Finance & Economics
Corruption in ex-communist countries
Judge or be judged
Jul 27th 2006From The Economist print edition
In the ex-communist world corruption seems to be declining. Mostly
TURNING an aquarium into fish soup is simple. Turning the fish soup back into an aquarium is not. For the ex-communist countries, stabilising economies and introducing market mechanisms has proved the easy bit. Remaking public institutions, and making them clean and efficient, is much harder to do and to measure.
A new study published this week by the World Bank* casts an optimistic light. It asked almost 10,000 firms in 26 ex-communist countries (Turkmenistan was excluded) and Turkey about the cost and frequency of bribe-giving, and their views about the nature and nuisance-level of corruption. This time, for comparison, it included five other European countries.
Compared with the previous surveys, in 1999 and 2002, it suggests corruption in the region is becoming a bit less frequent, costly and damaging. Although some countries are doing better than others (Georgia is a strong performer, Russia a weak one) nowhere is it getting comprehensively worse. In many countries corruption is falling on every count.
The trend is favourable—but, the authors note, still reversible. The Czech Republic, for example, scored well in 2002 and seems to have gone backwards since. But there's a twist. That firms complain more about corruption may be a good sign if it means they are becoming less tolerant of it. The most depressing feature of the report is the high incidence of firms in Russia—fully a fifth—that say they pay bribes often but do not regard it as a problem. That figure is four times higher than in the eight nations now in the European Union.
Most progress has been made in customs administration, which used to be slow and predatory but is now quick and clean. That reflects the changes in the countries that have joined the EU and those in the Balkans that are eager to join. The average “bribe tax”—the share of turnover paid by those firms that pay bribes—has declined from 3.6% to 2.9%, though booming economic growth means that the total of bribes paid is probably rising.
The report says corruption hurts private firms more than state-owned ones, small more than large, new more than old, locally owned more than foreign. In short, the weak suffer more than the strong.
One big remaining problem, especially in the poorer ex-communist countries, is the justice system. In the early post-communist years, the trend was to give judges great independence but low salaries. That was a recipe for corruption. The new approach is to pay them more and police their activities more strictly. That is working—particularly in Romania—but it is a slow slog elsewhere.
Other kinds of corruption are harder to deal with. Public procurement is notably dirty—though not noticeably worse than in some countries of “old Europe”. High-level political corruption, or “state capture” in the jargon, is also a lingering curse. That is when bribery affects not just the implementation of policy, but its conception. As the Russian proverb says, a fish tends to rot from the head.
* “Anticorruption in Transition 3: Who is succeeding and why?”: www.worldbank.org/eca/act3
Friday, July 28, 2006
Finance & Economics
Thursday, July 27, 2006
Croatia's seaside socialism and crony capitalism
By Edward Lucas
My first visit to Dubrovnik was as a black-marketeer. Hitch-hiking through the then Yugoslavia in the summer of 1985, my brother and I, fervent evangelists for capitalism, were trying to practise what we preached. A long lift took us from Graz in Austria to the Dubrovnik bus station, but we initially found few takers for the foil-wrapped bricks we had brought from Vienna: Yugoslavs in those days bought their coffee in beans. Then my brother, showing his characteristic business acumen, slit open one of the packages, unleashing an enticing aroma and banishing suspicion. We quickly sold the lot.
This month I was there again, for what at first sight seemed like a meeting of the Balkan Bodyguards' Association. The hotel was full of muscular, alert-looking men in loosely-cut suits, gruffly discussing engine sizes, muzzle velocities, and radio frequencies in a hotchpotch of local languages. But behind the biceps, I glimpsed some politicians, including Nursultan Nazarbayev (Kazakhstan), Mikheil Saakashvili (Georgia), Dan Fried (America's brainbox regional fixer) and top representatives of most of the countries of the neighbourhood.
The conference was Croatia's attempt to show that it is a constructive regional player, friends with its neighbours and worthy of speedy entry to the EU and NATO. To some extent it worked: anything that gets the enlargement train on the rails and moving is welcome.
But there were some curious features. One was a complete absence of any critical local voices. Croatia has a bunch of independent-minded NGOs and institutes. None came, though there were plenty of independent outsiders from farther afield. Equally, there were no opposition politicians from the region-though plenty from elsewhere, such as Carl Bildt, the former Swedish conservative prime minister. Some might wonder if the Croatian authorities are nervous of something.
I tried to find out why. "Don't blame the diplomats: they know it's stupid. It's the foreign ministry protocol department" said one well-informed outsider. "They just make sure that any invitations to undesirable people get lost".
It is hard to avoid the impression of Croatian control-freakery. The authorities have just been criticised by the International Federation of Journalists for appointing a number of political cronies to the board of HINA, the main news agency (and that in itself is odd: why does the state have anything to do with the media anyway?). Some journalists say that advertising from state-owned industries is used to reward friendly media outlets and withdrawn from critical ones. One local think-tank compares Ivo Sanader, the Croatian prime minister, to Vladimir Putin of Russia.
That may be too harsh. But there is an interesting analogy. Just as the top-heavy and incompetent Russian state survives thanks to the rents (unearned income) from the country's oil and gas wealth, Croatia's stodgy economy lives off the rents of tourism. The country scores very poorly on indexes of economic freedom: labour laws are restrictive, taxes high, foreign investment puny.
Yet the combination of climate and coastline is so compelling that only gunfire will keep tourists away (which it did, during the war).
Now Croatia has plenty of visitors again, and they are well-fed, well-sunned and well-refreshed. But even in Dubrovnik's top hotels and restaurants you do not feel, to put it mildly, that you are the customer of a world-class tourism industry where intense competition is driving standards ever-upwards.
Yugoslavia was in theory a communist dictatorship, but it did not feel like one. Now in theory, Croatia is a normal capitalist democracy. But it does not quite feel like one. Even the glitziest conferences cannot fix that.
Friday, July 21, 2006
Jul 20th 2006 | WARSAWFrom The Economist print edition
Central Europe risks becoming a bad advertisement for the further expansion of the European Union
TIME was when “new Europe” felt superior to “old Europe”. Before joining the European Union in May 2004, the eight ex-communist candidates transformed their economies and political systems, changing everything from competition policy to food-hygiene rules. They dumped bad communist habits and odd post-communist ones alike. Governments of left and right showed impressive determination to qualify for the club. Those that the European Commission found lagging, such as Lithuania and Slovakia, made strenuous efforts to catch up. Abroad, new Europe proved an eager ally, deploying armed forces for peacekeeping in the Balkans and for American-led interventions in Afghanistan in 2001 and Iraq in 2003.
Some of the headiness of that era still lingers. The newcomers' economies continue to grow strongly (see chart). At this rate, living standards will catch up with the European average within a generation. But in many other respects, the region is stagnant or going backwards. The reform momentum has petered out. These days the only ex-communist country with a strong reformist government is Romania. It, along with somewhat less reformist Bulgaria, is outside the EU. Both expect to join in 2007.
For their counterparts inside the EU, political weakness seems now to be the rule. The Czech Republic, after a tie in last month's election, has no government at all. Estonia, Latvia and Slovenia all have cautious coalitions, preoccupied with sharing the fruits of power rather than pursuing further reform. In Slovakia and Poland the coalitions have an added ingredient: extremist populist parties of left and right. Lithuania has a weak minority government. Only Hungary has a solid government made up of mainstream parties—and it is probably in the most alarming economic situation. Public debt is ballooning, and both the currency and bond markets look wobbly.
The effect is like that of a bunch of runners going briskly but with their shoelaces undone. Accidents are waiting to happen across the region. In Estonia and Latvia, the fear is of runaway growth—a nice problem, perhaps, but one that risks a crash. One possible cooling mechanism would be for the two to open their labour markets to migrants, but neither government has the vision or grit to push that through.
Lithuania and the Czech Republic suffer from fractured political systems unable to produce any plausible government. In contrast, Poland and Slovakia suffer from too much government, not too little. After nine months of bickering, Poland's new prime minister, Jaroslaw Kaczynski, won a vote of confidence this week. But his priorities are moral—eg, purging ex-communists—not economic. He has few convincing plans to trim the state and create the sort of modern economy that might tempt back the 1m-plus Poles working abroad.
Foreign policy is flagging too. Enthusiasm for American-led coalitions has cooled, but with no alternative in sight. There is no coherent strategy from the eight central European countries on such crucial issues as relations with Russia or energy security. Poland, for example, is trying to diversify its gas supplies, whereas Hungary is co-operating with Russian efforts to prevent this.
To be fair, cynicism and timidity over reform are not unique to the post-communist bit of Europe. Nor are extremist or populist parties. Italy's post-fascist party, Flemish nationalists, Jean-Marie Le Pen in France, and Austria's Jörg Haider have all pushed the boundaries of tolerance farther than their counterparts to the east.
Nor is it clear that the region is suffering now from bad (or no) governments. One common worry is that it may damage their chances of joining either the Schengen passport-free area, or the euro, or both. Yet, given today's fears in western Europe over legal and illegal migration, the expansion of Schengen is some way off. As for the euro, joining the single currency looks a risky step, particularly for the larger ex-communist countries—so a slippage in the timetable may be no bad thing.
The real dangers are different. One is that the central Europeans need deeper reforms if they are to stay ahead as their labour costs rise. Being cheap has served them well, but they now face competition from countries that are cheaper still: Romania and Bulgaria close to home, China and India farther afield. That puts the emphasis on quality, flexibility and innovation—none of which is a strong point. Universities are mediocre and overcrowded, even by the dire standards of continental Europe. Spending on research is feeble.
Worst of all, unstable and populist governments in the new democracies offer a poor advertisement for continued EU expansion. Arguably, the prospect of EU membership for the western Balkans is all that prevents a return to violence there. In the longer run, the lure of joining the EU is also the best way to keep Turkey, or ex-Soviet countries such as Ukraine and Georgia, on the right track.
But are politicians in western Europe ready to tell their voters that the EU needs more countries like those that joined in 2004? Support in old Europe for further expansion is sliding: in the 15 old members, only 41% are now in favour, compared with 47% in 2003 (and 66% in the new members). Nutty politicians in Poland and Slovakia, baffling stalemates in the Czech Republic and Lithuania and a belief that a chunk of the continent will stay backward may lead voters farther west to feel disappointed by past enlargements—and to be hostile to any future one.
Thursday, July 20, 2006
The caustic complaints of a ghetto survivor
By Edward Lucas
Lodz (pronounced Wootch) is one of the most lacklustre cities in Poland. But in a leafy suburb of this hard-scrabble former textile town a living legend is puffing his way through his 87th year.
Amid clouds of smoke (he likes unfiltered Gitanes) and in a room decorated with a striking mixture of modern Polish art and a Playboy calendar, I interviewed Marek Edelman, who is the last surviving commander (indeed one of the last survivors) of the 1943 Warsaw ghetto uprising.
If you are American or Jewish, you will certainly have heard of this: it is when the ghetto's prisoners, armed with pathetically few weapons and even less ammunition, staged a Masada-like revolt against their Nazi tormentors.
It is sometimes confused with the later Warsaw uprising of 1944 when the country's underground army, loyal to the exile government in London, seized the capital and then defended it for two desperate months against hopeless odds, while Soviet forces cynically waited on the other bank of the Vistula river. The crushing of the uprising made it easier for them to install a puppet regime, which was driven from power only in 1989.
It would be nice to think that this history would bring Jews and Gentiles together in Poland. Sometimes it does. But accusations of prejudice from both sides cloud Poland's history of remarkable religious tolerance. Which is why I had gone to see Edelman.
Unlike almost all Polish Jews, he was neither murdered by the Nazis, nor did he emigrate during the disgraceful periods of post-war persecution. He usually crops up in the media doughtily defending his homeland against accusations of ingrained anti-Jewish feeling and behaviour.
That's right. There is a lot of nonsense talked about Polish 'anti-Semitism'. Sure: prejudice exists as it does anywhere. In my experience it's more often shallow than deep; it was stoked by Communism and since then I think has been declining.
But it is easy to exaggerate, particularly with the use of lazy phrases such as "Auschwitz, a Polish concentration camp" (when Auschwitz in fact was built and run by the hated Nazi occupiers).
Now Edelman is troubled by the tone and status of Radio Maryja, an obnoxious station run by an unruly and opinionated Roman Catholic priest. It used be a fringe affair. But it is now close to the government.
That's the other thing bothering Edelman. The main coalition partner, Law and Justice, is a socially-conservative Catholic party with muddled views on economics and foreign policy but no trace of anti-Semitism. But it is in alliance with the League of Polish Families. This is an ultra-patriotic, ultra-Catholic party which idolises a pre-war politician, Roman Dmowski, who thought that only ethnically pure Poles could be real patriots. It also has a youth wing whose gatherings attract a thuggish type of supporter (entirely unwished-for, it insists). Senior figures habitually conflate paedophilia with homosexuality.
So Edelman is speaking out, in uncharacteristically caustic terms. Law and Justice, which has roots in the dissident Solidarity movement, is betraying its heritage, he says. The party leadership's "desire for power is so great that they would get cosy with the devil". That cynicism is a "time bomb".
That was before the resignation of the prime minister, Kazimierz Marcinkiewicz and his replacement by the Law and Justice party leader, Jaroslaw Kaczynski. Marcinkiewicz oozed reasonableness. I don't know what the provincial, conspiratorial Kaczynski oozes, but it certainly isn't that. Edelman, sadly, may have to do quite a lot more complaining before he's heard.
Yo Blair! What those words (plus an expletive) reveal about Bush and poodle BlairBY EDWARD LUCAS, Daily Mail 21:57pm 18th July 2006
The occasion was a grim one. The fates of millions of people were to be decided in a few days of hurried discussion about opening the second front in Western Europe during World War II.
Stalin, sinister and jovial, chided Winston Churchill for refusing to agree to have 100,000 German officers shot. The American President, Franklin D. Roosevelt, was ill and incoherent, scarcely able to resist the pernicious advice of his officials to be nicer to the Soviet Union and cooler to Britain.
That ill-fated meeting, the Tehran conference of 1943, was the first time that the two leaders of the free world - the Prime Minister of the United Kingdom and the President of the United States - met the master of the Kremlin.
This week, six decades later, witnessed its direct successor: the G8 summit in St Petersburg. Again, there was no shortage of wrongheadedness, short-sightedness, timidity and cynicism at the meeting of the world's top industrial powers, whose agenda covered the toughest questions of conflict in the Middle East, trade, energy, security and the environment.
As expected, there was more talk than action. But there was a strikingly new ingredient: the extraordinary banality captured by an open microphone which eavesdropped a private conversation between George Bush and Tony Blair.
Dubya, the master-mangler of the English language, greeted our PM with 'Yo Blair!' - a salutation more common in the ghettos of Washington DC than in its diplomatic salons.
But it is not just the greeting which seems to so belittle Blair and by definition Britain as well. The truth is that this snatch of dining-room farce will dull the spirits of every patriotic Briton.
Mr Blair offers to go to the Middle East to pave the way for a peace mission by U.S. Secretary of State Condoleezza Rice, Mr Bush's infinitely more able sidekick. Mr Blair says humbly: "If she goes out, she's got to succeed - whereas I can go and just talk."
What a damning indictment of Britain's weakness, of the contempt in which we hold ourselves, and of our readiness to prance to the tunes of others.
Does it not occur to Mr Blair that going to 'just talk' might confirm the sadly well-founded feeling in both Arab and Israeli camps that Britain's role in the region is that of a duplicitous phoney? It would be cruelly fitting if, when Mr Blair next visits a foreign potentate, they ask him whether he is there for a real discussion, or wishes 'just to talk'.
Having exhausted the diplomatic lexicon, the two leaders quickly retreat on to safer ground. Mr Blair, it seems, has bought Mr Bush some item of clothing, a sweater.
The American leader is touchingly grateful. Oddly, his conversational register switches from rap patois to the language of an Enid Blyton story, as he chirps 'it's awfully thoughtful of you'.
Then the conversation moves back to geopolitics and provides further reason for despair.
Mr Bush pronounces that "what they need to do is to get Syria, to get Hezbollah to stop doing this s*** and it's over".
And that's it. Does Mr Bush really believe that the longestrunning, costliest and most intractable international conflict in the world will somehow be 'over' if one bunch of terrorists can be strong-armed into stopping their cowardly rocket attacks on Israeli civilians?
What about the murderous rejectionists of Hamas, now the government of Palestine, and Iran's leaders who want to 'wipe the state of Israel from the map'? What about Al Qaeda? What about the mills of hatred financed by Saudi Arabia across half the world, which teach impressionable Muslim youth that the West and Israel are evil and deserve only destruction?
The depressing truth is that for all our previous disappointments, the shallow, callow nature of Mr Bush's world view is still capable of shocking us. He may have the right ideas - on bringing democracy to the Muslim world, for example. But his inattentive approach and botched planning are reflected all too savagely in these throwaway remarks.
In one sense it is perhaps comforting that the leaders of the two English-speaking nuclear powers are so comfortable in each other's company that they chat as easily as two teenagers.
But the familiarity and laziness of their discourse jars hideously when set in the context of the summit. For these are not two dullards with some piece of GCSE coursework to be plagiarised. These are our leaders, and on the table is the prosperity and safety of the world.
At one point, Mr Blair casually refers to the stalled world trade as the 'trade thingy'. Mr Bush replies rather plaintively: "I just want some movement." They are referring to nothing less than the future of the world's economic system which now hangs by a thread thanks to the timidity, greed and incompetence of the politicians visiting St Petersburg.
Without movement by the rich countries on farm subsidies, and by poor countries on opening their protected home markets, the world will spiral downwards into protectionism and poverty.
It is no exaggeration to say that the astonishing gains of globalisation, which has lifted hundreds of millions of people out of poverty in the past decade, are now at stake.
That is not a 'trade thingy' - and to call it that reflects a flippant approach that demeans both the speaker and the listener.
To see how far we have fallen, contrast the chit-chat of our prime minister with his American chum to the tone of correspondence between two friends nearly 70 years ago. When Roosevelt learned of Churchill's appointment to the War Cabinet in 1939, he wrote as follows:
MY DEAR CHURCHILL:
It is because you and I occupied similar positions in the World War that I want you to know how glad I am that you are back again in the Admiralty. Your problems are, I realise, complicated by new factors but the essential is not very different.
What I want you and the Prime Minister to know is that I shall at all times welcome it if you will keep me in touch personally with anything you want me to know about. You can always send sealed letters through your pouch or my pouch. I am glad you did the Marlboro volumes [historical works written by Churchill] before this thing started - and I much enjoyed reading them.
With my sincere regards,
FRANKLIN D. ROOSEVELT
In that letter, there is intimacy, respect and trust - everything that one would wish for in the relationship between the two great leaders of the free world.
They are literate, thoughtful men: one writes books. The other reads them.
Mr Roosevelt's casual use of 'thing' to describe the war is as unexceptional in the context of his lucid prose as Mr Blair's 'thingy' is jarring.
The two men's bond, which defeated Hitler and imperial Japan, was echoed in the equally dignified and affectionate relationship between Thatcher and Reagan: a friendship that conquered communism.
But what Mr Bush and Blair so dismally fail to realise is that a leader's symbolic role demands dignity and a sense of occasion.
Nobody is perfect (Mr Reagan, infamously, once tested a microphone by saying, jokingly: 'Let's bomb Russia'). But especially in a semi-public event, are we not entitled to hope that our leaders speak to each other with intelligence and dignity?
For the bedraggled lame ducks of London and Washington, that is evidently too much to ask.
Edward Lucas is East European correspondent for The Economist
Why 'Captive Nations Week' still matters
By Edward Lucas
Few people have heard of it now, though the White House proclaims it each year, as it has done since 1959. During the Cold War the third full week in July was a chance for victims of the evil empire to highlight their plight.
After chanting "Nyet-Nyet-Soviet!" outside the embassy for a bit, a gaggle of Poles, Balts, Czechs and Ukrainians, and their British hangers-on like me, would go to a pub and engage in slightly stilted conversation about the evils of communism (easy) and the unique merits of our own country (trickier).
Now the week and even the phrase "captive nations" have fallen deeply out of fashion. If you search hard on the internet you can still find faint traces of the once-mighty architecture of organised anti-communism. The World Anti-Communist League has renamed itself and retreated to Taiwan. The Anti-Bolshevik Bloc of Nations, the European Freedom Organisation and others have wound up completely.
For the most part, that's good. Some of these outfits were distinctly odd, or worse, with links to the Moonies, ex-Nazis, and Latin American and Asian dictators. And though you still find communists here and there, without superpower backing they are no more influential than flat-earthers.
But the principle of commemorating the captive nations (including those now uncaptive) is a good one. For a start, it is a useful reminder that the Soviet Union was not just a failed economic system; it was an empire. The Cold War gets remarkably blurred in hindsight. This puts it back in stark focus.
It is also useful because not all the captive nations are free. Turkestan (in China); Ide-Ural (now Tatarstan and Bashkiria); Chechens and Ingush, Karelians and the Mari are all still under what any fairminded outsider would call colonial rule.
Other countries are free but in pieces: Georgia and Moldova both have Kremlin-backed illegal statelets on their territory, which are fast integrating into Putinland. The Georgian President, Mikheil Saakashvili, told me last weekend that when he goes to his country house north of Tbilisi, his mobile phone picks up a signal from the breakaway 'republic' of South Ossetia and shows a message saying "Welcome to Russia".
The once-captive nations will only be truly free when they are both whole and safe. That means, above all, joining NATO. It is remarkable how the Baltic states' membership of the alliance, though accompanied by so much teeth-sucking and clucking when it happened, has proved to be a huge success. Without NATO, the Balts would now be in a grey zone, where Russia would be demanding that its 'interests' be accommodated. As NATO members, though there are constant pinpricks of mischief-making, the Balts are firmly out of the game.
Ex-captive nations, like ex-kidnap victims, deserve a special ration of sympathy and support. That is not always forthcoming from the rich, timid and lazy countries of 'old Europe'. Saakashvili told me of a letter to Woodrow Wilson he had discovered written from Georgian freedom fighters around the time that their country's brief post-1917 statehood was being crushed by the Soviet Union. "If you don't help us, no one will," the signatories had written. The letter never reached the White House and all those involved were jailed; most never saw freedom again.
It is to George W. Bush's credit that he wants to keep expanding NATO, first to the western Balkans, and then to Georgia and (if it survives) Ukraine. It would be nice if that enthusiasm were echoed more loudly in the lucky half of Europe that was spared communist captivity.
Friday, July 14, 2006
Poland's government Twin problems
Jul 13th 2006 WARSAW From The Economist print editionPoland is suffering from a bad image. Blame the Kaczynski brothers
One of them is now prime minister
IT IS easy to argue that the Law and Justice party has done disappointingly little in the nine months since it won Poland's parliamentary and presidential elections. But in one respect it has done a lot: once a regional heavyweight, respected in America and around Europe, the country now attracts ridicule and condemnation.
The main culprit is the president, Lech Kaczynski. Chaotic organisation, poor staff and inexperience have led to a series of gaffes, rows and snubs. The latest was his withdrawal from a trilateral summit with France and Germany after a satirical article in a minor German daily. By insisting that the German government apologise, Mr Kaczynski cast doubt on his understanding of press freedom.
Another culprit is the right-wing League of Polish Families, one of two small parties in the ruling coalition. It attracts a thuggish fringe, deliberately conflates homosexuality with paedophilia, and has failed to shake off accusations of anti-Semitism. The Israeli ambassador refuses to meet its leader, Roman Giertych, who is deputy prime minister and also in charge of education. Mr Giertych's father, Maciej, a member of the European Parliament, recently made a speech praising Franco, Spain's fascist dictator, as a hero and statesman of a stature Europe is now sorely lacking.
Mr Kaczynski's identical twin brother Jaroslaw, who runs the Law and Justice party, is doing his bit too. This week he took over as prime minister from Kazimierz Marcinkiewicz, who was the country's most-trusted politician, and also proved himself a competent negotiator on Poland's behalf at European summits.
The switch was a big surprise. Mr Kaczynski argues that the government will be more stable if he is running it from the front rather than from the back seat, as before. By becoming prime minister, though, he is breaking an earlier pledge, when he argued that it would look odd to have the two top political positions in Poland occupied by identical twins.
Now the Kaczynski brothers (particularly Jaroslaw, who is the brainier and bossier one) are in full charge. Their priority is to press ahead with the moral regeneration of Poland, which implies fierce criticism of both its communist history and the sleaze and injustice of the past 15 years. In practical terms, that means tough anti-corruption measures and a purge of the public sector.
Much of this is welcome. Poland has been shackled by the influence-peddling of the old elite. The justice and interior ministries have been notably successful of late in putting more police on the streets and bringing more criminals to justice. The defence minister has closed down the lawless military intelligence service.
But this is only part of what is needed. There remains a huge need for reform in the public administration, such as tax collection. Shake-ups in pensions, welfare payments and farm subsidies are also long overdue, but they may be blocked by the two populist parties in the coalition. Mr Kaczynski has brought in a well-respected free-market economist, Stanislaw Kluza, as finance minister, after a previous incumbent, Zyta Gilowska, was forced out on (possibly trumped-up) spying charges. But the Kaczynski brothers still have a strong welfarist streak.
For now Poland's economy is booming and public finances are buoyant. Growth this year will be over 5%; inflation is the lowest in the European Union; unemployment is coming down. Foreign firms, including Toyota and Google, are eagerly eyeing up Poland. Much of the credit goes to Mr Marcinkiewicz, who wisely avoided picking fights with such Law and Justice bogeymen as the central bank, the European Commission and foreign investors. He will be a hard act to follow.
Monday, July 10, 2006
HOW JOSEPH Stalin and Leonid Brezhnev would have relished the irony: the leaders of the rich free world kowtowing to the authoritarian ruler of a state that is rich only in oil, gas and ruthlessness.
As Western leaders pack their bags for the first G8 summit hosted by Russia, starting in St Petersburg later this week, every one of them knows the event is a sick farce, of which President Putin's Soviet predecessors would have been proud.
On the surface, the arriving Western leaders will be smiling. But they are intensely aware that there is only one agenda on Mr Putin's mind: to increase his iron grip on his country and rebuild the once-mighty Russian empire. America's vice-president Dick Cheney warned Russia in March to stop bullying and blackmailing those fledgling ex-Soviet states that were once part of its empire.
Mr Putin was utterly contemptuous in response, warning in his state of the union speech days later that Russia would build up its economic and military might, so as to make his country immune to foreign pressure.
For good measure he savagely mocked America, calling it 'Comrade Wolf'. The days are gone when such remarks could be dismissed as bombast by the leader of a ruined empire.
Though Russian living standards are pitiful by the standards of real G8 countries such as Britain, France and Germany, billions of dollars in oil and gas revenues make the Russian state flush with cash. Putin has given notice that it wants to be strong, too.
In the days of the Cold War, when the Kremlin tried to match the West in an arms race, the economic costs proved so crippling that they destroyed the whole country. But the steely-eyed Putin is much cleverer than the geriatric despots who used to run the Politburo. His arms race will be based on brains, not brawn.
Russia is already developing and deploying ultra-modern nuclear missiles, such as the submarinelaunched Bulava and the land-based Topol-M, that will be near-impossible for Western defences to counter. Spending on high-tech conventional weapons is soaring, too.
But military might is not the only weapon in Putin's arsenal -- the other is economic power, and he is wielding it to devastating effect.
Georgia and Moldova, the two weakest former Soviet republics, are facing a crippling economic war. On the one hand the price of their gas, delivered by Russia's monopoly pipelines, has soared. On the other, their main exports of wine and mineral water have been banned from the vital Russian market.
And old Soviet dirty tricks are at work, too: an official psychiatric 'assessment' of the Georgian leader, Mikheil Saakashvili, is being circulated. Bearing the imprint of leading Western psychiatric institutions, it makes him out to be a sex-crazed nutcase.
Yet the Kremlin-inspired document is a forgery from start to finish.
The message to the former empire is simple: abandon your dreams of joining the EU and Nato, and return to the iron embrace of your imperial master.
I am no stranger to the despotic nature of Putin. As a correspondent in Moscow in the early years of his reign, I was immediately sceptical of his sinister background and motives.
I saw a lot of him once he became my neighbour. I doubt he saw me, fuming at the side of the road as his presidential convoy swept past at 90mph all the way to the Kremlin from his newlybuilt presidential palace in our village of Kalchuga, ten miles outside Moscow.
Even then, Putin's country home highlighted for me his regime's increasingly authoritarian, bullying style.
For one thing, it was new -- Putin hadn't inherited the sumptuous country retreat of his predecessor, Boris Yeltsin.
That was because the deal between Russia's crooks and spooks that brought Putin to power in 2000 included an iron-clad agreement that the outgoing Yeltsin clan would not just be immune from prosecution for corruption but also keep the spoils of office -- the cash, cars and mansions.
Any president sincerely committed to breaking with the past would surely have shunned the pompous, greedy lifestyle of old -- including the heavily policed convoy that cleared cars off the road every time he wanted to go to the office. Not this one.
The Putin 'dacha' or cottage -- it was about the size of Sandringham -- had been built at amazing speed and in great secrecy on a disused airfield at the edge of our village. That infuriated my sons, who were learning to ride bicycles there.
But although the Russian state may be corrupt, lethargic and stunningly incompetent, when the man at the top wants something done, whether it is building a new house or a new missile, it happens fast and ruthlessly.
Our Russian neighbours in the village were unhappy at the rush of other developments that followed Putin's arrival. One new rich neighbour with
close Kremlin connections concreted over the village green to make a driveway for his mansion, beating up an elderly neighbour who objected.
Then a property company, also with Kremlin links, started bulldozing a nearby forest for housing.
That taught us some lessons about Putin's Russia. The first was that a decade of freedom under Mikhail Gorbachev and Boris Yeltsin had had an effect -- the villagers reacted not with traditional Russian apathy but with lawsuits, petitions and, when all else failed, direct action: they blocked Putin's road to work.
The second -- and sadder -- lesson was that the grotesque habits of the Stalin era were still there. Protests and petitions were not just brushed aside, the organisers were brutally intimidated.
'We will turn up with a bit of paper saying your house is built on our land, and then we will bulldoze it,' a shadowy official told my next-door neighbour.
Clearly, Putin is no Stalin. Although tens of thousands have died in Chechnya, including in the sinister, brutal 'filtration camps', there is nothing to compare with the Gulag and artificial famines in which tens of millions perished.
And Russia is, at least on the surface, a democracy, with some lively if struggling media outlets, the semblance of contested elections and a strong desire to integrate into the structures of the civilised world.
Russian companies are queuing up to list their shares on the London stock exchange. 'And if they don't let us, we'll buy it,' jokes one rich Russian.
Yet the sinister echoes of the past grow ever louder. Russia has abandoned any attempt to put its Stalinist history behind it. School textbooks skate over the crimes of the Stalin era, presenting them as tragic mistakes or justified responses to external aggression.
Few Russian schoolchildren have any idea that Stalin was allied with Hitler until 1941, and jointly carved up the peaceful countries of Eastern Europe.
Putin himself describes the collapse of the Soviet Union -- Stalin's empire -- as 'the geopolitical catastrophe of the century'.
Imagine a German leader saying that of the Third Reich.
And imagine how that sounds to the brave, freedom-loving Estonians, occupied by Stalin in 1940 and regaining their independence only in 1991. How would the Dutch feel if a German leader openly expressed nostalgia for the days of Hitler and Himmler?
The truth is that, under Putin, Russia's lust for imperial expansion is stronger than it has ever been since the Cold War. But he wants to rebuild Stalin's empire using banks, pipelines and financial threats rather than tanks and barbed wire.
With its monopoly supplies of gas and oil, Russia has already forced the former captive nations to hand over their energy supply companies, thereby regaining a crucial foothold in the economies of the former Soviet bloc.
And that economic foothold soon turns into a political one. Murky Russian-backed energy brokers sprout like mushrooms in the former satellites, spraying directorships, political donations and outright bribes over the fragile political landscapes of these new democracies.
Indeed if Gazprom -- the Russian energy giant -- succeeds in its stated intention of buying Britain's Centrica gas company, it is hardly far-fetched to worry that the same noxious mixture of influence-peddling and mischiefmaking will quickly take root in Britain's own fetid political culture.
'I know how much a congressman costs. What about an MP?' a Russian tycoon asked me ten years ago. Then I thought he was just teasing me. Now I would not be so certain.
For Putin's long-term plan is to establish economic dominance also in the complacent and greedy countries of 'old Europe'. The first thing is to sabotage any plans for diversifying gas supplies.
Russia is desperate to stop the Nabucco pipeline, an EU-backed project to bring gas from Iran and central Asia, which threatens to challenge its own monopoly of gas deliveries from the east.
So do plans, bravely pioneered by Poland, to import more gas in liquified form by tankers from sources other than Russia. These projects are expensive but as vital to our security as radar was in World War II.
But just as politicians in the 1930s preferred appeasement to rearmament, our Western politicians are failing to support the scheme, preferring the short-term, easy gain of gas deals with Russia to the hard work of establishing the continent's independent energy security.
This takes us to the crux of the forthcoming G8 negotiations. On one side there is Putin, desperate to increase his stranglehold on European gas supplies and sign up long-term deals with Western consumers.
On the other is Europe's need to maintain a diversity of supplies from a free market. The stark fact is that Putin is likely to be the winner, offering persuasive arguments and incentives that are attractive in the short term to the West but for which we will pay dearly.
For there are no signs of Putin embracing Western-style financial and political reforms -- indeed, quite the reverse.
Mikhail Kasyanov, the prime minister who ran Russia during the startling economic success of Putin's early years, told me last week that the Kremlin is now full of thugs and yes-men. 'There is nobody willing to stand up to Putin in an argument,' he said. That sounds all too like the craven culture surrounding Soviet leaders.
Although Putin claims to dislike personality cults, every Russian office in the public sector (and many in the private sector) has a picture of the President on the wall.
The Kremlin is a law unto itself, intervening in politics, business and the legal system as it pleases -- a kind of power that Britain abandoned, at least until the dying days of the Blair government, with the signing of Magna Carta nearly 800 years ago.
At first sight it is hard to see why Putin has done so well. A dull, publicity-shy bureaucrat with not an ounce of charisma, he seemed sure to be swept aside by some bouncier character.
But for the public, President Putin was sober, young and athletic -- everything that his predecessor Mr Yeltsin wasn't.
And for the Russian elite, he was the ideal compromise.
The spooks, longing to restore Russia's great-power status, liked him because of his intelligence department background: not quite the top drawer, perhaps, but certainly part of the charmed circle that had studied at the Red Banner Institute, the top Soviet spy school.
All KGB officers are trained in target acquisition -- gaining an enemy's co-operation through bribes, flattery or threats, and then bending them to your will. Putin will have every opportunity to display these talents when he plays the host in St Petersburg.
Privately, Putin even enjoys showing off the fruits of his spy networks and their dungeons packed with information. A Western newspaper editor who met him was amazed when the Russian leader murmured at the start of the interview, in English: 'I hope your wife's mother recovers soon.'
Not even the editor's closest colleagues knew that his mother-inlaw was gravely ill.
It is this combination of guile, charm and utter ruthlessness that has enabled Putin to increase his grip on power.
Everyone who has dared challenge or resist his rule has been sidelined, neutralised or humiliated. The Yeltsin advisers are gone. The tycoons are in jail, in exile or in political purdah.
The media is cowed. The opposition parties are shams, run to give the appearance of pluralism to the Russian public and the outside world, but with no chance of taking real power.
The once-mighty regional chieftains who used to run Russia's cities and regions are now merely nervous servants of the Kremlin.
Putin understands the way that corruption both fuels Russia and makes it manageable. When the rules can be bent and are impossible to observe, everyone is vulnerable.
He has unleashed the two most sinister forces of his country's Stalinist past: the totalitarian habits of the security services and the imperialist urge that lies deep in the Russian psyche.
Putin is trying to recreate an empire reminiscent of the Soviet Union -- feared by its own people, its neighbours and the West in equal measure.
And the tragedy is that we in the West are letting it happen.
THERE are governments that are strong, and governments that are good, but never governments that are both things at once. That is Polish politics in a nutshell; and the fall of another prime minister, Kazimierz Marcinkiewicz, suggests that the rule of thumb still holds good.
Mr Marcinkiewicz’s government was the good-but-weak variant. Indeed, he has a claim to be seen as one of Poland's best prime ministers since the fall of communism. A plain speaking ex-teacher representing a conservative party called Law and Justice, he was remarkably popular with the public and an efficient manager of government business. After half a year of minority rule his party managed to secure a workable majority in parliament, albeit at the price of bringing into government two populist parties with seamy political connections. He had some good ministers—for example, in justice and in defence.
But he never had a free hand to run things quite the way he wanted. Behind him lurked the dumpy figure of Jaroslaw Kaczynski, leader of Law and Justice, winner of last year’s election.
If Mr Kaczynski looks familiar (see photo), that may be because his twin brother, Lech Kaczynski, was elected Poland's president last year. Jaroslaw Kaczynski decided then not to claim the post of prime minister, partly for fear that it would look weird to have the country run by identical twins.
The reservation was well founded. It does look weird, now that it has happened, and the more so given Jaroslaw Kaczynski’s eccentric bachelor lifestyle.
The Kaczynskis have many virtues. They are personally honest, with a loathing for the sleaze and influence-peddling that pervaded Polish politics under the previous, ex-communist, government. But Jaroslaw Kaczynski has a well-deserved reputation as a chronic intriguer. When Mr Marcinkiewicz proved popular and competent, Mr Kaczynski began questioning his authority and judgement in a series of disparaging briefings.
One outward sign of the growing gulf between government and party came when the government’s finance minister since January, Zyta Gilowska, was forced out of office by a mysterious scandal over possible secret police collaboration in the communist era—a charge she denied, but chose not to contest in court. When Mr Marcinkiewicz appointed one of his own senior advisors, Pawel Wojciechowski, to replace Ms Gilowska, Mr Kaczynski publicly disapproved of the choice, saying that he had never heard of Mr Wojciechowski.
Some wondered Mr Marcinkiewicz might burn his bridges with Law and Justice and join forces with the liberal centre-right opposition party, Civic Platform, which finished second in last year’s election. That speculation grew last week when Mr Marcinkiewicz met the Civic Platform leader, Donald Tusk.
Instead, it was Law and Justice that dumped Mr Marcinkiewicz as prime minister, and it is Mr Kaczynski who has taken his place. As a consolation prize, Mr Marcinkiewicz is to be the Law and Justice candidate for the mayoral election in Warsaw this autumn.
Mr Kaczynski argues that this will make the government more stable. Given that the leaders of the other two coalition parties are in the government, doesn't it make more sense to have the leader of Law and Justice there too, matching them for political weight?
Perhaps it does. It may be that Mr Kaczynski will prove an able successor to Mr Marcinkiewicz. But the odds are against it. Whereas Mr Marcinkiewicz was, by the provincial standards of Law and Justice, rather competent in foreign policy, Mr Kaczynski is notably weak in this area. This matters all the more, because his brother, the president, is proving a near-catastrophic representative, and one whose erratic habits and views risk making Poland a laughing-stock.
That is bad, and wrong. Poland is a good country going through a bad patch of party politicking. But that bad patch may get worse before it gets better.
Friday, July 07, 2006
A man who counted
From The Economist print edition
ADVANCED mathematics is a hard sell, but David Leavitt's biography of Alan Turing, which was published in America last December and is just coming out in Britain, will give even the most innumerate reader an idea of the beautiful and fascinating world he is missing.
Mr Leavitt does not use the word, but in today's parlance Turing, a brilliant misfit who laid the foundations of modern computing and cryptography, would probably have been called autistic. He took things very literally, was almost incapable of lying, cared little for his outward appearance, and was rather bad at understanding what other people felt or meant. None of that helped him live a happy life.
But understanding numbers was another story. Turing's mathematical genius first flowered at school, and then bloomed in the laid-back, brainy atmosphere of 1930s Cambridge. His “vice” (as many termed it then) of homosexuality was regarded sympathetically, at least within the walls of King's College.
The author does a fair job of portraying both the world of pre-war scholarship and the Bletchley Park code-breaking centre where Turing spent the war years. There he created electro-mechanical contraptions that, combined with genius, patience and a lot of help from Poland, cracked the Nazi Enigma code. Without that, the war would have gone on for much longer—perhaps long enough for Hitler to get an atom bomb and win it.
He also portrays convincingly the bureaucratic struggles and intellectual snobbishness that surrounded the development of computing in Britain. Machines that seem to think prompted the same mixture of muddle and panic then that they do now.
Mr Leavitt does his best to explain the principles of both mathematics and philosophy, although it is probably impossible to explain the principles of advanced maths, cryptography and computer design in a way that is simple enough for even the most indolent reader to understand. Mr Leavitt's self-confessed lack of a mathematical background does not help his accuracy. Goldbach's Conjecture, a famous mathematical problem, for example, states that any even whole number is the sum of two primes. Mr Leavitt leaves out the word “even” which may have some readers scratching their heads as they reach for pencil and paper.
The author shows considerable sympathy with Turing's homosexuality and the difficulties he faced as a result of it; when convicted for “gross indecency” in 1952, he was forced to have oestrogen injections, a form of chemical castration that also, humiliatingly, made him grow breasts. He committed suicide two years later. By today's standards that was outrageous treatment. The author implies that this was exceptional. Sadly, in the climate of the day, which treated homosexuality as an abhorrent mixture of sickness and weakmindedness, rather as paedophilia is regarded now, it was not. To see him chiefly as a gay martyr is a mistake. Turing's life added up to more than that.
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Slovaks and Czechs
Folk-dance in suits
From The Economist print edition
Two countries that seem to fight boredom with political bafflement
Fico, socialist with a low credit rating
HARRIED by the secret police, Czechoslovakia's communist-era dissidents used to dream of living in a “boring European country”. In the 16 years of democracy they have now had, politics has rarely been boring, but it is at the moment exceptionally baffling.
The first lot of puzzles is set by Slovakia (which left the former federation in 1993). A big one is why voters last month dumped a government that had become a byword in the region (and the world) for fast reform and economic success. The answer is that booming growth and investment did not quite make up for the government's image as devious, divisive and unsympathetic.
A harder puzzle is to understand the new government that took office this week. At first sight it seems dodgy and unattractive. It is led by Robert Fico, a left-wing populist committed to reversing economic reform. One of his coalition partners is a nationalist party whose attitude to Roma (gypsies) and Hungarians strikes many as racist. The other is run by Vladimir Meciar, the prime minister whose thuggish rule in the 1990s brought international isolation and economic stagnation. Mr Fico's party, Smer, claims to be mainstream socialist. But its choice of coalition allies has brought a rebuke from other European socialists. Some want to expel Smer from their international group.
Mr Fico wants his new government to look reasonable. Neither Mr Meciar, nor the nationalist party leader, Jan Slota, has a formal cabinet position (though the three will form a “coalition council”). Populist promises have been swiftly dumped. Money permitting, says the new finance minister, Jan Pociatek, there may be some tax changes (such as lower VAT on food and household energy). But the government will keep Slovakia's famous flat tax on personal and corporate incomes.
That has partially reassured outsiders and financial markets, which had noted with alarm the weakness of Mr Fico's economic team. Mr Pociatek, a restaurateur known more for his penchant for flashy motorcycles than for his familiarity with public finance, was a particularly unexpected appointment. He says that Slovakia will join the euro in 2009 as planned. But this will require an unlikely degree of budget discipline from a government that plans to splurge on the poor.
The upshot is neither ideal nor disastrous. That contrasts with the puzzle in Prague, where a tied election result on June 3rd has so far produced no upshot at all. A right-wing coalition of conservatives, Christian Democrats and Greens has, in theory, 100 seats in the 200-seat Czech parliament. But this week it could muster only 98 votes in a secret ballot to elect a speaker. Barring an unlikely defection from the left-wing parties, it is thus doomed not to form a government. The outgoing Social Democrat prime minister, Jiri Paroubek, cannot form a government on his own (even with the hardline Communists, who are widely treated as political outcasts). But it seems he can block anybody else.
The resulting manoeuvres are as intricate as a central European folk-dance, but one performed in grey suits, not colourful peasant costumes. Some think that a German-style grand coalition between right and left is now the only sensible outcome. But for that to happen, the leaders on both sides would have to show their supporters that all other options (such as a minority government) had been tried.
A grand coalition may also need different leaders. Mr Paroubek damaged his standing in his own party by a strikingly ill-tempered outburst on election night. The conservative leader, Mirek Topolanek, is also looking shaky. He could yet make way for the popular and powerful mayor of Prague, Pavel Bem, who is a close chum of the Czech president, Vaclav Klaus. Mr Klaus is better known as a stirrer than a peacemaker. But he would like a second term in office. Brokering a deal that gave the Social Democrats a role in government—at least for a year or two—might be a good way to get it.
| Copyright © 2006 The Economist Newspaper and The Economist Group. All rights reserved. |
Thursday, July 06, 2006
By Edward Lucas
Last time I met Mikhail Kasyanov was five years ago, when he was prime minister of Russia.
Oddly, though we both lived in Moscow, his staff thought it would be better to meet in Salzburg at an international conference. The interview was formal and rather disapproving. He thought The Economist's coverage of his government was harsh and simplistic. I thought Russia was becoming xenophobic, authoritarian and doing too little real reform.
Last week we had lunch in London, in one of the most exquisite clubs in Mayfair (he paid). There were some changes. He spoke English. He was on his own. And having been sacked by President Vladimir Putin, he is running for president in 2008.
Most of what he said rang true. The Kremlin is full of thugs and yes-men, with nobody willing to stand up to Putin and argue out difficult issues. That may be why the Russian leader behaved so strangely during Ukraine's Orange Revolution, when he publicly backed the fraudster, Viktor Yanukovych. Putin's aides apparently misled him into thinking that he was as popular in Ukraine as he is in Russia, and that simply by making a public statement, he would change the outcome.
I was also interested in the question of fragility. The Russian government is now highly ineffective, with no central co-ordination of the ministries. The presidential propaganda machine is having to work harder and harder to keep their man's rating at 70%. Whereas it used to need just one hour of air-time a day: now it's two. Most Russians think that the country is going in the wrong direction - strange given that it is awash with oil revenues. It's a tantalising prospect for a presidential candidate: plenty of people might vote for you - but they won't hear your message because the media is so tightly controlled. Kasyanov says that whoever the Putin camp picks as their candidate, the election aftermath may be bumpy.
Perhaps wisely, he refrained from criticising, even privately, his ex-boss. He said that everything had been fine until the Beslan terrorist attack, which had given the hardliners in the Kremlin the chance to start restricting democracy. But he did concede that the attacks on Mikhail Khodorkovsky's Yukos and on the television empire of Vladimir Gusinsky, had been regrettable. And Kasyanov also let slip that Putin had repeatedly tried to get onto "Misha" terms with him, but that he in turn had insisted on maintaining the formal "Vladimir Vladimirovich" and "vyi" forms of address.
But the big question that I and the other lunch guests were interested in was "what should the west do". And here Kasyanov's message was much harder to understand. He strongly advised against bringing Georgia and Ukraine into NATO and said that US Vice-President Dick Cheney's hawkish speech in Vilnius had been most unhelpful. The west should criticise Putin but not Russia and should do so respectfully, with attention to the country's economic achievements as well as the current rulers' political failings. And we should do so either when visiting Russia, or at home, but definitely not in "third countries". Doing otherwise will strengthen the bad guys.
That seems very odd to me. Russia is increasingly nasty at home and abroad - and the main pro-western challenger for the presidency says that we shouldn't defend its victims, for fear of making things worse. It's a familiar tune from the past ("give us what we want or it'll get much nastier"). But here it is again, coming from rulers and opposition alike.