The Economic Collapse and the Neoliberal Onslaught
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This is the lecture I would have given if I had been able to accept the invitation to address the St. Petersburg International Economic Forum in Russia last weekend.
Executive Summary: From the standpoint of Russia's dilemma, this is an important column. Putin's partial impotence via-a-vis Washington is due to the grip that neoliberal economics exercises over the Russian government. Putin cannot break with the West, because he believes that Russian economic development is dependent on Russia's integration within the Western economy. That is what neoliberal economics tells the Russian economic and financial establishment.
Everyone should understand that I am not a pro-Russian anti-American. I am anti-war, especially nuclear war. My concern is that the inability of the Russian government to put its foot down is due to its belief that Russian development, despite all the talk about the Eurasian partnership and the Silk Road, is dependent on being integrated with the West. This totally erroneous belief prevents the Russian government from any decisive break with the West. Consequently, Putin continues to accept provocations in order to avoid a decisive break that would cut Russia off from the West. In Washington and the UK this is interpreted as a lack of resolve on Putin's part and encourages an escalation in provocations that will intensify until Russia's only option is surrender or war.
If the Russian government did not believe that it needed the West, the government could give stronger responses to provocations that would make clear that there are limits to what Russia will tolerate. It would also make Europe aware that its existence hangs in the balance. The combination of Trump abusing Europe and Europe's recognition of the threat to its own existence of its alignment with an aggressive Washington would break the Western alliance and NATO. But Putin cannot bring this about because he erroneously believes that Russia needs the West.
America's Fifth Column Will Destroy Russia
If the neoconservatives had self-restraint, they would sit back and let America's Fifth Column -- Neoliberal Economics -- finish off Russia for them. Russia is doomed, because the country's economists were brainwashed during the Yeltsin years by American neoliberal economists. It was easy enough for the Americans to do. Communist economics had come to naught, the Russian economy was broken, Russians were experiencing widespread hardship, and successful America was there with a helping hand.
In reality the helping hand was a grasping hand. The hand grasped Russian resources through privatization and gave control to American-friendly oligarchs. Russian economists had no clue about how financial capitalism in its neoliberal guise strips economies of their assets while loading them up with debt.
But worse happened. Russia's economists were brainwashed into an economic way of thinking that serves Western imperialism.
For example, neoliberal economics exposes Russia's currency to speculation, manipulation, and destabilization. Capital inflows can be used to drive up the value of the ruble, and then at the opportune time, the capital can be pulled out, dropping the ruble's value and driving up domestic inflation with higher import prices, delivering a hit to Russian living standards. Washington has always used these kind of manipulations to destabilize governments.
Neo-liberal economics has also brainwashed the Russian central bank with the belief that Russian economic development depends on foreign investment in Russia. This erroneous belief threatens the very sovereignty of Russia. The Russian central bank could easily finance all internal economic development by creating money, but the brainwashed central bank does not realize this. The bank thinks that if the bank finances internal development, the result would be inflation and depreciation of the ruble. So the central bank is guided by American neoliberal economics to borrow abroad money it does not need in order to burden Russia with foreign debt that requires a diversion of Russian resources into interest payments to the West.
As Michael Hudson and I explained to the Russians two years ago, when Russia borrows from the West, the US for example, and in flow the dollars, what happens to the dollars? Russia cannot spend them domestically to finance development projects, so where do the dollars go? They go into Russia's foreign exchange holdings and accrue interest for the lender. The central bank then creates the ruble equivalent of the borrowed and idle dollars and finances the project. So why borrow the dollars? The only possible reason is so the US can use the dollar debt to exercise control over Russian decision making. In other words, Russia delivers herself into the hands of her enemies.
Indeed, it is the Russian government's mistaken belief that Russian economic development is dependent on Russia being included as part of the West that has caused Putin to accept the provocations and humiliations that the West has heaped upon Russia. The lack of response to these provocations will eventually cause the Russian government to lose the support of the nationalist elements in Russia.
Putin is struggling to have Russia integrated into the Western economic system while retaining Russia's sovereignty (an unrealistic goal), because Putin has been convinced by the element in the Russian elite, which had rather be Western than Russian, that Russia's economic development depends on being integrated into the Western economy. As the neoliberal economic elite control Russia's economic and financial policy, Putin believes that he has to accept Western provocations or forfeit his hopes for Russian economic development.