Cyreenik Says
As this latest Malaysian Airlines plane crash crisis evolves, it continues to highlight Putin's ruthless leadership style. Ruthless leadership is something I wrote about back in 2002 and Putin continues to play by the playbook I outlined back then. He is now in a position where he can generate crises, and then have the local press say, "Look how scary this is. Isn't a good thing we have our Fearless Leader in power to protect us?"
There are some signs the locals, the Russians, may be tiring of this, but not many. On the whole he is stroking emotions well. Sadly, as is usually the case, he and those who like this style are getting more and more delusional and out of touch with harsh reality over the years. This will catch up with them. It is warping Russian culture and economy and another severe recession is coming.
But that worry is for another day, it seems. In this crisis Putin chose to cover up and pull Russian equipment out of the Ukraine rebel areas, rather than let the rebels hang for their beginner's mistake of using this new, fancy equipment they just got to shoot down the wrong plane.
This cover up choice plays well locally, but it will prove very costly in the international arena -- in that arena messing with commercial airline crashes stokes a lot of the wrong kinds of emotions for a ruthless leader's sustainability. Now we get to see which set of emotions will win out with the faceless leadership behind Putin in Russia. Has he become too much of an out-of-touch bozo? Someone who is now seen as leading Russia over the cliff and into the abyss? Or will he be permitted to continue?
Update: This 22 Jul 14 WSJ article, End to the Putin Puzzle? Ignore the Metternichs: What Putin fears is not the West but his own people. by Holman Jenkins, asks similar questions to mine. From the article, "The Sochi Olympics extravaganza, meant to suggest to Russians they are a world-class country with a world-class president, now looks like $50 billion down the drain. The Russian economy, already weighed down by corruption and cronyism and stunted development outside the government-controlled energy sector, is sinking fast under sanctions and capital flight."
And this This 26 Jul 14 Economist article, Web of Lies, also describes this ruthless leader leadership style and its up and coming bad consequences. From the article, "Under him Russia has again become a place in which truth and falsehood are no longer distinct and facts are put into the service of the government. Mr Putin sets himself up as a patriot, but he is a threat -- to international norms, to his neighbours and to the Russians themselves, who are intoxicated by his hysterical brand of anti-Western propaganda.
The world needs to face the danger Mr Putin poses. If it does not stand up to him today, worse will follow."
And this Buttonwood article from the same issue, Trillion-dollar boo-boo: Bad governments cost investors a fortune, explains another way Putin's ruthless leadership style is costing Russians: their poor-performing stock market. Ivan on-the-street Russian isn't going to notice this, but the oligarchs sure are. The graph in the article shows that this is something they have been putting up with for years, but that doesn't mean they aren't noticing, and wishing and hoping for an alternative.
From the article, "One trillion dollars. That may be the cost to Russian investors of Vladimir Putin’s rule. It is the equivalent of about $7,000 for every Russian citizen.
The calculation stems from the fact that investors regard Russian assets with suspicion. As a result, Russian stocks trade on a huge discount to much of the rest of the world, with an average price-earnings ratio (p/e) of just 5.2. At present, the Russian market has a total value of $735 billion. If it traded on the same p/e as the average emerging market (12.5), it would be worth around $1.77 trillion."
This 11 Aug 14 WSJ article, Russia and Markets: The Power of Weakness Investors Anticipating Resolution in Ukraine Are Missing Russia's Bigger Potential for Geopolitical Upset by Liam Denning, talks more about the triple whammy of Russia's aging demographics, low productivity and the popularity of Putin's geopolitical adventurism. This mix means the adventurism is not likely to end soon.
From the article, "Russia must boost productivity. Yet, measured as gross domestic product per hour worked, this was only around half the average for the Organization for Economic Cooperation and Development in 2012.
Reform—a perennial hope among Russia bulls—would help. But it is hard to see where the impetus will come from. The latest data from Russian pollsters at the Levada Center puts President Vladimir Putin's popularity close to an all-time high."
This 17 Jul 14 WSJ article, U.S. Says Missile Downed Malaysia Airlines Plane Over Ukraine by Paul Sonne, Alan Cullison and Julian E. Barnes, is one of dozens of articles about this most recent mystery airplane crash. From the article, "A Malaysian Airlines plane carrying 283 passengers and 15 crew crashed Thursday in the battle-torn east Ukraine region of Donetsk, where U.S. intelligence agencies say it was struck by a ground-to-air missile."
This is full panic time. Any airplane crash brings out the full media circus. Mix in mystery and the circus goes into full three ring mode. Mix that this is Malaysia Airlines 2nd mystery crash this year and... wow!
Expect Blunders to follow over the next month as media and politician-types try to react to this high-profile, high-scare situation.
It's Blunder Time, folks!
Update: This has proved too much for the company itself. This 8 Aug 14 WSJ article, Malaysia Airlines Set for Buyout, 'Wholesale Change' State Investment Firm to Overhaul Flag Carrier After Calamitous Year by Jason Ng, P.R. Venkat and Gaurav Raghuvanshi, says the airline's owner is taking it private to undergo a restructuring.
From the article, "KUALA LUMPUR—Malaysia's embattled flag carrier may soon face layoffs and board changes as part of plans to rebuild an airline that is struggling to fill seats after the losses of two planes and the deaths of 537 people.
The nation's state investment firm, which controls nearly 70% of Malaysian Airline System Bhd., on Friday disclosed a $430 million plan to take the airline private, a first step in a restructuring effort that aims to return it to financial strength."
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