Dmitry Orlov

-Dmitry Orlov on Russia

Club Orlov,

18 December, 2012

….Another reason for my desire to temporarily stay off the topic of collapse is that I am spending the lengthy Russian holiday season with my family in Russia (where Christmas through mid-January is one continuous country-wide federal holiday). Russia is definitely not collapsing; it is getting stronger and richer. If you listen to the paranoid ramblings of Secretary of State Clinton, it is also getting bigger, by absorbing several resource-rich former-Soviet tin pot dictatorships to the south which the Americans erroneously thought might be their cold war prize.

St. Petersburg, where I am spending the winter, is still dark and snowy—it is currently -15ºC (5ºF) and promising to head lower—but it is now also full of luxury cars, swank boutiques, gourmet shops and restaurants (the place has gone sushi-mad). There are now cafés with free WiFi that are open 24/7. Everywhere, even in the government offices, the service is now prompt and courteous. There is simply a ridiculous amount of culture going on—opera, concerts, theater, art exhibits, and so on. It is one thing to keep up a stream of collapse-related commentary from a place that's collapsing; it is quite another to try to do the same from a place that's experiencing a rather remarkable rebirth.

In one sense the rebirth is quite literal: Russian birth rates now exceed death rates and the population is once again growing. The low birth rates were partly the legacy of the Soviet era, where cramped living conditions often limited the size of families, and partly a cultural change that made having just one child socially acceptable. That the trend toward falling birthrates has been reversed is a major feat, accomplished through many different means, among them vastly improved, free prenatal and postnatal care, financial aid to families with young children and a large cash award given to women who have more than one child. All of this has resulted in a baby boom: there are children and baby carriages everywhere and all the better nurseries have waiting lists.

Another transformation taking place is the conversion of Russia from a lawless bandit-state run by oligarchs and the mafia to a law-abiding society. This process began just a dozen years ago and is by no means complete. An overhang of that lawless time, and of the Soviet legacy before that, is Russia's very high prison population. While not as high, per capita, as that of the United States, which is the shame of the world, it is still quite shameful. With Putin's pronouncement, around 2000, of “dictatorship of the law” the emphasis was given to shutting down protection rackets and mopping up all the petty crime that erupted as a result of professional thugs suddenly becoming unemployed. Now the emphasis seems to be shifting to shutting down corruption at higher levels. The recent corruption-related dismissal of Defense Minister Anatoly Serdyukov was highly publicized even in the West. A more obscure corruption scandal, but one involving similar amounts of money (around 100 million USD), recently erupted right here in St. Petersburg: Vladislav Petrov, the person in charge of the city's steam mains, is being questioned (St. Petersburg is heated using cooling water discharged from power plants, which is distributed throughout the city via buried pipelines). Petrov oversaw a scheme in which some 600km of large-diameter steam pipe was replaced using substandard, salvaged gas pipe which was purchased from Gazprom. The inspection certificates were forged, and the difference in price was pocketed. This came to light when, with the start of the heating season, geysers of steam erupted in various parts of the city, requiring emergency repairs and shutting down traffic. These are by no means isolated cases: it is impossible to keep corruption entirely under control in a suddenly wealthy, rapidly transforming country that had only recently lived through a bout of almost complete lawlessness.

But what is most stunning is the pace of economic development: Russia seems to be developing into the United States of the 1990s, while the US seems to be developing into a vast wasteland of boarded-up strip malls and suburban slums surrounding abandoned downtowns. That this is not a good development model should be obvious to all and does not bear repeating here. A lot of the new development here is car-centric; Russia has recently surpassed Germany in car sales, with Lexus and Infiniti leading among the newly popular brands. Big box stores are erupting everywhere, and the arrival of the global consumer culture is quickly making Russia just like any other prosperous place on earth, with the same global brands on sale as anywhere else. I can only hope that this trend does not run to completion, as it has in the US, with its deadweight of underwater suburbs, ridiculously overbuilt retail space, and very little else. But from what I have observed, Russia is quite capable of making rapid changes in direction. Also, although private cars and big box stores are all the rage now, they have not shut down public transportation or local shops, so that, when this development model is discovered to be a dead end, there will be a path back.

Of the two largest (and related) problems affecting the planet as a whole—national resource depletion, oil and gas in particular, and global warming—Russia seems to be spared. (I tend to discount all of the recent nonsense about fracking; it seems to be a scheme to defraud investors, with gas and oil only figuring as dirty, overpriced byproducts of this process. I also tend to discount the efforts to control climate change; the recent fiasco of a conference at Doha is a case in point.) Russia has 70 years of natural gas left at current production rates from already developed sources, and probably somewhat less oil. There may be much more of each to be found in the rapidly thawing Russian arctic. With regard to global warming, the UN climate change effect maps I have looked at show the US and Europe as major losers with regard to their ability to feed themselves, while Russia appears to be the greatest benefactor, with longer growing seasons and more plentiful rainfall. And while many coastlines in the world are under threat from rising oceans (the Eastern Seaboard in the US a prime example, with the recent damage from Hurricane Sandy in New York and New Jersey just a small taste of things to come) Russia's population centers are mostly inland. St. Petersburg, the second-largest Russian city, is on the water, but is on the far side of the Baltic, does not have tides, has built a dam to shield it from storm surges, and is not forecast to experience significantly higher water levels any time this century.

If there is one thing that Russia should be doing but isn't it's this: Russia should stop helping sanitize US government debt. In this, it should not do it alone but join other countries and stop buying US debt. Currently, when Russia exports products, it then uses a share of the revenues to buy up US debt, in the form of US Treasury paper. That paper then sits at the central bank, accruing approximately 0% interest (always far below inflation, which Americans systematically underestimate) and eventually dwindles to nothing as the USD loses virtually all of its value over time. Why subsidize American defense and other government spending when this money can be invested productively? For instance, it can be distributed as loans to Russian-owned businesses that have a good business plan for replacing imports with domestic production.

In a couple of months I'll be heading back to the US, and back to collapse. The book will be out in May, and I will be traveling and talking about it both before and after that. No doubt people will ask me: “What about Russia?” You see, I have compared the USA to the USSR, showing that the USA is not as well-prepared for its inevitable collapse as the USSR was. I did not compare the USA to Russia. Although some Americans continue to use USSR and Russia as synonyms, they really should make an effort and try to sound a bit more intelligent. The USSR is dead, and modern Russia came after it died. What will come once the USA is also dead is anyone's guess.

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