1 comments about Overselling the Web?: Development And the Internet (Ipolitics).

1. OVERSELLING THE WEB? DEVELOPMENT AND THE INTERNET considers how the internet has and will continue to impact the world - and why it may be oversold as a result. Chapters survey the presence and evolution of the technology in both developing and under-developed nations with an eye to explaining business control of applications, cultural influences, differences within nations on how the Internet is promoted, marketed, and controlled, and more. An excellent college-level survey IT classes will appreciate.
   
   Diane C. Donovan
   California Bookwatch

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2 comments about The Politics of Market Reform in Fragile Democracies: Argentina, Brazil, Peru, and Venezuela.

1. A pessimistic view about the vulnerability of Latin American democracies confronting the need to adopt harsh economic reforms predicted that any attempt at adjustment would be blocked by the population in order to avoid its high costs or, in the worst scenario, a painful reform could generate massive protests that would undermine the regime. However, the cases of Argentina and Peru refuted those predictions of incompatibility between democracy and market reforms. This book explains under what circumstances it is possible to implement successful economic reforms without destabilizing fragile democratic institutions.
   Weyland applies a novel and powerful cognitive-psychological theory to explain the behavior of both policy makers and the public regarding the macroeconomic stabilization and structural adjustment programs implemented in four Latin American countries during the late 1980s and 1990s. He uses prospect theory to frame this unconventional analysis of "adjustment politics". The most fundamental findings of this theory of decision-making are that individuals behave as risk-seekers when they face losses and, on the contrary, individuals avoid risk when they are situated in the domain of gains. By using an empirically supported theory of the "new behavioral economics", Weyland challenge rational choice scholars that explain decisions according to the less plausible assumptions of expected utility theory. The latter theory would predict very different outcomes in the countries under analysis, supporting the pessimistic view of incompatibility between democracy and market-oriented reforms.
   The central argument of this book stresses the role of severe economic problems in triggering intrepid market reforms. The author's theoretical framework suggests that both political leaders and common citizens are more likely to accept risky measures when they share the perception that the national and household economies are trapped by a grave crisis (e.g. hyperinflation). As an implication, this micro-foundation for the "crisis argument" should also explain why in fragile democracies it is possible to put into practice tough economic reforms without regime damage. In fact, the author claims, it is the other way around: "by empowering the populace, the institution of democracy - in the context of severe crises - paved the way for market reform" (p. 283).
   The book contains a case-oriented study that takes into account context factors. It is a synthetic effort based on extensive field research. The first three chapters are an introduction to the research question, a discussion about the rival theories, and a summary of the theoretical framework used for the description of the cases. These chapters are especially enjoyable for those who are interested in solving theoretical puzzles. Chapters four through eight are the core of the book. The author analyzes the political economy of the mid-1980s (i.e. "heterodox experiments"), and the reforms of the 1990s (i.e. "neoliberal adjustment") implemented by the new leaders - if not political outsiders - of the four countries. He also describes the peculiar combination of populist politics and free-market oriented reforms, and explains the causes of differential outcomes: the political failure of reforms in Brazil and Venezuela, and the political sustainability of liberalization in Peru and Argentina. In the final chapter the author summarizes the central findings: "chief executives succeeded in enacting a large part of the market reform program where both aspects of the crisis - conjunctural and structural problems - were acute and grave. By contrast, where conjunctural or structural problems were less severe, as in Venezuela and Brazil, respectively, neoliberalism ran into serious political difficulties" (p. 252).
   Definitively, the main notions of prospect theory are very important to understand individual choice. The key idea about how individuals respond to crises is, as Weyland suggests at the end of the book, a powerful one that most be applied in depth in the fertile soil of comparative politics. The seminal work of Kahneman and Tversky (1979) showing how people manage risk and uncertainty was the beginning of an impressive research agenda in several economics domains (e.g. stock market, labor economics, saving and consumption, and insurance). Yet in political science, only the international relations subfield scholars have been exploring the applicability of prospect theory. Thus, Weyland's book is one of the first attempts to apply the recent cognitive-psychological findings in the field of comparative politics.
   Paradoxically, a shortcoming of this book is its ineffective use of prospect theory. There is a lack of formal modeling to explain with parsimony and deductive rigor the payoffs and probabilities that the actors have faced during the decision-making process. Weyland affirms that precise information about payoffs and probabilities attached to different decision options is unavailable and he recognizes that this limitation makes difficult to prove the hypotheses. Additionally, there is not a systematic procedure to demonstrate whether a political leader was in the domain of losses when he decided to take a risky measure. There are descriptions that assume a specific position of the subjects along the value function, but these assumptions are based on the subjects' choices in a later moment. There are many arguments about the level of risk that different policy options had, but it still unclear which was the riskiest. Without numbers or algebra, the fundamental distinction between "more or less risk" is difficult to grasp. Certainly, it is harder to measure the political behavior of the President and the common citizen in order to show risk aversion than the economic behavior of a customer to prove the "asymmetric price elasticities of consumer goods" (Camerer 1998). However, some degree of formalization is desirable for the advancement of this approach in comparative politics. Precisely because "prospect-theory explanations rest on well-established empirical findings, not on unrealistic ideal-typical postulates," (p. 7) it is necessary to organize the historical facts and context factors according to previous experiments. At least, it is crucial to know whether the conditions that can be controlled during an experiment are present in the real world.
   This provocative book will be useful for graduate students who have interest in political economy, especially as a complement to the abundant literature on economic reforms in Latin America.



2. The market reform process in Latin America over the past two decades has inspired any number of political and economic explanations concerning the motivations of politicians and policymakers for their change in attitude. Amidst an already crowded field, Kurt Weyland offers an intriguing account based not upon the underlying assumptions of political science, but instead upon experimental economics. His cognitive psychology-based prospect theory rests upon the willingness of actors to take risks depending upon the conditions of the status quo.
   
   Weyland starts by carefully defining all competing explanatory approaches---rational choice, economic structuralism, and political institutionalism---as a prelude to their dismissal. Rational choice models, for example, come closest to challenging prospect theory; yet, while based on similar psychological micro-foundations, Weyland contends that these differ from prospect theory in that the former method posits that decisions are made according to that option which carries the highest expected value.
   Prospect theory, in contrast, acknowledges that decision-makers do not always choose on these grounds alone.
   
   As background, Weyland references the 1984 work of experimental economists Kahneman and Tversky, who constructed an S-shaped value curve that weighted expected value according to whether a respondent is experiencing gains or losses from the status quo. Their conclusion: decision-makers facing dire circumstances are more likely to take risks and make decisions that have lower expected values. For instance, if today is worse than yesterday, then respondents are more likely to take risks that could facilitate a return to "normalcy." Conversely, if today is better than yesterday, respondents are less prone to accept change. Thus, Weyland argues that rational choice assertions based upon expected utility fall short of a full explanation.
   
   In conjunction with prospect theory, Weyland discusses the somewhat fuzzier notion of prior option bias. This holds that once an actor has made a decision, s/he is more likely to stay the course even if conditions have worsened as a result of it. New actors, on the other hand, are more predisposed to taking risks.
   
   After establishing prospect theory's virtues, Weyland applies it to four Latin American cases---Argentina, Brazil, Peru and Venezuela---and argues that this regional focus helps to reduce the range of explanatory variables. First, all of these countries have deep cultural and historical similarities, which simplifies their comparison. Second, each was plagued by debt and hyperinflation to different degrees in the 1980's, but the threat of further economic deterioration was visible in each case.
   
   Using hyperinflation as a gauge of gains or losses, Weyland shows that in the countries where politicians and the electorate perceived hardship, all were willing to take risks. Citizens took risks by withdrawing their support from established parties and throwing it behind little-known candidates. Politicians took risks by implementing sweeping market reforms. Politicians in all four countries used neopopulist rhetoric to convince their citizens of the need of such drastic reforms for "the good of the common man," as well as to distance themselves from entrenched political forces.
   
   In Argentina and Peru, reforms brought enough people into the domain of gains that the presidents who enacted the plans were re-elected. However, once politicians and voters returned to a comfortable state, both were less willing to gamble on further reforms - even if economic policymakers declared deeper measures to be a necessary condition for future growth. In Brazil, the results of the reform package were not sufficient to bring large numbers of voters into the domain of gains, and President Collor was unable to garner support for additional reforms. Venezuela was unique in that the public's perception of economic strength was high to begin with. Thus, when President Andres Perez adopted the same draconian measures as his contemporaries, his plan was very unpopular. In each case, support was lacking for a continuation of reforms. Corruption, inefficiency, and trade barriers remained in place and hindered further economic development, but according to Weyland prospect theory can account for this by taking stock of the economic winners and losers.
   
   In search of further validation of prospect theory, Weyland uses it to explain such historical phenomena as the rise of Nazism and Roosevelt's implementation of the New Deal. Although prospect theory seems relevant to the cases analyzed in the book, the difficulty of measuring a populace's perception of crisis limits its ability to forecast change. Nevertheless, Weyland does a masterful job of merging this well-established economic approach with comparative political economy and backing up his argument with a host of rich empirical evidence and historical examples.

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4 comments about Upsizing: The Road to Zero Emissions, More Jobs, More Income and No Pollution.

1. This is an excellent book for anyone who's interested in the environmental consequences of human industrialization and development. I had never heard of the author or his organization (ZERI: Zero Emissions Research Institute), but it's all described in this book, and it's a fascinating proposition.

   At first I was a little worried that this book would be a little boring, but it's succinct and well-written. You'll think that the proposals are impossible or unattainable, but the author backs them up at the end with real-world implementations that are successful.

   I recommend this book for the CEO of any manufacturing company. The concepts presented in this book will show you how to expand your product offering, minimize environmental impact, and make more money all at the same time.




2. Upsizing seems more a visionary work to me than one to read to find out the environmental consequences of human industrialization (See review below). Pauli presents a vision for an economically viable world where there's ZERO pollution, and offers a number of real-world experiments that seem so far to have worked. However, the path he encourages won't be an easy one -- it requires systematically rethinking what industry is, how it works, and how it fits into our world. Upsizing begins to construct an argument for why we should do this and shows how the rethought world might look.

   Basically, Pauli is making a case for turning all industrial waste toward productive purposes. Our current processes, for instance, to make paper result in a huge loss of productivity when waste wood products -- which could be turned to other uses -- are burned or disposed of such that they are lost forever.

   While the ideas in this book are incredibly exciting, the delivery seemed to me a bit rough. While competently presented, as an argument this book seems a little bit disparate and untamed, and its style is a bit flat, if not boring. Still, kudos to Pauli for writing it. His is an exciting vision, and I only hope his projects get the press and consideration they deserve. I'm giving it four stars because of the extraordinary ideas: more people should know about how we can make our waste productive.




3. Pauli has succeeded in doing a rare thing indeed...that of demonstrating how the environment and the economy can complement each other to create synergies! All this in the context of protecting and preserving our environment for current and future generations.

   The book is well written and supported by solid facts and well-developed case studies. It serves as a guide post for people of all walks of life, including CEOs, entrepreneurs, environmentalist and public servants, who want to act or promote action that will help reduce, even eliminate waste, while stimulating economic development. More importantly, this book gives hope that we can adopt ways of doing business that reduce the negative impacts on our environment.




4. This is a must read for anyone interested in the future of business.

5 comments about Sale of the Century: Russia's Wild Ride from Communism to Capitalism.

1. As other reviewers and readers have noted, Freeland's book _The Sale of the Century_ offers a vivid account of the human side of the story that is so essential to grasping the magnitude of what really happened in the Russian Nineties. The narrative clearly reveals the author's exceptional competence in the area of Russian current affairs. Her familiarity with the turns of history so central to Russia's shaky experiment in marketization makes this work indispensable for the student of contemporary Russia. While the myriad anecdotes, names, and intricate descriptions of events can definitely require slogging through, a careful reading will be an excellent education in the political and economic history of contemporary Russia. Also included, scattered amidst the detailed journalistic narrative, are intense historical insights on the nature of Russia's destiny and self-image in civilizational history. Overall, highly recommended.



2. This book was both easy to read and interesting. Freeland has a gift for writing in a way that both speaks to not only people with Finance backgrounds but laymen as well. I would recommend this book to anyone who has an interest in expanding their horizons in a new and exciting direction while learning something at the same time.



3. Chrystia Freeland, Moscow bureau chief for the Financial Times, chronicles Russia's roller-coaster ride from communism to crony capitalism. She writes poetically, with creative metaphors, colorful word pictures, and a keen insight into Russian history. The copious adverbs, adjectives, and details--sometimes superfluous-may, however, irritate those reading her book for the "bottom line." The book also omits analysis of organized crime in general. On the other hand, a key strength of Sale of the Century is Freeland's ability to bring to life the key players in Russian politics: Yeltsin, Gaidar, Chubais, and the handful of wealthy oligarchs. As a journalist, she was able to meet most of them often. The book enables the reader to develop a more refined and differentiated understanding of the oligarchs.
   Among these are Mikhail Friedman ("the outsider") who heads the Alfa Group, an oil, industrial, trading, and financial conglomerate. As a Jewish Ukrainian barred from prestigious educational establishments, Friedman began his entrepreneurial ventures early, starting with illegal bartering of theater tickets and later obtaining Western consumer goods for top officials (p. 115).
   Mikhail Khordokovsky ("the apparatchik") is also Jewish and leads Menatep, the bank and financial-industrial conglomerate. Outwardly docile with a soft voice and slight stutter, Khordokovsky is adept at winning the trust of the government officials, having pursued a parallel career in the Komsomol. Beneath the subordinate exterior, however, lies a ruthless person who installs hidden video cameras in his buildings and does not hesitate to fire slackers (p. 121).
   Unlike Friedman and Khordokovsky, Vladimir Potanin ("the blueblood") was the son of a senior Soviet trade official and already had a promising Soviet career. He realized in the nick of time that, as the Soviet Union's collapse accelerated, "the advantages that had ensured Potanin's advancement suddenly threatened to become golden handcuffs" (p. 129). He started his own business, which eventually became Oneximbank, which now handles the "juiciest" government accounts, including the State Customs Agency .., and the state arms-trading company "Rosvooruzheniye," which keeps "a few tens of millions" on Potanin's books (p. 131).
   Vladimir Gusinsky ("the impresario") dabbled in many entrepreneurial activities (driving a gypsy cab, peddling blue jeans, and "medicinal" copper bracelets) and also worked as a theater director before founding the consortium of banks (the Most group) and persuading his patron Yuri Luzhkov, mayor of Moscow, to transfer money to them from Soviet-era banks. He founded inter alia the newspaper Segodnya and the first independent television channel (NTV).
   His main rival is Boris Berezovsky ("the nomad"), although the two oligarchs have functioned temporarily as allies. Perhaps the most unsavory of all the oligarchs, Berezovsky, also Jewish, has been particularly good at winning the favour of members of Yeltsin's entourage (especially the latter's youngest daughter, Tatyana Dyachenko) and directly influencing the presidential elections of 1996 and 2000.---Johanna Granville, Ph.D.



4. The author clearly intends us to appreciate the characters she portrays as dynamic and progressive entrepreneurs. But she actually gives us a picture of a bunch of greedy criminals who have shamelessly looted and wrecked their country.
   
   The government sold off several huge oil companies including LUKoil, Russia's largest company, Yukos, Russia's second biggest oil company, and Sidanco. Mikhail Khodorovsky loaned the government $159 million for a 45% stake in Yukos in 1995. He sold it to himself in 1996, using a shell company, for $160 million. The state got $1 million profit; Khodorovsky got the company, valued at $15 billion in 2002. He bought oil cheap from the extractor companies, and pledged it, at high export prices, to secure the loans. This transfer pricing stripped the assets and values from the producers, who got only the debts and expenses. Goldman Sachs profited from the looting: they underwrote Khodorovsky's $500 million loan against future oil sales.
   
   In 2000, Sibneft bought 27% of its shares for $542 million from shareholders. Less than a year later it secretly sold those shares, for far less, back to the same shareholders. It then announced a $612 million dividend to the stockholders - one of whom, Roman Abramovich, now the owner of Chelsea Football Club, owned 87% of the stock. He had stripped Sibneft's cash to fund his repurchase.
   
   The government sold off other national assets at knock-down prices, including tax concessions, TV channels, radio frequency licences, export licences and government bank accounts. Yeltsin privatised Channel 1, which reached 200 million Russians, without the legally required auction, selling it to his ally Berezovsky, whose capital was only $2.2 million. The government sold bonds to the capitalists' banks at a huge discount. The banks resold the bonds at market prices, raising cash supposedly for Yeltsin's re-election campaign, but the owners pocketed most of it.
   
   The capitalists looted state funds and the Soviet Union's gold reserves. The new banks took billions of dollars of party, government and trade union funds, and transferred the money to foreign bank accounts. Russia's central bankers defrauded Russia by transferring profits to offshore tax havens, and used the profits to pay themselves bonuses.
   
   Anatoly Chubais, head of the State Privatization Committee, said of Russia's capitalists, "They steal and steal and steal. They are stealing absolutely everything and it is impossible to stop them." By 1999, 38% of Russia's people existed below the poverty line. 90% of the people endured worsening conditions, while the handful of arrogant capitalists made colossal profits by theft and corruption. That's capitalism for you!



5. The book is somewhat entertaining, but its style is a bit too sardonic and her attitude vis-à-vis Russians is patronizing. Even Russians who, admittedly, are not my favorites characters, I feel like defending. She calls Alexander Korzhakov, an influential former head of Yeltsin's Security Service, a Russian illustration of the Peter Principal', because he `climbed to a position of power that far outstripped his intellectual resources'. Granted, Korzhakov is no Socrates, but his college degree in jurisprudence and current post of the deputy chairman of the Duma's (Russian Parliament) Defense Committee is a confirmation that perhaps behind a façade of a simpleton is hidden a smart individual. Even notorious (and wanted by the Russian government) Boris Berezovsky, whom the author calls `a jumped-up car salesman', is much more than that - a highbrow Russian `enfant terrible' with a Ph.D. in mathematics for starters.
   
   However, the most important thing is that the book appears, as the French say, engagé. I believe this book's real purpose is to divert attention from the individuals and institutions, which are really responsible for the debacle of the Russian privatization. For one thing, she mentioned the name of Gregory Yavlinsky only once in her 360-page long book about Russian capitalist revolution and only at the end of the book. Yet, Yavlinsky, who is household name in Russia and twice-also-ran-presidential-candidate, was one of the midwives of Russian privatization. His `500 days' program was written in the late 1980s with Mikhail Gorbachev's blessing. It was supposed to transform Soviet centralized economy into a market economy by the end of 1993. Yavlinsky resigned form the government after Gorbachev rejected the program in 1990. Neither this is mentioned in the book, nor the fact the Harvard University fellows, like Graham Allison, were promoting ideas and giving intellectual impetus to Yavlinsky and Shatalin (another Russian co-author of the program).
   
   In the late 80s and early 90s Boris Yeltsin was competing with Gorbachev for power. He decided that the road to power lies through economic radicalism. Yeltsin assembled a competing set of pet economic advisers - most famous among them were Gaidar and Chubais. These two well-educated English-speaking Russians had even more far-reaching ideas than Yavlinsky. Eventually Yeltsin prevailed over Communists, and Gaidar and Chubais moved into the government. They had their own set of Harvard intellectuals to assist and advise them, among them was the Harvard professor Jeffrey Sachs. Sachs is a very interesting figure, whose liberalism and market fundamentalism are fused into one. Freeland mentioned Sachs only once in passing (on page 75), but his personality and ideas were of paramount importance. He was the real intellectual father of Russian `shock therapy'. All in all, the Harvard advisors look to me like sort of collective `éminence grise' to the Russian privatizers of both camps (Gorbachev's and Yeltsin's). What interesting to me is the fact that the author doesn't mention Harvard in the book, except mentioning in `Acknowledgments' that the Harvard University provided her with nonresident fellowship and `stimulating environment to complete the book'.
   
   As I see it, `shock therapy' came from the West, more precisely from the U.S., and specifically from the group of radical Harvard professors, most notably Andrei Shleifer and Jeffrey Sachs, who both were directly advising the Russian government in 1992-1993. These were the years Russia plunged into abyss. And yet, there is nothing of this in the book. There is also nothing to explain how Yegor Gaidar managed to stumble into `shock therapy' idea. He was, according to Freeland, a big fan of Samuelson's textbook `Economics', which `became his bible'. But there is nothing the textbook about `shock therapy'. Indeed I doubt that Samuelson would have approved such an outrageous idea.
   
   Freeland's conclusion is a master stroke. She likes ideas of Richard Pipes, who was her professor at Harvard (déjà vu). These ideas in a nutshell - the tsarist, communist or re-born capitalist Russia represents hypostases of same imperialist, semi-barbaric, Asiatic despotism, which is driven by the eternal messianic zeal.
   For Freeland, the free-market-through-minimum-government regime is the best economic system that Russia could have established, but the neo-Bolshevist zeal of `young reformers' spoiled the whole thing up.
   
   With a straight face she is saying `The problem was not that the young reformers were too radical, but that they were too fanatical'. Or `I am convinced that the central failure of Russia's capitalist revolution was that it did not go far enough' (page 344). It is a folly. Shock tactics of Gaidar and his western advisers didn't work and couldn't have worked in Russia, regardless how far they would go. They caused nothing but pain and social strife. Withdrawing price control and unleashing unregulated free markets had caused a continuous 25% monthly inflation and falling industrial production of 25% per quarter (faster than during the Great Depression in America). The hyper-inflation wiped out most of people's life savings, which in combination with general decline of living standards and crumbling infrastructure, caused millions premature adult deaths in Russia through the 1990s. During this hurried transition to market democracy, Russia became a society with Third world mortality rates and First World birth rates. This should have been mentioned in the book as the real price of Russian privatization. All in all, the book feels to me like a Disney version of events, nothing more than an attempt to divert attention or may be even reassign the blame to vaguely defined by the author `Russian messianic tendencies'.

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