Saturday, September 20, 2008

Karl's Weekend Reading

WSJ's Mary Anastasia O'Grady, in her op-ed Hugo Chavez's Russian Dalliance, expands the recent Russia-Venezuela cooperation to include Bolivia and all of Latin America. She adds perspective to Russia's motivations, Bolivia's struggling communist president Evo Morales, and Chavez's vision for Latin America.

Mr. Chávez is only too happy to be used. He thinks he's getting something in return. His Bolivarian Revolution -- a full-court press designed to impose communism throughout Latin America -- is in trouble, and as its popularity has waned, so too have his options for restoring confidence in his leadership. Yet there is still the fail-safe practice of Yankee-baiting. In the spirit of Fidel Castro, Mr. Chávez seems to believe that if the foreign devil can be painted as an imminent threat to sovereignty, the nation might rally behind him. This idea, shared by Bolivian President Evo Morales, explains not only Russian military tourism in the Caribbean but also last week's expulsion of the U.S. ambassadors to Caracas and La Paz.
It is true that Bolivia is witnessing a battle between regions for control of the nation's resources. But we are also watching a life-or-death struggle against the communist ideology that Mr. Morales -- also an admirer of Fidel -- wants to impose. He has admitted that Castro coached him on how to use the guise of democracy as a way of reaching his goal. Yet he hasn't been prepped to face resistance. His hard line has unified and emboldened his critics. Now he can no longer reach out to the governors without appearing weak.

Watch for finger-pointing, a new enemies list and show trials in Russia! Not a big news story in light of Lehman and AIG this week, but the Russian stock market has been closed for two days, having lost 55% in the past 4 months. The WSJ editorial, A Run on Russia, highlights the real reasons - putting the blame squarely on Comrade Putin, with well-deserved hits on the US State Department and those European 'powers'.

...the dive in Moscow began before the wider world cared about AIG's balance sheet, and its chief causes are home-grown. To wit, the bill for eight years of Putinism is coming due. And a Kremlin leadership that only weeks ago brimmed with menacing self-confidence is struggling to slow this financial free fall.

The first sign of trouble came in late July when Prime Minister Vladimir Putin lashed out at a Russian coal and steel company, Mechel, for alleged price gouging and appeared to threaten personally its chief executive. Mechel shares fell by a third, and the incident sent a chill through the market as a whole. Investors woke up to the systemic risk to property rights and the lack of any rule of law in Russia. They did so belatedly, we'd add, considering the attempted or successful expropriation of Yukos, BP and Shell assets and the blatant use of state resources to menace private business.

Another trigger was last month's war in the Caucasus.
As it has turned out, much faster than anyone realized or hoped during the Georgian war in August, Western governments haven't had to do anything to have Russia pay a price for its aggressive behavior. Which is fortunate, considering the weak stomachs in Europe and at the State Department for any serious response to the war. Investors did it for them.

The war has also exposed the fiction that Russia is the next China -- an authoritarian political regime that's stable, predictable and on a path toward becoming a free-market economy.

Garry Kasparov explains in his Friday WSJ article, Putin is Ruining Russia's Economy, the history that has led to the unfavorable business climate in Russia.

The market's collapse, down 57% since May, is linked to the dysfunctional nature of the Russian state and economy. Nearly every aspect of commerce in Russia is deeply entangled with state power, if not with Mr. Putin personally. This, for obvious reasons, does not comfort most investors.

Maybe the US State Department lacks any will to fight, but don't count on Mike Adams to surrender in his latest battle! The North Carolina professor has been invited to mandatory sexual harassment training. Having attended these in the corporate world, I can share his frustration and thank him for some great ideas for my next class. From his Townhall article, F.A.S.H.I.S.T!:

a new campus group called “Faculty Against Sexual Harassment Initiatives and Sensitivity Training” - or FASHIST. I’m the founder of the new group.
Those who join UNCW FASHIST will not attend the sexual harassment training sessions biannually as has been proposed. We will attend every single one of them. And we will interrupt the meetings – just like the radical protestors of the 1960s – with a lot of tough questions for the administration. Some examples follow:

Remember, Prof. Adams, "harass" is one word, not two!