by Fred Guterl October 17, 2005. Newsweek
Of all the stories people tell, the least grounded in fact tend to be those about origins. Only a few decades ago, Christopher Columbus was the discoverer of America and a hero of the second-grade classroom. In recent years, however, Americans have moved toward a more brutally realistic view of their nation's beginnings. Now teachers are more likely to depict the slaughter of Native Americans at the hands of European settlers, and to paint Columbus as a ruthless tyrant who put peaceful, nature-loving natives in chains.
Despite this coming-to-terms, Americans have clung to certain founding myths. One is the notion that Europeans came to dominate the continent because they possessed superior technology and culture. Another is the idea that Native Americans coexisted side by side with natural wilderness without imposing on it. In "1491: New Revelations of the Americas Before Columbus" ( 465 pages. Knopf ), author Charles Mann demolishes both of these myths.
Mann pulls together in a thorough and readable volume years of scholarly work--little of which, to the author's surprise, has made its way into the popular sensibility. As a child, Mann (now 50) was told the story of early English settlers struggling to survive in the New World. A friendly Indian named Tisquantum teaches these Pilgrims how to plant maize and live on the edge of the wilderness. The story may be true enough, but Mann paints a more complex picture of mutual distrust. When a rogue English officer kidnaps a handful of natives, Tisquantum among them, tribal leaders declare themselves permanently hostile to all European settlers.
The Europeans might have been driven from the shores of Massachusetts forever, or at least faced the prospect of a costly war, had their diseases -smallpox and hepatitis, among others- not acted quickly to vanquish the natives. Technology, says Mann, wasn't the decisive factor. Contrary to popular wisdom, natives lost their fear of guns when they realized how hard they were to aim. Bows and arrows, by contrast, proved more accurate and had a longer range. The climatic battle never occurred. When Tisquantum returned to Massachusetts a few years later, he found that his tribe had been wiped out by disease.
Technology and social organization, Mann argues convincingly, were, if anything, more advanced in the Americas than in Europe. In 1491, the Incas ruled "the greatest empire on earth," in part by pulling off a unique feat of adaptation: they exploited the rugged terrain of the Andes by fashioning an economy based on trade among the different ecosystems- fish from the coast, maize from the foothills, llama jerky from the Andes.
The Native Americans were far more populous than previously thought, say scientists. Feeding themselves would have required cultivation of nature on a massive scale. The New World wasn't wild; it was a vast garden, shaped by human hands. Why isn't this taught in American schools? Perhaps because it isn't a convenient object lesson in conservation, Mann says. Some myths die harder than others.
Thursday, 30 September 2010
Tycoon takeover
by Christian Caryl April 19, 2004. Newsweek.
It's no secret that a handful of "oligarchs" dominate the Russian economy, but until now the details have been murky. No one knew all the names in the oligarchy, exactly what they own, how many industries they dominate or to what effect. Are oligarchs leading the modernization of Russia, as they claim, or crippling progress? Answers have been hidden behind the thicket of shell companies that still obscure Russian accounting. "This is an absurd situation," says the World Bank's chief economist in Russia, Christof Ruehl.
"It is one of the biggest countries on earth and no one knows how concentrated the economy is."
The World Bank dispatched dozens of researchers to cut through the murk and produce the first clear view of just who controls Russia. Last week it released the surprising findings: the 23 biggest oligarchs control 35 percent of industrial sales, high by European standards but less than the 50 percent claimed by earlier estimates. The oligarchs do dominate the heights of the Russian economy--including oil, gas, metals, autos and banks--but not much else. They have only a 2 percent share of the fast-growing service sector. Yet they may also be a bigger threat than even some pessimists thought.
The World Bank echoes those who say Russia's recent boom is a precarious "jobless recovery," with annual growth inflated by high oil prices, productivity built on restarting empty factories, and a fat public sector growing fatter. To create lasting economic growth and diversify away from oil, these bears argue, Russia needs to create a more efficient private sector, on which the oligarchs now act as a drag.
Some of this is the fault of Soviet central planners, who built standardized factories and cities and spread them across the breadth of Russia, creating a unique industrial structure that makes no economic sense. Most factories are too big, in the 1,000-worker range, and cities too small, around 500,000 to 1.5 million people. When leaders began to privatize the economy in the 1990s, they sold factories one by one, creating one-plant companies; again, the plants are too large and the firms too small. What Russia needed were efficient conglomerates like General Electric or Siemens. What it got were oligarchs--cutthroat bosses who own many firms but run most badly.
The World Bank distinguishes the bad from the good, focusing attention on the men Ruehl describes as "classic robber barons." Typically, they are bankers who in the mid-'90s granted free loans to the Kremlin in exchange for shares in state companies, handed out in rigged auctions that the bankers themselves often ran. The report doesn't name names, but bank insiders say the "classic" examples are Vladimir Potanin, Roman Abramovich and Mikhail Khodorkovsky.
All three are in the top 10 of the new World Bank list of 23 major oligarchs (chart). Khodorkovsky was recently jailed on tax charges after he threw his billions behind political opponents of President Vladimir Putin. The others have stayed out of election politics and thrived, gaining a general reputation in global markets as a necessary evil--a positive influence on the Russian economy at this stage in its transition from communism to capitalism
The World Bank finds the opposite: labor productivity is lower in companies run by oligarchs than in every other kind of enterprise--other than those still owned by the state. (This is controversial: two Russian researchers who worked on the report say the evidence does not fully support it.) Less debatable: small businesses are now the most significant source of desperately needed new jobs in Russia.
The oligarchs undermine such small businesses. The bank studied regions in which local government had been "captured," meaning that one business won more than half of all preferential legislation--tax breaks and the like--between 1996 and 2002. The top 23 oligarchs as a group won fewer favors than other businesses. But the robber barons won 20 percent more. And they did so at the expense of competitors, who saw sharp drops in profit and productivity. Where smaller businesses or foreign companies received preferential treatment, rivals didn't suffer -or in some cases actually gained. Why? Local legislatures normally weigh the special pleading of businessmen against other interests, but it's hard to resist big tycoons who can threaten to throw thousands out of work if they don't get their way. "They are ruthless," says Ruehl. "After all, that's how they got their fortunes in the first place."
Aluminum tycoon Oleg Deripaska, for instance, "captured" the government of the Krasnoyarsk Krai region of Siberia in 1999 and 2000. Deripaska won tax breaks, discounted rail-freight and electricity rates. Local business groups protest that they pay far higher electricity bills than Deripaska's plants, but such firms are no match for oligarchs. "They all have their people in federal government, in the bureaucracy. Their lobbying takes place in a matter of seconds," says Alexander Spiridonov, who owns a dental clinic and three stores in Krasnoyarsk.
The upshot of all this is that Putin needs to launch a broader campaign to restrain all the oligarchs. Critics like the World Bank say Russia needs to encourage both the downsizing of its oversize factories and the consolidation of its undersize companies. They recommend opening the economy to more foreign competition, encouraging mergers and acquisitions in hopes of transforming the oligarchs' holding companies into Russian versions of GE. At the same time, the country needs an aggressive trust-busting agency to break up the monopolies run by the oligarchs, much as America did with its own robber barons in the 1920s. Rather than jailing personal foes like Khodorkovsky for political reasons, Putin would do well to loosen the grip of all the top oligarchs, for the sake of Russia's economy.
It's no secret that a handful of "oligarchs" dominate the Russian economy, but until now the details have been murky. No one knew all the names in the oligarchy, exactly what they own, how many industries they dominate or to what effect. Are oligarchs leading the modernization of Russia, as they claim, or crippling progress? Answers have been hidden behind the thicket of shell companies that still obscure Russian accounting. "This is an absurd situation," says the World Bank's chief economist in Russia, Christof Ruehl.
"It is one of the biggest countries on earth and no one knows how concentrated the economy is."
The World Bank dispatched dozens of researchers to cut through the murk and produce the first clear view of just who controls Russia. Last week it released the surprising findings: the 23 biggest oligarchs control 35 percent of industrial sales, high by European standards but less than the 50 percent claimed by earlier estimates. The oligarchs do dominate the heights of the Russian economy--including oil, gas, metals, autos and banks--but not much else. They have only a 2 percent share of the fast-growing service sector. Yet they may also be a bigger threat than even some pessimists thought.
The World Bank echoes those who say Russia's recent boom is a precarious "jobless recovery," with annual growth inflated by high oil prices, productivity built on restarting empty factories, and a fat public sector growing fatter. To create lasting economic growth and diversify away from oil, these bears argue, Russia needs to create a more efficient private sector, on which the oligarchs now act as a drag.
Some of this is the fault of Soviet central planners, who built standardized factories and cities and spread them across the breadth of Russia, creating a unique industrial structure that makes no economic sense. Most factories are too big, in the 1,000-worker range, and cities too small, around 500,000 to 1.5 million people. When leaders began to privatize the economy in the 1990s, they sold factories one by one, creating one-plant companies; again, the plants are too large and the firms too small. What Russia needed were efficient conglomerates like General Electric or Siemens. What it got were oligarchs--cutthroat bosses who own many firms but run most badly.
The World Bank distinguishes the bad from the good, focusing attention on the men Ruehl describes as "classic robber barons." Typically, they are bankers who in the mid-'90s granted free loans to the Kremlin in exchange for shares in state companies, handed out in rigged auctions that the bankers themselves often ran. The report doesn't name names, but bank insiders say the "classic" examples are Vladimir Potanin, Roman Abramovich and Mikhail Khodorkovsky.
All three are in the top 10 of the new World Bank list of 23 major oligarchs (chart). Khodorkovsky was recently jailed on tax charges after he threw his billions behind political opponents of President Vladimir Putin. The others have stayed out of election politics and thrived, gaining a general reputation in global markets as a necessary evil--a positive influence on the Russian economy at this stage in its transition from communism to capitalism
The World Bank finds the opposite: labor productivity is lower in companies run by oligarchs than in every other kind of enterprise--other than those still owned by the state. (This is controversial: two Russian researchers who worked on the report say the evidence does not fully support it.) Less debatable: small businesses are now the most significant source of desperately needed new jobs in Russia.
The oligarchs undermine such small businesses. The bank studied regions in which local government had been "captured," meaning that one business won more than half of all preferential legislation--tax breaks and the like--between 1996 and 2002. The top 23 oligarchs as a group won fewer favors than other businesses. But the robber barons won 20 percent more. And they did so at the expense of competitors, who saw sharp drops in profit and productivity. Where smaller businesses or foreign companies received preferential treatment, rivals didn't suffer -or in some cases actually gained. Why? Local legislatures normally weigh the special pleading of businessmen against other interests, but it's hard to resist big tycoons who can threaten to throw thousands out of work if they don't get their way. "They are ruthless," says Ruehl. "After all, that's how they got their fortunes in the first place."
Aluminum tycoon Oleg Deripaska, for instance, "captured" the government of the Krasnoyarsk Krai region of Siberia in 1999 and 2000. Deripaska won tax breaks, discounted rail-freight and electricity rates. Local business groups protest that they pay far higher electricity bills than Deripaska's plants, but such firms are no match for oligarchs. "They all have their people in federal government, in the bureaucracy. Their lobbying takes place in a matter of seconds," says Alexander Spiridonov, who owns a dental clinic and three stores in Krasnoyarsk.
The upshot of all this is that Putin needs to launch a broader campaign to restrain all the oligarchs. Critics like the World Bank say Russia needs to encourage both the downsizing of its oversize factories and the consolidation of its undersize companies. They recommend opening the economy to more foreign competition, encouraging mergers and acquisitions in hopes of transforming the oligarchs' holding companies into Russian versions of GE. At the same time, the country needs an aggressive trust-busting agency to break up the monopolies run by the oligarchs, much as America did with its own robber barons in the 1920s. Rather than jailing personal foes like Khodorkovsky for political reasons, Putin would do well to loosen the grip of all the top oligarchs, for the sake of Russia's economy.
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