XPost: alt.economics

(Even the super rich Russian understands the socialist
mainstay of expropriation is sure to backfire.)

from https://hotair.com/ed-morrissey/2022/03/11/russias-top-oligarch-to-putin-never-go-the-full-maduro-or-lenin-n454676

Russia's top oligarch to Putin: Never go the full Maduro ... or Lenin
ED MORRISSEY Mar 11, 2022 2:41 PM ET


AP Photo/Ariana Cubillos
A gutsy move by Russia’s wealthiest oligarch, who probably should make
sure all of his upper-story windows are solidly reinforced after this.
The first signs of a public split between Vladimir Putin and his
big-money support edged out into the open today. Yesterday, the Russian
tyrant threatened massive expropriations for Western firms that bail out
of Russia over the invasion of Ukraine, a move that comes straight out
of Russia’s Communist past:


President Vladimir Putin had promised a response. Speaking Thursday at a meeting with government officials, he backed a plan to introduce
“external management” of foreign companies leaving Russia.

“We need to act decisively with those [companies] who are going to close their production,” Putin said according to a video posted by the Kremlin
and aired on state media. “It is necessary, then … to introduce external management and then transfer these enterprises to those who want to
work,” he added.

Russian Prime Minister Mikhail Mishustin said earlier that legislation
had been drafted. “If foreign owners close the company unreasonably,
then in such cases the government proposes to introduce external administration. Depending on the decision of the owner, it will
determine the future fate of the enterprise,” Mishustin said, according
to the Kremlin.

“External management” means outright seizure through expropriation. Socialist regimes almost always play this card when industrial owners
refuse to play ball with their collectivist policies, if not immediately
at the start of la revolucion. Hugo Chavez and Nicolas Maduro used expropriation in Venezuela in the oil industry, which had been at one
time the backbone of prosperity in the country. After kicking out the
oil companies and seizing their assets, the normal Hayekian sequence
rapidly followed, as it did in other industries where expropriations
took place.


In fact, the Soviet Union did the same thing in 1917, with disastrous
effect, as Jim Geraghty reminds us today:

Our study shows that until the year of the 1917, Revolution Russia’s
economy was declining, but by no more than any other continental power.
While wartime economic trends shed some light on the causes of the
Russian Revolution, they certainly do not support an economically
deterministic story; if anything, our account leaves more room for
political agency than previous studies.

In the two years following the Revolution, there was an economic
catastrophe. By 1919, average incomes in Soviet Russia had fallen to
less than 600 international dollars at 1990 prices. Less than half that
of 1913, this level is experienced today only in the very poorest
countries of the world and had not been seen in Eastern Europe since the
17th century (Maddison 2001). Worse was to come. After a run of
disastrous harvests, famine conditions began to appear in the summer of
1920 (in some regions perhaps as early as 1919). In Petrograd in the
spring of 1919, an average worker’s daily intake was below 1,600
calories, about half the level before the war. Spreading hunger
coincided with a wave of deaths from typhus, typhoid, dysentery and
cholera. In 1921, the grain harvest collapsed further, particularly in
the southern and eastern grain-farming regions. More than five million
people may have died prematurely at this time from hunger and disease.


That brings us to Vladimir Potanin, Russia’s wealthiest oligarch with
over $22 billion in assets even after the sanctions collapsed Russia’s
stock market and ruble. Potanin warned that Putin’s plan to expropriate
these assets would preclude any return of Western capital to Russia for
a generation, a fate that Potanin doesn’t think is necessarily set.
Pursuing this path would bring Russia all the way back to Lenin, and
Potanin warns that Russians won’t stand for that:

“Firstly, it would take us back a hundred years, to 1917, and the consequences of such a step — global distrust of Russia on the part of investors — we would experience for many decades,” he said in a message posted on Norilsk Nickel’s Telegram account on Thursday.

“Secondly, the decision of many companies to suspend operations in
Russia is, I would say, somewhat emotional in nature and may have been
taken as a result of unprecedented pressure on them from public opinion
abroad. So most likely they will come back. And personally, I would keep
such an opportunity for them,” he added. …

Potanin said it wasn’t particularly expedient to talk about
nationalizing Western assets, but the Kremlin’s proposal could allow “owners to keep property, and companies to avoid collapse, continue to produce products and pay money to employees.”

“I understand that in light of the economic restrictions directed
against Russia, there may be an understandable desire to act
symmetrically,” he wrote. “But on the example of Western countries, we
see that the economies of these countries suffer from the imposition of sanctions against Russia. We must be wiser and avoid a scenario where retaliatory sanctions hit ourselves.”


That’s a gentle nudge toward Putin to consider the backfire potential long-term of his consequences. If Putin still needs to be reminded of
that necessity after watching his Ukraine adventure blow up in his face,
it seems doubtful that Putin will be encouraged to moderate his economic response to the financial lockout from the West. Putin justifies his
power by acting muscularly, not intellectually, an impulse that likely
has increased in Putin the more it becomes apparent that his military is actually a paper tiger when it comes to conventional forces. That makes
this rare dissent from the ruling oligarchical class especially
dangerous to Potanin.

It might be even more dangerous to Putin, however. It looks as though he
might have exhausted his support from the oligarchical class, whose
corruption has deep tentacles in Putin’s government. Putin’s not the
only dangerous man at that level in Russia, and the question may arise
as to whether the oligarchs might start looking for another option if
Putin keeps making matters worse. Potanin had better watch his back, but
maybe Putin should start worrying too — especially when Potanin seems to
feel comfortable enough to publicly rebuke Tsar Vlad.


Manchin: Here's how Biden can help fix his energy crisis

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Ukraine debacle; Update: FSB HQ raided?

Has Russia's strategy shifted?

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