World-System (1980-2060) Five Futures for Russia (one surprised me)

 

Now that the Syrian Regime has collapsed (here), questions about what the collapse will mean for Russia are begin discussed (here). Russia did not intervene when rebels overran the Syrian capital and the question is "why" given that Syria fought not be become a Russian puppet state (a topic I will cover in a future post). In this post, I will concentrate on some possible future geopolitical alignments for Russia, one of which is to go it alone (BAU). One of the interesting and controversial models is to link to the EU, which would be by far the best choice for Russia, the least likely to happen in the medium term future and certainly the least discussed openly right now.

The graphic above presents five futures for Russia based on the RUL20 model (here):

• BAU The Business As Usual model is unstable and cyclical (you can run the model yourself here). BAU is a fairly good model but not the best model (91.26 < AIC = 130.2 < 163.5). Unfortunately, the BAU model encourages military expansion because currently Russia needs Ukraine to prevent a Malthusian Population Crisis (to be covered in a future post).
  
  
• RW The Random Walk model would be best interpreted as a descent into Chaos, today being like tomorrow except for random shocks. The RW is actually not a bad competitor model for Russia (110  < AIC =  128.9 < 147.3) and may be quite likely if Russia looses the War in Ukraine.
  
  
• W Rather than isolating itself (BAU model), the World Linkage model assumes that Russia becomes an Open Society with Political and Economic links to all countries in the World-System (right now, Russia is a Semi-peripheral authoritarian country trying to become a Core country through military force). The W-Linkage model is not a very good competitor (126.4 < AIC = 155.6 < 190.1) and retains the unstable cyclical nature of the Russian System.
  
  
• US Linking to the US has never been seriously pursued in Russia, although the Glasnost period in the 1980s is about as close as the two countries came (67.98 < AIC = 114.3 < 150.7)--maybe because it would lead to cyclical collapse for Russia. 
  
  
• EU Russia joining the European Union (EU) is, to me (somewhat surprisingly), the best option (of the models considered here) for Russia (58.25  < AIC =  102.2 < 144). It would allow Russia to continue growing exponentially and benefit from trade with the EU (particularly oil, natural gas and agricultural trade with Ukraine). Maybe this dream scenario will happen at some time in the distant future, but I am not holding my breath.

There are certainly many other futures for Russia, but the graphic above seems to bracket the options from continued exponential growth to collapse. Let's just assume that Business as Usual with continued military expansion is, at least in the short run, the best prediction. To me, since the BAU model is cyclical and in the process of heading for a downturn (as of 2024), the best response would seem to be to keep supporting Ukraine and allow Russia to continue on the path of cyclical downturn. This does not seem to be the preferred path of the New Trump Administration in the US, starting in 2025.

Notes

Data taken from the World Development Indicators (WDI). All variables are in standard scores. The methodology used to create forecasts is similar to the one used by the Atlanta Federal Reserves GDPNow app. Prediction intervals are generated using a Bootstrap algorithm in the R programming language. The Akaike Information Criterion (AIC) is used for model selection.

You can run the RUL20 BAU Model here. You can change any coefficients in the System Matrix, F, to see what effect your changes will have on the system. Reasonable counterfactual values can be determined from the coefficient bootstrap confidence intervals:

LCI is the lower confidence interval and UCI is the upper confidence interval. In probability, the system can clearly be stabilized.

You can also run the EUL20 model here.

There is a small cottage industry of articles on Russia's Future many of them envisioning "Five" futures. Most of the articles are behind paywalls but here is one you can read from Casey Michel at The Atlantic Coouncil.

The Axis of Evil

Russia, China, North Korea and Iran: A new Axis of Evil? No.

Alternate Futures for the US

 

The graphic above (click to enlarge) shows four alternative futures for US1, an index of overall growth in the US SocioEconomic System (see the measurement matrix below). It is based on computer simulations of alternative estimated state space models. I would argue that the graphic says a lot about why US voters decided the way they did in the 2024 Presidential Election and what we can expect from the new, Right-Wing Republican Administration after 2025.

First, why did the MAGA movement embrace an extension of the American First isolationist movement? The Foreign Policy of the Obama Administration (2009-2017) was directed toward the World System and was not Isolationist. The World System input model (W) in the graphic above put the US on a slower overall growth path (dotted green line). I would argue that voters were well aware that growth of the US Economy and the US standard of living was slowing (see Economist Kathryn Ann Edward's comments here). The realization led to a Right-Wing backlash (the same thing that happened in Germany during the Inter-War (WWI-WWII) Years, see Arno Mayer's The Persistence of the Old Regime).

Second, the President-elect's policy pronouncements and transition plans suggest abandoning the World System and doing everything possible to stimulate unlimited endogenous economic growth in the US: eliminating regulation, ignoring white-collar crime, closing borders to immigrants, abandoning environmental regulation (allowing businesses to exploit free environmental resources), eliminating labor regulation (a restraint on profits), dismantling the Welfare State, slashing business taxes (another restraint on profits), eliminating funding for and control over education (a stimulus to wage growth and a limit on profits), etc.

The red and the blue dashed lines in the graphic above show possible time paths for the US Economy unleashed.  The models predict uncontrolled, unending exponential growth for the US System. They are, I would argue, a business man's fantasy. Nothing can grow forever and eventually limits will be reached (my models suggest sometime after 2050). Most of us living at the present moment, me included, will be dead by then. It will be someone else's problem.

There is another possible time path for the US SocioEconomic System: the Random Walk (RW, the solid line in the graphic above). No one can know the future. Attempts to dismantle failing US Institutions may or may not happen as imagined. The new Administration's cabinet picks, so far, are not reassuring. Essentially, in a Random Walk, today is like yesterday except for random error, actions by people who are making it up as they go along. 

I am always surprised that commentators can seem so confident about what happened in the 2024 Presidential election and what will happen as a result of it. I'm not. My advice for the future is to take defensive positions and not follow Economic Bubbles that might develop in response to crippling of US regulatory institutions. 

We know our current systems are failing and need to be rebuilt. In future posts I will look more carefully at all of these systems.

US Measurement Matrix

The graphic at the beginning of this post applies the weights from row [1,] of the state space measurement matrix to 36 indicators of US development from 1950-2010. After 2010, the results are simulated from four state space models: RW (Random Walk), W (World System input), US (components from rows [2,] and [3,] in the measurement matrix), and BAU (a Business as Usual model with no inputs).

Measurement Matrix 

     L.US.E. L.US.U. GDP.US.  GDP.C.  GDP.I.  GDP.X.

[1,]  0.1955   0.138  0.1978  0.1972  0.1961 -0.1402

[2,]  0.0669   0.200 -0.0462 -0.0554 -0.0355  0.0751

[3,] -0.0312   0.239  0.0284  0.0314 -0.0272  0.2229

      GDP.G. P.US.TBILL. P.CPAPER. P.FED.FUNDS.  P.CPI.

[1,]  0.1976     0.00429  -0.01554       0.0127 0.19773

[2,] -0.0377     0.40583   0.40460       0.3998 0.00996

[3,]  0.0541     0.07630  -0.00165       0.0986 0.02128

     P.GDP. P.SP500. V.NYSE. P.S.P.DPR. P.S.P.EPR.

[1,] 0.1967   0.1868   0.166     -0.146     -0.112

[2,] 0.0337  -0.1076  -0.131      0.144      0.128

[3,] 0.0240  -0.0277   0.165      0.321      0.384

     Q.H.Starts.   K.US.      M1      M2 P.WPI.    Q.A.

[1,]     -0.0202  0.1974  0.1953  0.1979 0.1932  0.1918

[2,]      0.0392 -0.0418 -0.0145 -0.0325 0.0612  0.0766

[3,]     -0.4666  0.0446 -0.0318  0.0472 0.1051 -0.0973

        Q.I.   O.B. P.FUELS. P.W.AG. P.W.MFG. Q.OIL.

[1,]  0.1967 -0.173   0.1834  0.1983   0.1990 -0.113

[2,]  0.0374  0.186   0.0269  0.0131   0.0125  0.312

[3,] -0.0683  0.110   0.2538  0.0489   0.0232 -0.145

       N.US. IMM.US.   U.US.   CAPU     EF Globalization

[1,]  0.1951  0.1440  0.1967 -0.141 0.1867        0.0818

[2,]  0.0746  0.0546  0.0477 -0.153 0.1096       -0.2964

[3,] -0.0642 -0.1371 -0.0589 -0.164 0.0303        0.3905

        CO2 Q.FOSSIL.

[1,]  0.180     0.129

[2,]  0.155     0.283

[3,] -0.110    -0.157

 Fraction of Variance 

 [1] 0.698 0.854 0.900

Atlanta Fed Economy Now

My approach to forecasting is similar to the EconomyNow model used by the Atlanta Federal Reserve. Since the new Republican Administration is signaling that they would like to eliminate the Federal Reserve, the app might well not be available in the future.

Hurricane Forecasting

My vision for SocioEconomic system forecasting is to follow the US National Oceanic and Atmospheric Administration's (NOAA) approach to hurricane (Economic Crisis?) forecasting using Spaghetti Models (see below).

Currently, Economic forecasting does not use Multimodel Inference but it is getting there! The best state space model for the US SocioEconomic System in the graphic at the beginning of this post is the World System (W) model based on the AIC Criterion.

Climate Change

Another comparison for what I have presented above are the IPCC Emission Scenarios. These scenarios are for the World System. Needless to say, the new Right-Wing Republican administration plans on withdrawing the US from all attempts to study or ameliorate Climate Change.