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Economic Growth and the Rule of Law

Economic Growth and the Rule of Law

Monday, 3 September, 2018 - 10:30
Vladimir Putin seems to have it all: Seemingly endless political power. Oil. A nuclear arsenal. What he doesn’t have, though, is the ability to breathe new life into Russia’s listless economy. And that is bad news for the country’s future – which has implications for the rest of the world.

More specifically, Putin can’t fix what ails Russia – slow growth, crumbling infrastructure and an unhealthy and aging workforce, for starters – without changing everything about how he rules, write Bloomberg’s editors: “Putin can have Putinism or a more prosperous Russia, but not both.”

Mark Whitehouse, who lived in Russia for a decade, including the years of Putin’s rise, and recently spent another informative month there, provides an essential history of Putinism. Essentially, Putin’s choices – seizing property to give to his supporters, crushing political opposition, invading neighbors – have made the country toxic for investment. Changing his approach now, however, could lead to his ouster and then, maybe, an even bigger mess. “If Putin can’t establish a rule of law, how does Russia get from where it is to a brighter future?” Mark asks. At the moment, it doesn’t seem possible.

Of course, underestimating Putin is dangerous too. Leonid Bershidsky examines the skill with which Putin is handling the uproar over his proposal to raise the retirement age – a necessary but unpopular step on the road to economic health. Open question: Will that artistry be enough to transform Russia, or will the rest of the world have to deal with a nuclear power in perpetual decline?

President Donald Trump’s trade war’s latest friendly-fire casualty is good old American alcohol maker Brown-Fofrman Corp. The company today cut its profit forecasts for the year, thanks to tariffs Europe levied in retribution for Trump’s. Brooke Sutherland points out that Trump’s chummy meet-and-greet with European Commission President Jean-Claude Juncker last month didn’t remove any of these tariffs, meaning Brown-Forman and other US exporters are still suffering. Trump may ultimately cut a symbolic deal with Europe as he did with Mexico. Still, Brooke wonders: “[H]ow many millions in profits will Brown-Forman and others have sacrificed before we get there?”

Trump’s aforementioned trade deal with Mexico seems to be focused on North America. But a lot of it – including its protections for intellectual property, labor rights and, most glaringly, shark fins –  seems aimed right at China, writes Christopher Balding. This suggests the Trump administration hopes to isolate and keep up the trade pressure on its Asian rival, Chris writes.

Such worries have been slamming Chinese stocks for months now, writes Shuli Ren – prolonging an earlier downturn over worries about government efforts to curb runaway borrowing. As a result, China’s stock market may be stuck in bear country for a long, long time.

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