That title is partially borrowed from the subtitle of the New Yorker piece, and I’d strongly urge all of you to read it in its entirety.
I know next to nothing about geopolitics (which is one reason why I enjoyed reading the interview so much), and my notes that follow below aren’t so much about my take on the geopolitical aspects. Rather, they’re about reading this interview as a student of economics, and asking how much of what I know helps me understand the points being made. Simply put, what economic principles are helpful in understanding this interview? And as always, how can I apply these lessons and realizations while reading about geopolitics in general?
- “Was Iraq the way it was because of Saddam, or was Saddam the way he was because of Iraq? In other words, there’s the personality, which can’t be denied, but there are also structural factors that shape the personality. One of the arguments I made in my Stalin book was that being the dictator, being in charge of Russian power in the world in those circumstances and in that time period, made Stalin who he was and not the other way around.”
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Is there causality, and which way does it run, is a question that seemingly occupies the minds of most economists today. But as you can see from this excerpt, the question matters in other contexts too. And in these other contexts, you don’t have access to “data” that you can use to run a model that “establishes” causality one way or the other. Think long and hard about causality, and across multiple contexts, and revel in the confusion that it causes in your mind. If thinking about causality does not confuse you, you aren’t thinking hard enough!
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.. - “Instead of getting the strong state that they want, to manage the gulf with the West and push and force Russia up to the highest level, they instead get a personalist regime. They get a dictatorship, which usually becomes a despotism. They’ve been in this bind for a while because they cannot relinquish that sense of exceptionalism, that aspiration to be the greatest power, but they cannot match that in reality. Eurasia is just much weaker than the Anglo-American model of power. Iran, Russia, and China, with very similar models, are all trying to catch the West, trying to manage the West and this differential in power.”
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What are you optimizing for? Growth for it’s own sake, because it is fundamentally a good thing, or growth in order to achieve another end (whatever that end may be)? Does the answer matter in terms of how you’ll achieve said growth, and if so, with what consequences? Is there a stable way to grow, as opposed to potentially unstable ways? How should one, as an Indian, think about the answers to these questions?
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.. - “And so we think, but we don’t know, that he is not getting the full gamut of information. He’s getting what he wants to hear. In any case, he believes that he’s superior and smarter. This is the problem of despotism. It’s why despotism, or even just authoritarianism, is all-powerful and brittle at the same time. Despotism creates the circumstances of its own undermining. The information gets worse. The sycophants get greater in number. The corrective mechanisms become fewer. And the mistakes become much more consequential.”
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Does information matter? We teach, in economics, that prices are a way of communicating information. Need prices always be thought of as being pecuniary in nature? And if not, how does the stymieing of information flows affect the entity being analyzed? How should one use this thought exercise to think about setting up organizations?
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.. - “But it turned out that “the television President,” Zelensky, who had a twenty-five-per-cent approval rating before the war—which was fully deserved, because he couldn’t govern—now it turns out that he has a ninety-one-per-cent approval rating. It turned out that he’s got cojones. He’s unbelievably brave. Moreover, having a TV-production company run a country is not a good idea in peacetime, but in wartime, when information war is one of your goals, it’s a fabulous thing to have in place.”
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This reminds me of Churchill during the second world war, but I mention that only in passing. But there’s that question again: what are you optimizing for? I don’t know enough about Ukrainian politics to even try and guess what the Ukrainian population was optimizing for when they elected Zelensky into power, but the broader take-away for me is that human resources are multi-dimensional. If person x turns out to not be good at task y, it’s not necessarily the end of the road for person x in your organization. This seems like an obvious statement to make, but the longer you work in an organization, the more you realize that this seemingly obvious lesson is often ignored.
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.. - “The West is a series of institutions and values. The West is not a geographical place. Russia is European, but not Western. Japan is Western, but not European. “Western” means rule of law, democracy, private property, open markets, respect for the individual, diversity, pluralism of opinion, and all the other freedoms that we enjoy, which we sometimes take for granted.”
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What are the opportunity costs of being the west? What are the opportunity costs of trying to be like the west? What are the opportunity costs of deciding to not be like the west? These are surprisingly deep questions!
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.. - “It’s a military-police dictatorship. Those are the people who are in power. In addition, it has a brilliant coterie of people who run macroeconomics. The central bank, the finance ministry, are all run on the highest professional level. That’s why Russia has this macroeconomic fortress, these foreign-currency reserves, the “rainy day” fund. It has reasonable inflation, a very balanced budget, very low state debt—twenty per cent of G.D.P., the lowest of any major economy. It had the best macroeconomic management.”
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Amit Varma is fond of reminding his listeners that politics is downstream of culture. Well, economics is downstream of politics. Us economists, we tend to forget this. We should try not to, and that comes with (at least) two implications. Any economist who chooses to not study politics or culture is short-changing themselves. And any economist who makes recommendations while ignoring the cultural milieu and political context is always going to be sorely disappointed with the eventual outcome.
Students who encounter econometrics for the first time are wont to forget the “econo” bit and focus on the “metrics” bit. If only I had a penny for the number of times I’ve been asked a variant of the following question: I have an econometric method I want to use – can you recommend a good dataset? Similarly, I think we are wont to forget the “social” bit in the phrase “social science”. We do so at our own peril.
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.. - When asked about China, Chinese growth over the last three decades, and the Chinese Communist Party taking credit for it, this was Professor Kotkin’s response: “Who did that? Did the Chinese regime do that? Or Chinese society? Let’s be careful not to allow the Chinese Communists to expropriate, as it were, the hard labor, the entrepreneurialism, the dynamism of millions and millions of people in that society.”
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Sure, each of these are a factor – of that there is no doubt. But is it the case that the Chinese Communist Party had no role to play at all? And if it had some role to play, what was the extent? Is it replicable, this role, in other countries in other contexts? Is this a desirable role? Or do “better” alternatives exist? If so, what are they? Development economics is a very hard, and therefore a very fascinating subject.
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.. - “There’s never a social contract in an authoritarian regime, whereby the people say, O.K., we’ll take economic growth and a higher standard of living, and we’ll give up our freedom to you. There is no contract. The regime doesn’t provide the economic growth, and it doesn’t say, Oh, you know, we’re in violation of our promise. We promised economic growth in exchange for freedom, so we’re going to resign now because we didn’t fulfill the contract.”
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Are there countries that have such a social contract? Read more about Singapore! (To be clear, I am not endorsing the Singaporean model, or any other model.) Here is a good book to get started.
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.. - “They [Russia] have stories to tell. And, as you know, stories are always more powerful than secret police. Yes, they have secret police and regular police, too, and, yes, they’re serious people and they’re terrible in what they’re doing to those who are protesting the war, putting them in solitary confinement. This is a serious regime, not to be taken lightly. But they have stories. Stories about Russian greatness, about the revival of Russian greatness, about enemies at home and enemies abroad who are trying to hold Russia down. And they might be Jews or George Soros or the I.M.F. and Nato.”
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Stories matter, but beware of stories. Humanity is all about stories, including the idea of the existence of nations (think about it). Stories, when they work well, are all about uniting folks behind a story. Stories, when they don’t work well, are all about an idea being pushed too far. The truth lies somewhere in the middle, and figuring out exactly where is a Sisyphean task that humanity is perennially engaged with.
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.. - “The biggest and most important sanctions are always about technology transfer. It’s a matter of starving them of high tech. If, over time, through the Commerce Department, you deny them American-made software, equipment, and products, which affects just about every important technology in the world, and you have a target and an enforceable mechanism for doing that, you can hurt this regime and create a technology desert.”
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Here’s the flipside of that question: why is it the case that the “West/America” has all this awesome technology and the rest of the world does not? Ask yourself this question: the next Elon Musk, wherever they may be in this world today – are they likely to migrate to Russia, or to America? Think through this question, and then think about cultural, political and economic aspects of a free society that is open to migration. Go back to pt. 5 and think about it once again.
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.. - “What are the dynamics there with the regime? You have to remember that these regimes practice something called “negative selection.” You’re going to promote people to be editors, and you’re going to hire writers, because they’re talented; you’re not afraid if they’re geniuses. But, in an authoritarian regime, that’s not what they do. They hire people who are a little bit, as they say in Russian, tupoi, not very bright. They hire them precisely because they won’t be too competent, too clever, to organize a coup against them. Putin surrounds himself with people who are maybe not the sharpest tools in the drawer on purpose.”
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This excerpt helps us understand what Putin is optimizing for, to the extent that you agree with it. What are the opportunity costs of this optimization? Does this organizational set-up help the long term growth prospects of Russia? How should you think about the nature of organizational set-ups in other nations, in governments, firms and institutions? How should you think about building up your team, in your line of work? Read The Hard Thing About Hard Things, chapter 5 in particular.
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.. - When asked about Putin and the nuclear option, this was the response: “I think there’s no doubt that this is what he’s trying to do. The problem is, we can’t assume it’s a bluff. We can’t assume it’s a pose of being crazy, because he has the capability; he can push the button.”
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It’s painfully hard, thinking through this!
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.. - “Steve, Sun Tzu, the Chinese theorist of war, wrote that you must always build your opponent a “golden bridge” so that he can find a way to retreat. Can the United States and nato help build a way for Russia to end this horrific and murderous invasion before it grows even worse?”
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This is an important lesson, particularly for students. You’ll meet folks in a professional context who you do not like, do not enjoy working with, and have frequent quarrels with. You’ll meet folks who are at the opposite end of this spectrum, and most will lie in the middle of this spectrumThis is a guarantee, because that how statistics works.
Your job is not to defeat the folks in the first set, but to work with them. The sooner you learn this lesson, the better your work and career will be.
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.. - When asked about the Biden administration: “They’ve done much better than we anticipated based upon what we saw in Afghanistan and the botched run-up on the deal to sell nuclear submarines to the Australians. They’ve learned from their mistakes. That’s the thing about the United States. We have corrective mechanisms. We can learn from our mistakes. We have a political system that punishes mistakes. We have strong institutions. We have a powerful society, a powerful and free media. Administrations that perform badly can learn and get better, which is not the case in Russia or in China. It’s an advantage that we can’t forget.”
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Competition matters. Insulating oneself from competition is the surest path to slow but guaranteed institutional decay. Individuals, institutions and nations tend to not like this lesson, but it is an unavoidable truth.
EconForEverybody 