This article is © 2014 by Stephen J. Sniegoski. All rights reserved by author.
This version was posted February 5, 2014 by WTM Enterprises.


The doublethink games
Russia’s wasteful Olympics vs. necessary U.S. Government spending


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Orwellian "doublethink" — the holding of two mutually contradictory beliefs — has once again surfaced in the mainstream media in their view of Russian government spending on the Sochi Olympics compared with their polar-opposite view of the usual American government spending.

The American media's picture of the Sochi Olympics is largely negative. True, the media implicitly acknowledge that Russia has developed a very impressive Olympic venue and that it has created it from scratch in a location that's unlikely for a Winter Olympics, the Black Sea resort of Sochi being one of the warmest places in frigid Russia, with temperatures even in the nearby mountains often above freezing during the winter. In the environs of Sochi itself, the Russian government has constructed an Olympic Park that includes 11 new state-of-the-art arenas for all the indoor events — on a former swamp. A new high-speed rail line with a highway beside it links Sochi to the town of Krasnaya Polyana, 35 miles away, which will be hosting the skiing and snowboarding events. Krasnaya Polyana had been a relatively insignificant town of wooden houses and largely unpaved streets, but it has now been transformed into a modern resort with new high-end hotels and restaurants.

Moreover, in view of the terror threat from groups based in the nearby Muslim Caucasus areas, about 37,000 police and troops will be on duty for the games.

Instead of detailing the achievement of the Russian government, the American media have instead focused on the corruption, cost overruns, and overall wastefulness of the upcoming games. The estimated $50 billion cost of the 2014 Sochi Olympics exceeds that of all of previous Winter Olympics combined and even surpasses any of the much larger Summer Games, with the Beijing Summer Olympics of 2008 coming next, in the $40 billion range. The media have pointed out that the very expensive facilities built for the Olympics will serve little purpose in the future, since there is no significant demand by private citizens for the facilities. And Krasnaya Polyana will not be a successful ski resort since it has little snow in the winter, meaning that the new train line from Sochi will be largely unused. After the games, the hotels in both Sochi and Krasnaya Polyana are apt to sit largely empty.

All of what the American media have stated about the wastefulness of the Sochi Olympics is absolutely true. It is obvious that there is virtually no private demand for the expensive goods that have been produced, meaning that resources were essentially wasted. But the media normally apply a radically different type of analysis to government spending in general, and especially to spending by the U.S. government, which they generally present as a positive good — an ideal means of increasing employment and the national income.

For example, sequestration is blamed for keeping the U.S. growth rate for the fourth quarter of 2013 lower than it would have been had the sequestration not taken place. Furthermore, according to the media, the increases in government spending and the creation of money by the Federal Reserve prevented the national income from falling even further during the recession, with Ben Bernanke being credited with saving the United States from another 1930s-type Great Depression. In fact, that scenario very likely would appear to be true if one were to rely on quasi-Keynesian economic models and the official Gross Domestic Product figures that include government spending as part of national income.

However, using the same quasi-Keynesian models and GDP approach, one could probably also show that the Sochi Olympics are a boon for the overall Russian economy and that the Russian economy would be even larger if the Russian government had created comparable Olympic venues throughout the length and breadth of the country. One might hope that mainstream-media sages would mull over that obvious absurdity, becoming skeptical of the existing methods used to analyze the U.S. economy, and would instead begin to apply their economic analysis of the Sochi Olympics to the United States. They would come to realize that U.S. government spending and money creation by the Federal Reserve, while perhaps not as obviously worthless as building Olympic venues, nonetheless promote malinvestment and that, despite what official GDP figures may indicate, do not actually represent an increase in the economic well-being of the American people.

While that analysis is best brought out by Austrian School economics, and it would be ideal if the Austrian approach could gain a foothold in the mainstream, such a development is likely a utopian dream, and the best that can be expected is some rudimentary understanding along those lines.

However, one doubts that even that will ever happen. For it is very likely that the mainstream's analysis of the Sochi Olympics is colored, not by a new understanding of economics, but by a deep hostility toward Vladimir Putin because of his non-economic political positions — his semi-dictatorial tendencies; assertion of Russian power in neighboring states (formerly part of the Soviet Union); opposition to the full panoply of "gay rights" as currently defined; moderate state support for the Russian Orthodox Church; suppression of various oligarchs; and backing of the governments of Iran and Syria.

It seems apparent that, in regard to allowing some individual liberty and pursuing a non-threatening foreign policy, Putin's Russia is a vast improvement over the Soviet Union, but that buys Russia nothing from the mainstream American media, which — one may recall — were far less critical of the former Communist regime. When the topic does not involve a demonized villain such as Putin, but just the U.S. economy, the mainstream likely will continue to fit the facts within its usual economic paradigm. And doublethink will remain intact.  Ω

February 5, 2014

© 2014 by Stephen J. Sniegoski. All rights reserved by author.
This version was posted in 2014 by WTM Enterprises.

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