FacebookTwitterGoogle+RedditEmail

Will Russia Reject Neoliberalism?

by

According to various reports, the Russian government is reconsidering the neoliberal policy that has served Russia so badly since the collapse of the Soviet Union.  If Russia had adopted an intelligent economic policy, its economy would be far ahead of where it stands today.  It would have avoided most of the capital flight to the West by relying on self-finance.

Washington took advantage of a demoralized Russian government, which looked to Washington for guidance in the post-Soviet era.  Thinking that the rivalry between the two countries had ended with the Soviet collapse, Russians trusted American advice to modernize its economy with best-practice Western ideas. Instead, Washington abused this trust, and saddled Russia with an economic policy designed to carve up RussianScreen shot 2016-08-09 at 3.57.13 PM economic assets and transfer ownership into foreign hands.  By tricking Russia into accepting foreign capital and exposing the ruble to currency speculation, Washington made sure that the US could destabilize Russia with capital outflows and assaults on the ruble’s exchange value.  Only a government unfamiliar with the neoconservative aim of US world hegemony would have exposed its economic system to such foreign manipulation.

The sanctions that Washington imposed – and forced Europe to impose – on Russia show how neoliberal economics works against Russia. Its call for high interest rates and austerity sank the Russian economy – needlessly.  The ruble was knocked down by capital outflows, resulting in the neoliberal central bank squandering Russia’s foreign reserves in an effort to support the ruble but actually supported capital flight.

Even Vladimir Putin finds attractive the romantic notion of a global economy to which every country has equal access. But the problems resulting from neoliberal policy forced him to turn to import substitution in order to make the Russian economy less dependent on imports.  It also made Putin realize that if Russia were to have one foot in the Western economic order, it needed to have the other foot in the new economic order being constructed with China, India, and former central Asian Soviet republics.

Neoliberal economics prescribes a dependency policy that relies on foreign loans and foreign investment.  This policy creates foreign currency debt and foreign ownership of Russian profits.  These are dangerous vulnerabilities for a nation declared by Washington to be “an existential threat to the US.”

The economic establishment that Washington set up for Russia is neoliberal. Most notably, the head of the central bank Elvira Nabiullina, minister of economic development Alexei Ulyukayev, and the current and former finance ministers, Anton Siluanov and Alexei Kudrin, are doctrinaire neoliberals.  This crowd wanted to deal with Russia’s budget deficit by selling public assets to foreigners. If actually carried through, that policy would give Washington more control over Russia’s economy.

Opposed to this collection of “junk economists,” stands Sergey Glaziev.  Boris Titov and Andrei Klepach are reported to be his allies.

This group understands that neoliberal policies make Russia’s economy susceptible to destabilization by Washington if the US wants to punish the Russian government for not following Washington’s foreign policy.  Their aim is to promote a more self-sufficient Russia in order to protect the nation’s sovereignty and the government’s ability to act in Russia’s national interests rather than subjugate these interests to those of Washington. The neoliberal model is not a development model, but is purely extractive. Americans have characterized it as making Russia or other dependencies “hewers of wood and drawers of water” – or in Russia’s case, oil, gas, platinum and diamonds.

Self-sufficiency means not being import dependent or dependent on foreign capital for investment that could be financed by Russia’s central bank.  It also means keeping strategic parts of the economy in public, not private, hands. Basic infrastructure services should be provided to the economy at cost, on a subsidized basis or freely, not turned over to foreign owners to extract monopoly rent.  Glaziev also wants the ruble’s exchange value to be set by the central bank, not by speculators in the currency market.

Neoliberal economists do not acknowledge that the economic development of a nation with natural resource endowments such as Russia has can be financed by the central bank creating the money required to undertake the projects.  They pretend that this would be inflationary.  Neoliberals deny the long-recognized fact that, in terms of the quantity of money, it makes no difference whether the money comes from the central bank or from private banks creating money by making loans or from abroad.  The difference is that if money comes from private banks or from abroad, interest must be paid to the banks, and profits have to be shared with foreign investors, who end up with some control over the economy.

Apparently, Russia’s neoliberals are insensitive to the threat that Washington and its European vassals pose to the Russian state. On the basis of lies Washington has imposed economic sanctions on Russia. This political demonization is as fictitious as is the neoliberal economic propaganda.  On the basis of such lies, Washington is building up military forces and missile bases on Russia’s borders and in Russian waters.  Washington seeks to overthrow former Russian or Soviet provinces and install regimes hostile to Russia, as in Ukraine and Georgia.  Russia is continually demonized by Washington and NATO.  Washington even politicized the Olympic games and prevented the participation of many Russian athletes.

Despite these overt hostile moves against Russia, Russian neoliberals still believe that the economic policies that Washington urges on Russia are in Russia’s interest, not intended to gain control of its economy. Hooking Russia’s fate to Western hegemony under these conditions would doom Russian sovereignty.

Paul Craig Roberts is a former Assistant Secretary of the US Treasury and Associate Editor of the Wall Street Journal. Roberts’ How the Economy Was Lost is now available from CounterPunch in electronic format. His latest book is The Neoconservative Threat to World Order. Michael Hudson’s new book, Killing the Host is published in e-format by CounterPunch Books and in print by Islet. He can be reached via his website, mh@michael-hudson.com

CounterPunch Magazine

minimag-edit

bernie-the-sandernistas-cover-344x550

zen economics

Weekend Edition
April 28, 2017
Friday - Sunday
Paul Street
Slandering Populism: a Chilling Media Habit
Andrew Levine
Why I Fear and Loathe Trump Even More Now Than On Election Day
Jeffrey St. Clair
Mountain of Tears: the Vanishing Glaciers of the Pacific Northwest
Philippe Marlière
The Neoliberal or the Fascist? What Should French Progressives Do?
Conn Hallinan
America’s New Nuclear Missile Endangers the World
Peter Linebaugh
Omnia Sunt Communia: May Day 2017
Vijay Prashad
Reckless in the White House
Brian Cloughley
Who Benefits From Prolonged Warfare?
Kathy Kelly
The Shame of Killing Innocent People
Ron Jacobs
Hate Speech as Free Speech: How Does That Work, Exactly?
Andre Vltchek
Middle Eastern Surgeon Speaks About “Ecology of War”
Matt Rubenstein
Which Witch Hunt? Liberal Disanalogies
Sami Awad - Yoav Litvin - Rabbi Lynn Gottlieb
Never Give Up: Nonviolent Civilian Resistance, Healing and Active Hope in the Holyland
Pete Dolack
Tribunal Finds Monsanto an Abuser of Human Rights and Environment
Christopher Ketcham
The Coyote Hunt
Mike Whitney
Putin’s New World Order
Ramzy Baroud
Palestinian, Jewish Voices Must Jointly Challenge Israel’s Past
Ralph Nader
Trump’s 100 Days of Rage and Rapacity
Harvey Wasserman
Marine Le Pen Is a Fascist—Not a ‘Right-Wing Populist,’ Which Is a Contradiction in Terms
William Hawes
World War Whatever
John Stanton
War With North Korea: No Joke
Jim Goodman
NAFTA Needs to be Replaced, Not Renegotiated
Murray Dobbin
What is the Antidote to Trumpism?
Louis Proyect
Left Power in an Age of Capitalist Decay
Medea Benjamin
Women Beware: Saudi Arabia Charged with Shaping Global Standards for Women’s Equality
Rev. William Alberts
Selling Spiritual Care
Peter Lee
Invasion of the Pretty People, Kamala Harris Edition
Cal Winslow
A Special Obscenity: “Guernica” Today
Binoy Kampmark
Turkey’s Kurdish Agenda
Guillermo R. Gil
The Senator Visits Río Piedras
Jeff Mackler
Mumia Abu-Jamal Fights for a New Trial and Freedom 
Cesar Chelala
The Responsibility of Rich Countries in Yemen’s Crisis
Leslie Watson Malachi
Women’s Health is on the Chopping Block, Again
Basav Sen
The Coal Industry is a Job Killer
Judith Bello
Rojava, a Popular Imperial Project
Robert Koehler
A Public Plan for Peace
Sam Pizzigati
The Insider Who Blew the Whistle on Corporate Greed
Nyla Ali Khan
There Has to be a Way Out of the Labyrinth
Michael J. Sainato
Trump Scales Back Antiquities Act, Which Helped to Create National Parks
Stu Harrison
Under Duterte, Filipino Youth Struggle for Real Change
Martin Billheimer
Balm for Goat’s Milk
Stephen Martin
Spooky Cookies and Algorithmic Steps Dystopian
Michael Doliner
Thank You Note
Charles R. Larson
Review: Gregor Hens’ “Nicotine”
David Yearsley
Handel’s Executioner
FacebookTwitterGoogle+RedditEmail