Coercive seizures don't work where long term credibility is important.

From Five reasons the sanctions are working by Alan Cole.  The subheading is "In lieu of a military response, Biden and his allies are waging economic war on Putin's Russia. It's not a close fight."

In Ukraine, Russia is fighting the Ukrainian Army, Ukrainian Militia, and Ukrainian civilians.  But outside Ukraine, Russia is having to contend with a much larger coalition of opponents and is fighting a financial war rather than a military war.  Cole outlines the parameters of that conflict.

In doing so he makes some observations which touch on other issues I have been mulling.

I have argued that our cities are at risk at the moment owing to the autocratic lock that exists in urban politics.  Big cities are blue and there is no local political opposition or alternative to blue policies.  Because they are so secure from political risk and exposure, more extreme versions of ideological ephemera can gain traction, among the more recent examples being the movement to defund police in several large cities in 2020-21.

The number of cities which actually defunded their police was small but the ideological message was clear and far more city police departments have pulled back from proactive policing than were actually defunded.  All with the predictable and now realized outcome of starkly increased violent crime.  

However, I have argued that the real risk to cities is the accumulation of small nuisances rather than any of the more dramatic items.  Yes, political mono-culture is real and a risk.  Yes, ideological hegemony breeding extremism is real and a risk.  Yes, rising crime from depolicing is real and a risk.

Our cities suffered greatly over half a dozen years of riots and property destruction in the late 1960s.  They then became the picture of dysfunction and poverty for three lost decades.  They only really began to revive, in fits and starts, in the 1990s as select cities imposed law and order once again, enticed businesses and people back to downtowns.  It was a virtuous cycle with success leading to success.

While the cycle of Ferguson and Floyd riots (2014-2020) were not nearly as destructive or searing as those in the late 1960's, they have marked a possible inflection point.  Cities which were flourishing have halted.  The halt has then been exacerbated by the city responses to Covid-19 with more extreme masking mandates, lock downs, and vaccine mandates.  

And it is not the headline items which are causing the greatest concern.  Citizens are concerned to a degree about increased violence but it is sometimes a limited concern.  It doesn't affect them directly.  But postal deliveries which are stolen from the mailbox or front porch do.  Mail deliveries not occurring at all.  Noisy street racing in the small hours of the morning.  Cars rifled overnight.  Shootings at a local bar where no one is killed.  Having to mask up when no one else is.  Development occurring owing to political insiders.  Zoning decisions made by political connectedness rather than resident interests.  Pot holes in the street.  Slow restoration after storms.  Spreading urban encampments.

None of these in themselves are existentially threatening or overwhelming.  Combine them together and suddenly the cost-benefit calculation of living in a city begins to shift.  People slowly and quietly begin to move to the suburbs.  It is masked by continued expansion for a while but then the retreat turns to a route.

This impact of the small quotidian things is highlighted by Cole with regard to some of the financial sanctions against Russia.

A key weapon here is financial technology platforms. A wide variety of transactions made in Russia actually have hidden dependencies on financial systems based in the U.S. or Western Europe. Suddenly, all of those have been called into question. Little conveniences like Apple Pay stopped working for many customers; per one observer, this contributed to congestion at the Moscow Metro.

I discussed correspondent banking last week; customers of Russian banks are going to find international transactions difficult or impossible due to the lack of middleman services that connect them with banks abroad. And things got harder from there. On Saturday, Russia lost access to the Society for Worldwide Interbank Financial Telecommunication (SWIFT) system, which banks use to communicate with each other about how much money is owed, and to whom.

This sounds somewhat trivial, and in a way, it is. For most people, it works smoothly and you don’t have to think about it. But banks can’t simply send their money away without verifying information about the recipient, and that verification becomes a great deal more difficult if you don’t have access to your usual tools. You can use less efficient, older tools. You could code a different system eventually. But a sudden loss of functionality⁠—especially, the loss of the tool that everyone else uses⁠—is a huge inconvenience timed perfectly to coincide with a moment of financial turmoil in Russia.

Death by a thousand micro-cuts is sometimes the more compelling strategy than dropping a MOAB.

There is a second point Cole makes which is relevant to a recent topic.  Cole is talking about the trust inherent in property rights.  Again, emphasis added. 

In liberal economies, there is normally a strong presumption that property can’t be arbitrarily taken away. Sure, you could be fined or sued and lose money that way, but only through a system of laws and precedents.

If you have money, you are thought to have a right to use it, especially if the money is parked at a reliable institution like the New York Fed. Also⁠—though this is less important⁠—if you own a big boat, that is also yours to hold onto.

This system of solid, reliable property rights is usually the right strategy. While it might seem temporarily advantageous for the government to seize money or boats⁠, a profitable “betrayal” like that would have deleterious consequences in the longer run. (Game theory, a branch of economics, often validates betrayal as an advantageous strategy in a one-off game, but not in a more permanent relationship where credibility is important.)

If currency isn’t a reliable store of value, people won’t feel comfortable using it and its value will plummet. And if possessions aren’t protected by law, people won’t feel comfortable buying things in your country. A system of commerce depends on the idea that once you own stuff, you own it.

And yet, the White House and its allies are forcefully rejecting that foundational idea with respect to Russia, rendering their central bank’s assets inaccessible and threatening to confiscate the yachts and mansions of high-level Putin cronies.

Under ordinary circumstances, these kinds of “one-time” policies are disastrous because they are recognized as the tell-tale signs of an unreliable partner in repeated games. When you read about a politician confiscating property and seizing bank accounts, it is usually a sign that your money had better run for the exits.

Cole affirms that the deprivation of property rights in the Russian context is not seen to be alarming, in part because everyone is agreeing that it should be done in this circumstance, the Russians deserve it, and that it will be effective.

And he's right.  To a degree.

However, only last year, we had extended policy discussions from one of our two political parties about the expediency and effectiveness of a wealth tax (a form of property seizure).  We have the longstanding and continuing issue of civil forfeiture whereby the state seizes private property without due process or criminal charges being laid.  Civil forfeitures are widely cited as being greater than the total value of all lost property stolen during burglaries.  And finally, we have the glaring example from Canada of the State being willing, during their recent invocation of the Emergencies Act, to seize assets and property from political opponents of the governing party.

So yes, asset seizures would seem to make sense in the Russian context.  But in the larger context, there is probably a lurking issue.  Civilians are probably beginning to get the impression that property rights are not nearly as secure as they once thought.  

Lost confidence in a police presence and lost confidence in the security of property rights - these are not good things.