

A policy of mass destruction - yread
http://www.cam.ac.uk/research/news/a-policy-of-mass-destruction/

======
PaulHoule
Yep, another article about the perils of financialism.

Unfortunately the ability to raise money (or make it by trading) isn't well
correlated with the ability to use money to make wealth.

Donald Trump, for instance, was recently voted "most respected businessman" by
the readers of a major Men's magazine. Perhaps people are impressed by the
lifestyle he leads and the fact that he's put his name on buildings all over
Manhattan, but he's not really a businessman... he's somebody who plays a
businessman on TV.

Back in the 90's, Trump lost money running casinos, back when the industry was
booming and, for everybody else, running a casino was like having a license to
print money.

So, if you're the kind of person who cares about profit and loss and who also
thinks business can solve problems, delight customers and provide meaningful
and renumerative work it's very frustrating to see somebody like that have a
reality distorsion field that lets them live a lie and involve a lot of people
in it.

Now the U.S. economy is maybe 5% or 10% B.S. and you can find many valid
criticisms but it's basically on the level. That's why we're the world
financial center.

You look at places like Russia where the physical and human resources are so
great but it's a 80% B.S. economy and the government is 100% corrupt and
that's very sad.

------
JumpCrisscross
An analogy for privatisation and increasing an economy's capital dynamism is
turning up the heat in a reactor. The added energy makes the entire system
more powerful if properly directed. But the steam doesn't _want_ to drive a
generator; if it's easier to breach a weakness in the containment structure
then so be it. The higher the temperature the stronger the containment need
be.

Russia was privatised shockingly fast without building up a competent
judiciary, informed public, nor the rule of law necessary to direct that
activity. So it settled for the path of least resistance to profit and turned
inward and venal.

We are still learning about engineering economies on an international scale
like this; it doesn't always turn out as "mass destruction". In today's FT Jim
Yong Kim, US nominee for the World Bank, comments on being "born in South
Korea when it was still recovering from war, with unpaved roads and low levels
of literacy. I have seen how integration with the global economy can transform
a poor country into one of the most dynamic and prosperous economies in the
world. I have seen how investment in infrastructure, schools and health
clinics can change lives. And I recognise that economic growth is vital to
generate resources for investment in health, education and public goods" [1].
The "policy of mass destruction" headline is needlessly hyperbolic.

[1]
[http://www.ft.com/cms/s/0/e2adc88c-7733-11e1-baf3-00144feab4...](http://www.ft.com/cms/s/0/e2adc88c-7733-11e1-baf3-00144feab49a.html#ixzz1qWMUbwoJ)

------
Roboprog
Dismantling the state run businesses should have been done more slowly, to
allow the Soviet people time to adapt.

I'm not saying the communist oligopoly should have been left in place. But,
dismantling it so quickly simply allowed a different oligopoly to be put in
place, with little net improvement for most people.

Some would argue that not letting the people adapt to the change was exactly
the intended result, though.

~~~
alephnil
> Dismantling the state run businesses should have been done more slowly, to
> allow the Soviet people time to adapt.

Poland, Hungary and the Baltic countries mostly did this, and they had far
less problem after communism than Russia and most other former Soviet
republics.

~~~
mkup
The difference between Baltic countries + Poland vs. Ukraine, Moldova and
Russia is a lack of independent juridical branch of government, ephemeral
property ownership rights, no rule of law, and, in general, more
paternalistically minded people (towards government regulation of /
interference in business). All of this makes medium sized business almost
impossible to survive; rapid privatization in 1990s (as per subject article)
seems totally irrelevant factor to me as a person living here: I see a
reprivatization wave of roughly half large enterprises after each election
cycle here. Corporate raidership is run by judges, governed by executive
branch of govt by phone, and local analog of FBI is just a tool to bereave
tasty property, they have no connection to justice at all. So how capital can
accumulate in such an environment? There's no way.

~~~
guard-of-terra
Who knows whether it is the reason behind the economic problems of 90-s, or it
is a fallout of those.

Perhaps if the whole country has not been rapidly blasted into a decade of
absolute poverty, we'd have less corrupt justice and more rule of law.

~~~
mkup
My basic thesis is Capitalism in Eastern Europe is not gonna work until solid
property ownership system is established, until the property and the capital
is protected [from corrupt statesmen] by law, and this protection is enforced
in practice.

East-to-the-Poland nations can remain in this "half-assed capitalism" state
forever, the transition is not gonna happen automatically.

Poverty is just a consequence of such conditions, so it will remain as is
until transformation of juridical branch of government is over.

~~~
guard-of-terra
The solid property ownership system isn't going to establish itself. What do
you think can (should) be done to establish it?

------
crewtide
"Some economists argue that mass privatisation would have worked if it had
been implemented even more rapidly and extensively." This is always the
argument about any failed policy. These researchers should do a wider study
that includes privatization efforts before 1990.

We could conduct some pretty sweet experiments in virtual worlds. Would
libertarianism really work if it were the law? A real welfare state?
Privatization of a communist country? Start a virtual world with those laws
and see what happens. Some obvious drawbacks include: \- self-selection of
participants (you could get around this by controlling who is allowed to
participate) \- lower motivation (being unable to pay your actual rent has a
pretty different effect from having a low virtual bank account balance) \-
natural anonymity of avatars (there are plenty of things people do online
they'd never do in real life)

But a well-done research study could probably account for a lot of those
things.

Maybe the IMF should conduct some virtual world experiments before shoving
their current pet policy down the throats of millions of people whose
government just collapsed. This isn't the first complaint I've heard that
goes, "The policy forced on X country by the IMF turns out to have ruined
everything. Oops."

~~~
praxeologist
This is impossible. In fact, the whole pursuit of mathematical economics and
economic modelling is flawed. Se here for a fuller explanation:
<http://mises.org/daily/3638>

------
forgottenpaswrd
When you replace a "central planned" public economy by a "central planned"
private economy you have not done anything at all.

The problem is being "central planned" in the first place. Companies should
not grow to a level in witch they get profits from monopolies and privileges,
but for giving a service for the people.

We are learning this the hard way, in the west we have institutions that are
"too big to fail". The politicians solutions? Make them even bigger so they
can trick the people for a while until it makes a bigger boom in someone else
election year.

The Federal Reserve and the ECB are central planning our economy and it is not
working for the general population.

------
johngalt
Tl;dr A bunch of politicans with geopolitical goals made central policy on how
to direct a bankrupt nation in turmoil. A nation which has existed in
perpetual corruption under collectivism. Yet this is described as a failure of
privatization?

I can't wait for the day Russia isn't under corrupt leadership. The natural
and human resources there are vast and untapped. To think what the world would
be like if they had followed Adam Smith instead of Marx.

~~~
guard-of-terra
Corruption wasn't a killing problem for USSR. Inefficiency was.

There wasn't much to be stolen. There wasn't much to be earned either; hence
the inefficiency and the lack of determination.

------
ilaksh
I believe that the IMF, World Bank and friends are primarily economic
pillagers. I think that destroying economies and taking over countries is
their main purpose.

They normally go after second and third world countries. Recently they have
begun attacking the first world.

I think that the financial crisis could have been resolved in a number of
ways. However, they decided to deliberately exacerbate it and perhaps
deliberately induced it to begin with. I believe that the goal is to redraw
international borders by forming new supernational poltical entities, and they
think that they cannot do that with healthy economies during peacetime. They
believe they need a new world war.

The theory looks to be something along the lines of "you've got to crack a few
eggs to make an omelette". I think that the fact that these people are taking
these destructive actions behind everyone's backs means they are
untrustworthy.

I know, I'm just a crazy conspiracy theorist who is too stupid to comprehend
the intricacies of the hard science of economics.

------
didgeoridoo
Whoa. I never knew this "couponing" was how the post-Soviet economies went
about privatization. It seems like perhaps the exact worst way to go about de-
centralizing an economy, especially when little-to-no financial and corporate
management expertise existed in the population steeped in generations of
collectivism. I don't think this is an anti-capitalism lesson -- it's a lesson
on the dangers of the widespread implementation of good-sounding academic
ideas with little basis in reality.

A good-sounding idea of my own: I wonder what would have been the result if
all privatized operations had been sold to the highest foreign bidders, with
the cash disbursed to the citizens who had been the putative "owners" of these
enterprises. Instead of the post-Soviet kleptocracies, perhaps a real
industrial base would have developed, with intimate global ties.

~~~
pgeorgi
Your good-sounding idea failed gloriously in a large scale in East Germany
(just that the money was used to pay back part of the debt). The problem is
that most sales processes can be rigged (ours definitely was), if only by
making up such a complex procedure that only those in the know are able to
fill out the forms in the short time allocated by the same people.

I guess that every "simple" idea on how to approach decollectivization was
tried in one of the former socialist or communist countries (there were a
whole bunch to try theories on, after all). That the author probably chose the
one they could most easily pick apart.

------
Torn
Naomi Klein's 2009 film "The Shock Doctrine" (imdb:
<http://www.imdb.com/title/tt1355640/>), available on netflix, looks at
similar subject matter.

In short, the 'chicago school' economics lead by Milton Friedman posit that
as-free-as-possible markets, de-regulation and privatisation are economically
beneficial. In practice (see: Argentina, Chile, etc) they only seem to further
the gap between rich and poor, and the 'shock doctrine' way of destabilising
the existing economy and government to achieve this is pretty disgusting.

~~~
maratd
> In short, the 'chicago school' economics lead by Milton Friedman posit that
> as-free-as-possible markets, de-regulation and privatisation are
> economically beneficial.

They are. You want a comparison? Let's compare Chile to North Korea, and the
wealth gap in those nations. Free-as-possible markets aren't perfect. They may
not even be good. But they're better than the alternative.

~~~
EvilTerran
"Free-as-possible markets ... are better than _the_ alternative[, North
Korea]."

That's a nice false dichotomy you've got there.

~~~
maratd
Wow. In the future, if you're going to put quotes around something someone
said, make sure they actually said it. Re-arranging words that I used into new
sentences doesn't count.

~~~
EvilTerran
I made no attempt to hide my editing. I stand by it, too -- I only stated
explicitly what you were implying.

You followed the dichotomy "Let's compare Chile to North Korea" with the
dichotomy "Free-as-possible markets [or] the alternative", in a context where
the parent comment had already associated Chile with "free-as-possible
markets". Are you now going to insist that you were not intending to associate
North Korea with "the alternative"? Because I find that pretty unlikely.

~~~
maratd
I should have used a plural instead of the singular. There are, of course,
many alternatives to the free market. Communism, socialism, feudalism,
anarchism, capitalism, cronyism, and quite a few other isms. And free markets
are better than all of those alternatives. You don't think so? Examples,
please, instead of non-existent dichotomies.

~~~
EvilTerran
Indeed, the mention of North Korea as an alternative only got under my skin
owing to its proximity to the implication that there was only one alternative
- I probably wouldn't have bothered grumbling if only that "the" had been an
"any".

A market that was "as free as possible" would have no government regulation at
all - there's one of those in Somalia. How's that for an example?

~~~
maratd
> there's one of those in Somalia. How's that for an example?

First, I asked for an example of an alternative that works better. You gave me
an example of what you think a free market system looks like.

Second, that's not even an example of a free market system. That's anarchy.
Anarchism. An ism. A free-market system still has a functional judiciary, a
respect for property rights, etc etc. Somalia has none of those.

~~~
EvilTerran
Of course Somalia's not an example of something that works better. I meant it
as (I guess the term would be) a co-example; there's no market regulation, &
it's pretty obvious that pretty much anything else works better.

However, I do insist that, strictly speaking, anarchy is a free market system
- it's the reductio ad absurdum of free-market-ism. It's only fair if you're
willing to cite North Korea, a totalitarian dictatorship with absolute state
power, ie the reductio ad absurdum of state regulation, as an example of such.
North Korea also lacks a functional judiciary, a respect for property rights,
etc etc.

I take it you at least consider justice & law enforcement to be sectors that
benefit from state regulation - and I'd be surprised if there were no other
such sectors as well.

To take less extreme examples:

* the (pre-Obamacare, as it's too early to judge the new setup) US healthcare system, which is less regulated than most developed countries', is the most expensive & least effective.

* In the UK, the cheapest & most reliable part of the rail network is the part in Northern Ireland... being the only part that wasn't privatised back in 1993. Everywhere else, costs have grown & reliability has fallen.

...

To try to find some common ground here: you believe in "as little regulation
as possible", but that "as little as possible" is not none; I believe in "as
much regulation as necessary", but that "as much as necessary" is not
totalitarianism. I suspect these beliefs are, in the end, adjoint - opposite
approaches to the same fundamental idea, although we may disagree on the
details. Does that seem reasonable to you?

~~~
maratd
> Does that seem reasonable to you?

Actually, I can sum up my beliefs very simply. I am against big things. Big
government, big business, big whatever. Big things breed corruption. I don't
mind regulation or even government involvement, as long as it's happening on a
very local level and I have the freedom to live someplace else.

~~~
EvilTerran
Okay, I can get behind that. I feel a certain amount of government is
necessary to stop big business, big gangs (mafia & the like), or whatever from
getting out of hand -- but too much government has its own problems. As you
say, corruption, whoever gets too big.

Similarly, a certain amount of unionisation helps keep big business under
control, but too much leads to the workers holding the populace hostage.

And so on -- balance in all things, really. Although what constitutes
"balance" will vary considerably depending on what you're looking at. (Law
enforcement needs more regulation than most industries, for instance.)

------
scythe
A quote from none other than libertarian idol Ludwig van Mises comes to mind:

 _"If a man has been hurt by being run over by an automobile, it is no remedy
to let the car go back over him in the opposition direction."_

But the real motivation for the rapid privatisation was not economic growth or
stability. Indeed, the article states this:

"Its aim was to guarantee a swift transition to capitalism, before Soviet
sympathisers could seize back the reins of power."

In other words, the goal of rapid privatization was to prevent, at any cost,
the return of Communism. Was that a good idea, from an economic point of view?
Probably not. But an ideology that, several times, nearly plunged the world
into a nuclear war, and was responsible for the deaths of over a hundred
million people, between the gulags, famines, and the Great Leap Forward, might
have generated a bit of fear among the Western countries, who wanted to get
rid of Communism as quickly as possible. Similarly, emancipating the slaves
destroyed the economy of the South for two decades -- but it was worth it.

~~~
guard-of-terra
"But an ideology that, several times, nearly plunged the world into a nuclear
war"

Citation needed. Any nuclear conflict had two sides. One of those tended to be
USA.

Also, USA is the only country to ever drop a nuclear bomb on a city.

~~~
maratd
> Also, USA is the only country to ever drop a nuclear bomb on a city.

The peace we're enjoying now is a direct consequence of that. After the
realization of the devastation, everyone suddenly lost the appetite for using
those weapons again. Which is why there haven't been any nuclear bombs dropped
on any living person in the last 70 years.

~~~
guard-of-terra
Maybe so, still I don't see why one can accuse one party in "nearly plunging
the world into a nuclear war" while turning the blind eye on another side.

------
guard-of-terra
A new analysis showing how the radical policies advocated by western
economists helped to bankrupt Russia"

Funny thing is, it is instantly obvious to anyone living in the country.

Those "policies" looked like they're aimed at destroying any research or
production capacity short of mining of natural resources.

Of course, incompetence played leading role in the process, not just malice.

