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What Putin Can’t Create, He Destroys
Putin’s Russia has an economy smaller than Texas. Why?
And what has that got to do with the invasion of Ukraine?
“Even though Russia has nearly five times as many residents as Texas, the Lone Star State’s economy is more than $400 billion larger. Texans, therefore, enjoy a gross domestic product (GDP) per capita of around $58,000, whereas Russians have one closer to $8,700.” – 2018 Forbes article. One-sixth that of Texas!
What has Texas got that Russia doesn’t? Oil? No.
Other natural resources? No.
Fewer business regulations and less top-down control from the government? YES!
More freedom to start a business and profit from your inventions? YES!
After the fall of the Soviet Union in 1991, many in the West hoped for a conversion of Russia to a free market economy. For that to happen, there needed to be a system of private property. Since the government previously owned everything, from apartment buildings, farmland, oil fields, and manufacturing plants, how could anyone decide to buy and develop a business or property? Who would they buy it from? Enter the Oligarchs. Former government officials claimed ownership of manufacturing, oil, and land. They then began milking these near-monopolies for cash and got rich. They didn’t create these businesses, but they became parasites on them, sucking out cash like mosquitos sucking blood.
Creators Versus Parasites
Unlike Steve Jobs, Bill Gates, or Sam Walton, the oligarchs did not create or invent anything new for people to buy. Like parasites, they sucked cash from existing enterprises. In many cases, they invited Western companies (with the know-how) to help develop these Russian natural resources and establish factories or stores. McDonald’s Hamburgers opened in Moscow and elsewhere. BP and Shell oil companies partnered with Russian oil companies to bring their expertise in oil drilling to Russia. Ikea established factories and stores in Russia.
Did Russians not know how to grill a hamburger?
Did Russians not know how to drill for oil?
Did Russians not know how to saw lumber and make furniture out of it?
Russians could do all of these things, but they could not do them efficiently and profitably. Why? Because under communism, there was no profit motive. The communist government did not allow you to keep the fruits of your labor. So, why work hard? Why make anything more efficiently? Why use your brain to figure out a better way to do anything? Making something better would not make you better off.
“They pretend to pay us, and we pretend to work,” was the popular saying of workers in the old Soviet Union. When the oligarchs scooped up all the prime ownership of companies and natural resources like oil, there was little room for private citizens to start businesses, like Steve Jobs and Steve Wozniak starting Apple Computers in a garage.
Laissez Nous Faire! Jean-Baptiste Colbert, comptroller general of finance under King Louis XIV of France, asked industrialists what the government could do to help business. They answered: “Laissez Nous Faire! Leave us alone to do it!”
Freedom Versus Permission
While Jobs and Wozniak could say, “let’s tinker with electronic components in our garage and make a personal computer,” the average Russian citizen would say, “Will the government allow it? Are we allowed to buy electronic parts? Will the government allow us to keep the money we make if we make any?” This mindset was instilled by generations of Soviet propaganda and tight control of citizen behavior, creating cowering citizens with no motivation to create or improve anything.
Like Jobs and Wozniak, Americans did not ask permission; they just did it. The Russians feared asking permission and did not do it.
Freedom to try new things in a free market (where customers decide what if useful and valuable to them – not the government) is what makes an economy grow and prosper. Tight government control is what strangles an economy and keeps that economy small and withered.
Freedom = Prosperity, Control = Scarcity
When Putin rose to power by out-maneuvering Russian oligarchs, his paradigm as an ex-KGB agent was power and control. That’s how he ran the Russian government and the Russian economy. The predictable results? A small economy was reliant on something you don’t have to make: natural resources like oil and gas.
The idea of allowing people the freedom to invent and create is not on Putin’s mental map of the world. All he knows is how to do is dominate, control, and destroy. So that’s what he does. Invade and control Georgia, invade and control Crimea, and now invade and control Ukraine.
My prediction? If Putin controls Ukraine, that country’s prosperous economy will wither under the Putin formula of tight control and restriction of the profit motive. It will become another economic basket case like Russia.
Can’t Create? Destroy Instead!
Putin can’t create prosperity, so he destroys it. Like a toddler who doesn’t know how to build with toy blocks, he kicks them over. Dictators and politicians who have never created anything, who don’t know how to create anything, do what they do know how to do: control and destroy.
In our own country, Joe Biden is another case in point. A life-long politician who has never created a business or invented a product, Biden does the only thing he knows how to do: control the American economy and strangle it with executive orders and regulations. Result? Higher prices for everything, including gas for your car.
Time to resurrect the Jimmy Carter Misery Index. The Misery Index is the sum of the inflation rate and the unemployment rate. February unemployment was 3.8% (understated since the Feds pay many to stay home). The February inflation rate was 7.9%.
So, the Biden Misery Index is 11.9%. How high will you go, Joe?
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