Monday, March 19, 2007
Monday, February 26, 2007
Tuesday, February 06, 2007
On Economic Freedom
Andy from Siberian Light posted some very interesting statistics from Index of Economic Freedom 2007 compiled by Heritage Foundation. According to the index Russia is #120 among 157 rated countries while other post-Soviet countries are mostly doing much better. For example, Kazakhstan is #75 and Georgia is #35.
Andy is at a loss
I’ve been racking my brains to think of something positive to say about this for Russia, and about the only thing I can think of is: if Russia has the world’s 10th largest economy, but is this unfree… imagine what it could do if it took deregulation seriously.
I decided to dig a bit deeper into the index because I know well how the economy of Kazakhstan works and I don’t find any serious differences between Kazakhstan and Russia. I did find many curious details.
First, the overall country index is based on a weighted score of such factors as business freedom, fiscal freedom, property rights, freedom from corruption, etc. The freest country in the world Hong Kong has the score of 89,3. At the bottom of the list are Cuba (29,7) and North Korea (3). Russia’s score is 54 and Kazakhstan’s score is 60,4. The difference of 6,4 points brings Russia 45 places down. If Russia could improve its score from 54 to 64 it could be as free as Jordan and South Africa (67 countries in between). At the same time at the top of the list things look different. Hong Kong score of 89 minus 10 brings us to Luxembourg (6 countries in between). Luxembourg score minus ten brings us to Czech Republic (69,7 and 23 countries in between). As we see for “mostly unfree” and “repressed” countries every point counts but for free countries plus-minus 10 points don't really matter.
Second, let us look at detailed ratings of Kazakhstan and Russia. There are two approaches: some ratings are calculated technically: inflation, taxes, taxed to GDP, etc. This is a very nice approach – no bias only digits. But then some rating are purely subjective and sometimes subjective beyond comprehension. Technical scores of Russia and Kazakhstan are very similar. There are only two differences. The first difference: in financial freedom Kazakhstan gets 60 but Russia 40. Why? I agree that Kazakhstan has better banking regulations, fewer banks and the sector is less dominated by state-owned banks (it is dominated by private banks run by Nazarbayev’s close relatives). But does it make 20 points difference? The second difference in ratings: Kazakhstan labor freedom rating is 80,5 but Russia gets only 66,2. This means that in Kazakhstan labor has less guarantees from employers, minimal wage is tiny, working hours are not limited, unwanted workers could be fired without much ado. Russia cares more about employees rights and less about employers. Conclusion – Russian economy is less free. Don’t you find this labor freedom index a bit tricky? For example, the shining example of labor freedom is Georgia – it’s 99,9 (one of the main reasons Georgia is #35). I can confirm it – in Georgia employees are treated like cattle.
Third, even technical scores could be adjusted subjectively. There is a freedom from corruption score. It's subjective but separate from technical ratings. Good. But the guys from Heritage Foundation act differently. There’s corruption rating, then (in case with Russia) they say that from the point of legal demands the courts are totally independent but judges are corrupt and we bring the score down. Property rights judicially are ok but officials are corrupt. What’s the problem? Either get rid of a separate corruption rating or stop introducing this “Russia is corrupt” bias into every technical ratings.
Comparing ratings of rich countries and the rest of the world is hilarious. Take labor freedom rating in France and Russia. French labor code is Draconian – to fire a lazy worker is almost impossible. France labor rating is 65,9 and Russia has 66,2.
Heritage Foundation has a lot of problems trying in vain to prove that economic freedom brings prosperity, growth and a lot of investments. Unfortunately the correlation is so weak that special methods are introduced into methodology to make statistics more “supportive” for ideological dogmas.
Andy is at a loss
I’ve been racking my brains to think of something positive to say about this for Russia, and about the only thing I can think of is: if Russia has the world’s 10th largest economy, but is this unfree… imagine what it could do if it took deregulation seriously.
I decided to dig a bit deeper into the index because I know well how the economy of Kazakhstan works and I don’t find any serious differences between Kazakhstan and Russia. I did find many curious details.
First, the overall country index is based on a weighted score of such factors as business freedom, fiscal freedom, property rights, freedom from corruption, etc. The freest country in the world Hong Kong has the score of 89,3. At the bottom of the list are Cuba (29,7) and North Korea (3). Russia’s score is 54 and Kazakhstan’s score is 60,4. The difference of 6,4 points brings Russia 45 places down. If Russia could improve its score from 54 to 64 it could be as free as Jordan and South Africa (67 countries in between). At the same time at the top of the list things look different. Hong Kong score of 89 minus 10 brings us to Luxembourg (6 countries in between). Luxembourg score minus ten brings us to Czech Republic (69,7 and 23 countries in between). As we see for “mostly unfree” and “repressed” countries every point counts but for free countries plus-minus 10 points don't really matter.
Second, let us look at detailed ratings of Kazakhstan and Russia. There are two approaches: some ratings are calculated technically: inflation, taxes, taxed to GDP, etc. This is a very nice approach – no bias only digits. But then some rating are purely subjective and sometimes subjective beyond comprehension. Technical scores of Russia and Kazakhstan are very similar. There are only two differences. The first difference: in financial freedom Kazakhstan gets 60 but Russia 40. Why? I agree that Kazakhstan has better banking regulations, fewer banks and the sector is less dominated by state-owned banks (it is dominated by private banks run by Nazarbayev’s close relatives). But does it make 20 points difference? The second difference in ratings: Kazakhstan labor freedom rating is 80,5 but Russia gets only 66,2. This means that in Kazakhstan labor has less guarantees from employers, minimal wage is tiny, working hours are not limited, unwanted workers could be fired without much ado. Russia cares more about employees rights and less about employers. Conclusion – Russian economy is less free. Don’t you find this labor freedom index a bit tricky? For example, the shining example of labor freedom is Georgia – it’s 99,9 (one of the main reasons Georgia is #35). I can confirm it – in Georgia employees are treated like cattle.
Third, even technical scores could be adjusted subjectively. There is a freedom from corruption score. It's subjective but separate from technical ratings. Good. But the guys from Heritage Foundation act differently. There’s corruption rating, then (in case with Russia) they say that from the point of legal demands the courts are totally independent but judges are corrupt and we bring the score down. Property rights judicially are ok but officials are corrupt. What’s the problem? Either get rid of a separate corruption rating or stop introducing this “Russia is corrupt” bias into every technical ratings.
Comparing ratings of rich countries and the rest of the world is hilarious. Take labor freedom rating in France and Russia. French labor code is Draconian – to fire a lazy worker is almost impossible. France labor rating is 65,9 and Russia has 66,2.
Heritage Foundation has a lot of problems trying in vain to prove that economic freedom brings prosperity, growth and a lot of investments. Unfortunately the correlation is so weak that special methods are introduced into methodology to make statistics more “supportive” for ideological dogmas.
PS. By the way, Andy. Before exclaiming "Russia's economy is less free than Communist China's" look at the rating Russia and China both have 54,0 score. Why China is #119 but Russia #120? Can you guess?
Thursday, January 18, 2007
Sagacious Economist
It is widely believed that the Economist is a serious and respectable magazine but somehow its analysis of Russia is simply miserable. Only a couple of years ago Economist stopped making doomsday forecasts for Russian economy. It embarrassed itself too many times.
Kirill Pankratov found this wonderful masterpiece in Economist’s “The World in 1999” where its renowned analysts made economic forecasts almost for every country on this planet.
1999 will be the year of Russia's disintegration… Trade between Russia's regions will plunge at least until they hit on a stable, trusted currency in which to do business. That is hardly likely to be the rouble, and the planned coupons and currencies which some regions have been planning look equally unattractive substitutes. How much would a Urals franc be worth in Rostov-on-Don, or a Saratov mark in Perm? ...foreign invasion, albeit of a peaceful and benevolent kind, is exactly what Russia's regions should want… The probable decline in Russia's wealth in 1999 will be around 10%… expect yet another bleak and miserable year.
Kirill Pankratov found this wonderful masterpiece in Economist’s “The World in 1999” where its renowned analysts made economic forecasts almost for every country on this planet.
1999 will be the year of Russia's disintegration… Trade between Russia's regions will plunge at least until they hit on a stable, trusted currency in which to do business. That is hardly likely to be the rouble, and the planned coupons and currencies which some regions have been planning look equally unattractive substitutes. How much would a Urals franc be worth in Rostov-on-Don, or a Saratov mark in Perm? ...foreign invasion, albeit of a peaceful and benevolent kind, is exactly what Russia's regions should want… The probable decline in Russia's wealth in 1999 will be around 10%… expect yet another bleak and miserable year.
Monday, January 15, 2007
Fedia Kryukov's New Blog
When I grew completely sick and tired of writing on the topic “Western media lies about Russia” Fedia Kryukov took the baton from me and started his own blog “Russia in the media”.Here’s an extract from his post “The “Empire of Lies” Strikes Back”:
Our fearless exposer of lies and liars, Alexandra Poolos, further maintains that if you "ask any seemingly cosmopolitan Russians on a downtown Moscow street about their take on the international scandal, [...] they will most likely shrug and suggest that the former spy Alexander Litvinenko poisoned himself just to make Russian President Vladimir Putin look bad." Well, from this I can only assume that Alexandra Poolos never actually bothered to "ask any seemingly cosmopolitan Russians" anything of that nature. Because the polling agencies, those who actually ask such questions as part of their job, came up with somewhat different results. For example, the independent Levada Center conducted a poll between December 8-12 and found that 20% of Russians believe Litvinenko was killed by his former business partners, 15% -- by Boris Berezovsky, 10% -- by Russian special services, 8% -- by western special services, 8% -- he accidentally got poisoned while smuggling radioactive materials, 1% believe it was a suicide. The same poll also asked why Litvinenko was killed. Only 19% of Russians believe it was done to make Russia (14%) or Putin (5%) look bad. Other theories included revenge for something Litvinenko did (15%), due to dangerous information he possessed (14%), in order to create a political emergency in Russia to enable Putin to run for the third term (4%). Thus, Alexandra Poolos's alleged "most likely" replies are possible only from the 9% of respondents who believe Litvinenko killed himself, and the 19% of respondents who believe it was done to damage Russia or Putin. And these two sets don't even necessarily intersect, which would make the number of people who espouse the "most likely" view rather tiny.
Read more…
Great job, Fedia!
Our fearless exposer of lies and liars, Alexandra Poolos, further maintains that if you "ask any seemingly cosmopolitan Russians on a downtown Moscow street about their take on the international scandal, [...] they will most likely shrug and suggest that the former spy Alexander Litvinenko poisoned himself just to make Russian President Vladimir Putin look bad." Well, from this I can only assume that Alexandra Poolos never actually bothered to "ask any seemingly cosmopolitan Russians" anything of that nature. Because the polling agencies, those who actually ask such questions as part of their job, came up with somewhat different results. For example, the independent Levada Center conducted a poll between December 8-12 and found that 20% of Russians believe Litvinenko was killed by his former business partners, 15% -- by Boris Berezovsky, 10% -- by Russian special services, 8% -- by western special services, 8% -- he accidentally got poisoned while smuggling radioactive materials, 1% believe it was a suicide. The same poll also asked why Litvinenko was killed. Only 19% of Russians believe it was done to make Russia (14%) or Putin (5%) look bad. Other theories included revenge for something Litvinenko did (15%), due to dangerous information he possessed (14%), in order to create a political emergency in Russia to enable Putin to run for the third term (4%). Thus, Alexandra Poolos's alleged "most likely" replies are possible only from the 9% of respondents who believe Litvinenko killed himself, and the 19% of respondents who believe it was done to damage Russia or Putin. And these two sets don't even necessarily intersect, which would make the number of people who espouse the "most likely" view rather tiny.
Read more…
Great job, Fedia!
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