BORIS KAGARLITSKY, MOSCOW
AN INTRODUCTION TO THE CRISIS
The Russian society is vaguely alarmed by the world economic crisis. I say “vaguely” because the people cannot realize how the events in the distant USA are connected with the Russian reality and how the stock market crash will tell on their wellbeing.
On the one hand, even a person, who doesn’t know much about economics, understands that such a financial crisis will certainly have its consequences. But on the other hand, oil is being produced, the factories continue operating and the public transport works properly.
What capitals have devalued at the stock exchange overnight? Where do they come from and where they go? All of that is unclear.
Indeed, the stock exchange crash did not influence the real sector directly, at least in Russia. It is another matter that the stock-exchange capitals were withdrawn from the real economy some time ago. This money could be spent on roads laying, plant construction, equipment modernization and wage increase. Now the money is lost for the economy and cannot be returned. But, in fact, the funds were lost when financial speculators took possession of them.
In short, the crisis has shown how irrational, unfair and hopeless the existing system is, but, at the same time, it has not damaged the majority of population financially yet. Nevertheless, people feel at heart that troubles will happen. They take their savings from banks, sell the bonds of the investment funds (however, few Russians bought them), change rubles and dollars into euros since they find the European currency more reliable. In some Russian cities those wishing to buy a lot of euros have to sign up beforehand, thus creating queues like in the Soviet epoch.
The burglars have become more active. The quantity of burglaries increases the more people are keeping their cash at home. Bertolt Brecht joked that the bank robbery can’t be compared with the bank establishment, but during a crisis burglars suddenly gain an advantage over bankers.
Incidentally, all the current events are an introduction to a crisis rather than a crisis itself. The rules of play and succession of events have been well known since the XVIII century. After the stock exchange crash, thousands of white-collar workers working for the speculative games of the financial sector lose their jobs. This may occur anywhere. Consumption falls, production declines, oil becomes cheaper.
Then banks, real estate agencies and insurance companies suffer from the crisis. By wasting billions of dollars the governments desperately attempt to save the financiers. The U.S. government is allocating 700 billion dollars that they do not have. The Russian authorities allotted only 50 billion dollars that they have. But in both the cases, the money will be lost. The crisis cannot be staved off and the government will run out of the financial resources.
The problem is not just a lack of funds of some companies; I am referring to the collapse of the whole financial system. Such financial injections cannot solve the structural problems, they can only aggravate the situation.
The nationalization of economy is a side effect of the crisis management measures. The privatization resulted in the fact that business can neither develop nor even exist without the state support. What is more, the business needs such support that the USSR State Plan Committee officials, not to mention the Western Social Democrats of the “mixed economy” period, could not imagine.
Bold liberalism paves the way for “war communism”, which is quite logical. The Russian Revolution and the Great Depression made the Western governments come to realize that there is a need for government regulation. After the collapse of the Soviet Union those lessons were forgotten. The liberals’ coming to power led to grab-what-you-can privatization.
Now that the consequences of the neoliberal policy, which has been pursued for two decades, are clear to everybody, alarmed economists and frightened billionaires speak about a new Great Depression, but they are wrong. After the XX century crises the world economy became much more complicated. But for the past twenty years all the structures, which could regulate it, have been destroyed, undermined or spoiled.
Things will be getting far worse than they were during the Great Depression.
Boris Kagarlitsky is Director of the Institute of Globalization and Social Movements
October 13, 2008
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