Invincible Capitalism

GENERAL COMMENTS: A decade ago most Russians would have regarded all KGB agents as thugs. Now it looks as though one of them, Prime Minister Vladimir Putin, hand-picked by Boris Yeltsin as his successor, is about to ascend to the presidency. Putin is the guy who sent the tanks into Chechnya, evidently with Yeltsin's blessings. Most Russians cheered, but the Western press seems painfully divided over whether the military expedition was villainous or heroic. In trying to answer this question, The Wall Street Journal has managed to straddle the fence, as they frequently do in trying to reconcile their almost unerringly conservative op-ed columns with the rest of the paper, which is blandly centrist in its coverage of hard news.

The dichotomy was always strongest in the analysis of the Clinton presidency. While the op-ed pages reflected a well justified lynch-mob mentality, the news stories put a more charitable spin on the Clintons' stunning and voluminous record of criminal misdeed. Similarly, while today's front page makes Yeltsin out to be a hero even after a bit of war-mongering in Chechnya and a promiscuously erratic political career, it was only a few days ago that the op-ed page published an inspiring letter of defiance written by an ostensible Chechnyan freedom fighter. Putting all of that aside, the news pages had it just about right Monday in assessing Russia's prospects over the foreseeable future: "Russia is ultimately lurching toward democracy, capitalism and integration with the rest of the world. It will be a particularly Russian brand of all three that will never sit quite right with Western sensibilities."

Legacy of Murder

That's about as optimistic as we can be, given the murderous legacy of Stalin and its metastasis within today's Russia into corruption on a breathtaking scale. Still, in commenting on the methods of America's erstwhile business partners, the Journal has always been most civil and eager to forgive. If bankers in Moscow were getting shot in the kneecaps or worse for a while, it was a necessary evil in the East's transition toward a (somewhat) kinder and gentler capitalism. And if nearly every cent of the money we've loaned Russia over the last decade now sits in Swiss accounts, the losses must be seen in the larger context as a way to motivate the country's business class toward the attainment of the still greater rewards that come with establishment of ostensibly trustworthy financial markets.

No "Russian Mt. Rushmore"

Surely even the most ideologically hardened Bolsehevik can see in the example of American capitalism that it is possible to get rich without resorting to threats or physical violence. Has Goldman Sachs ever broken an arm or whacked a single kneecap? Case closed. Okay, another millennium could pass before Russia nurtures enough real heroes to erect its own Mt. Rushmore. And it's true that George Washington's legend does not rest on so dubious an act as subduing New England's militia or murdering half the civilian population of Boston. But for these times, given the imperatives of a truly open global economy, the likes of Yeltsin and Putin will do just fine.

Elsewhere in the world, we note that Syria, badly humiliated and somewhat diminished in size as a result of the 1967 Arab-Israeli war, has allied itself with the U.S. in trying to regain the Golan Heights. After decades of war and terrorism, Israel appears too weary to negotiate, even if its survival is at stake. With Albright brokering the deal and Israel about to accede, the moral burden of Israel's defense will fall on the U.S. -- on Bill Clinton, that is, and his successor. Given the advanced state of weaponry in the Middle East, however, any war between Israel and its enemies would likely end before a U.S. carrier group could get within five hundred miles of the Persian Gulf. Mushroom clouds and airborne biological toxins would probably make the area unfit for war for quite some time thereafter.

Stock Markets Fear Not

The world is a dangerous place, yet U.S. tech stocks continue to storm higher. Some of them got socked on the first trading day of 2000, but by the final hour a few bellwethers sat comfortably in the winner's column. America Online finished up 6 7/8, and on a percentage basis Yahoo did even better, closing with a gain of more than 42 points. By the reckoning of Larry Amernick, editor of The Amernick Letter (510 525-3055), the stock market as represented by the S&P 500 index is 23.5% overvalued -- more overvalued than just prior to the 1987 Crash. To give the bull its due, however, I should note that the failure of the dreaded Millennium Bug to generate any significant crisis so far suggests that our worst fears were indeed exaggerated. If the world's cleverest and most pernicious hackers couldn't produce a global viral epidemic over the weekend, and if terrorists could not make the free nations of the West cower in fear, they are clearly less threatening than many of us had come to believe.

Rick Ackerman forecasts stock, index and commodity futures prices for market professionals in his daily newsletter, Black Box Forecasts. Visit his web site at www.blackboxforecasts.com