econlife - A Russian Wheat Story With an Unexpected Ending by Elaine Schwartz

There once was a farmer who started to accumulate land in 2005 and now has 3,600 acres. While at first he planted wheat with a dilapidated tractor, now he has state-of-the-art John Deere equipment, top notch fertilizer, and up-to-date seeds.

Sounds like Iowa?

No, this wheat farmer is in Russia. His land is in the same place that Soviet collective farms called Lenin’s Path and Dawn of Communism had once underproduced. But this gentleman sounds like an entrepreneur. He works long hours, owns a fleet of trucks, benefits from a cheap ruble, and has access to improving storage facilities. In world markets he has been faring beautifully.

Russia just pulled ahead of the U.S. as the world’s biggest wheat producer:

Reading about this farmer in a recent WSJ article, I couldn’t help but think about how the Russian economy has changed.

Our Bottom Line: Economic Systems

We could say there are three basic economic systems. And Russia had all of them during the past 120 years.

Tradition

Looking way back at some Russian history, we could go to a typical pre-revolutionary estate owned by an exceedingly affluent family called Osorgin. Located 90 miles south of Moscow, their manor had eight villages, 8,327 acres, and 600 serfs. Its agricultural life was dominated by tradition. In traditional systems, land, labor, and capital produce the same goods and services year after year. Because roles are passed down from father to son and mother to daughter, all remains pretty much the same.

Command

Leaping to the 1920s, we have the Bolsheviks seizing farmland and the beginnings of a command economy. Through a series of five-year plans, the Soviets form a central planning apparatus that told people what and how to produce. As for agriculture, they created a network of collective farms where employees worked for a daily wage determined by economic planners. Individual initiative was disparaged and innovation was unnecessary. While Russia had been a major exporter of wheat until 1913, by the 1970s, they were unable to feed their entire population.

The Market

It took until 1991 for it all to collapse. With privatization, we get some capitalism and a wheat farmer who buys land, works hard, and flourishes. He employs ten farmhands, a cook and 3 guards.


Perhaps this entrepreneur is an unexpected ending to our 120-year Russian wheat story.

My sources and more: A WSJ front page article alerted me to Russian wheat. It also returned me to all that is fascinating about Russian history. I tell some of the story in my text, Understanding Our American Economy–available through econlife.

Ideal for the classroom, econlife.com reflects Elaine Schwartz’s work as a teacher and a writer. As a teacher at the Kent Place School in Summit, NJ, she’s been an Endowed Chair in Economics and chaired the history department. She’s developed curricula, was a featured teacher in the Annenberg/CPB video project “The Economics Classroom,” and has written several books including Econ 101 ½ (Avon Books/Harper Collins). You can get econlife on a daily basis! Head to econlife.

econlife - What a High Social Score Can Get You in China by Elaine Schwartz

In Suining, near Shanghai, China tried out a social credit system in 2010. The whole country might have something similar in 2020.

Suining

In Suining, if you were older than 14, you started with a social score of 1,000 points. Then though, your behavior determined where you wound up. Caring for an elderly parent got you an extra 50 points while helping the poor added another 10. But if you were convicted of drunk driving or bribing an official, you lost 50.

After adding in a host of other criteria like education and even jaywalking, people got a point tally and then a letter grade. Individuals with an “A” could go to the best schools and get the best jobs. But if you were a “D” citizen, you were denied certain licenses and governmental services.

China

Countrywide planning for a social scoring system formally began on June 14, 2014 when the State Council published its “Planning Outline For the Construction of a Social Credit System.” While all is not yet in place, they do have many local experiments (like Suining’s) and several national programs. The national lists have been created by groups that include China’s Supreme Court, the People’s Bank of China and the National Tourism Administration.

One person on the Supreme Court’s “discredited” (also called dishonest) list told of being unable to get a plane ticket or travel on a high speed train. For not paying a fine, he was also prohibited from staying in luxury hotels and buying expensive real estate. More serious offenders have a voicemail saying, “The person you are calling has been listed as a discredited person by the local court. Please urge this person to fulfill his or her legal obligations.”

In a 2016 article, the Wall Street Journal had this perfect summary of what China could create:



The results:

Our Bottom Line: Three Economic Questions

Economic systems need to decide how they will produce and distribute goods and services. A market economy mostly uses a “bottom-up” approach. Based on countless decisions from households and businesses, people get what they want and need. By contrast, China’s social scoring system is “top-down” control.

The one common thread shared by bottom-up and top-down economic systems is the three basic questions they have to answer:

1. What? We have to ask which goods and services should be produced because the supply of all land, labor and capital is limited.
2. How? When making goods and services, we have to select our land, labor and capital.
3. To whom? And finally, we have to know how wealth will be distributed. Will it be equal or market-related…or based on social scoring?

My sources and more: Thanks to marketplace.org for reminding me it was time to take a second look at China’s credit scoring. My first stop was a chock-full-of-facts Wired article. But the Atlantic had the insight and the WSJ link to some resistance while here and here are more from WSJ.

Ideal for the classroom, econlife.com reflects Elaine Schwartz’s work as a teacher and a writer. As a teacher at the Kent Place School in Summit, NJ, she’s been an Endowed Chair in Economics and chaired the history department. She’s developed curricula, was a featured teacher in the Annenberg/CPB video project “The Economics Classroom,” and has written several books including Econ 101 ½ (Avon Books/Harper Collins). You can get econlife on a daily basis! Head to econlife.

Book Review - How Adam Smith Can Change Your Life (Andy Jobson)

Review – How Adam Smith Can Change Your Life: An Unexpected Guide to Human Nature and Happiness by Russ Roberts

I recently was introduced to How Adam Smith Can Change Your Life: An Unexpected Guide to Human Nature and Happiness by Russ Roberts.  Roberts takes the lesser known Adam Smith work, The Theory of Moral Sentiments, and selects useful highlights to illustrate how we can know ourselves better and pursue happiness.


I first became interested in Moral Sentiments when I read a P.J. O’Rourke book called On the Wealth of Nations.  Like Roberts, O’Rourke analyzed Smith’s seminal works and made his own observations, (although O’Rourke worked far harder, and perhaps less successfully, at being amusing), and he referenced the earlier book enough that I bought a copy.  Like many before me, however, I bogged down somewhere in the middle.  Smith is brilliant, but his syntax can get complicated, and his reasoning is often roundabout. I got busy with work and family life and set it aside.  

When a friend at izzit.org recommended the book, however, I was excited to re-open my investigation. Capitalism gets a lot of bad press as being ‘heartless’—evil capitalists are the villains of several TV shows and movies nowadays, it seems—but I believe capitalism is actually the most moral of economic systems.  (As Smith put it, as everyone pursues his own self-interest, the good of society results, as if an ‘invisible hand’ were manipulating the process.)  The challenge is to figure out how to explain this.

Roberts does a good job of selecting appropriate passages to explain key ideas from The Theory of Moral Sentiments. He adds more modern stories to illustrate the concepts, such as the role of conscience (or what Smith called ‘the impartial spectator,’ whose approval we seek).  At my school, moral instruction is important, and Roberts takes a book that raises important issues (like ‘How to Be Good’ and ‘How to be Lovely’) and provides a coherent, entertaining overview.  I look forward to sharing portions with my students this year.

You might enjoy doing the same.

An educator of 22 years, Andy Jobson has taught government, economics, and U.S. History. Currently teaching English literature at Riverside Military Academy in Gainesville, GA, he’s also been an administrator, a STAR teacher twice, and taught elementary school with Teach for America.