Doug Casey on the Russian Bear

(Interviewed by Louis James, Editor, Conversations with Casey

L: Doug, I'm in Belarus this week, a pit stop to help some of my students with their various business ideas. I'm struggling with my Russian, but getting along. And that has me thinking about Russia's role on the global economic stage. I know this is something you've given some thought to… What do you think? Is Putin out to take over the world? What do investors need to keep in mind?

Doug: Well, the first thing to keep in mind is that any time you're talking about a large group of people, I think it's about 150 million in Russia's case, it's hard to generalize. Russia makes headlines, being one of the BRIC countries (Brazil, Russia, India, China), which are "emerging" economies seen as a sort of wave of the future. But I have to say that Russia doesn't really belong in this group. We may lose some Russian readers by my saying this, but while Russia has a lot of resources and should have a bright future, I don't think it will.

L: Whoa, I didn't see that one coming. Why?

Doug: There are many reasons, and it's hard to tease out which one is the most important driver, but taking it all together, including Russia's history and resulting culture, I just don't see that Russia has The Right Stuff. That culture, which is transmitted explicitly, verbally, and more subtly, attitudinally, is one shaped by centuries of state oppression. It has strong streaks of isolationism, collectivism, and brutal authority. Russia's long history is full of sadness, fear, and violence. It's been relatively calm for the last few years, but that's a drop in the ocean of Russian tears.

L: Hm. They suffered under the Tsars, threw them out, only to get a greater tyranny in the form of a totalitarian socialist regime, which actively suppressed the kind of individual creative virtues that make for success on the global economic stage. I guess I could see that as a cultural handicap…

Doug: Think of it this way – if you keep mowing down the tallest poppies in a field of poppies, pretty soon you don't get many tall poppies. It's a not a survival trait to stand out in a field like that. It would be politically incorrect to suggest that various cultures have encouraged and suppressed different character traits to such a degree that there are now subtle genetic differences between people of different cultures – but I think it's possible. It's like Darwin's finches in the Galapagos. And breeds like the poodle, dachshund, and shar-pei – which are all pretty different – that evolved in historic times. Vive la difference. Thousands of years hence, when mankind has spread throughout the galaxy, we'll undoubtedly evolve into different species. Just as there were numerous different hominids on the planet until homo sapiens sapiens decisively started taking over perhaps 40,000 years ago.

L: Well, I could imagine decades of brutal selection under the Soviets resulting in a greater incidence of timidity and acquiescence among Muscovites, and a greater tendency towards independent, rebellious thinking among the survivors in Siberia and other places the Soviets sent troublemakers they didn't kill outright.

Doug: I don't think there are any statistics on this sort of thing, but that's my general impression. I first went to Russia in 1976, which was right at the peak of the Cold War. At the time, the whole place had the feel of an armed military camp. I've been back three or four times since then, and there have been great improvements, at least in the big cities. But once you get out of Moscow and St. Petersburg, it's really still pretty backward. Shiny new buildings in the capital don't alter the fact that most of the people across the country live in towns and villages that are aging, run-down, depressing, and poor. It seems like most of the smart, upwardly-mobile Russians have emigrated long ago. Or at least moved to Moscow.

To make things worse, there's a big problem in that culture with alcohol abuse, especially among the men.

L: I've seen that in my travels in Eastern Europe, but you're such a bon vivant, it's a bit surprising to hear you pointing to this as an important variable.

Doug: You've seen me drink, but you've never seen me drunk.

L: That's true.

Doug: I'm far from a prude, but many of these people don't just drink too much, they drink way too much. I'm not talking about having a great party; I'm talking about alcoholism, which is a real fault. And chronic, widespread alcoholism is a serious social problem.

L: Sure enough.

Doug: And that's not all. The population seems to have fallen into a terminal decline curve. It takes about 2.2 children per female to maintain a stable population, and in Russia, the birth ratio is down to something like 1.2 - 1.4. This is not just a decline; the population is actually collapsing. That's true of most of Europe, Japan and other relatively advanced countries as well, so it's not just a Russian problem, but when you add this factor to Russia's other problems – like a high death rate – the future looks considerably less bright.

L: That fits, I guess… I just hadn't thought of it. I'm told that in Belarus, I would be considered a "Hero Father" by the state and eligible for extra benefits because I have five children. Minsk isn't Moscow, and I find Belarusians to be quite different from Russians, especially on moral issues, but Belarus still has a very state-controlled economy – perhaps the most Soviet-style economy left in the world today. It's hard to create new businesses here and most young people simply don't see many opportunities. So they put off having children… If that's the culture in Russia too, I can definitely see the problem.

Doug: I don't know how much the population collapse relates to perceived lack of opportunity, the alcoholism, a remnant culture of fear from the Soviet era, or any number of other variables, but it's a very serious problem.

L: And this isn't a problem for which one can look to history for solutions. Effective, widespread birth control is a recent innovation. And in the agrarian economies we've known for most of history, having a lot of children was a good thing; they helped on the farm.

Doug: That's right, kids were financial assets then. They were your pension plan, if you had enough that some might survive to look after you, if you were lucky enough to reach old age. In an industrial, urbanized setting, they are expensive liabilities – at least from an economic point of view. And in the modern world, the state is supposed to steal money from everyone else to take care of you in your old age. So, if people feel less economic necessity and, perhaps subtly or not so subtly, that their world is not the nice place they want to have kids in, it's hardly surprising to see birth rates falling across the developed world.

L: Hm. As you say, this doesn't apply to Russia alone. I wonder why we don't hear more about this problem?

Doug: Well, since Paul Ehrlich wrote his famous book, The Population Bomb, and perhaps farther back, since Malthus' paradigm-shifting 1798 Essay on the Principle of Population, overpopulation has been the bugaboo of intellectuals around the world.