Cultural and Institutional reality

A tragicomic story on what’s essentially a result of bad institutions in Moldova.

I enjoy Igor Cobileanski’s works a great deal, but I think he misses the point when saying that he’s only illustrating a cultural reality specific to Moldovan people. The truth is that there wouldn’t be any “cultural reality” that he’s so fond of had there not been the corrupt institutional system guiding peoples’ incentives and behavior toward unproductive and destructive activities.  What Cobileanski should really be getting at is not a romantic view on Moldova’s cultural reality as he states, but rather a disturbing institutional reality which, I believe, is sadly the case for all of the “failed” ex-soviet democracies (Moldova, Ukraine, Kazakhstan, Russia, Belarus, Azerbaijan, Kyrgyzstan, Uzbekistan, Turkmenistan).

Measuring “Doing Business in 2010″ – World Bank vs. Reality

Doing Business - World Bank 2010

In newly released “Doing Business 2010” report, World Bank has very good news! In 2009, pro-enterprise reforms went 20% up; Eastern Europe, Central Asia, Middle East and Northern Africa are world regions with the most reforms implemented per country.

Between June 2008 and May 2009, 287 reforms were recorded in 131 economies, 20% more than the year before. Reformers focused on making it easier to start and operate a business, strengthening property rights and improving the efficiency of commercial dispute resolution and bankruptcy procedures.Two regions were particularly active this year: Eastern Europe and Central Asia and the Middle East and North Africa. In Eastern Europe and Central Asia, 26 of the region’s 27 economies reformed business regulation in at least one area covered by Doing Business. Governments in the Middle East and North Africa are reforming at a similar rate, with 17 of 19 reforming in 2008/09. In both cases, competition among neighbors helped inspire widespread reform.

I am in particular cheery for Moldova. As one of the top 10 performers in reforming business, Moldova’s 2010 regulations are supposedly making it easier for local entrepreneurs to start up a business (“offers an expedited, 24-hour company registration service for an additional fee”), to register property (number of days to register land went from 48 to 6 days), and paying taxes (employers’ payments to social security funds went down).

However, I am skeptical about World Bank’s tools and methodology as far as measuring “de facto” versus “de jure” improvements in doing business over time in country X or Z.  Especially with respect to the rigid assumptions in their approach to target businesses: no corruption, no foreign trade, ltd. only, 100% local ownership, etc. Their narrow definitions of business assume away a lot of potential inhibiting factors ( increases in either formal, informal or both types of transaction costs) that could offset the new achievements in regulating business. A few new official business reforms, therefore, might not de facto translate into easier doing of business in Moldova or in any other country, just as it also might not say a lot about development.

Russian journalists – Enemies of the State?

Michael Specter, American journalist, talks about the series of murdered journalists since Putin became president.

13 Journalists have been killed since Vladimir Putin became president. They share a couple of chilling characteristics; one is ugly deaths, and the other one is that they were all opponents of the Kremlin.

In another more actualized article Jameson Berkow, a Canadian journalist, counts:

…21st to be killed since Putin became president in 2000, and the 44th since the fall of communism in Russia [...]

And here’s a comprehensive list of journalists killed in Russia. Tragic… think that these people lost the war for freedom – freedom from oppression, corruption, crimes, all injustices on the part of a violent state. And, if seeing how these murders still happen in the 21st century around the world doesn’t  infuriate you then sadly, if  all you feel is fear and hopelessness, you are a victim whose life and behavior have been altered as a results of years and years of living under a terror regime. But worse than all, if you don’t have these feelings, you might be “one of them” – one with power, one with no respect for human life, no respect for others’ freedom, no sense of morality, no conscience, and though you may hold vested power, nothing can justify your criminal actions.

In memory of my favorite  Russian TV anchor, murdered in 1995, Vladislav Listyev:

Gore Warming vs. Mother Nature

For the global warming skeptic/realists in you, here’s an excellent new cartoon by Glenn McCoy (copyright 2009 Universal Press Syndicate) to enjoy!

Trouble in the Silicon Valley. Blame USCIS

The US anti-immigration laws are bankrupting the Silicon Valley (Tech Crunch). H-1B – work visa – related costs and quotas impede American tech companies from employing foreign minds trained in American universities .

Running a business (profitably) is not easy; an economic crisis and the world wide competition in the industry will make sure you constantly optimize your costs and outputs. By all means, cutting back on costs is vital. In the tech industry’s case, firms look up cheaper yet highly skilled sources of labor – foreign labor. International students in US universities acquire virtually the same level of skills as their American colleagues, yet because of their lower opportunity costs in their home markets they will settle on mutually agreed lower wage rates with US employers. Cheaper yet equally or more productive labor will improve firms’ cost structure which in turn will lead to an increase in revenues, and maybe even profits!

Star gazing with NASA

Great picture of the Sun, Venus, Earth, Mars, Saturn, and our Moon. Which one is which is something that I will probably never be able to tell (except for Venus and the big ones) with naked eye.  Glad that folks at NASA can point them out.

Soviet (marginal) labor story

This is a page from a book of “Illustrated Russian language” which I often used at age 5-6 in my preparation for school, 1st grade, in the Soviet Russia.

We’re on page 59, and the new word to learn is “beet” (репқа). The 7-step beet  story  goes:

1. A peasant plants a seed. The second day finds a gigantic overgrown beet, big problem!

2. He tries and tries to get it out, all in vain. Calls he’s wife for help – nothing.

3. She calls their daughter for help – still not enough.

6. Dog comes – nothing.

5. Cat – nope.

6. Until finally, the mouse saved the day. Uraaa!

The moral of the soviet story was that the combined brute power of the family solved the difficult harvesting problem. The other hidden “moral” of the story was that the Soviet lands have the richest soils of all, things grow on it by themselves, just wait, the sole problem comes at harvest, the crops grow enormous, but of course, who would mind something like that;  in USSR there was no such thing as diminishing returns to labor.

The un-perverted moral of the story is that:

What makes soil a rich resource is its most valued use;  you can cultivate thousands of giant beets on your land, but if nobody wants beets, or if there are restrictions on how you could make use of it, than the whole agricultural dream is highly impoverishing. All in all, these sort of stories fooled people into dreaming and hoping for an overnight miracle that would pull them out of poverty. Unfortunately, the giant beet never came. Land plus labor and self sufficiency never was and never will be the key to prosperity no matter how fat the Soviet chernozem…

Finally, a call for a scary thought of brainwashing as education:

= besides seeing this story in my preschool books, I also had it printed on my toys. On cube games, the puzzle type of games when you have to rearrange the printed sides of cubes so that to reconstruct the whole picture.

The Stalin-Putin joke, or C КГБ Вперёт!

People at STAFORD Intelligence are celebrating “the 10th anniversary of Vladimir Putin’s assumption of a leadership position at the Kremlin” this weekend. Below is an excerpt from their “intelligent analysis” of Putin’s role for Russia:

[...] Russia is a tough place to rule, and as we’ve implied, STRATFOR is mildly surprised Putin has lasted. We don’t think him incompetent, it’s just that life in Russia is dreadfully hard and the Kremlin is a crucible, and leaders often are crushed swiftly. Before Putin took Russia’s No. 2 job, former President Boris Yeltsin had gone through no fewer than 10 men — one of them twice — in the position.

But Putin boasted one characteristic that STRATFOR identified 10 long years ago that set him apart. Putin was no bureaucrat or technocrat or politico; he was a KGB agent. And as Putin himself has famously proclaimed, there is no such thing as a former intelligence officer. This allowed him to harness the modern incarnation of the institutions that made Russia not just possible but also stable — the intelligence divisions — and to fuse them into the core of the new regime. Most of the Kremlin’s current senior staff, and nearly all Putin’s inner circle, were deeply enmeshed in the Soviet security apparatus.[...]

I am celebrating the spontaneous intelligence in this new joke with a good laugh; a joke so very popular these days among people of the ex-USSR…

Stalin’s ghost appears to Putin in a dream, and Putin asks for his help running the country. Stalin says, “Round up and shoot all the democrats, and then paint the inside of the Kremlin blue.” “Why blue?” Putin asks. “Ha!” says Stalin. “I knew you wouldn’t ask me about the first part.” (Source: wikipedia)

Whose crime?

“Isn’t it ironic…” :

… That a crime with ZERO harm involved is still possible in what is today the 21st century of civilization? That people are condemned by the state, but not by their victims (because they have none)?

In Romania, the selling/buying of human reproductive cells from individuals  fully informed, and fully capable to consent  is against the law.

“Isn’t it ironic?” II:

… That this is by law a crime denounced by the Romanian authorities and media as shocking, and highly regretful; and that it is considered a criminal case similar to those which ACTUALLY HAVE a victim and a perpetrator (theft, physical abuse)?

Why is it not obvious that there are no victims in this case, and that the only harm=crime arises from a stupid law prohibiting the legality=freedom of a vital market – in human organs – that solves the problem of scares resources for the well-being of the essential engine of humanity – the human being itself!

… “Don’t you think?”

Trade restrictions. Untangling WTO tariff statistics – Albania

My current research is focused on recent achievements in the state of trade and economic cooperation among a number of 13 countries in the Black Sea Region. Most of these countries have been enjoying independence for more then 18 years, which gave their governments (I insist) just about enough time to take advantage of the international division of labor by opening their markets (free the circulation of goods, services, labor, persons, enterprises, property rights in and out their territories, across jurisdictions)  to the global economy and implicitly to their neighboring economies. In my endeavor, I marched with a very simple (optimistic) question: ” Given there was some progress toward economic integration at the Black Sea in the last two decades, what is left to improve in terms of trade? More simply: What are the remaining barriers to trade in this region?” .

How hard can it be to find a clear answer to this? I imagined not that hard; for goods trade, for instance, I’ll just have to check with the WTO folks website… And so I did and,

I took Albania first and searched for its trade (tariff) barriers on wto.org:

-> Albania in the WTO -> Goods schedules and tariff data-> Albania Tariff Profile 2008 -> SUCCESS! -> this final summary of which the excerpt below basically says (correct me if I am wrong) that add-valorem tarrifs on imports of specified agricultural products do not go past 20% in the case of duties “bounded ” by the negotiations within the WTO setting, and not more then 15% in case of MFN (Most Favored Nation clause, non-discriminatory duties) agreements. The tariff range goes from 0% (duty-free) on a totally insignificant percentage of animal (0.1 ) and cereal (1.9) products imported into Albania, to 20%.

So far, it seems that imports under MFN agreements, unlike the rest, are a “privileged” category of products with lower maximum and average duties to be paid at Albanian customs. In reality, the numbers do not tell us much about the volume of transactions, do they? For instance, does it matter to know the simple average of all levels of customs duties applied on dairy products by Albania? For statistical records, maybe, but for economic interpretation, very little.

What would have been important to know in evaluating how restrictions on foreign dairy products on Albania’s market is not the simple, but the weighted average of import duties for each agricultural category. I could not find such information in WTO reports posted online.

Sure, I can find the trade flows data myself and then compute the averages, but then what is their role? Shouldn’t WTO issue (especially) qualitative reports that would make at least the average person understand the meaning of tariffs and why negotiations for tariff reductions is desirable for each country’s economic progress?

And I am not asking this because I am lazy to do that myself , I can do it! It’s just common sense. At some point, these giant organizations tend to loose the initial purpose of their whole existence…