For the development of any program must be based on the understanding of modern economic development in the first place. Secondly, from understanding our position in the world, the Russian economy. And thirdly, the program can be realistic only if the economic interests in the ruling elite will correspond to the areas of work under this program. So in Economics it is very difficult to distinguish between objective recommendations from the reflection of interest.
Any economic policy is the sum of the participating interests of the economy subjects. And, as a rule, certain economic doctrine, even the sanctified by Nobel prizes and other attributes of big science reflect some interests.
We are going to talk about the program, which is based on a purely scientific understanding of the laws of economic development. At the heart of modern economic growth is technological progress, which accounts for 90% of the increase in output in the advanced countries. We are not an exception here. In the conditions of very tough demographic constraints we have other opportunities for economic development, except on the basis of scientific and technical progress. So if we want to achieve economic growth, it is necessary to proceed from the laws of development of modern economy, where science and technology play a major role in the long-term sustainability.
Take into account the regularities of scientific-technical progress in General today is not in any economic programs, because the underlying economic doctrine, which is now being implemented in the country, serves the interests of owners of big money. For owners of big money, in other words, for the oligarchs, it is important that the state not interfere them to manage the economy to extract excess profits as they want. In the absence of state planning, goal setting and long-term goals of socio-economic development’s economic policy is arranged for the needs of big capital, which is mostly offshore today, which is focused on the development of the country, and the export income of the country. In fact, created the model of neo-colonial exploitation of Russian natural and human resources, in which we lose between 120 and 150 billion dollars annually in the form of legal and illegal capital flight.
So when you see different types of forums with high representative of the guests, which are designed to justify and tear of economic policy from a large economic science, we must understand that this is nothing more than apologetics in the interests of the oligarchs, the owners of large capital, who do not want the state to interfere in the management of money to organized economic life on the basis of national interests, because their interests do not coincide with nationwide. It is important for them to not have foreign exchange restrictions that defended their property rights, even if they are derived offshore, the state allowed them to suck out of our natural economic system the maximum profit.
Technological progress is a complex process, which is not easy. It is necessary to take into account its uncertainty, nonlinearity, a large number of feedbacks. And speaking of building management system, based on development goals, all public functions should be focused on stimulation of innovative activity, attract investment in the development of new technologies, the creation of internal sources of Finance these investments. In General, we define the role of the state as the main subject of development in the economy.
As the subject of development, the state first, it ensures long-term forecasting. We need to see, and our science in technological forecasting allows us to see the main directions of scientific-technical progress and economic growth. Based on the assessment of our scientific and technical potential and mapping of these prospects and directions, selects priorities, where we can go forward. Within these priorities, implements the program of priority development, that is, the money is invested in order to reach a growth rate of 20-30% per year on technological directions.
Part of the production is in the area of technological gap is not so far from the world level, that is, there is the opportunity to catch up on. And the second component of this strategy is the financing and stimulating innovation. We call this dynamic of catching up, where the import of technology to reach the advanced level. Long-term successful development is achieved in the case that our economy will get through the global exchange of intellectual rents — excess profits at the expense of his intellectual superiority. And now we get mostly natural resource rents, that is, we sell non-reproducible natural resources, and, in fact, live at the expense of future generations, to call a spade a spade.
Finally, in those areas in which we are hopelessly behind (such, unfortunately, are) necessary to attract foreign direct investment, to borrow the technology and on this basis to fill the gaps and to catch up with other countries in those areas where we can be competitive.
The main question around which the debate today — where to take money. As you know, in the Soviet Union, this question did not stand, because the money issued as much as needed for the implementation of national economic plans. It is curious that, going to a market economy, we suddenly forgot about the fact that the monopoly of the state, even in the conditions of market economy, the most effective and important monopoly is the monopoly on money creation. The state itself creates the money. Our monetarists pretend that they do not know. Rather, exactly what they do not know, that is why they are monetarists. They believe that money is a commodity.
But the people who shape monetary policy, declare themselves monetarists, actually drops by 200 years in the dense middle Ages, where money was gold, and, indeed, was a special commodity General equivalent. And to some extent on commodity-money exchange has extended the same laws that operate in the goods market: more products — lower prices, less goods, more rare commodity — higher prices.
But the money today is not a product. This Institute which is formed by the state to ensure the reproduction of the economy. Modern economic growth began when European States invented Central banks and created a national currency. The state discovered the “philosopher’s stone”, ie the ability to create money only from his power. If the loans were very expensive, the lenders had to borrow money at 50%, 100%, and no industrial development was not possible, after the state began to create money, the interest rate dropped to 4-5%, it was possible to increase production because they are economic functions of credit is advancing economic growth. When we give someone a loan, we make a prepayment of output growth in the next phase. And no accident that Schumpeter called interest rate tax on innovation, that is, without creating a system of long-term cheap credit to realize the strategy of development of economy is impossible. And those people who are trying to convince us that money is created through savings, through income from production activities and from other types of economic activity, source of financing investment can be either savings within the country, or foreign loans, hiding from us the main source of funding — trivial monetary emission.
Countries all around the world today who are faced with the challenges of structural adjustment and transition to new technological way, almost universally rely on a credit issue, as the main source of investment financing. If, God forbid, (that’s in the past) in Europe after the war, the monetarists would be in the Central banks, Europe still lay in ruins. This is a good example that shows how to organize a money issue through the creation of money under obligations of the companies to increase production was made by the European economic miracle.
Logically increase investment in all countries that have made breakthroughs during our lifetime. Take Japan or India, which today leads the world in growth, or China, have made the economic miracle. Prior to that, Singapore, Korea. These countries at the time before moving to a policy of growth was poor, the savings was not a monstrous economic backwardness, and now they advanced. They are 20-30 years has made the leap from backwardness among the affluent advanced countries, and they did it at the expense of a sharp increase in investment. The rate of accumulation (the amount of investment, share of investments used in gross domestic product) has jumped from 15% to 35% and even 45%, as in China today.
The main question — what was the source of funding. The Central banks of these countries created credit, and the government, disposing of loans financed the development and modernization of industry. And what we offer in our program is not reinventing the wheel, it is the realization of the international experience of economic development management. Notice that in countries that are considered a model liberal economic structure (for example, the United States will take or Europe, or Japan), money is created under the debt. For some reason our monetary authorities don’t know that after the Second world war, first, Europe began to issue the money for the debts of the enterprises, and in 1971 the Americans refused to exchange dollars for gold, began to issue dollar under the Treasury obligations.
Modern money is Fiat money, experts say, meaning they are not secured by any gold or currency of other countries, they secured debt only, that is, money is created under the debt. They are two sides of the same coin, as they say. In America the Federal reserve prints money for the purchase of U.S. treasuries, and the whole vast issue of the dollar goes to Finance the budget deficit and managed by the Government.
Over the past eight years, when the world entered a period of crisis, and began a restructuring of the economy with the aim of developing new technological system, the monetary authorities, without exception, all advanced countries have started pumping money, what they call quantitative easing. Actually, it is banal money issue, which is an astronomical amount. For example, the number, the monetary base of dollars has grown over the past eight years, nearly four times the Euro — half. It’s trillions and trillions soilnitrogen of money, entering the economy through commercial banks, transformirovalsya in loans to small businesses.
Today for any businessman, engineer, scientist, neither in the West nor in the East, there is no problem to take money. This is done in order to facilitate the business community in the implementation of innovations. The European Central Bank has even moved now to a negative interest rate, that is, if you have ideas and want something useful to do, and you are trustworthy, and there is a corresponding business plan, you even give a prize for what you are doing. That is, give a loan at a negative interest rate even in nominal terms today, but in real terms, ie adjusted for inflation. For almost 10 years, the advanced countries live in a situation of zero interest rates, the loans are granted via commercial banks come into the economy at a symbolic interest.
And nothing prevents us to implement the same scheme. We must create a multi-channel system for controlled credit issue. The money should be targeted to reach the production companies. For this to be formed plans, strategic plans for the next 20-30 years that determine the future direction of economic growth, and the indicative plans, which are formed by government, researchers and businesses together and presented in the form of contracts. One of the forms may be a special investment contract, on which our President said in last Message to Federal Assembly. On the one hand, the business undertakes to increase and modernize production. Regional authorities, on the other hand, give him benefits, the appropriate infrastructure access to local resources. And finally, the Central government provides stable macroeconomic conditions and the allocation of long-term loans.
We propose this mechanism to begin to implement with the military-industrial complex, where everything is clear, there are long-term plans, there is a defense order, and there is no risk that the money will not return because the budget, and gradually extended to the entire economic system, which will thus be provided with the necessary funding to address economic development objectives. Us today is not enough for the normal reproduction of about 5-7 trillion rubles, but to throw this money into circulation is impossible, because they will be pumped to the foreign exchange market, and we get a spiral of devaluation and inflation. So through authorized banks in accordance with legally significant agreements that define the responsibilities of the parties (business, industry, and government, relevant ministries and agencies), implementing a funding mechanism indicative plans, which according to our estimates provide no less than 8% per year.
Assuming available resources, we could produce according to the production capacity at 40% more than now produced, labor resources in the same employment, as of now, 20% more. If we implement modern technologies of processing of raw materials, we can increase production tenfold on that resource base that we have at hand. From the point of view of scientific-technical potential, we are not limited because of the country’s gushing flow, the brain drain, and it is clear that the current economic model of today, these minds are not in demand. Therefore, we have no generally no restrictions imposed on capital in the sense of productive capital, production capacity, nor the labour nor raw material nor intellectual resources. There is a limit only for the money, artificially created.
Artificially created, because for many years, and especially the Central Bank limits the amount of money in the economy, based on primitive, I would say, vulgar monetarist views on the relationship of money and inflation, is trying to fight inflation by reducing the amount of money. Although already proven and tested on statistics, almost a greater part of the world that the fight against inflation by reducing the amount of money don’t get none. This is due to the fact that the reduction in the quantity of money automatically if we nedemonstrativnye economy, leading to contraction in output and investment. The contraction of production and investment leads to a fall in the purchasing power of money, therefore shrinking/decompresses the economy to reduce inflation very difficult.
Inflation is falling due to the same scientific and technological progress, by reducing costs, improving efficiency and increasing production. So if we take our statistics, the inflation rate is always reduced when increasing the production and expanding the money supply, and it always rises when production falls, especially now, when the Central Bank is exacerbating the current difficult situation by raising interest rates and releasing the ruble float freely.
A very important point is the creation of constraints in this economic development model. First, we must be insured that the money will be used on the currency market, so need to be selective exchange controls, which will prevent the leakage of capital, on the one hand, and, on the other hand, to protect our economic system from speculative attacks from abroad. Without the election of currency restrictions to stabilize the situation is unrealistic, because our financial market is very small, it is smaller than the capacity of even a single major us Bank or hedge Fund. If we fail to defend ourselves, we will hang indefinitely depending on the external environment and the willingness of foreign speculators.
Of course, should be stable exchange rate. Without this there can be no planning. It is not hard to do, because the current situation, the volume of foreign exchange reserves the country has two times the amount of rubles in the economy. Therefore, the Central Bank could theoretically, at any level, to stabilize the exchange rate and ensure that it is maintaining its interventions in the foreign exchange market.
With a stable exchange rate, fluctuations which today are the main factor of inflation to macroeconomic stability will require the activation of antitrust policy. We need to break the link between the external environment and internal pricing for a commodity. There is no reasonable explanation why, for example, metal prices are now growing so fast. Well, dropped the ruble, but the metallurgists and chemists working in Russia, they are working on the Russian raw materials, using Russian labor. Of course, there are elements of imported equipment, but that is no reason to index the price of the metal, other structural materials and commodities on the dynamics of the ruble.
It’s all just words, but difficult to implement, because planning implies responsibility. And the first problem we face — our proposals are rejected, corrupt bureaucracy because they don’t want to take responsibility. Even now, the recently adopted law on strategic planning, initiated by the President, are trying to push for two years, already introduced by the Government relevant legislative initiative and voted by the Duma majority, which suggests that our bureaucracy doesn’t want to be responsible for the implementation of the plan. Plan development is a complex thing. Well, the execution is hard. If there is a plan, that means we need to be responsible for the compliance with the targets. So we have just sabotage on the part of our officials, especially from state banks, which today manage public money without any control and dispose of them as their personal. They certainly don’t want planning because our multichannel model of target credit issuance in accordance with the indicative strategic plan does state banks instruments of the state policy. They will have to answer for the lending industries, which the country needs, which are necessary for the development of the economy and not to engage in speculation, that only by manipulating the exchange rate of the ruble allowed to have 100 percent or more per annum, without risking anything.1
Well, of course, prevents the implementation of the policy of development of structure of interests, dominated today by the same offshore oligarchy. She is not subject to any instructions of the political leadership. Despite all efforts to produce the de-offshorization, within three years it is increasing, and today more than half of the shareholders in the industries are non — residents, mostly hidden in tax havens. Maybe if we stopped this huge circulation of money, the export from Russia without paying taxes, without interest, in exchange for a pseudo foreign investment from offshore due to high interest, again with tax incentives, it wouldn’t have been no budget cuts, we could now additionally have more than a trillion rubles of income. And if we introduced a tax on speculation, which played a positive would be to stabilize the macroeconomic situation, would have received about three million additional revenue.
So we have no need today to reduce consumption, reduce living standards, to tighten their belts. We have to work more, to earn more to have more income. And for that you need to implement the ideas about which I have told you, and which are in the Arsenal of control all the advanced countries of the world.
