I've written much on Eurasian Integration, and it's really gone into overdrive with the Ukraine crisis. Here's a new piece for Russia Direct on how Ukraine is killing integration... and how China is benefiting.
Courtesy of Ukraine, which has not just gone off the deep end but is actively attempting to become the poorest nation in Europe, a list of how to completely and utterly botch an economic transition:
Sounds like a perfect recipe, one that Ukraine is following to the letter. Ukraine - the country of the future.
In a world where fiscal "austerity" means the growth of government is slowed from 6% annually to 5%, it was perhaps inevitable that governments would still be in dire straits fiscally... and, of course, this means that there need to be new ways to fund Leviathan. The latest approach, pioneered by Central and now Eastern European governments, is a pension grab - either changing the laws to channel private pension fund money into government coffers (as in Poland) or... this.
Prime Minister Dmitry Medvedev told ministers Thursday that the government needs to check that the money Russians channel to private pension funds is safe. To do this, it will seize 244 billion rubles ($7.6 billion) from non-state pension funds and put them into the state pension fund.
So to recap, the Russian government is going to "inspect" the money by taking it away, booking it as part of their money for a year, and then possibly giving it back. Does this remind anyone of a Simpsons episode? Also remember, New England Patriots' owner Bob Kraft already claims that Vladimir Putin took his Superbowl ring to "look at" and never gave it back. What is the chance that this money will ever be returned?
Even beyond that basic question is a more fundamental one - in what universe this is even considered a half-way decent idea? This shows that the institution of the government only ever operates for one institution, and that is government. In the middle of an economic slow-down such as the one Russia is facing now, the government has decided that keeping the government going is more important than investor confidence, contracts, or any of those either issues that come with a market economy.
Here, let me just take that for you!
The ramifications of a naked money grab such as this are myriad: decline in the stock market, further deterioration of (admittedly already fragile) property rights in Russia, financial volatility, and a further pallor of economic policy uncertainty. The upside? The government's budget numbers look good for one year. The shortsightedness of government never seems to amaze me.
Yesterday was Constitution Day in the United States, honoring the signing of the Constitution on September 17, 1787. When we talk about political institutions, scholars often focus on constitutions and constitutional law as the sort of ur-political institution: after all, constitutions are generally "founding documents" that lay out the rules of the game and describe the distribution of political power within a system. Of course, constitutions can be amended, but there is no better example of a "Type II" policy - a policy that is directly related to institutional building. And like institutions themselves, constitutions (and Type II policies in general) are mean to be fairly solid and unchanged, if not immutable. Indeed, looking at constitutional changes is often a great proxy for political volatility (as shown in Argentina).
Of course, this doesn't mean that constitutions are actually restraining in reality, for administration can always thwart the designs of a piece of paper; a court can aggrandize power for itself to "interpret" the constitution; or normal political processes can entirely subvert the supposedly eternal truths of a constitution in favor of transient political expediency. Moreover, a constitution itself can be nothing more than a political ploy, a way to show the world that democracy has been achieved while acting counter to its tenets. Of course, constitutions also need not be politically or economically liberal in any way shape or form: given that a constitution is written by political elites ascendant at the time, it can enshrine such anti-liberal attributes as slavery or restricted voting to a certain class/race/gender.
Moreover, the economic effect of constitutions is debatable; my own preliminary research in my book showed that constitutions really didn't matter in transition economies for many economic metrics, but this is somewhat to be expected (after all, constitutions shouldn't really matter in the short-term, and 20 years was definitely the short-term). We should really only expect to see constitutions have effects in the medium- and especially the long-run, as institutions develop under its protective umbrella. Of course, others have done much more intensive research in this area (Persson and Tabeliini literally wrote the book on this), but this has been somewhat limited to the structure of the political system that is created under a constitution; in the citation above, P&T find that presidential systems have smaller governments, while parliamentary systems have more persistent fiscal outcomes. Much more work needs to be done, especially in seeing if constitutions actually do restrain government in more than just size - based on the US, and given its explosion in size of government since the mid-1960s (but especially over the past 10 years), it is likely that current political processes can always undermine past ones.
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Dr. Christopher Hartwell is an institutional economist and President of CASE Warsaw. All commentary on this page is exclusively his own and in no way represents the views of CASE, his wife, his dog, or anyone else. Especially not his wife or his dog.