Publication in Russian on the Zen blog
https://dzen.ru/a/ZpzwLncFU31s0T-v

The Russian leader has set the economy on a path that began a quarter century ago. This trajectory of structural economic weaknesses is inherent in a command economy and harmful geopolitical events. The evidence suggests that a surreal economic fall down the rabbit hole may occur. A publication to raise awareness of Russia's economic problems and the impact of sanctions and pressure on the Russian economy.

Let's talk about economic history, about modern Russia over the last quarter of a century. Russia today is a real "rabbit hole". Vladimir Putin is a dictator, and we know about dictators that every step a dictatorship takes away from freedom and democracy, free markets and free movement of labor and capital, is a step toward inefficiency and economic failure, toward a system that will eventually fail to perform its functions and will collapse on its own. But let's look at history first.

Let's try to follow the rabbit down the rabbit hole. Let's discuss the origins of the current Russian economy over the last 25 years under the current leader. History is very important because it outlines some decisive factors that many people don't know about.

A certain Boris Yeltsin did a good job with democracy and governance in the country in the 90s, but then he got a little carried away with alcohol and corruption, so he had to go in the 90s. And he had a successor, and this guy was a good Westerner in terms of free movement of labor and capital. It was a time of collapsed markets, and into the rubble came Vladimir Putin. Putin signed a special agreement that said that all of Yeltsin's successors and all of Yeltsin's people, all of Yeltsin's family, Yeltsin himself, are exempt from prosecution for corruption. Putin was appointed as interim prime minister, and then there was a very dubious election as the full prime minister of Russia. His first act was to restrict the free press. You can say a lot about Yeltsin, that he had a lot of faults, but he had a free press. So the first thing that happens is that when a "faceless man" comes to power, he is considered as such and is labeled as such because no one knows where he came from. He tells you where he comes from, but every piece of information you know about him, about his grandfather, about his mother, comes from the mythology of Vladimir Putin himself. Therefore, at that time, it was a "man without a face", about whom we do not know where he came from, what his history was in St. Petersburg. On this account, a book was written "A Man Without a Face" about an incredible rise to power, the book has not been officially translated into Russian, this is a book by journalist Masha Gessen.

So maybe he was a taxi driver and then suddenly he became prime minister, then a series of events happen to consolidate his power and a series of successes. And success number one is the success in Moscow and the surrounding regions, connected with buildings and explosives. A series of events in which people from the southern border of Russia were blamed, but in fact the police arrested the people involved, who were FSB agents with branded explosives made at FSB headquarters. Putin explained that it was just a test to see if the local police were doing a good job. The purpose of these events is to create a crisis on the southern border and to make a statement about the need for a strong leader, and that's exactly what happens, Putin consolidates his power at the very beginning of his rule. And then what happens is oil went from 10 to 100 dollars in a short time. And what you need to know about oil is that oil has an inelastic curve. Like salt, for example, that you have to buy it, it costs 50 dollars or 50 cents. For example, bread has a more elastic curve because there are substitutes. But with an inelastic good like oil and gas, it's different. People are not going to stop driving, they're not going to stop heating their apartments in the winter, you can choose any price for this product and you'll make a profit. So when oil and gas went to 100, it was his "cash cow", his "special crop", and he had a great relationship with Western Europe. That's the story, and that's the most important part. In his book Winter Is Coming, the foreign agent Garry Kasparov says that when 9/11 happened, Putin ran, almost stumbling, out of breath, and called George W. Bush, and he made it so that he became the first world leader to offer condolences, and instead of being the tough KGB agent that he really was, he was milk and honey flowing out of his mouth, he said, "George, we're in this together, good against evil, and we're going to work together." It was the greatest sales pitch in history, with this green check mark that said, oh, maybe Putin isn't so bad. And he was able to sell the Germans and all the other Europeans that oil and gas relations with Russia wasn't such a bad idea. But Bush and his people didn't quite buy it, at that point Bush needed some information on Afghanistan. However, Putin did a great job, and it changed the course of the century.

So now we have an economy that is built on the paradox of plenty, the Dutch disease, where you extract resources and build pipelines to the East and the West. Let's imagine a story: big city, bright lights, guy in suspenders, running a "tech fund" on Wall Street. He's a genius, people say he's amazing, a strong guy who invested in all the companies successfully. And everybody invested, and their mothers, including widows and orphans. And then with undiversified or systematic risks, of course, it all collapsed, turned to vapor, nobody knows what happened to this guy, but I'm sure he's okay now, but the point is that these people, strong geniuses, are asymmetrical people who get lucky with a coin and the clock is right twice a day. So this is what Putin has built the economy on, this is the resource curse, this is an undiversified crop, an undiversified cash cow. If you are a summer resident, an agronomist or a farmer, you know what happens if you keep planting the same crop in the same field and you don't care about the insects that get into that field. So here, friends are being introduced into the economy, not gas and oil experts. And if any of you reading this are businessmen or if you have watched Game of Thrones, then you understand how much you have to be on your guard, always on your guard, putting some of your close "cronies" in jail and putting others in charge of oil and gas. What does this mean for Russia? The point is that every such step moves away from the free market and capitalism. 100% every time you deviate from this, you create inefficiency. The Russian economy is an example of an inefficient economy, which historians in 100 years will look back on and say: "Wow, how could that even exist? And if it did exist, how could people stand it?"

For such an economy to collapse, you need a couple of ingredients, one of which is Putin and his efficiency, and the other ingredient is some kind of crisis that can affect countries, for example, the mortgage crisis in 2008 in the US and in Russia. Now there are these two ingredients, and there is no oil at $100 a barrel. There are windmills, nanotechnology and third-generation nuclear power plants. The Russian track, on which oil and gas were brought, is gradually being destroyed and replaced, now the Europeans are saying that there is no turning back, they will not transport this oil for $100 anymore. Of course, there are some neutral countries, like Austria, where 90% of oil and gas still comes from Russia, but here too the issue of destroying roads with Russia is being considered, because there is an inefficient element in Russia, to which the geopolitical conflict in Ukraine has been added. Despite all the difficulties that the Russian economy faces in the world, the administrative-command system, even in China it is a great tool, will never be compared with the capitalist one. In Russia in the 1990s there was hunger and destruction, people were aggressive, and entrepreneurs thought a lot and trembled for the future. And comparing the capitalist economy with the administrative-command one now, one can come to the conclusion that capitalism makes you live to the fullest, and the command-administrative structure deprives you of opportunities for self-realization. Under capitalism, more people per square meter can become Nobel Prize winners than under the administrative-command system, which is aggravated by the geopolitical conflict. And the most toxic thing is not the inefficient economy or the mortgage crisis, but the geopolitical conflict in Ukraine, which is destroying the economy when people think it is not, but the collapse will happen unexpectedly and quickly. Every mistake that the leader of Russia has made leads to this, because the only reason he got rich is because he was lucky. Leaders who sought self-realization ended up being smarter, and therefore richer. The Russian economy, which was built into inefficiency for 25 years, was unable to get out of it, and it has "toxic" and "inefficient" written all over it.

Historical Perspective and Analysis in Metaphorical Story: "I was in Moscow before the wall came down (late 1980s). On behalf of everyone in my tour group, I went looking for a souvenir. I came across a jewelry store and found a decent watch that cost about $100 back then. I couldn't speak Russian, so I just pointed at the watch. Everyone in the store gathered around me noisily. Not understanding what they were saying, I couldn't quite comprehend what was happening at that moment. Reflecting on it later, I realized that Russians probably had to save up for months, if not years, to afford something that I could pay for with one salary. I'm afraid that Russians are going back to those days."

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Publication in Russian on the Zen blog
https://dzen.ru/a/ZpzwLncFU31s0T-v

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