Thursday, March 30, 2006

Illarionomics

A couple of years ago it was somewhat amusing to read Andrei Illarionov’s rants. I think the main reason Putin paid him salary (he was Putin’s advisor) was simple, “Do exactly the opposite to what Illarionov says and the country’s economy will prosper.” Andrei Illarionov for the last seven years was making horror doomsday forecasts – “Next month Russian economy will definitely crush! It’s already crushing! Crushing! Ahhh!” Kirill Pankratov has a great article on the state of Illarionov’s professionalism. You can find it here.

Illarionov is a charlatan like this. Many of his economic "ideas" are pure nonsense. The list is too numerous. I'll just give a couple of examples.
Among his two main recurring themes there are: a) Russia does not need foreign investments, and should push every available dollar out of the country lest they will cause ruble appreciation and decrease competitiveness; b) economic growth in the last few years is solely attributable to prices and increasing volumes of oil and other export commodities, i.e. more revenues from export coming into the country.
Aside from both being silly, these two things are in direct logical contradiction with one another. If more foreign currency coming into the country is bad for economic growth (a), then much higher export revenues from oil and other commodities would kill growth completely, rather than be its main driver (b). Any sane person pausing for five seconds would see that (a) and (b) are mutually exclusive. Illarionov and his coterie of admirers do not.

Since Illarionov banged the door of his Kremlin cozy office his rants became even worse – totally delirious. He definitely competes with Kasparov for the title “Russian Political Lunatic of the Year”. Ilaarionov’s letter was published today in Moscow News. Andrei was mad with one Beliakovich’s article in which it was proved beyond doubt that Illarionov is a moron.

Editor,
Beliakovich's letter accuses me of "either utter ignorance or purposeful misrepresentation of commonly known facts and easily accessible information." Let's look at whether this accusation is grounded.

Illarionov nowadays is developing a theory that economic growth in any country depends only on the level of its political and social freedoms. “Freedom” here means – what rating a country gets from Freedom House. This fundamentalist neocon organization always gives the highest rank to the US no matter what. When Putin started disagreeing with Washington advisors, Freedom House began lowering Russia’s rating and in 2006 this country became “not free” having the same rating as the Soviet Union had back in 1989. I once wrote how uninformed and unprofessional FH analysts are. For anyone who didn’t live in the USSR in 1989 and who doesn’t live in Russia today – comparing these two countries is like saying that in 2006 Afro-Americans in Louisiana are as free as they were in 1859.
So, Andrei Illarionov sincerely believes that because Russia’s FH rating is “not free” this country has no other choice but to stop growing economically, collapse into crisis and slide down to Cave Age. This should happen in one year or so. Here’s a proof he believes is irresistible:

Even for small oil countries like Qatar and the United Arab Emirates, the pattern seems to hold. For most of the last 30 years they were partially free, sliding into a non-free status relatively recently. In meantime, GDP per capita declined in Qatar from $57,000 in 1973 to $13,000 in 2005, and in UAE from $37,000 in 1974 to $22,000 in 2005.

Wow! Andrei forgot to mention that the population of these countries grew almost six times since 1973, an average family had 4,6 children on average in these years, life expectancy grew 18 years and women were almost completely ousted from productive activities. There’s difference between GDP produced by nomadic Bedouins or by office clerks and spa hotel workers.
It’s certainly cynical to say, but from purely economic point of view negative population growth, small families and high number of gastarbeiter help Russia in its GDP per capita growth.

8 comments:

Anonymous said...

Among his two main recurring themes there are: a) Russia does not need foreign investments, and should push every available dollar out of the country lest they will cause ruble appreciation and decrease competitiveness; b) economic growth in the last few years is solely attributable to prices and increasing volumes of oil and other export commodities, i.e. more revenues from export coming into the country.

Show me where in this passage Illarionov says that foreign investment is bad for the country?? He simply says that Russia does not need it for the ecomomic growth. And he says it in responce to Gref and the ministers, who are saying that Russia desperartely needs foreign investments... And that is a common knowledge. Needless to mention that it is a common place in Russia to think that it is a bad idea to let foreingers into our economy (see the banking sector and lots of other examples). So it seems that either you just see what you want to see, or you and the journalist you are reffering to as the unquestionable source of truth are morons yourselves. My advice - concentrate on whatever you do to make money, since you are a terrible political and ecomomic analyst.

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hamesha: said...

Re your last post, Havel may himself be out of politics, but he remains a heavyweight and a vocal supporter of democracy in E. Europe...

english_teacher said...

Dr. Illarionov is spot on. Deliterious cutural shifts occur with the implementation of wrong headed economic policies. Can anyone say Yukos? Socialist style economic shift leads to loss of freedoms.

Anonymous said...

Yukos was about taking back stolen property and taxes and forcing a criminal conglomerate with links to US political establishemnt out of Russia. As for Illarionov, the few times I cared enough to read his shall we say wild and sometimes irresponsible writing, he did not impress me as a someone who would be given any responsible position in USA. President Putin proved too tolerant.
I do recall an artcile in the "Moscow Times" where Illarionov several times asserted that Russia will not reach $12,000 per head at PPP by 2007, but they did. Nothing to make a big deal out of, but for such a reputed economic expert and a scholarly mind according to some western think tanks...

Then he wrote how Georgia is becoming a market democracy.Would even the Freedom House stray that far off reality? I doubt it.

The fact seems to be that unless he becomes wild and accusatory, nobody really is ready to listen to him. This is his only way, outside of delivering papers to a small audience somewhere in Washington.

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