Putin’s approval rating is high, but it has declined over the past year. The decline is mainly related to domestic policy.
Apparently, the public perceives recent Kremlin economic policy as a continuation of the disastrous policies that Washington imposed on Russia in the 1990s when Russia was loaded up with foreign debt while state assets were privatized and plundered by oligarchs sponsored by the West who “cashed out” by selling the assets to foreigners.
As far as we can tell, the Institute of Economics of the Russian Academy of Sciences is so brainwashed by neoliberal economics that their minds are closed to correct policies. The failure of Russian economic leadership imposes far more costs on the Russian economy than do Washington’s sanctions, writes Paul Craig Roberts and Michael Hudson at The Herland Report. (Photo: The Atlantic)
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The approval rating of Putin and the government dropped in response to the recent increases in the retirement age and value added tax. The former raised concerns about pension security and reminded Russians of the collapse of Soviet pensions. The latter reduced consumer disposable income and lowered consumer demand and the economic growth rate. These policies represent austerity imposed on the domestic population instead of on foreign creditors and reflect the neoliberal view that austerity leads to prosperity.
This money could have been invested in Russia itself to raise the productivity and living standards of its citizens. The outflow puts the ruble under pressure, and the interest payments draw money out of the country away from Russian uses. If it were not for these outflows, the value of the ruble and Russian wages would be higher.
Russia’s economic problems are due to the looting of the country during the Yeltsin years, to the imposition of neoliberal economics by the Americans, and to financialization as a result of the privatizations.
Russia’s stock market became the darling of the West in the mid-1990s as underpriced mining, oil and infrastructure were sold for a fraction of their value to foreigners, thus transferring Russian income streams abroad instead of leaving the income to be invested in Russia. In effect, Russians were told that the way for their country to get rich was to let kleptocrats, oligarchs, and their U.S. and British stock brokers make hundreds of billions of dollars by privatizing Russia’s public domain.
People’s savings (called the “overhang”) were wiped out with hyperinflation. Privatization was not accompanied by new investment. The economy was not industrialized, but financialized. The proceeds from privatization were deposited by the Russian government in private banks where the money was used to privatize more Russian assets.
The banking system thus served to finance the transfer of ownership, not to fund new investment, and the proceeds were transferred abroad. Russia was turned into a financial colony in which proconsuls created wealth at the top.
Today privatization continues in the de facto privatization of public assets, such as charging fees for use of federal highways. As the Russian economic profession has been brainwashed by the Americans, the country is devoid of economic leadership.
This advice served to prevent Russia from using its own central bank to fund public infrastructure and private investment projects by issuing rubles. In other words, Russia might as well not have a central bank.
As far as we can tell, the Institute of Economics of the Russian Academy of Sciences is so brainwashed by neoliberal economics that their minds are closed to correct policies. The failure of Russian economic leadership imposes far more costs on the Russian economy than do Washington’s sanctions.
Intellectual leadership is weak with many in the intellectual class favoring integration with the West rather than with the East. To be part of the West has been an important goal since Peter the First and Catherine the Great, and the Russian Atlanticist Integrationists cannot let go of the ancient goal.
This goal no longer makes sense. Not only does it imply Russian vassalage, but also Europe is no longer the center of power. The East is rising, and China is the center and will be until the Chinese destroy themselves by copying the Western neoliberal policy of financializing the economy.
The Russian government’s popularity was at a peak when the government showed it had the intelligence and will to reincorporate Crimea into Russia. However, the Russian government, hoping to reassure Washington and Europe, refused the requests of the Luhansk and Donetsk republics to be reincorporated into Russia. Russian nationalists, the majority of the population, saw this as kowtowing to the West.
Moreover, the Russian government’s decision has resulted in Ukraine’s ongoing military assault on the breakaway republics and to the arming of Ukraine by the West. Instead of acting decisively, the Russian government enabled the continuation of conflict that can be exploited by Washington. The Russian people understand this even if the government does not.
By failing to show firmness, the Russian government encourages the crony system of oligarchs who want a government that they can use for their narrow interests. Their interests include participating in the system of Western plunder known as “globalism.” These client elites of the West oppose a powerful Russian state that could assert itself on the world stage and offer an alternative policy to the West’s policy of plunder. The influence of this narrow interest group on government policy indicates that the Russian government is compromised.
Various aspects of Russia’s difficulties and transformation into a power with a foot in both West and East are discussed by commentators. What goes unacknowledged is that Russian economic policy is constrained—indeed, crippled—by the neoliberal brainwashing given to Russian economists by the Americans in the 1990s.
Consequently, Russia is enfeebled by an economic policy that encourages privatization and foreign ownership, and by financialization of economic rents, that is, of income streams that do not result from productive investment but from such factors as location and rise in value due to public infrastructure development, such as a road built across a property.
In a financialized economy credit is used to transfer property ownership instead of to finance new plant and equipment and construction of infrastructure.
Money that flows into productive projects that raise output is not inflationary. Generally speaking, such projects lower costs.
For Russia to succeed, Russia needs an economic re-education and a government that finds its footing in Russian nationalism and discourages Western provocations with firmer responses.
It is our view that the Western world, indeed all of life, has an interest in a Russia too strong to be attacked or provoked as a strong Russia is the only way to curtail the Western aggression that is leading to nuclear war.
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