The Winter Olympics came and went, as the world’s best skiers and skaters (yeah, the entire winter Olympics is based on those two unpopular sports, but we try not to talk about that in order to be polite) descended upon the previously unknown town of Sochi, Russia. They were accompanied by hordes of spoiled, uppity, first-world journalists, a large contingent of whom happened to be relatively young, represent non-traditional media outlets, and armed with camera-phones and thousands of Facebook fans and Twitter followers.
This produced the interesting phenomenon of “Sochi Problems,” where visitors (and let me stress that this is mostly coming from journalists who were assigned to be there, not athletes who are grateful for the opportunity to compete or fans who paid their own money to attend) take to Twitter to highlight and complain about the various deplorable conditions in Sochi. The complaints are long and varied, and cover just about every problem you might imagine confronts the citizens of developing nations on a day-to-day basis: there are too many stray dogs, there are power outages, the water looks nasty, manhole covers are missing, light bulbs are a scarce commodity, litter isn’t picked up, etc.
Just about everyone, regardless of political affiliation, seized upon this issue to point and laugh at Russia in general and strongman Vladimir Putin specifically. After all, it was Putin who personally went to the IOC and guaranteed that he would spend $50 billion to ensure that things would go smoothly: That the snow would be ready for top-level competition (it wasn’t), that the infrastructure of the city would be upgraded to handle the influx of visitors (it wasn’t), and that generally speaking, Russia would seize the moment to prove that it’s an economic and cultural powerhouse rather than some backwater craphole (it didn’t). Any and all problems or complaints with the Sochi games land directly in Putin’s lap, and for good reason. That’s one of the downsides of being an absolute authority figure – everyone knows exactly who to blame when things go wrong (although I’ve heard he received advice from another world leader that whenever anyone criticizes him, he should always blame Republicans in Congress).
But wait just a second here. While everyone is busy laughing and drawing conclusions about Russia as a country, nobody seems to be asking the important question: Why didn’t it work? Why couldn’t a strongman with absolute authority and nearly limitless financial resources deliver the results he promised? Surely the motivation was sufficiently high; Putin knew quite well this would be his moment in the spotlight. Some have generally pointed to “corruption” as a catch-all explanation with no real investigation into specific examples or exactly what that means. There seems to be a hint of cold-war resentment involved with that, as the implication is that corruption is an inherent aspect of the Russian people, and exists in Russia to a much greater extent than it does elsewhere, an implication rarely supported by any serious factual analysis.
The “progressive” movement has always featured a somewhat bizarre and macabre fascination with tyrants, dictators, and autocrats. Time Magazine infamously named Adolf Hitler as “Man of the Year” in 1938. Mussolini is famously celebrated for “making the trains run on time.” In recent years, American leftists in Congress, the Obama administration, and the media have praised communist China for its ability to “get things done.” There’s a certain sense among a large element of the population that in some ways, absolute unchecked power is a positive feature of government, because it will be able to move quickly and not get bogged down in needless debates and “gridlock.” The implication seems to be that this is a simple tradeoff. Sure, autocratic regimes may be prone to tyranny, human rights abuses, and the occasional genocide. But hey, when you need a highway built in a hurry, they can make it happen! No debate necessary, no 2000-page stimulus bill required, no compromising with opposition figures. Dear Leader just says, “Build a highway here!” and within weeks, a highway suddenly exists. Progress!
So what happened in Sochi? Putin’s plans weren’t derailed by political opposition – he has no meaningful opposition. They presumably weren’t derailed by a lack of desire or enthusiasm on his part – after all, what’s more important to dictators than appearing to be powerful and godlike in front of the world? They seemingly weren’t derailed by a lack of funds – he claims to have spent a ton of money, and surely has the power to allocate it to whatever he sees fit.
I would suggest that the reason Putin’s attempt to “modernize” Sochi has failed is because it is a government project. It failed for the same reason government projects are always prone to failure. Because economic calculation is impossible under socialism. There is no market in play here to properly direct and distribute the resources. How many hotels should be made? What material should they be made out of? Do we need new roads to be built? If so, to where? How many lanes should they have? Basic questions like this are virtually impossible to answer in the absence of market prices. For a bureaucrat who is not risking his own capital on these projects, accurate predictions are nearly impossible. Keep in mind, they aren’t just building for one solitary event, all reports are that Putin plans on turning Sochi into a high-profile international resort town.
But a funny thing about resorts – they depend entirely on voluntary trade to exist. People need to want to go there. And when people want to go somewhere, no government involvement is necessary. Why do five-star luxury hotels exist in the Bahamas? Not because some strongman decreed they must be built. They exist because the demand existed, businessmen saw an opportunity for profit, and they used market prices to determine which hotels to build, where to build them, how much to charge, etc. Presumably, the reason Sochi was light on infrastructure prior the Olympics is because nobody wanted to go there. And, unfortunately for the bureaucrats, just building a lot of hotels won’t really change that. Most tourists don’t choose where to vacation based on where the best hotels are. Supply does not “create its own demand.”
The fact of the matter is that “Sochi Problems” are not unique to Sochi. They are not unique to Russia. They are not unique to Vladimir Putin. They are symptoms of the same problems that plague all government intervention into the market. Sochi is just the latest in a very long line of government-created economic boondoggles. All the guns and all the money in the world cannot magically create prosperity. Russian entrepreneurs were smart enough to recognize this, which explains why the government “had” to step in. The results; while surprising to most Americans, are entirely predictable to those of us who have a sound understanding of free market economics.
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