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Privatization Is the Atlanticist Strategy to Attack Russia

By       Message Paul Craig Roberts       (Page 1 of 2 pages)     Permalink    (# of views)

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Reprinted from Paul Craig Roberts Website

Co-written by Michael Hudson

Russia's Economy Resilient?
Russia's Economy Resilient?
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NOTE: Readers are asking to know who, in addition to the Western-financed NGOs, are the Fifth Columnists inside Russia. Michael Hudson and I left the description general as Atlanticist Integrationists and neoliberal economists. The Saker provides some specific names. Among the Fifth Columnists are the Russian Prime Minister, head of the Central Bank, and the two top economics ministers. They are springing a privatization trap on Putin that could undo all of his accomplishments and deliver Russia to Western control.

Two years ago, Russian officials discussed plans to privatize a group of national enterprises headed by the oil producer Rosneft, the VTB Bank, Aeroflot, and Russian Railways. The stated objective was to streamline management of these companies, and also to induce oligarchs to begin bringing their two decades of capital flight back to invest in the Russia economy. Foreign participation was sought in cases where Western technology transfer and management techniques would be likely to help the economy.

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However, the Russian economic outlook deteriorated as the United States pushed Western governments to impose economic sanctions against Russia and oil prices declined. This has made the Russian economy less attractive to foreign investors. So sale of these companies will bring much lower prices today than would have been likely in 2014

Meanwhile, the combination of a rising domestic budget deficit and balance-of-payments deficit has given Russian advocates of privatization an argument to press ahead with the sell-offs. The flaw in their logic is their neoliberal assumption that Russia cannot simply monetize its deficit, but needs to survive by selling off more major assets. We warn against Russia being so gullible as to accept this dangerous neoliberal argument. Privatization will not help re-industrialize Russia's economy, but will aggravate its turn into a rentier economy from which profits are extracted for the benefit of foreign owners.

To be sure, President Putin set a number of conditions on February 1 to prevent new privatizations from being like the Yeltsin era's disastrous selloffs. This time the assets would not be sold at knockdown prices, but would have to reflect prospective real value. The firms being sold off would remain under Russian jurisdiction, not operated by offshore owners. Foreigners were invited to participate, but the companies would remain subject to Russian laws and regulations, including restrictions to keep their capital within Russia.

Also, the firms to be privatized cannot be bought with domestic state bank credit. The aim is to draw "hard cash" into the buyouts -- ideally from the foreign currency holdings by oligarchs in London and elsewhere.

Putin wisely ruled out selling Russia's largest bank, Sperbank, which holds much of the nation's retail savings accounts. Banking evidently is to remain largely a public utility, which it should because the ability to create credit as money is a natural monopoly and inherently public in character.

Despite these protections that President Putin added, there are serious reasons not to go ahead with the newly-announced privatizations. These reasons go beyond the fact that they would be sold under conditions of economic recession as a result of the Western economic sanctions and falling oil prices.

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The excuse being cited by Russian officials for selling these companies at the present time is to finance the domestic budget deficit. This excuse shows that Russia has still not recovered from the disastrous Western Atlanticist myth that Russia must depend on foreign banks and bondholders to create money, as if the Russian central bank cannot do this itself by monetizing the budget deficit.

Monetization of budget deficits is precisely what the United States government has done, and what Western central banks have been doing in the post World War II era. Debt monetization is common practice in the West. Governments can help revive the economy by printing money instead of indebting the country to private creditors which drains the public sector of funds via interest payments to private creditors.

There is no valid reason to raise money from private banks to provide the government with money when a central bank can create the same money without having to pay interest on loans. However, Russian economists have been inculcated with the Western belief that only commercial banks should create money and that governments should sell interest-bearing bonds in order to raise funds. The incorrect belief that only private banks should create money by making loans is leading the Russian government down the same path that has led the eurozone into a dead end economy. By privatizing credit creation, Europe has shifted economic planning from democratically elected governments to the banking sector.

There is no need for Russia to accept this pro-rentier economic philosophy that bleeds a country of public revenues. Neoliberals are promoting it not to help Russia, but to bring Russia to its knees.

Essentially, those Russians allied with the West -- "Atlanticist Integrationists" -- who want Russia to sacrifice its sovereignty to integration with the Western empire are using neoliberal economics to entrap Putin and breach Russia's control over its own economy that Putin reestablished after the Yeltsin years when Russia was looted by foreign interests.

Despite some success in reducing the power of the oligarchs who arose from the Yeltsin privatizations, the Russian government needs to retain national enterprises as a countervailing economic power. The reason governments operate railways and other basic infrastructure is to lower the cost of living and doing business. The aim of private owners, by contrast, is to raise the prices as high as they can. This is called "rent extraction." Private owners put up tollbooths to raise the cost of infrastructure services that are being privatized. This is the opposite of what the classical economists meant by "free market."

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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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