Has war with Russia become inevitable?

I am cautious when I write about things that extend beyond my immediate expertise. The situation in the Ukraine is one such case. When the crisis first broke, I took a relatively sanguine position:  http://belshaw.blogspot.com.au/2014/03/musings-on-ukraine.html. Now I’m not so sure. My instinctive reaction at the time to suggestions that this was like Europe in 1938 was to say over-exaggeration. Again, now I am not so sure.

I don’t understand Mr Putin’s end game, but his comments about the need to protect Russians wherever they live, the way those comments are phrased, the apparent willingness to use force to bring Russians elsewhere within the embrace of Mother Russia, are actually very similar to views expresses by Nazi leaders in the context of Germans and Germany.

Mr Putin’s Russian Federation does not have the relative power of Hitler's Germany, notwithstanding nuclear weapons. For the moment, he is protected in the east, for China is unlikely to come to support of any Western attack in the West. He also faces Western communities that really do not want to fight, that will compromise. And yet, if push comes to shove, if Russia over-reaches, they will fight. And then Russia will lose. So Mr Putin’s tactical and strategic question is how far he can safely push.

The difficulty is that Mr Putin has already over-reached himself. Poland’s Foreign Minister said this:      

We cannot let Putin get away with this,” says Radek Sikorski, Poland’s Foreign Minister. His Oxford English is perfect, his tone decisive. “By annexing Crimea, Russia is forcing a major change of boundaries on Europe. It means the breaking of the post-Cold War consensus. That is verboten.”

Vladimir Putin, lacking Mr Sikorski’s linguistic skills, does not understand “verboten”. He has been taunting the west for days now, placing troops on Ukrainian soil to defend -- as he puts it -- ethnic Russians there from the “nationalist mob” who overthrew President Viktor Yanukovych. The annexation of Crimea, the southernmost region in Ukraine, looks inevitable to Sikorski: “The timetable for the Kremlin’s annexation of the region is accelerating daily.” Putin knows America and the EU are in thrall to Russia’s money, oil and gas. He reckons that with huge economic interests at stake, no one will fight for Ukraine’s sovereignity.

But Putin has underestimated EU unity, says Sikorski. “I’m seeing William Hague on Monday. We are as one on Ukraine. We cannot allow Putin to redraw the map of Europe along ethnic lines. Europe is based on the principle of overcoming borders rather than redrawing them. No one has the unilateral right to move borders in response to presumed ethnic grievances. We’ve seen what happened when a European leader tried to do that before: the peoples of the Soviet Union paid one of the biggest prices for this.”

I’m far from sure that this is an accurate reflection of EU views. I am sure, or at least reasonably so, that European countries would fight to protect Ukraine’s remaining territorial integrity.

There is a story, I have no idea whether it’s true, that the Russian General staff sent the Tsar off to play tennis so that he would not be in a position to cancel the mobilisation order for Russian Imperial forces.

The fact that wars often begin by accident is, in a way, is Mr Putin’s problem. Can he balance all this? Can he control the forces that he has now unleashed? I am far from certain. That is why, for the first time, I think that a major war may be inevitable.   

Saturday morning musings – a morning at the house auctions

There is something addictive about auctions. It was a hot morning and a largish crowd had gathered to see the fun. The house was in a nice area, close to the shops, had a garage, but was also (I thought) rather ordinary inside. Really a smallish suburban bungalow. You could extend or even rebuild, but this is a heritage area. The house in question is not heritage, but you will still have to comply with heritage rulings re compatibility. 

The auction was slow to start with everybody watching each other. The bidding began about $A1.6 million with two couples bidding, two more on the phone waiting to bid. Bidding crawled up in $5,000 lots. The phone bidders dropped out without making a bid. Around $1.8 million, a new bidder entered with bidding still crawling up in $5,000 or even $1,000 lots. By now it was clear that the bidders were over their limits, but still staying in.

The wife of the original lead bidder put her hand on on her husband’s arm and whispered in his ear. Over the other side of the garden, the bidding couple turned to their friend. The wife was jiggling up and down, clearly keen but also cautious. In both cases, the women were in charge. I had noticed the couple from the other side, for from the back their friend was the spitting image of my brother. Surely David wasn’t in Sydney?

Now came an intervention, a clear crisp $1.9 million from a new bidder. He had been standing there passively with his wife, showing absolutely no emotion. Silence. The bidding crawled on for a little, and then the new bidder raised the price by a clear $50,000. That was it. “Sold to the man at the back for $2.095 million”. The agent’s staff rushed towards him with the paper work.

Was the house worth that price? It clearly was to the buyer. But as an investment, I doubt it.

A house across the road sold for a little more a few weeks back, but that was a much better house. In this case, by the time you renovate your embedded costs will push the recovery value of the asset to the point that it will take a number of years of capital growth for you just to get your capital back. Still, this is Sydney where monopoly money rules.        

When risk avoidance goes crazy

Those who read this blog regularly will know that there are a number of themes or subthemes that feature over time. One is the current Australian obsession with risk, risk avoidance, risk control.

In the public policy arena, I have suggested that this gives rise to decision paralysis, to wasted resources, to bad decisions in general and especially where laws or regulations are imposed to try to control or reduce particular risks regardless of the economic costs. Something similar holds in the private sector and in management in all sectors.

The concept of risk and risk management has a long history. However, in the late 90s and early 2000s it took a very particular form,a professional form. The strongest drivers here actually came out of Government and were promulgated by consultants such as myself as a new field of advice to clients. Now it has become so deeply entrenched that it crowds out anything new. You see, new is by nature a risk.

In my professional roles and in my management writing, I have tried to explain what has been happening. I have found it extremely difficult to get the message across because of the acculturation process in organisations, as well as the institutionalisation of  rules, regulations and processes. Now Australian Reserve Bank Deputy Governor Philip Lowe^*has joined the debate.

In a speech particularly targeting productivity improvement, he writes in part:

So if we are to improve efficiency and advance technology then innovation is required and innovation requires someone to take a risk – the risk of trying a different process, the risk of changing workplace organisation and management practices, or the risk of spending scarce resources to explore a new idea. Sometimes the effort will not pay off, but just occasionally it will, and when it does, we find a better process, a more efficient organisational design or an idea that transforms how we do things.

Note the words  “but just occasionally.”  Here Mr Lowe is making two points. Big change involves big risks. Most attempts fail to greater or lesser extent, but when they succeed they really succeed.

My focus is a little different, the constant improvement based on experience of of existing systems. This is the world of incremental change, the change that keeps day to day productivity improvement ticking over. It is in this area that rigid rules, complex decision structures and the need to constantly examine risk and have a very large impact. These things interact.

Mr Lowe recognises that there is a legitimate need for risk analysis and avoidance. However, to his mind these things have gone just too far,     

My own tentative answer is that there has been a subtle, but important, shift in the way we think about risk and innovation. In particular, our preferences appear to have shifted in such a way that we increasingly focus on risk mitigation and risk control. There are examples of this in a whole range of activities in our society – from the nature of the legislation that parliaments pass, to the increase in compliance activities in the nation's boardrooms, to the amount of money we are prepared to spend to limit the probability of blackouts and even to our attitudes about the design of children's playgrounds. In each of these areas, our society has been prepared to limit options or to spend more of our scarce resources to reduce risk.

I want to make clear that I am not saying that this is necessarily a bad thing. Wealthy societies like our own have considerable capability to address risks in a way that poorer societies cannot. After all, that is one of the benefits of economic progress. And it may also be the case that wealthy societies inherently have less tolerance for certain types of risk than do less wealthy societies. So what we are seeing may well be optimal from the perspective of our collective welfare, even if it does not maximise measured economic growth. 

But, at least in my opinion, it is appropriate occasionally to ask whether we have got the balance right. Reducing risks is not always cost free – resources need to be devoted to the task and this means that these resources cannot be used for other tasks. And perhaps even more importantly, it might also be the case that a more risk-averse society is naturally less inclined to support and finance innovation, to implement new processes and to apply new technologies. If this is indeed the case, it has implications for future productivity growth.

These are cautious words. I would go a lot further. I would argue that we have reached the point that our obsession with risk and the laws,regulations, policies and procedures that flow from that obsession have reached the point that they have become a fundamental drag on national welfare.

Our priorities and approaches are out of kilter. In NSW, we are prepared to impose via regulation economic costs of multiple millions to save one life from a swimming pool death when we can’t afford to spend an equivalent amount to save multiple deaths from child abuse. I don’t think that’s very sensible. Do you?  

However, the story doesn’t end there. Our obsession with risk affects every stage in decision processes: it affects just what decisions are made; it affects the way that decisions are implemented; and it imposes an ever increasing burden of monitoring, compliance and reporting. It colours our language and the questions we ask. It creates new legal risks and liabilities that then become embedded in the process. It also affects, diminishes, the responsibility that we are personally prepared to take for our actions and decisions, as well as the way we react to perceived irresponsibility on the part of others. We erect our moats and walls and look out on the apparently lawless plains beyond with a degree of fear.

Wearing my historian’s hat, I can look back and point to the good things that have occurred. The attitude of some mine owners in the Hunter Valley to the personal risks associated with coal mining were at best unthinking, at worst callous. The emerging unions, rightly, attempted to to address this problem and with a degree of success over time. However, that is a very different thing from a world in which “what if” and “what might happen”  have come to dominate. The unions were attempting to address real problems and risks, not “what ifs.”

It is possible to show mathematically some of the costs of current approaches. People will accept that argument. However, as soon as specific cases are dealt with, “what if” emerges. This becomes still more difficult when questions of personal safety are involved. “But” people say in the swimming pool case, “surely it is a good thing to save a life?” Of course it is, but you have to ask how many lives and at what cost?

I think the balance is wrong now and I don’t really see a way of addressing it. 

Problems with Livewriter and Outlook

I really hate modern technology sometimes. Its just so useful but, conversely, when things go wrong?

Livewriter has been my friend ever since Neil Whitfield introduced it to me. I have used i for all my blog posts except when travelling when I have had to use Google’s relatively clumsy editing system.

A day back, I received a message saying my version of Livewriter was no longer supported. As a consequence, I could not load the post. I did one post using the blogger post system, then searched around. Finally, I downloaded Windows Essentials. That took hours.

Now I have Windows Live Writer working again, but outlook has stopped working. I just get a message saying the interface has returned an unknown error and restart the program. I do, but get the same message!

Oh, and in passing I picked up that support for Windows XP finishes in April. 

Grrrr!

Biennale Insanity?

On 7 March Luca Belgiorno-Nettis announced his resignation as Chair of the Biennale of Sydney. I quote:

For several weeks there have been mounting calls for a separation of the Biennale of Sydney from its founding sponsor Transfield Holdings, because of the ‘chain of associations’ through to Transfield Services, the public company, which has contracts with the Australian Government to provide services at the offshore detention centres.

One could argue that last year’s popular election vindicates this detention policy as supported by the majority of Australians. However, the policy and the camp conditions have been widely criticized by local and international human rights groups. I wear two hats of relevance to this situation: one as Chair of the Biennale of Sydney and the other as Director of Transfield Holdings. Each of these organisations was conceived by my father and nurtured by my family over many decades. Transfield Holdings listed Transfield Services in 2001, and retains a minor shareholding with no continuing influence on its business. The more ardent advocates are asking that the Biennale make a total disassociation from Transfield Services by suggesting that Holdings either divorce itself from the Biennale or sell its shareholding..

The situation has now reached a crescendo: out of the 92 artists, 10 artists have withdrawn to date. There would appear to be little room for sensible dialogue, let alone deliberation. Yesterday I learnt that some international government agencies are beginning to question the decision of the Biennale’s Board to stand by Transfield. Biennale staff have been verbally abused with taunts of “blood on your hands”. I have been personally vilified with insults, which I regard as naïve and offensive. This situation is entirely unfair - especially when directed towards our dedicated Biennale team who give so much of themselves.

With many of the participating artists now torn between loyalty to our creative director and wanting to make a stand against this Government policy, the core spirit of the festival is under a dark cloud. A week away from opening, I am mindful of what the Biennale experience should mean to our many thousands of participants: artists, venue partners, audience, benefactors, sponsors and government agencies. 

So today I have tendered my resignation from the Biennale Board in the hope that some blue sky may open up over this 19th Biennale of Sydney: ‘Imagine what you desire’…and its future incarnations!

I am deeply thankful to the many friends of the Biennale, and my personal friends who have supported me throughout my tenure, especially in recent weeks. I also express my gratitude to my fellow Directors, past and present, to Marah and her beautiful team, and Juliana, for their unequivocal allegiance to me and the Biennale.

It must be pretty clear from this blog that I have severe reservations about asylum seeker policy over the last three Governments, but all this is too much. In a piece in the SMH, Nicholas Pickard wrote:

The arts are the only loser in the Biennale of Sydney's decision to sever ties with founding sponsor Transfield, and its chief executive Luca Belgiorno-Nettis' resignation as Biennale chairman. 

Despite this, the Twittersphere was full of self-congratulatory comments by artists and refugee activists celebrating the decision. The end result of the protest is the that contract for the Papua New Guinea and Nauru detention centres still exists and the arts have lost the support of a major sponsor, pushing aside a family that has done more for the arts in Sydney than anyone in the past 40 years.

I agree with this. I think that what has happened is plain wrong-headed. By all manner of means go after Transfield Services if you think that this will help. I am not convinced, I think that this is likely to be counter-productive, but it's arguable. However, this action simply plays into the hands of those supporting the current border protection policy,

I have tried to think of a scenario in which all this might have a positive outcome. For the life of me, I can't. Perhaps you can? .  

Should we maintain the company tax rate at 30%?

In its pre-budget submission, the Tax Institute stated:

A cut in Australia’s company tax rate will deliver economy-wide benefits that are necessarily in the national interest. 

As a result, The Tax Institute supports reducing the company tax rate in the medium term from its current 30% to the 25% recommended by the Henry Review. In addition to increasing 
Australia’s attractiveness as a destination for foreign investment, a 25% rate is comparable to
rates in similar sized OECD countries. A 28% rate would be a step in the right direction and
Australians across the board will stand to share in these benefits. 

A wealth of reliable evidence indicates that the incidence of company tax falls on employees. 
This means that reducing the burden of company tax is expected to result in companies passing on the benefits to their employees either in the form of increased wages or additional
recruitment – increasing productivity and employment. 

A company tax cut would also reduce taxes on investment, driving an increase in savings and 
capital as well as innovation and entrepreneurship – all outcomes that are indisputably in the
interests of all Australians. Such a cut would also reduce the incentive for profit shifting out of
Australia, allowing us to retain a greater share of the profits generated here in Australia.

This is bad special pleading, especially bad in a globalising environment. Just how does the burden of company tax fall on employees? Further, why should a fall in the benefits of the tax rate for specific companies be passed onto employees by that company?

The traditional argument runs that lower company tax rates increase the incentive to invest by increasing the net return on investment, thus encouraging more investment and more environment. That may or may not be true.  I am not sure that it is when company tax rates are relatively low and when the scope for tax shifting is substantial.

Profits will still be shifted, while companies may pay more in dividends. Not that the last is necessarily a bad thing. Further, within companies the increased pot is likely to go those with the most bargaining power, and that's not the ordinary employee.

Governments need funds to pay for services and investment, to maintain the structure on which profits depend. It is clear that Australia is under investing, especially in key infrastructure. Now Governments don't, it seems, have enough money to do minimum things. And yet, we want to cut taxes further.

When company tax rates were 40% plus, the argument for lower tax rates was highly persuasive. But a shift from 30% to 25%? Where do you draw the line? Are we saying that economic benefits will be maximised at a company tax rate of zero? If not, what is the optimum company tax rate?

I think that Australians would be more sympathetic to the arguments about lower company taxes if the could see the benefit to them. They don't, and for understandable reasons. They just don't seem to benefit.

Maybe its time to ask why not freeze the company tax rate at its current level? If the extra money raised was used to fund infrastructure, then we might all be better off.  

Memories of Holden utes past

Travelling along the express way can be a tiring business. Stopping at a rest spot, my eye was caught by a ute. Surely not, I thought? 

Suddenly swept by waves of nostalgia, I wandered across. It was!

Growing up, my aunt and uncle had a Holden farm ute, nowhere near as well maintained as this one. It was, after all, used as a transport vehicle. David and I loved sitting in the back while the ute bounced across the paddocks.

I chatted to the owner. "It's bloody hot," he said, wipe a sweating red hot face with a small towel. He had just been to a motor show where he had been standing in the sun all day.

"Where did the ute come from", I asked. "It was on a farm at Cowra", he said. "It's taken me nine years to do up."  We wandered round the vehicle as we talked.

Looking inside at the bench seat, I thought how could we have fitted? There is Kay by the passenger window, Ron driving, the two of us in the middle. We are singing "She'll be coming round the mountain when she comes". Kay was a school teacher, and she did things like that to keep us entertained. You could add verses of your own choosing.

All this got me thinking. The front grille wasn't quite right. Ron's ute was not a new car. We were very young. The car must have been, in fact, a FX ute, the model before, the first Holden ute released in 1950.

The ute itself was, I discovered, an Australian idea. 

We chatted on for a while, about motor shows and the increasing difficulty of getting original parts. Contented, I drove on towards Sydney. It was a fitting end to a good road trip. 

Meals, dinner parties, social patterns and the need for change

Growing up, we had breakfast, morning tea, lunch or dinner, afternoon tea, tea or dinner, then often supper. In all this mix, the variables were lunch, tea and dinner. Dinner was the main meal, a more ceremonial affair. If held in the middle of the day, it replaced lunch. If held at night, it replaced tea. 

Generally, dinner was the evening meal. However, on some days like Christmas, or more frequently Sunday, it took place in the middle of the day. How can you describe a full roast as Sunday lunch? It does not compute!

I mention this now because Asya Pereltsvaig had a rather nice post on GeoCurrents, “Mustard After Dinner”, Or Are Spain’s Mealtimes Climate-Related?. Her conclusion is no, the pattern of our meals and what we call them has changed over time and between countries. One of the most interesting features is the shift in times of meals.

In Australia, I think that the structure of meals is climate related as well as time related. Climate related because the Australian heat is not conducive to bigger meals in the middle of the day for those working out of doors. Time related because we simply don't have a lot of time in the middle of the day.

The time thing goes further than that. The word dinner has been dropping out of use.We just don't have time for it. Few come home for lunch (or midday dinner) anymore, Few actually have time for dinner in the old sense at night. Tired, most sag in front of the TV set.

The old idea of the dinner party is largely dead. When was the last time you went to one?

Central to a dinner party is the idea of multiple courses spread over a period of time when people actually have to talk to each other. That's the main entertainment. Who has time for that anymore?

We eat out a lot, but we call this going to a restaurant, not generally going out for dinner. Someone else is doing and serving,

I miss the old dinner party. Restaurants are often noisy, the food is so so, and they are not set up for conversation at group level. I actually miss dinner, full stop.

This will be my last post until Sunday, for I am travelling again. This time I am trying to organise a lunch when I get there. I haven't called it dinner, for dinner is dead. Its also at a restaurant. Here I have no choice. But I am trying to make it a little ceremonial in the way dinner parties once were, a little special.

Are we better off with more things as compared to enjoying the things that we have? I wonder. What's the point of working harder and harder just to survive, just so that we can buy things? This is the reason why I have so many problems with modern economic and policy analysis. I just don't want to play anymore.

The reaction to these changes in the structure of our society, the way we work, has manifested itself in many ways, from slow food to buy local produce and farmers' markets. These are all signs of people saying that they don't want to play any more, that they want an alternative.

Life is for living, not just the accumulation of brownie points in a never ending zero sum game.

We are very lucky, for most of those in Western countries have access to basic services and wealth in a way never seen before. Yet is that all  we want?

I am not a leftie or a green radical. I just think that we need a different model.

Better than expected Australian GDP growth, but is there a property bubble?

Yesterday's Australian gross domestic product (GDP) figures were better than most people had expected, with GDP in the December quarter rising 0.8% seasonally adjusted, bringing annual growth to 2.8%. (Original data here, example of reporting here).

Its been interesting reading the economic commentary over the last month, for it has bounced around depending on whether the news is good or bad. It's actually quite difficult to hold a steady view in the face of such reporting gyrations.

At this point, I think that we can say that so far Australia has survived the end of the mining investment boom better than expected, although biggish falls in mining related capital investment lie ahead. Overall growth is still below trend, still below the level required to soak up un and under employment.

I must admit that I'm worried about the apartment property bubble. Walking through Westfield Parramatta over the last few days, there is a stand at the front entrance predominantly manned by people of Chinese extraction selling a new apartment block. An article by Max Mason in the Sydney Morning Herald carries the headline Locals priced out by $24 billion Chinese property splurge. The analysis below the headline doesn't quite support that dramatic conclusion, but Chinese investment in certain parts of the metropolitan property market is driving demand.

Oh well, time to get on with the day!

Musings on the ABARES conference

It's been a while since I did a rural story. Over at Ochre Archives, Phillip Diprose continues his reports on his various experiments, this time under the heading "just add water." Phillip started with a burst of posts back in 2006 when blogging was new. Posting then became more irregular, with only four posts last year, but now five so far this year.

I have always enjoyed reading the stories about Phillip and Jan's experiments and experiences. Phillip is incurably curious. He lies to try new things and then measure the results. While the vague idea I once had of owning my own property is long gone (I would have been pretty hopeless at it), I still take vicarious pleasure in reading about other's experiences.

Meantime, down in Canberra the Australian Bureau of Agricultural and Resources Economics and Sciences (ABARES) annual conference was getting underway.

This map, produced under the Australian Water Availability Project, measures the upper layer soil moisture across the country as at January 2014 and compares those figures to the past 100 years. In simple terms,  the majority of sheep and wheat producing land has experienced the 10 driest months on record in that time. 

Its a funny mixed up world. In South and West Australia, ABARES is predicting incomes to increase to the highest level in 30 years, mostly due to bumper crops and an improved live export market for beef. By contrast, many farmers in the east are likely to experience significant drought related losses. Still, the recent rains will help.

The annual agricultural outlook conferences were begun by the Old Bureau of Agricultural Economics and have become something of a national institution. They began when agricultural economics was still a significant academic discipline, when primary production was still seen as a key national activity, if in relative decline. While I was not involved, I remember the sense of anticipation they created.

The world changes, but perhaps less than people realise. I am not sure what the practical average memory span is in Australia, perhaps ten years. The policy life cycle is less than that.

At the moment, the Australian financial press is full of discussion about the need for innovation, for new technology industries, for structural reform. Do these things, and all will be well. It sounds and reads a bit like a return to the 1980s, but without the historical context. The reality as I see it is that Australia's export base is actually less diverse than it was in the late 1980s.

Mining has grown enormously, but the combination of that with exports of rural products continues to dominate export trade. With the exception of education services, Australia has proved incapable of generating significant new export activities.Today, as in the 1980s, services and exports of services are seen as part of the growth solution.

It's possible, but I can't see it. Fortunately, it probably doesn't matter. The combination of primary production with mining will, as it has done over the years since 1788, carry us through.

A note on the coolie trade

Yesterday's post on my history blog, The Chinese in Australia - introducing Francis Darby Syme, started to fill in a small gap in my history of New England. Syme was a major agent in the coolie trade, the transmission of Chinese workers to a variety of overseas destinations including Australia.

While I have always been aware of the large number of Chinese in particular countries, it is only now that I have really begun to look at the reasons for and pattern of migration. This 1853 report to the House of Commons provides an interesting snapshot of Chinese emigration.

I notice that the Wikipedia article on Singapore attributes the growth of Chinese migration to Singapore to "the economic hardship in southern China due to the Opium Wars." To my mind, that seems to be a myth. Chinese emigration began once new sea routes were established early in the eighteenth century, well before the Opium wars, and was directly linked to economic conditions in Southern China. 

The Chinese authorities did not like Chinese leaving the country. In 1712, Emperor Kang Xi ordered all foreign rulers to return Chinese living in their countries to China so that they could be beheaded!    

Musings on the Ukraine

My apologies for not posting since Thursday. I have been travelling, gathering new information and ideas.

A friend asked me what I thought of Tony Abbott. It was a neutral question, and I asked why. My questioner commented that so far as my writing was concerned, I seemed to be politically neutral. That got me wondering about the nature of bias. Many of my colleagues would not wonder, they would provide a straightforward explanation. I found that I couldn't, although I outlined my concerns. There were too many shades of gray.

Maybe it's wimpy of me, but if I am asked for an objective assessment, I feel the need to provide balance, to observe, to give information. Of course I have opinions, sometimes very strong ones. For the life of me, I cannot provide an objective assessment of Paul Keating. He arouses absolutely visceral  reactions in me. So far as Australian politicians are concerned, he is actually a unique case, someone who managed to strike at things that I considered important to the point that I responded at a purely emotional level. It wasn't so much what he did, but what he said and the way he said it. Mr Abbott seems to arouse similar style responses in many people and for similar reasons.

As I write, Russian troops appear to be occupying the Crimea. This has lead some commentators back to the Crimean War. I am not sure that the commentary is always well informed, for Lord Tennyson's poem The Charge of the Light Brigade has coloured views in the anglosphere. Memories of perceived British incompetence linger:

Half a league, half a league,
Half a league onward,
All in the valley of Death,
Rode the six hundred.
'Forward, the Light Brigade!
Charge for the guns' he said:
Into the valley of Death
Rode the six hundred.

The reality appears to be that this war was a considerable success. It was also the war where the progressive spread of the telegraph suddenly made battlefield events and reporting available within hours in London or Paris, changing things for ever.

Other commentators have been influenced by Mr Putin's view towards gays and the Sochi Olympics, as well as his authoritarian tendencies. These things are important, but they ignore a key issue, the strategic importance of the Crimea to Russia. There was simply no way that the Russians would risk losing control of something that they regarded as absolutely critical to their national interest. I suspect that that is an issue on which most Russians would unite. The vote in the Duma would suggest that.

Comparisons between the current situation in the Ukraine and Chamberlain at  Munich are already emerging. By implication, Putin must be stopped now. If Mr Obama does not respond or fails, then he is like Mr Chamberlain. This comparison fails on two counts. US strategic interests are not as involved as were Britain's, nor is Mr Putin an Adolph Hitler.

I am not saying that the West should not try to protect Ukraine's sovereignty and territorial integrity, although we have to recognise the popular divisions in the Ukraine itself. I am saying that the West has to consider the price it (the EU and US) is prepared to pay if it really wants to affect events. If NATO is actually prepared to go to war, to use force against the Russian Federation, then we have one ball game, one that the Russians must respond too.

I don't think that this is the case. I see no appetite for war, although that is possible. In purely political terms, this is an EU problem, not a US problem. The US may support, but won't get involved.

What can the EU do? Probably not a lot. The most, I suspect, that it can hope for is an integrated Ukraine in the Russian Sphere of influence. Does this matter? Not a lot.

Russia is in structural decline. It is not the Soviet Union. It has an aging and declining population that it cannot easily address for nationalistic reasons. Move forward even twenty years, and Russia will have dropped many places down the international pecking order. Like Britain, it will have to adjust. The days of the Russian Empire are over; the effects will linger.

Against that longer term background, the question now is a simple one: what will most directly benefit the people of the Ukraine? I suspect that this comes back to the preservation of the Ukraine as an entity.  

In the meantime, Mr Abbott's warning that Russia should back-off has nothing to do with Australia beyond the chairmanship of the UN security council. Russia will do what circumstances dictate. If you want to change events, change the circumstances, That's all.

Postscript

The Lowy Institute blog had a useful post on all this: Russia-Ukraine: What is Putin up to in Crimea?

Postscript 2

It seems the the rouble is down, Russian interest rates up.