up with its capacity for transparency” I talk about how the release of the Senate Intelligence Committee report on CIA torture shows up the British secrecy culture. But I was clearly incorrect when I compared these current events over the Senate report with the Chilcot inquiry in Britain.  Of course, the Chilcot inquiry is on a whole different level, and is best compared with the 9/11 inquiry report in the US, and on the basis of that comparison the US doesn’t come out smelling any better.

The fact still remains that the US government is covering up the role of Saudi Arabia in 9/11 and that crucial pages in the 9/11 inquiry report were blanked out and classified as ultra top secret. Senator Bob Graham, head of the Senate Intelligence Committee at the time, has never been able to understand why it is that protecting the Saudis is a matter of US national security, despite his privileged position. In fact, despite this position, he is prohibited from talking about what he knows. Although he wrote a non-fiction book called Intelligence Matters: The CIA, the FBI, Saudi Arabia and the Failure of America’s War on Terror (2008), he has in fact been so frustrated about not being able to tell the world the truth about what happened that he has vented this frustration by additionally writing a fictional novel about Saudi Arabia called The Keys to the Kingdom (2011) to convey what he thinks are important matters.

Watch Senator Bob Graham discuss all this in 4 parts on the Real News network:

Part 1


Part 2


Part 3


Part 4


The US has always shown Britain up with its capacity for transparency

9th Dec: The Senate Intelligence Committee has humbled and hobbled a major US government agency (the CIA) by issuing its report on torture. It has shown up the CIA for being dysfunctional, disorganised, incompetent and rife with greed and deception. It has been shown up as having been ill-equipped to deal with al-Qaeda and then having consistently misrepresented the results of its investigations to the public and their representatives. The New York Times describes the indictment of the CIA as “withering”. Drawing on millions of internal C.I.A. documents the Senate has illuminated practices which it said were brutal, but more especially they were essentially ineffective .  See the report by opening link: http://www.intelligence.senate.gov/study2014/sscistudy1.pdf

Whatever one thinks of the devastation the US has wrought in the world over the past 25 years, this revelation is a rare event in these extremely bleak times that can only help towards repairing some of the damage and giving the world some hope. Perhaps releasing the Senate report has something to do with the fact that Diane Feinstein (as head of the Senate Intelligence Community) was furious at being spied on herself by the CIA. However, this was clearly a group decision.

The British press is up in arms about the US revelations, but what about them pressing the UK government to uncover the misdemeanours of the British Intelligence Services? The latter spoke to the CIA before the torture report was published (open link: http://www.bbc.co.uk/news/uk-30444679).

So the question is whether the British State can match the transparency displayed now by the US Senate? With its 30-year rule on “classified” documents, Britain has always been more secretive than the US. If the US legislative has thus humbled its intelligence services in front of the world, can the UK legislative find it in itself to issue and unbiased Chilcot report into the Iraq War and Blair’s activities? An unbiased report would be a major blow to the prestige of the Office of the British Minister, but a deserved and necessary blow, one that would lead to some renewed respect for Britain perhaps. The jury is out on this, however – pun intended. Let’s wait and see.


“Nothing is Immune”: the destruction of landmark buildings in Gaza – Amnesty International

The Israeli military committed war crimes during its Gaza offensive this summer and must be investigated, human rights monitor Amnesty International said on Tuesday.

The destruction of four multi-story buildings during the last four days of the 50-day war were in breach of international humanitarian law, the group said in a report.

“All the evidence we have shows this large-scale destruction was carried out deliberately and with no military justification,” said Philip Luther, director of Amnesty International’s Middle East and North Africa programme.

“War crimes must be independently and impartially investigated and those responsible should be brought to justice in fair trials”. Evidence including statements by the Israeli military at the time indicate the attacks were “a collective punishment against the people of Gaza” designed to destroy their livelihoods.

open link to see full report in PDF format:

Amnesty International recommends that the State of Palestine immediately sign the Rome
Statute and accede as a full member at the ICC (see below)

The State of Palestine accorded observer status at the International Criminal Court

The International Criminal Court has officially granted Palestinians observer status at a meeting of the 122 member countries. This is a pivotal step on the way to Mahmoud Abbas’s strategy to press war crimes charges against Israel.

It is still unclear if Palestine can actually sue Israel, because the court’s judicial body has not recognized it as a state. Abbas is planning to pursue a full membership to the court if the UN Security Council fails to act on the proposed resolution to compel Israel to withdraw and cease all activity beyond the pre-1967 demarcation line.

These steps and the gradual recognition of the State of Palestine  by all European countries is finally putting a limit to Israel’s unaccountability

Judging Erdogan’s human rights record

After the Blue Stream gas deal with Russia, which will turn Turkey into Europe’s gas hub, we should expect to see a major onslaught by the liberal press on Erdogan.

In this respect, we have to remember John Pilger’s recent words:

“The most effective propaganda is found not in the Sun or on Fox News – but beneath a liberal halo. When the New York Times published claims that Saddam Hussein had weapons of mass destruction, its fake evidence was believed, because it wasn’t Fox News; it was the New York Times… The same is true of the Washington Post and the Guardian, both of which have played a critical role in conditioning their readers to accept a new and dangerous cold war. All three liberal newspapers have misrepresented events in Ukraine…” (for this, open link: http://johnpilger.com/articles/war-by-media-and-the-triumph-of-propaganda)

However, Erdogan has already been the subject of demonisation by the liberal media, although this is now expected to rise to fever pitch. The original reason for the demonisation is due to the fact that Erdogan was backed by the West in his early career, and now that he has taken an independent line on public health, on banking and on Israeli Zionism, which in all cases stunned the US establishment, he is thus deemed a turncoat… and you know what happens to turncoats.

Sibel Edmonds was clear on this as far back as January 2014 when she wrote:

“… All Empire-installed puppets and regimes must commit to the Empire’s commandments….Thou shall not violate the Imperial commandments. Because if you do, thou shall be disgraced, exposed, uninstalled, and may even be given death. All you have to do is look at the past century’s history. See what happens when an installed puppet gets too confident and inflicted with hubris, and ignores one or more commandments. This is when they are reborn as dictators, despots, torturers, and yes, terrorists. This is when their backyards get dug up to find a few grams of weapons of mass destruction… No matter how we look at it Erdogan’s days are numbered … Anyone who ever dares to be this reckless will be punished and made an example for all other installed-puppets…”  (on this, open link:  http://www.boilingfrogspost.com/2014/01/18/turkish-pm-erdogan-the-speedy-transformation-of-an-imperial-puppet/)

But besides Erdogan still being with us, his human rights record is nevertheless said to be atrocious, and this essentially for two reasons:

(1) Press Freedom

It is the “Freedom House” Index of press freedom that is used to judge press freedom in Turkey, where the country scored 48/100 in 2006 and 55/100 in 2012. There are two points to be made here, although in principle the general idea that the press should allowed to work freely should always be upheld. Firstly, Freedom House itself needs to be judged as Nils D Steiner did in his article “Testing for a Political Bias in Freedom House Democracy Scores: Are U.S. Friendly States Judged to be more Democratic?” (for this, open link: https://www.academia.edu/5869279/Testing_for_a_Political_Bias_in_Freedom_House_Democracy_Scores_Are_U.S._Friendly_States_Judged_to_be_more_Democratic). Although Freedom House’s biases are reducing over time, they are still there. Secondly, and more importantly, as ex-editor of Der Spiegel, Ugo Ulfkotte, has shown in his book “Gekaufte Journalisten (Bought Journalists)”, articles in the Western press on crucial geopolitical matters are significantly affected by interference from the intelligence services (for the book, open link: http://www.amazon.de/Gekaufte-Journalisten-Udo-Ulfkotte/dp/3864451434).

This last point is a particularly important point in the light of what Sibel Edmonds says about Erdogan being demonised and “his days being numbered” (although he continues to be with us). Liberal journalists (as I have discovered in the case of Egypt – even Robert Fisk) write absolute rubbish about local events in the Middle-East, which only go to serve their masters in the intelligence services. This is not necessarily a judgement on the men and women of the press themselves, but a fact of life that Ugo Ulfkotte has clearly shown in his book: if you don’t do what “they” say – they destroy you, your life, your family.

(2) Kurdish Minority Rights

The Kurdish question isn’t one that Erdogan invented, it is a Turkish question dating from time immemorial. In fact, Erdogan has improved conditions for Kurds during his tenure, especially by coming to a peace arrangement with the PKK leader Abdullah Öcalan. It is the US, the UK, and Israel that continually stoke ideas of Kurdish independence, forming bases in Iraqi Kurdistan for their special forces and their regional covert operations, which give the Kurds a sense of invulnerability. While demands for independence relate to the Iraqi area for the moment, nevertheless it influences the Syrian Kurds’ demands also, and destabilises the relationship between Turkey and the PKK, which is still in fact listed as a terrorist organisation by NATO (of which Turkey is a member).

Propaganda’s Triumph over Journalism

John Pilger writes

Why has so much journalism succumbed to propaganda? Why are censorship and distortion standard practice? Why is the BBC so often a mouthpiece of rapacious power? Why do the New York Times and the Washington Post deceive their readers?

Why are young journalists not taught to understand media agendas and to challenge the high claims and low purpose of fake objectivity? And why are they not taught that the essence of so much of what’s called the mainstream media is not information, but power?

continue reading by opening link


The Mukameleen tapes and the modified hangar

As per the Mukameleen TV tapes, the modification of the hangar where Morsi was held and its conversion into an official prison by means of falsification was indeed completed.

The first Google Earth picture of the “hangar” taken on 5 February 2014 shows that it existed within the military unit close to the Military Academy in Abu Qir.

The second picture taken on 21 March shows the modifications undertaken on the military unit’s wall whereby the “hangar” ended up an independent building outside the borders and the wall of the unit, with a wide road leading to it from the main public street.