Johnson’s Russia List #6200, April 21, 2002
In his recent State of the Nation address, President Putin appeared to be mystified by the strange performance of Russian economy. Putin noted that the country was getting huge revenues from oil and gas, and yet failed to grow at a rate sufficient to catch up with many resource poor and relatively backward economies. Putin also noted that Russian bureaucracy is actually smaller than in many other countries, and yet its negative impact on the economy is immeasurably greater. Putin posed a question, but did not give the answer. Yet, the answer is simple: Russia lacks a new sophisticated social technology, a technology of win/win.
It is 9 am in America, and Americans get to work. They will now be engaged in a huge variety of tasks, but all these tasks would have a common denominator: they will be engendered and determined by the desire to cooperate. In America, a road policeman is there to keep the traffic offenders off the road, a state is there to create and maintain public goods, a pizza place is there to serve pizza.
It is 9 am in Russia, and Russians get to work. Many work hard to produce goods and services, just as Americans do. But almost as many people are engaged in a different type of activity: they impede, destroy, steal, misuse, divert, intimidate, lie, and cheat. The working day of these people is determined by their inability to cooperate, to achieve outcomes that are mutually beneficial. In Russia, a road policeman is there to fleece the innocent, to create dangerous road situations, to make drivers feel bad about themselves and their country, but not to keep the traffic offenders off the road. Russian state diverts and destroys huge percentage of public wealth, kills, maims, and insults its citizens, but does not create and maintain public goods. A Russian pizza place has no customers and does not serve pizza: it is a front for a money laundering operation and a place where gangsters drink beer between robberies.
Economic statistics tell us that Americans produce thirty times more per capita than do the Russians. But how is it possible? An INDIVIDUAL American does not produce thirty times more than an INDIVIDUAL Russian. I worked both in Russia and in America, and my rough estimate would be that because of skills, technology, and better time management, Americans are maybe five times more efficient. It means that the lion’s share of the difference comes from the way the individuals COOPERATE. In America, individual efforts ADD UP or even MULTIPLY. In Russia, an accomplishment is defined as overcoming best efforts of others to prevent your success.
Here is an example. Children play in two sandboxes. In one sandbox, we see two pies, and in the other - only one. We conclude that the productivity of labor in the first sandbox is twice as great as in the second sandbox. But is it really so? In the first sandbox, Lisa made a pie and Hanna made a pie, so there are two pies altogether. In the second sandbox, Vic made ten pies, but Mike destroyed nine of them, and so only one pie remains. It takes the same amount of labor to make a pie as to destroy one, and that means that the boys could have made nineteen pies, nineteen times as many pies as we saw. To make this example more lifelike, we should say that Vic could have made twice as many pies but did not as he knew that Mike was going to destroy them anyway. What does that tell us? It tells us that Vic’s real productive capacity is twenty pies, while Mike’s real destructive capacity is nineteen pies. Boys’ real productivity is thus thirty nine pies, thirty nine times more than we originally thought.
Russian labor productivity per capita is indeed thirty times less than in the US. But it does not mean that an average Russian works for ten minutes a day or that it takes five Russian men to lift a sack of potatoes weighting ten pounds. All it means is that one group of Russians destroys ninety percent of whatever the other group of Russians creates during the day. When Soviet Union collapsed, there were thirty times as many cars in the US as in Russia. But there also were ten times more tanks in Russia as in the US. While the productivity of creative labor was thirty times greater in the US, the productivity of labor oriented towards destruction was ten times greater in Russia.
For most of human history, people lived according to the principle of win/lose. It was either you have got this thing or I will get it. There were many wars, and the wars had clear objectives: should this piece of land be yours or mine. But the World War One did not turn out that way: it was a lose/lose war. And after this war, some countries, notably Russia and Germany, discovered a magnificent, towering magic of sustainable lose/lose existence. Lose/lose is like antimatter in physics: it redefines your goals and transfers you into a different realm of existence. (I would not talk at length about it here, as it is a rather sophisticated subject, and a subject of my new book, Russia: Where Lose/Lose Wins Out, still unpublished, but available to JRL readers upon request.) Suffice it to say that Hitler, Stalin, Mao, and Kim were loved, worshipped, and adored more than any other human beings in history, and it was so for a reason. And here is the reason: lose/lose profoundly satisfies all participants in the lose/lose interaction. This is what makes a lose/lose society so sustainable and strong.
A period of West European history from 1914 to 1945 could be called “a period, that showed to Germany and France that a win/lose type of interaction is simply the worst”. It was either the lose/lose or the win/win. Right after the WWII, there was a moment of indecision, with the French Communist Party becoming very strong. But fortunately, the American Army was there with its nylon stockings and chocolates, and with its tanks as well, and so the French reluctantly opted for the win/win.
Win/win is the newest social technology, born and developed in America. It is the most sophisticated technology America has today and the single most important source of America’s strength. Even in America, this technology is very new. When Martin Luther King delivered his “I have a dream” speech, he was calling for a win/win solution and, historically speaking, it is a very recent speech. Yet, we are moving in this direction. There is no denying that USAID does not have an eagle or a missile on its logo: its logo actually features a handshake. I also fondly recall a fine CIA motto “It’s time to know more about each other”. I invite you to appreciate the reciprocity.
America leads the world in the number of win/win technologists: lawyers (I must be mad!), law enforcement, social workers, medical professionals, bureaucrats in the good sense of the word. Shrinks and sex therapists also should not be forgotten. And their work brings tangible results: everybody works in the same direction, produces rather than to destroy, so that individual efforts add up or multiply.
It is this entire industry that Russia absolutely lacks, and that is why its economic progress hinges on how fast it can steal, divert, or misuse its own oil revenues.
This is a fundamental problem, and there is no fast and easy solution. Here is the root of the problem: Russian people still consistently choose lose/lose over the other two types of interaction. Russian productivity is determined by impediments to destruction. And Putin, if he is to succeed, must concentrate on destroying those who destroy.
In a recent gubernatorial election, a challenger made the following speech:
“I want all of you to live better. I have achieved personal success, I know how to achieve success through honest work and cooperation. Now I want to use this knowledge and experience to serve you. I do not want to use the state as instrument of achieving my personal goals: I want the state to be an instrument of achieving your goals, an instrument that would make your life better. But to live better, you have got to want it, and if you do, together we will win, and together we will make our life better.”
And then the governor made the speech:
“You riff-raff out there, listen up! We have got elections coming up, next Sunday. You all have got to come and vote for me. I can’t take each of you by the ear and take to the polling place, but I can sure as hell deal with you later, by turning off your gas, heat, or whatever. I will be the governor, because clearly I am the worst. There were other contenders, but I poked my finger into their eye, and they are running for their lives now. I am not gonna do nothing for you, you stinking lowlifes, because you know you don’t deserve it. I am done talking. Next Sunday, each and every one of you!”
Well, the challenger got 12% and the governor got 45% (and went on to win in the second round). The rest were drinking, fishing, or do not watch TV. And, unfortunately for Putin, the results fully reflect the reality. Only 12% of the Russians do not find the challenger’s speech incomprehensible or offensive. An overwhelming majority of the viewers find the governor’s speech adequate and fair, fully corresponding to their view of themselves. Obviously, this is a catastrophic problem, but this is the reality.
Let me reveal a little secret. I participated in writing the challenger’s speech. But it was written in this manner because the niche of a thug had already been taken. We knew we were doomed, and we were hoping against hope.
Here are some conclusions:
The way to develop the economy is not to “employ” people, but to make sure that those who spend their working days trying to impede others are either unemployed or are employed productively. To succeed, a country should have MORE producers and LESS controllers and claimants.
We often hear that a rich country gives a poor country a certain amount of monetary aid. This is rarely necessary and never effective. Effective aid could come only in form of psychological restructuring that would teach the people the new technology of win/win.
The capacity for destruction of resources is limitless. If the United States were to transfer one half of its GNP to Russia, year after year for a hundred years, Russia will still be at least as poor as it is now. As for the United States, if it were compelled to give half of its GNP away for a hundred years, its economy would readjust in such a way that this loss would have almost no effect on the well-being and wealth of its population. In Russia, we have an unlimited capacity to destroy; in the US we have unlimited capacity to create. Hitler killed six million Jews, but could have killed twelve million of them just as easily; Picasso could have easily created twice as many paintings.
There are two ways of increasing GNP in a particular country. You can improve technology, education, and labor productivity. But if the envious keep up with that, you would not be successful. We can call it the Shah of Iran Rule. If we restrict envy and liberate creativity, the most barren land quickly turns into a paradise. This could be called the Taiwan Rule. And that is all that Putin needs to know.