I had a Russian-Ukrainian colleague in my previous job in the UK. She loved dancing salsa, and spoke Spanish quasi fluently. She had never lived in a Spanish-speaking country, but learned dancing and the language in Kyiv, with Latin American students who had come over to the Soviet Union for their higher education. I am Central America-born. The Latin connection made it easier for us to get along and our colleagues wonder at our exoticisms. During a trip to Moscow in 2006, I had a long coffee break with a Russian bank employee. He was trained as a military, but ended up a marketing and communications executive in one of Russia’s most successful commercial banks. The discussion ended, far away from business, with Cuba, where members of his military family had been – he was born too late to be able to benefit from such perks. And the Russian army today is nothing for well-born young men. The few Russians I have met struck me as being very well aware of Latin America.
All this to say what? Like Karl Marx, that history repeats itself: “the first time as tragedy, the second as farce”. This year, clearly, we have been served a great number of reminiscences of the past. With the current financial crisis: the spectre of 1929. John Meynard Keynes, long thought vanquished by monetarism‘s irretrievable advance, is back. With the war in Georgia and the general re-emergence of Russia (see here, or here) : the 1930s and the Cold War. A new book came out this year, by The Economists’ Eastern Europe Editor, with the selly title “The New Cold War ” .
At the news that Russia was doing naval exercises with Venezuela’s “21st-Century Socialist” government just after the Georgian war, one couldn’t help thinking: this is a farce, isn’t it? I mean: Fidel Castro has retired, hasn’t he? His brother recently announced that Cuba cannot continue with a system that does not reward work! So why are we having the Soviets, err, scuze me, the Russians patrolling in the Caribbean? The Caribbean is now a popular holiday destination for Russian oligarchs with no interest in war games. They definitely prefer buying special services from women or go baracuda-fishing.
This sense of surrealism was further strengthened when the news broke out that Nicaragua recognized Georgia’s separatist enclaves South Ossetia and Abkhazia as independent states. Nicaragua is now again governed by Daniel Ortega, the head of the former “socialist” Nicaraguan Sandinista government (1979-1991). He was voted back in in 2006, after the democratic rule following the Sandinista’s demise in 1991 had failed to deliver growth, development, jobs, opportunities. Central America has a well-established tradition of being bought off by countries with a need of formal international recognition. Taiwan, for example, is recognized as independent state by most Central American countries, thanks to its famous check-book diplomacy of the 1980s. More here. Only Costa Rica reversed its recognition: bought off by mainland China. Here, the only reason for Nicaragua’s recognition is either a Ortega’s belief that we are still in Soviet times, or, more probably, a hefty check. The generally dirt-poor and corrupt Central American countries have suffered from the recent surge in oil prices. Cheap fuel has been a foreign policy objective and a condition for domestic political survival. Even traditionally fiercly anti-socialist Honduras* has let itself be bought off by Hugo Chavez. More here and here (only for Spanish speakers).
We used to have a cold war with a proper ideological battle over economic and political models. Now we have some sort of nostalgia. State-capitalism based on oil wealth has been the name of the game in recent years. And those who practice it are the former socialists (Russia) or the neo-socialists (Venezuela). Both have been re-nationalising their economies. Russia practices asset-stripping. Venezuala pays, even if below market prices. A friend who has been working for an international law firm working in investor-state dispute matters told me this was bad for business: in the Venezuelan case nationalised companies found it harder to mobilize resources to litigate.
Anyway: Both Russia and Venezuala like to stick up their middle finger to the United States, and thus give populists in the world reason to cheer. Uncle Sam’s neo-conservative excesses in Iraq and lack of control over a wayward Georgian president however (US alliance with Georgia is not a historical repetition: it is a first-ever event…), have disserved the cause for exactly the things they said they were going to war for: “freedom” and “markets”. Result? Today, whoever dares express these goals is easily tagged a “neo-con” and “market fundamentalist” .
The only convincing argument today to counter such accusations is the democratic one. In today’s state-capitalist countries, basic democratic rights are being eroded. Not least freedom of the press. Even Nicaragua is molesting its journalists (see here). A scaringly Hayekian-style scenario – one would prefer not have Hayek’s dramatic early 1940s statements on the Road to Serfdom sound so true. In Venezuela, the press has been harassed and clamped down on. In Russia there is hardly any independent media anymore. In both countries television is state controlled. Here a few posts by Reporters Sans Frontieres (1,2,3, 4.) on the matter. The US for its part has never poisoned, gunned down, expelled or shut down the business of, say, a Mike Moore.
Let’s hope this farce will not turn out to be excessively tragic, and that already lowering oil prices will weaken Putin and Chavez-style gung-ho politics echoed in other countries such as Ecuador or Bolivia. Gideon Rachman tried to assess the consequences of a barrel of oil above 100$. But today’s lower oil prices bring their own risks: potential political instability, governments becoming even more rapacious in order to cling to what is left….. Let’s never think that History is finished. And despite Global Finance’s and Capitalism’s Excesses: having a government attempting direct control of the country’s resources, for reasons of rent-seeking and corruption (Russia) or ideology (Venezuela, at least officially…), and a government attempting control over the polity, goes hand in hand. Global financial crisis or not. The real challenge is to make sure a system of equal treatment of all and opportunities (this is called the Rule of Law) is set in place, be it in the former Soviet Union, or in Latin America. Overcoming the curse of oil in Russia and in Venezuela (The International Crisis Group’s Energy Analysis unit even published an excellent report on Venezuela in 2007), and the curse of never-improving poverty rates (Central America) is THE hard job. Stopping rapacious rulers is one first step.
To finish, a warm Venezuelan blog recommendation: Caracas Chronicles. A few highlights:
- Why Venezuelans should not display too much Schadenfreude at the financial crisis, and for the rich ones, certainly not repatriate their money: here.
- Why it is not quite(?) finished with Venezuela’s rule of law: here.
- Why Venezuela’s caricaturists and local elections promise a bright future for the country’s democracy. Here and Here. (Russians don’t seem to be allowed that much political fun…)
* The country of my 1980s childhood was the base for US military advisors who helped out in the much-criticized repression of guerillas in Salvador and Guatemala; these advisors also monitored the “Contras”, counter-insurgency groups financed among others by Irangate money and who were making incursions into Nicaragua to destabilize the Sandinista government.