Credo Experto? Trust the jailers?

07.05.2015

When the latest issue of the Russian edition of the Security Index journal was just about to go to print, I chanced to see a quote from Andreas Hoefert, chief economist of the UBS, a Swiss bank. Speaking last December about the 2015 global economic forecast released by his bank, he had this to say:

“We need to be conscious that forecasts are usually more wrong than right. We have so many examples of blunders in forecasts. Maybe the biggest forecast error ever made was by noted economist Irving Fisher, who claimed in September 1929 that ‘equities have reached a permanent plateau.’ More recently we had Federal Reserve Chair Ben Bernanke saying in 2008 that he thought the economy would be better in the second half than in the first half.”

“So it shows you basically that we don’t know a lot about the future, and it seems quite impossible for us economists to correctly forecast a recession,” Hoefer went on to say. “So don’t rely on forecasts too much when you build your investment strategy. Despite this, many people still do. There’s this anecdote by Kenneth Arrow, a Nobel Prize winning economist, which shows this phenomenon well. In World War II he was working as a statistician at the US Army weather office. He was looking at weather forecasts and thinking, ‘they’re always wrong, so why are we doing them?’ He decided to write a memo to his superior saying, ‘We put a lot of money into these forecasts and it’s not worth it.’ The reply came back, ‘We all know the forecasts are wrong. But we need them for planning.’”

“It’s amazing, these human biases mean that even if you think the forecasts you use are wrong, they give a sense of security”, the UBS chief economist concludes.

Well, there are still plenty of forecasts in this issue of the Security Index. Could it be because we are subconsciously trying to give our readers a sense of greater security? Or maybe the real reason is that we are so ambitious (some would even say arrogant) that we expect forecasts made by our experts and/or published in our journal to be more accurate?

 

NO PROPHETS?

To begin with, let me draw your attention to the round table “Russia, Threats to Its Security, and Responses: Expectations of 2014 and Reality of 2015”. The event was attended by experts of the Higher School of Economics, the Moscow Carnegie Center, the Mezhdunarodnaya Zhizn (International Affairs) journal, and PIR Center. This was not precisely a round table but rather an experiment spanning the period from December 2013 through March 2014 to March 2015. Speaking a year or so ago, Dmitry Trenin, Dmitry Evstafiev, Armen Oganesian, Vadim Kozyulin and Andrey Suzdaltsev tried to predict the challenges and threats Russia would face, and the way it would respond. Now, in the spring of 2015, they are not merely looking back at their own forecasts for the year that has proved completely impossible to predict – they are also offering fresh forecasts for the rest of this year. Interestingly, it has suddenly turned out that many of their previous projections have in fact proved quite accurate. Of course, prophets are not without honor except in their own land. And yet – could the UBS chief economist’s bleak pessimism about forecasts be merely an elegant legal disclaimer?

 

DEFENSE INDUSTRY 2030

Another forecast – this one covering a long period until 2030 – is offered by Andrey Grigoryev, director-general of the Advanced Studies Foundation. Given the tasks set before the foundation, he is duty-bound to peer into the future so as not to miss any investment opportunities opened up by the latest advances in biotechnology, nanotechnology and IT, especially those that have defense applications. His interview reveals the potential outlines of the Russian Armed Forces in 2030. That is a mere 15 years from now. It would have been interesting to compare the forecasts made in this area back in 2000 with the real state of affairs 15 years on. In another article in this issue of the Security Index, Oleg Demidov argues that the lack of any real strategies has been a major obstacle to the transition of the Russian economy to the sixth technological order using the defense industry as the engine of that transition. Demidov also warns that the task is so ambitious as to verge on impossible: the Russian economy needs not just new engines of growth but a way out of the structural deadlock.

 

THE FUTURE OF THE INTERNET

Aleksandra Kulikova offers yet another forecast – this one about the future of the Russian segment of the Internet. Her projections take into account recent Russian Internet-related legislation and new initiatives currently being discussed by Russian lawmakers. To what extent do these initiatives reflect the wishes and aspirations of the Russian electorate? How compatible are the twin goals of guarding the freedom of the Russian segment of the Internet and protecting it from any adverse external impacts that could potentially lead to its utter breakdown? Can the Russian government plot a safe course between these two dangerous rocks?

 

THE SPLIT

In the past 12 months Russia has very clearly parted ways with the West.

Interesting times lie ahead for Russian foreign policy. While we retain an independent posture and let it be known that we prefer solitude to the company of fools, we still need to build partnerships in those parts of the world where countries are ready for such partnerships. We also need to flesh out in a practical sense some of the existing partnerships that remain largely symbolic. That is a monumental task in itself.

Legally speaking, the only allies Russia currently has are the members of the Collective Security Treaty Organization (CSTO). We must make sure to keep them on our side – but how to build unity within that organization? How can we make this military-political alliance a notable actor on the global arena? Viktor Vasilyev offers his ideas in that regard in the latest issue of the Security Index. It is clear, however, that allies can be united not only by shared interests but also by shared threats. These threats, incidentally, can originate both from the outside and from within the borders of the alliance. Some of the Central Asian states remain staunch members of the CSTO, while others are sitting on the fence. What are the challenges all of them should be preparing for? And how stable are the Central Asian regimes? Yuri Fedorov and Natalya Kharitonova offer their predictions in that regard.

 

ENTER IRAN

Meanwhile, it appears that our experts have few doubts about the strong position of Iran on the regional and global arena. So far, the Iranians have been scoring one brilliant victory after another in their chess game with the six international mediators. In early April, the negotiators managed to build on the success of the 2013 talks in Geneva. I believe that the arrangements achieved in Lausanne should be equally satisfactory for Iran, the United States, and all the other parties to the negotiating process. On top of that, the international community has been given an excellent demonstration of diplomacy’s superiority over the use of force and the policy of threats. That demonstration is especially valuable coming as it does in the run-up to the NPT Review Conference. Of course, turning the framework arrangement into a reliably working agreement is a different matter altogether. The Iranians are willing to make their nuclear program fully transparent. That is a necessary precondition for sustainable progress. But what about the Americans? Are they prepared to lift the sanctions? The question, incidentally, applies not so much to the current administration and the current Congress, but to the next ones. Obama is so invested in the talks with Iran that he has become too dependent on achieving a successful outcome on that front. For the same reason, he has become too vulnerable to critics in the United States, Israel, and Saudi Arabia.

As far as Russia is concerned, an Iran without nuclear weapons but with a transparent and actively developing peaceful nuclear program, a predictable Iran is clearly a desirable outcome. In recent years Moscow has been working hard (albeit quietly) to make such a diplomacy-mediated outcome a reality.

But has Russia laid the ground for its own foreign-policy and economic breakthrough on the Iranian track? Its achievements in this area are either cleverly concealed or nonexistent, with the exception of nuclear energy and arms trade cooperation. There is no doubt that Russia must make a sustained and systemic effort to achieve closer cooperation with Iran – and not merely to spite the Americans (the Iranians would be the first to reject such an approach). There are colossal opportunities for greater trade between our two countries. Iran could be offered full membership of the Shanghai Cooperation Organization as early as this summer, during the summit in Ufa. That offer would become a major step towards closer regional cooperation. I am of course well aware of the SCO decision with regard to countries facing sanctions, and the sanctions against Iran have yet to be lifted. But shouldn’t Russia use its advantage as the host of the summit to actively shape the rules of the game and to work with our SCO partners (none of whom is allergic to Iran) instead of playing it extra safe?

 

IRAN… GAS… NUCLEAR FUEL… MIDDLE EAST

Meanwhile, a new scenario is coming to the fore. In the near future Russia and Iran will become the main competitors on the global market for natural gas. Now that there is a realistic prospect of the Iranian sanctions being lifted, and with the Europeans actively pushing Russia away, the two leading global exporters of natural gas could become rivals. But there is also another scenario: instead of rivalry, the two could coordinate their interests in each individual market. Irina Mironova offers her analysis of these possibilities.

Another scenario that has become more realistic following the agreement reached in Lausanne is Iran becoming the regional center of nuclear services for the entire Middle East. Only recently commentators in the region itself and beyond regarded such a scenario as a pipe dream. We were aware, however, that several reputable experts (all of them from outside Iran) were pondering such a possibility. Among them were Mohammed Shaker from Egypt, Adnan Shihab-Eldin from Kuwait, and Thomas Pickering from the United States. Their ideas have now come to be seen as entirely relevant.

 

ON IRISH MONKS, AND WHAT SATANOVSKY SAID IN RESPONSE

This editorial began with musings on the nature of forecasts. There is, of course, an element of game in this; some forecasts do in fact come true (to the vast astonishment of the forecasters, in some cases). Leaving economics aside and focusing on international security, it is clear that the genocide in Rwanda, the separatism in Kosovo and the upheavals over Ukraine had been predicted in an entirely scientific manner years before those events took place.

Therefore, the next question is, who listens to forecasts? Does anyone listen at all? What is the purpose of think tanks? We discussed this at another round table with Elena Chernenko, Evgeny Satanovsky, Fedor Lukyanov, and several other colleagues. Evgeny Satanovsky opined during the discussion that even though think tanks don’t have much impact in the grand scheme of things, the best of them must carry out the function that was performed by Irish monks after the fall of the Roman Empire. That function is the preservation of knowledge. Well, that’s better than nothing.

In response, Yuri Nadtochey asked a question that I think is very relevant. “Are we sure that the current social environment is ready to pay any heed to experts’ opinions - especially now that the masses have become so immune to alternative opinions? Aren’t we just trying in vain to flow against the current? Some say top-quality expert opinions could be useful to the intelligentsia rather than the mass market. But speaking from a humanitarian point of view, what if the expert advice and opinion we give to the people who heed us merely serve to make those people unhappy? What if those people merely become hostages to the aggressive mainstream crowd?”

Please make sure to find out how Evgeny Satanovsky responded to that question. And here’s a tip:  we put his response on the back cover of the latest issue.

 

THEY ARE OUR JAILERS

As the editor-in-chief of the Security Index, I also offered my own alternative response, which is in fact a quote from the spy novel “The Russia House” by John le Carré. “Experts are addicts! They solve nothing!... When we are hanged, experts will hang us… When the world is destroyed, it will be destroyed not by its madmen but by the sanity of its experts…”

Here’s another tip: we have put the complete quote in the Bulls Eye section. “They are our jailers” – that is how it begins.

But if experts are our jailers, who is left for us to trust?

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