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Monday, October 24, 2016

Kudrin against Glazyev

One of the brightest events in the world of the Russian economy, and, perhaps, policy is the recent meeting of the Presidium of the Economic Council under the President of the Russian Federation. Though in the end, the exact vector of development was not determined, but in today’s reality the very birth of the discussion on the path choice of economic development strategy of the country is already a big thing. Prior to that, from the government we hear only the words but the unanimous encouraging statements.

It would seem, all with one purpose — to save the situation and to raise the country’s economy to its knees. Here are the methods the first minds of the state offer different to, and a priority, who and how to save, too. So, for example, the two main and always actively arguing with each other Russian economist Alexei Kudrin and Sergei Glazyev still not come to a common denominator. However, they all have in common is — both characters returned to the main stage in a moment of crisis and deadlock, which was the government, not having any decisive and definite position on an exit from current situation.

It is evident, that the eye is sincerely trying to save the situation of the people, to give a powerful stimulus to the development of the real sector of the economy, with special emphasis on the sector of small and medium — sized businesses- the backbone of any successful state. Kudrin also, and with it the Minister of Finance Siluanov and Minister of economic development Ulyukayev — people government. Their main task is to protect the government and constitutional order as a whole, not to allow a government vehicle to stop.

But the paradox is that, no matter how well at first glance intentions may be guided by the same eye, in the end, we see that it carries unwieldy, and in some parts even fantastic for the current situation offers. The illusory idyll of his program can be executed only on paper, in documents, are not burdened with detailed calculations and impact analysis. And here once there is a handicap in the program Kudrin — it starts from the fact that the slightest mistake and unnecessary risk can lead to severe consequences, from which Russia will not soon recover.

Yet none of the parties — neither Kudrin with a comprehensive program of gradual reforms, nor the eyes of a quantitative easing program — did not receive carte Blanche for realization of their ideas. But if to be realistic, in today’s terms that best described the most honest politician of modern Russia Prime Minister Medvedev: “no Money, stay here, just good” — is preferable to state power is the position of Kudrin, realistically evaluating the current state of the economy. That reform must be a severe shortage of funds is a fact, and it will have to live. So prepare to “stick”. At the moment the budget deficit is estimated not in the planned 2.3 trillion rubles, and in 4 trillion roubles. And experience of the person who was able to promptly pay off the foreign debt, inherited from the Soviet Union, is just what we needed. On account of Kudrin is not a single surplus budget. The concept of economic unit may be unpopular, but most likely it will be chosen as the key. Glazyev’s proposal to infuse the economy with 7.5 trillion rubles in advance creates unavoidable distortions. According to his idea the government should allocate these funds in the form of cheap loans (at least 2 times below the market) for business development and targeted investments. It turns out that we injected into the economy huge amounts of money, without creating conditions for the realization of potential. The funds will purchase again imported equipment (domestic, the same can not be created overnight, will release at some point, more goods, and further as? The demand of this instantly is formed.

Imagine that you have your small production and you suddenly get the opportunity to take a cheap loan. How here not to take, because he waited for so many years? Then you upgrade your equipment, have something released and face up to the fact that demand has not changed. Debt is a profit as there was no and no. In the end we get a lot of bankrupt enterprises, rising unemployment and rising inflation. Worldwide, in the US, Europe and Japan incentives industry runs parallel with the stimulation of demand. Affordable loans are available to all, and to the population including. In addition, the cash infusion will begin only in conditions of very low inflation — below the target of 2%. And we have good if there will be 8% this year. In Europe now inflation does take negative values. And here we return to the question where to take money.

To spend the reserves in the Reserve Fund and national welfare Fund so they simply will not be enough for all. Their total stocks on may 1 of 7.64 trillion rubles. Minus 4 trillion Federal budget deficit — is a bit more than 3.5 trillion rubles. But still it is necessary to compensate for the deficit of the Pension Fund. To seek the assistance of external creditors and to follow the path of Greece? No, thank you. Seen what this leads to, — Greece almost became the property of Germany for the debts. In the end, we only get to dependence on external creditors and will increase budget spending on debt repayment. Not calculated the consequences, and thus put an end to the right in General terms, the idea of development of real sector of economy through small and medium enterprises.

Now let’s see how things are going with spending in the program Kudrin. Trillion rubles does not require it, there’s another price, and other risks — primarily political. The reform of the judicial system, management system and the removal of administrative barriers do not require huge expenses. As noted by many entrepreneurs, the main thing — not to disturb their work. Even Vladimir Putin noted that the management of litigation concerning entrepreneurs in most cases leads to the closure of business despite the fact that only 15% of cases result in a conviction. How much money no give, in these conditions develop will not work.

Kudrino reforms cover a large layer leading spheres of the state and society, however, at the hearing, mainly raising the retirement age. The measure is now extremely late, but I must admit that in the future it is inevitable. In fairness it should be noted that Alexey Kudrin offers and actions aimed at social justice distribution of benefits, the return on the funded part of pension, which is about 70% of the population. But it is increasingly left out of the equation, mussiruya unpopular austerity measures. Obviously, many on the Soviet habit I want to live at the expense of the state, without incurring any liability. But today the country can no longer afford to remain composure and contemplation. We have to act though and carefully but quickly and harshly. So someone had to take the right to vote and become a kind of “lightning rod”, reflecting the expected dissatisfaction of a large part of the citizens to the fact that live will now have more tight-fisted. It is obvious that the role of such a “lightning rod” that Mr. Kudrin and prepared.

Today, any hasty measure may cause irreparable damage to the welfare of the population and even to endanger the constitutional order of the Russian Federation. Food riots, we don’t need, so obviously the start of the reform needed in the near future. However, unfortunately, none of the proposed plans is not perfect. Glazyev too risky, almost adventurous, it lacks consideration of the possible consequences. Weak place Kudrinsky plan — the lack of development of methods of reform. Without a clear plan, set clear objectives and strict control are not enough. In fact, reinventing the wheel is not necessary. Many methods have already been developed, the question is rather how to combine them to amplify the effect, not to nullify. Even the source of Finance is actually not the biggest problem. The required amount can be obtained by release of inefficient spending. There is no need to rely on new sources of income for modernisation of the economy is sufficient to reallocate resources.

Endless delays in development (after the meeting, Council identified the approximate timing of the development of the new program year) will lead to the fact that the concept of the moment of creation is irrelevant. Without urgent and decisive action we’re just going to repaint the fence collapsed, drawing the name of a failed strategy-2020, 2030, 2035…

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