Between Crisis and Reform
The term “globalization” has become popular in Russia, but with a certain delay. This is happening just at that moment when all over the world the talk is no longer about the creation of a new global economy, but about the crisis in it. That our writers on current affairs and theoreticians are speaking about globalization later than those in the West testifies not at all that it has missed us or been held back, but rather gives evidence to the backwardness of our social thought.
Worst of all, when it speaks of globalization, our press immediately divides itself into two camps. Some see in globalization an irrepressible “natural process” in which it is necessary to be enrolled, others see it as a conspiracy of dark forces against Russia, against which it is necessary to struggle. But certainly neither one view nor the other corresponds to reality. Globalization is the result of the neoliberal economic policy, which has triumphed on a world scale. The result of this policy is that not only the Russian worker in the majority of departments are barely surviving, but also that the American workers receive less, adjusted for inflation, than they received 20 years ago. This policy was not directed expressly against Russia, any more than against America. Multinational financial capital simply vanquished industrial capital. The victims of this are the toiling classes of the entire world. It’s clear that the poorer nations suffer more than the richer, but that is certainly not news, it’s the logic of capitalism.
Now, when the world economic depression is maturing, Russia cannot stand on the sidelines. She most probably suffers less from the crisis than the US and Western Europe. But what does “less” mean in a practical sense? Our situation would otherwise be more difficult. If it should worsen, will it be a consolation for us, that fore someone else it is even worse? In the economic and financial sense, the California energy crisis is more of a shock for the US than our crisis in the Maritime Region. [The region in the Russian Far East notorious for frequent outages.] But the residents of the Maritime Region would gladly exchange places with he citizens of California.
Market economics is, in principle, cyclical and in this sense predictable. In post-war Europe and in part also in the US, the government, in accordance with the ideas of J.M. Keynes, regulated business life, carrying out a policy of “constructive intervention”. The essence of this policy is to sharply increase government expenditures and investments in the period when market demand is falling, but then to curtail them when the economy improves. This permitted an equalization of the fluctuations of supply and demand, guaranteeing stable development.
Neoliberal economists criticized this policy because it, firstly, leads to gradual growth of inflation, but secondly, they noted that while averting crises, the government should not save ineffective enterprises from failure. Crises are necessary to capitalism to maintain the competitive dynamic and periodic “cleansing” of the economic organism. The principle of “Survival of the Fittest” is realized completely only in times of decline. When in the countries of South Asia the local currencies crashed and then, just as swiftly the volume of production began to fall, everyone expected that this was the beginning of a world crisis. Further events, it seemed, confirmed this assumption. The crisis began to spread. After South Asia it seized Russia. After the collapse of the Ruble, the financial unpleasantness seized Latin America. The Brazilian Real was twice devalued, a currency that was not only the strongest regional currency, but also a symbol of economic development on the continent. International financial experts at this instant panicked, and raised their voices in support of a return to regulation and control over the global movement of capital.
However, the slump of 1997-1998 did not become global. Massive credits were thrown at saving those falling into bankruptcy as victims of the financial, governments began printing money. Multimillion credits were distributed to every possible stabilization program, even if they were mutually contradictory. Whether the methods employed were good, bad or indifferent, the situation stabilized. After the devaluation of the national currencies, the situation began to improve in both Russia and Brazil.
The second warning bell was heard in April, 1999, when the prices of a coterie of shares of US firms fell sharply, firms representing the “New Economy” (this coterie forms the NASDAQ index). As soon as it was revealed that the majority of these firms, which worked to permit all possible services based on Internet technology yielded insignificant profits, the slump in the market led immediately to a wave of bankruptcies. However, the Dow-Jones index, comprising the more traditional companies, stood firm. NASDAQ, which was shaken, also leveled out. The slump was held an inevitable correction, although, to general astonishment, the correction did not occur. The prices of the surviving companies remained extremely high.
After the Spring stock market shock of 2000, a sign of a greater crisis strongly settled in in the USA. No one knew, where, how and with what it would begin. As long as the economy of the USA continued to grow, a world crisis was impossible. It’s true, for Russia the crisis on the American stock market seemed a blessing. In 1999, when in connection with the renewed economic upswing in Asia, the price of oil began to grow turbulently, no one expected that with growth would last long. Thanks to the acceleration of credit and stock market inflation in the USA, massive funds over the course of the last 15 years were taken out of the “real economy” and migrated into the sphere of financial speculation, principally international. Russia was not an exception. To the contrary, it was on the front line of this process, moving in the same direction as the US. The government sincerely believed monetarist theories, maintaining that the true sources of inflation were government spending and the printing of paper money. For that reason no one undertook measures to contain credit and stock market inflation, moreover, they were considered a blessing and a general stimulation. It was not just that the American firms had elevated stock values. This occurred under conditions, when for 10 years the price of paper money had not fallen. In other words, speculative financial capital grew disproportionally to the growth of production, and depreciated non-cash funds could be freely converted, for the time being, into sound cash funds. Only a mechanism was needed, which would permit this to happen, without immediately bringing down the markets (if everyone begin to sell shares, a Wall Street nightmare would begin). The first who would find a solution to this problem would be the winner.
The agitation in oil prices ensured such a mechanism of redistribution. In the economy of the West a kind of “inflationary canopy”, similar to the Soviet “conserved inflation” (remember, when everyone’s savings book was growing but prices were stable). In the Soviet economy “spare” money sooner or later created an insuperable problem of “deficit”.
This time the “spare” money, in the final analysis, fell on the oil market.
To the extent that the dollar “ceiling” collapsed, inflation sooner or later went out of control and “spare” money, breaking free, distributed itself over all sectors of the economy. Hard money was doomed to lose value and the question of devaluation of the dollar was placed on the order of the day. The dollar, over the course of the second have of the 90s continuously gained strength in relationship to the German Mark, and the Japanese Yen. Now the Europeans and the Japanese will be able to take revenge. Another question is whether the price of this victory will be to dear for everyone.
The irony of history is that the first oil shock disorganized the system of state regulation and undermined the “socialism of redistribution” governing the West. On the other hand, the second oil shock is disorganizing the system of market-corporate regulation and is causing a shock to neoliberal capitalism. If the answer to the oil shock of 1973 was the beginning, if somewhat lagging displacement of the world economy, “to the right”, towards the liberal model, well now the more believable answer will be (also after a few pauses) an analogous movement “to the left”. The circle is closed.
This process will not pass us by. The Russia of today demonstrates, on the one hand, an incredible openness and integration into the world economy. On the other hand, the discrepancy of the neoliberal approach to the growing new global dynamic, chosen by Gref (tr. Herman Gref, Russian economist, and close Putin associate), Putin and Co., is becoming more and more obvious).
Under conditions where predictions of a relatively imminent larger
crisis are becoming almost commonplace, the criticism of governments
and international financial institutions responsible for introducing
the neoliberal course on the global scale will grow. On the basis
of massive movements, the protests against the International Monetary
Fund (IMF), the World Bank (WB) and the World Trade Association (WTO)
became reality in Seattle in 1999 and in Prague in 2000, when thousands
of people blockaded the work of the WTO, IMF and WB. The enlightened
Russian intelligentsia looked with bewilderment at the events, asking
themselves how in “advanced Europe” hundreds of thousands of people
would go to protest in the streets, unless they are mad with luxury.
In America and in Europe the understanding is growing that we are far
from living in “the best of all possible worlds”, and that something
is in urgent need of change before it’s too late. After 5-6 years
Russia risks taking the position of the last bastion of economic liberalism,
“globalization” and “free capitalism”. This, by the way is completely
natural for a backward state. Czarist Russia frequently played
the role of the decisive bastion of the international reaction – it’s
sufficient to remember her role in the suppression of the European revolutions
of 1848-1849. But to stop history is difficult even with all the
powers of the Russian bureaucracy. Sooner or later the new radical
anticapitalist movement that is developing in the West, “will infect”
our country, just as did the ideas of the French Revolution and Marxism.
The sooner, the better.