This year’s Moscow Economic Forum (MEF) opened last Thursday at the Lomonosov State University under the slogan A New Strategy for Russia. The panelists—prominent academics, businessmen and senior managers—were brutally blunt in their diagnosis of the causes of Russia’s economic woes, and especially critical of the country’s Central Bank for continuing to follow a neoliberal strategy. There is a general consensus that Russia’s economic and financial problems are systemic, and only in small part due to Western sanctions.
Ruslan Grinberg, head of the Institute of Economics and the Forum’s moderator, noted that in the 1990’s everyone was intoxicated by the dogma of the free market: you should privatize, deregulate and stabilize. The results were disastrous, but Russia’s economic decision-making community is still not free of neoliberal blinkers. This applies not only to the Central Bank, but also to the economic departments of the Medvedev government. According to Grinberg, “market fundamentalism is dead, but its cause still lives on in key segments of Russia’s ruling elite.”
Economist Vladislav Zhukovsky noted that the economy is supposedly growing, but the country’s human potential has declined. Current spending on education is only 4.1%, instead of 7% of GDP, and health care accounts for under 5%. The overall state of the Russian economy can be described as degradation and compression. It is accompanied by bureaucratization, monopolization, and dollarization. On the other hand, says Zhukovsky, “our officials have discovered a new art form—ever more sophisticated forms of statistical manipulation to draw a beautiful reality in contrast to the deteriorating crisis situation.” According to the latest revised data, in 2015 the downturn officially amounted to only 2.8%, and to a mere 0.2% in 2016, while the real economy was actually growing. Zhukovsky is adamant that this is “statistical alchemy,” and that all key macroeconomic indicators were overrated. In reality, he says, Russia has experienced 26 months of continuous fall of real incomes, by about 17.5% overall.
In an earlier interview Zhukovsky complained that this year’s MEF would be the voice of the entrepreneurial community crying in the desert: “It is clear that none of those who determine macroeconomic policy, and distribute annually a trillion rubles of public procurement, are interested in it. Today we see a strange situation that the windfall in oil and gas complex, metallurgy, raw materials, natural monopolies, in the production of various kinds of fertilizers, technical complex, which has grown over the last 2.5 years, more than 55% in ruble terms, all to no positive effect in the economy. The growth of corporate profits did not affect the growth of investment and wages . . . There is no general strategy.”
Professor James K. Galbraith, author of the seminal 2012 study Inequality and Instability, noted that rising inequality happens in clusters of countries. Extreme polarization occurred between 1990 and 2000 in Russia and other ex-communist countries. There has been considerable stabilization after 2000, however, as many of those countries abandoned the extreme neoliberal model. In recent years Russia has experienced the fact that when currencies weaken, those who sell abroad do better than those who sell at home. Russia’s fundamental problem is the dollar-based global financial regime. Galbraith added that the new U.S. administration does not have an effective economic strategy to preserve and expand a stable and diverse middle class: “We still suffer, and we will continue to suffer, from private affluence and public squalor.”