During the early days of the Crimean annexation episode, US President Barack Obama famously accused Russian President Vladimir Putin of “not understanding how the world works.” Given that the USA has never in its history understood anything about the world outside of its borders and has merely launched attack after attack on foreign lands from its cozy and resource wealthy island before returning to its isolated ignorance, this is pretty lulzy. It’s sorta like the cavalier 6-year-old telling his school principal how class should work, or the University student telling the Department Head how research funds should best be allocated.
This being somewhat obvious for the well educated reader, let’s still delve into the specifics for the sake of completeness. Let’s look at what Putin can teach Obama and the raft of other “progressive” Westerners about how to run a country.
1. Industry: Putin’s increasingly strong ties with China and Germany have positioned Russian industries to take advantage of two of the strongest production economies in the world. China and Germany are basically giant factories requiring a constant supply of natural resources. As Russia’s largest industries are coal, oil, and gas, it has exactly what those countries need. The new Chinese gas pipeline deals are particularly notable for not only their size and scale but also their use of direct currency swaps that bypass USD.
2. Currency: Speaking of currency, while the Ruble has taken a bit of a beating on the FX markets of late,i and despite all the scare-mongering tawk of “capital flight” in the Western press, the Russian Central Bank is injecting just a fraction of the liquidity into its economy that the Americans and Chinese are.ii Russians who were holding foreign currency in foreign banks were taught a lesson from the events in Cyprus in 2013.
Putin has also been stock-piling physical gold at record levels, deepening his country’s financial reservesiii as Western nations pile on debt up to their eyeballs and beyond. The Russian federal government’s debt-to-GDP level is a paltry 13% compared to the US’ 101%, Germany’s 77%, and Canada’s 89%.
Earlier this year, Putin also founded the New Development Bank (NDB) in coordination with the other BRICS nations. With a $100 bn non-USD-denominated currency pool earmarked for new infrastructure projects, the NDB is designed to extract these nations from the clutches of the IMF.
3. Taxation: Starting in 2001, Vladimir Putin instituted a flat federal personal income tax of just 13%… and the only local/regional taxes are on property and vehicles!iv Compare this to progressive taxation systems with upper personal income tax brackets in Germany (45%), USA (40%), and Canada (55%).v
For capital gains tax, Russia only hits its citizens at a modest 13% and only if the asset is held less than 3 years. Other Russian taxes include Value Added Tax of 18%; Unified Social Tax (for welfare programs) of 26% on the first 415,000 Rubles earned; Excise Tax for alcohol, tobacco, and fuel; Corporate Profit Tax of 20% with 18% going directly to regional budgeting; Mineral Resource Extraction Tax; Water Tax.vi
To sum up this rather lengthy intro to Russian economics, I’ll turn to Mr. Orlov:
Financially, Russia’s position is so solid that even the three Western credit ratings agencies don’t have the gall to downgrade Russia’s rating, sanctions notwithstanding. This is a country that is aggressively paying down its foreign debt, is running a record-high budget surplus, has a positive balance of payments, is piling up physical gold reserves, and not a month goes by that it doesn’t sign a major international trade deal (that circumvents the US dollar). In comparison, the US is a dead man walking: unless it can continue rolling over trillions of dollars in short-term debt every month at record-low interest rates, it won’t be able to pay the interest on its debt or its bills. Good-bye, welfare state, hello riots.
In modern times, the separation of church and state is largely an American construct.vii Various forms of Christianity have, for over a millenium, found themselves on the right side of Europe’s Kings and Queens. While the Soviets severed the close Tsarist ties to the Orthodox Church, Putin, himself basptised as a boy, has done much to reestablish this connection. Many Russians – just like many Muslims and Jews – don’t rationally segregate “religion” into a category distinct from cultural, social, and political organisation. Talking to God, much less being talked to about God, for two hours on Sunday and ignoring Biblical teachings the rest of the week is as American as apple pie, as modern as Canberra, and, for many in the Orthodox faith, as alien as the moon.
The separation of Church and State is, for most people, undesirable. This distinction doesn’t magically give people the shepherds they need, so their personal search for meaning has to be fulfilled by something else. In a “progressive” society, this ends up being Science,viii the Golden Calf, the State, or a mix of all three. While there’s little doubt that Russians love their Western luxury brands, Putin is proving to be a strong shepherd in his own right and his alignment with the Orthodox Church smartly extends his power to a much broader demographic.ix
Bizarre as this may sound to the Western reader, Russians seem to enjoy being treated like zeks. Freedom of speech and the rest of our “rights railroads” seem to be low on the priority list for Russians. For them, higher priorities include faith, food, occupation, and survival. So, no, gay marriage and marijuana aren’t about to be made legal is Russia any time soon, and there’s nothing unhappy, unfair, or unjust about this. That’s just your crusty Western lens getting in the way.
Uniting ethnic Russians, as per Solzhenitsyn’s 1990 essay entitled Rebuilding Russia,x is a priority for Putin. Rightfully so. The borders “Russia” currently maintains don’t encompass many predominately Russian populations in the area, including those in Latvia, Ukraine, Uzbekistan, Belarus, and Kazakhstan. I wouldn’t be surprised if Putin continued to annex portions of “other countries” that he sees containing his fellow Russians.
Remind me again, how is uniting a people “not understanding how the world works”?
Whereas Obama plays golf and waddles like a penguin down the red carpet, Putin can be seen riding horseback shirtless, hosting the Sochi games without a hiccup, hosting his country’s first F1 race just last month,xi and, in 2018, hosting the World Cup of Football.
In summa: What Putin understands better than any leader in the Western World is this: Action matters, action is non-negotiable, and to the active goes the agency.
Since the most recent Syrian civil war began, what with Obama’s “If you cross this line, I swear I’ll do something” followed by his “I’m very disappointed that you crossed that line. I think you should know that,” the US has ceased to be a going concern in international affairs. Sure, they can still print money by the bucketloads, flooding every street with fake wealth and generally distorting natural incentive systems, but this too shall
come to pass.
The US has probably never understood “how the world works” and, without some serious scholarship, probably won’t anytime soon. This won’t stop Putin, intent on maintaining a large nation state in the midst of Computer Times, from distancing himself from the nouveaux riches diktats of the West.xii
With his understanding of economics, religion, capitalism, diplomacy, and his peoples’ dispositions, Putin is poised to stretch out his legacy well beyond his already impressive 15-year reign. He seems like he could keep rocking for another decade or more.
For the record, while I personally maintain an intellectual interest in Russian literature, I have zero desire to live in Russia. Dissidents with blogs can have all kinds of polonium-flavoured “problems” there.xiii At the same time, viewed from the Bitcoin castle in the sky, Russia’s resurgence under Putin is a pleasure to watch, not least of all because it wipes the smug smile off the face off Team America.
To the extent that Putin wants to pretend like La Serenissima was never created, and to the extent that he wants to wants to unify and organise his people into a single nation state, he sure seems to knows a thing or two about how the world works.
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- Some people blame oil prices, which are currently at $66.15 for WTI and $70.15 for Brent. A barrel of crude was over $100 this past summer. [↩]
- The Russian Central bank injected ~$70 bn into its economy in all of 2014, or less than the US Federal Reserve created ex nihilo every fucking month under QE3, the most recent but hardly the last round of US QE. The People’s Bank of China is basically on par with the Fed, as far as we know. [↩]
- As best he knows how. Putin’s still a bit slow on the uptake vis-a-vis Bitcoin. [↩]
- Seriously. Can you fucking imagine how sweet that would be?? [↩]
- The province of Quebec has a progressive income tax with an upper bracket of, sit down for this, 25.75%, on top of the federal 29%. Alberta has a flat personal income tax of 10% and is also the only province without a Provincial Sales Tax (PST), which typically range from 6-9%. [↩]
- A water tax in Oilberta would put an end to the oil sands cashcow faster than you can say “Athabasca River.” If $50 crude doesn’t kill it first… [↩]
- The Khans of AD 1200-1370 were also quite permissive of various religions and specifically chose not to align themselves with any single religious denomination in particular. The Mongols were cherry-pickers, incorporating the best ideas and technologies from both West and East. While this open-minded ideology served to create a prosperous society at the time, we have few physical monuments to remember them by. [↩]
- And its bastard brother, Statistics. [↩]
- Notably, the Russian Orthodox Church is the second-largest Church on the planet with some 200 mn adherents. [↩]
- Rebuilding Russia PDF: original. [↩]
- You can watch Putin shake hands with Russian Grand Prix winner Lewis Hamilton at 2:48 of this race review. [↩]
- From Orlov:
Pardon the analogy, but this is the way nouveaux riches behave when they suddenly end up with a great fortune, in this case, in the shape of world leadership and domination. Instead of managing their wealth wisely, for their own benefit too of course, I think they have committed many follies.
- Eg. Mr. Artyom Borovik: “Borovik died in 2000 in a still-unsolved Moscow plane accident days after producing a scathing article about an ascendant Russian politician, Vladimir Putin, who was about to become president. Borovik quoted Putin in an article as saying, “There are three ways to influence people: blackmail, vodka, and the threat to kill.” [↩]