Sergei Glaziev — The full extend of economic manipulations in Russia.

This is a rather long interview. I have excerpted the sections that are particularly relevant from the MMT POV. Glaziev has a pretty good handle on it, and he has Putin's ear. Alexei Kudrin, a former minister of finance, is a neoliberal, and he is agitating from outside for a conventional Western approach that would essentially turn Russia into a vassal state of the Empire like the EU.

Monetarists think that money equals golden coins. That is how they regard the money, and that is why they think the smaller amount of money circulates, the lower the prices, the same as with any product. Our financial authorities have an understanding of the money matters at the level of 18th century, totally backward, having nothing to do with the reality. Credit is the mechanism of promoting the economic growth. The economic growth since the 18th century happened when the states invented the credit, managed to squeeze out the usurers form the financial market and gave the industry the opportunity to obtain “long” long-term money. Naturally, there has to be a balance. Obviously, money should not be simply given away or dropped from the helicopter, as some did.

Our program include the goal-based regulation of the money, creation of the long-term credit via the mechanisms that will not not just control the money movements with the help of the institutes of development but will be coordinated with the strategic and indicative plans. What we refer to as “strategic and indicative plans” is not the same as the old centralized planning. This is a collective creation of the business, science, and the state, with the state acting not as a dictator but as a coordinator.…

The state can only be responsible for things it controls. Our state does not control the dollar emission, so it cannot respond for dollars and euros. That is why the decision to stop giving lending in foreign currency was correct, albeit belated. However, since that was permitted, and people believed the state that the ruble exchange rate would be stable, which was the obligation of the state, the state should pay off its obligations, i.e. convert these mortgage obligations into rubles based on the exchange rate that was promised. This is my opinion. The stable exchange rate was promised, and I do not see why law-abiding citizen should suffer just because the Central bank simply removed itself from the financial market. The law-abiding honest citizens that believe in our government are suffering. 

I would like to return to the planning mechanism, to round up our conversation about the program that we have developed in cooperation with the business and science within the framework of the Stolypin Club and are now offering to the society. The key is the partnership between the private and the state sectors. Business would develop its potential, find, with the help of science, the opportunities for the breakthroughs, modernization and increase in productivity. The state must, as a part of this social contract with the business, guarantee the stability of the macroeconomic conditions, i.e. the ruble exchange rate, interest rates, taxes. The state should also provide long-term credit with reasonable interest rates. In exchange for that, the business should take on the obligation to increase the production of the products that are in demand, for example, within that program of the substitution of import that we talk so much about and that has a potential to increase the economic output by about 3 trillion rubles. The business should also take care of the modernization and increase in productivity. All of this should be cemented by a contract between the state and the business, and each side should fulfill its obligations. In such situation, increased loan availability to the industry will result in the increased output, increased productivity of the economy, and, consequently, lower prices.

The real way to fight inflation is not to reduce the money mass, which leads to the deterioration of the quality of money, as we have seen in the 1990s. Anyone familiar with the economic practice would agree that the sure way to fight inflation is to reduce expenses, increase productivity, develop new technologies, and increase the production output. Our dialog with the business has demonstrated that today our business community is ready to take on the responsibility to increase the industrial output by at least 10% a year and introduce new technologies.

Let me emphasize that as far as resources are concerned this is perfectly realistic. We are using today on average 50-60% of our industrial capacity, and the higher the technical level the lower the percentage. Recession we are witnessing today concerns the new sectors, i.e. the enterprises with the modern technologies experience the sharpest decline in production. We have no limitations in resources: we produce ten-fold less of the finished product per unit of raw material than, say, Europe does. Thus, our resources permit us to achieve such rate of growth. We also have unlimited labor resources, for we have hidden unemployment and suboptimal use of the labor resources. We also have access to the large labor reserves of the Eurasian Union. The catastrophe in Ukraine produced a significant influx of qualified knowledgeable people willing and able to work. 

The time when a shift in the technological paradigm occurs is also the period of geopolitical tension and struggle for the leadership. The sanctions against our country are a clear attempt of the USA to solidify their dominance in our part of the planet. In the 1990s, they have decided that we were their periphery, and from the macroeconomic point of view we indeed were their periphery: offshorization, external dependence, the share of the external credit all point to us being at the periphery of the American economic system. They want to keep us that way. That is why the economic sanctions are directed against the independent policy of our President and are aimed at keeping us at the periphery of the American economy, at preventing us from developing and gaining independence. Obviously, if we do not alter our economic policy, if we do not chose the development strategy I talked about, the strategy encompassing the activity of the business, scientific achievements of our country and the state activity in the area of indicative planning and credit policy with the flexible control of the proper use of the money, then we will not be able to maintain the independent policy in other areas for much longer. Obviously, no one can be independent without strong competitive economy.

The Vineyard of the Saker
Sergei Glaziev: The full extend of economic manipulations in Russia.
Interview with Sergei Glaziev
Translated by Eugenia