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OpEdNews Op Eds    H2'ed 3/1/19

Is Neoliberlism Killing Russia?

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Apparently, Russian economists do not understand that Russia does not spend borrowed foreign currencies inside Russia. If Russia takes a foreign loan, the borrowed money goes into central bank reserves. The central bank then issues the ruble equivalent to be spent on the project, and the cost of the project goes up by the pointless interest paid to the foreign lender.

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.

Southfront's report says that the Russian government has failed to explain its economic policy to the public. Perhaps the reason is that the public, unlike the economists, has not been brainwashed and will see through the nonsensical explanations.

Apparently there is also no intellectual leadership. Although Putin is a leader and has a sense of Russian purpose, many officials use their office not in service to Russia but in service to their own wealth, much of which is held abroad. Corruption and embezzlement seem to be the purpose of many office holders. Scandals abound among members of government and reflect badly on Putin and Medvedev.

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, this mistake by the Russian government 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.

Putin is trying to break free of the West's grip by directing Russia's economic orientation to the East. His effort is helped by the American sanctions. But Russia remains sufficiently mired in the Western system to be vulnerable to sanctions and is only slowly extracting itself. 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.

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.

The Russian government and central bank have been blinded to the fact that Russian infrastructure projects and private investment are not dependent on borrowing dollars abroad or by acquiring dollars by selling Russian assets to foreigners. Such projects can be financed by ruble creation by the Russian central bank. 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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Dr. Roberts was Assistant Secretary of the US Treasury for Economic Policy in the Reagan Administration. He was associate editor and columnist with the Wall Street Journal, columnist for Business Week and the Scripps Howard News Service. He is a contributing editor to Gerald Celente's Trends Journal. He has had numerous university appointments. His books, The Failure of Laissez Faire Capitalism and Economic Dissolution of the West is available (more...)
 

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