Is mobilization economy Russia’s future?

Russian media practically ignored information about an economic mobilization program being developed by people close to senator Sergey Pugachev; the program is planned to be submitted for the president’s consideration in autumn. Only several analysts threatened that democratic freedoms might be cut down and a police state would be established. However, creation of this program is very much significant. It provides for the following measures designed to strengthen the state economy management:

- restoration of governmental monopoly on export and import of most important goods to deprive oligarchs of their economic might; - arrangement of foreign trade operation accounts through authorized banks to prevent illegal outflow of capital; - introduction of a state order for enterprises; accounts should be settled in government-controlled prices; - control over travels abroad and over currency spent at that; - raising of media’s educational role; large-scale business should be prohibited to buy Russian media at all.

It is perfectly clear that such measures are urgent especially now, when after the past 12 years of liberal reforms Russian economy is not advancing at all, but regressing, on the contrary. Although, liberals themselves explain the problems with the fact that they were not allowed to complete the reforms. In this connection it is not a surprise that authors of the program propose a slogan: enough playing democracy and market relations!

Do the mentioned-above measures mean that Russia may turn into a police state? Liberals would certainly say that the measures are repeating experience of fascist Italy and nazi Germany, the countries that managed to overcome collapse within 5-6 years and create powerful economies, that at the same time allowed them to wage a long war against the strongest powers of the world.

I would not like to use these examples that are not really popular in Russia for rather clear reasons. I think, it is enough to refer to experience of the USA, the country that is so much respected by Russian liberals.

A crisis broke out in the USA in 1929, the event was subsequently called the Depression. The crisis occurred because of an overheated stock market, a rather usual thing for every market economy. A deeper cause of the crisis rooted in the fact that 5% of the population owned one third of the country’s private earnings. The American people suffered at that period even more than over the whole period since the Civil War. By the peak of the crisis, production reduced practically twice, majority of enterprises stood idle, the number of unemployed reached 17 million people, almost one third of the population capable of working. Agricultural production decreased in value, farmers had to liquidate it to keep prices on a saleable level (I remember pictures in the Soviet books on history in which farmers poured milk out in rivers and burnt wheat in fire-boxed, although millions of people starved at the same time). Thousands of American banks went bankrupt, and savings of the population vanished into thin air. The crisis ruined not only economy of the country, but also fundamentals of the US national character: the nation of hard-working people believing in the future was slowly turning into a faceless crowd. The USA was on a verge of a destructive social outburst.

President Herbert Hoover, whostuck to liberal views, tried to appease the people and promised the country would prosper again. He believed, this could be achieved by a gradual realization of liberal policy that provided for reduction of state expenditures and inflation, self-supporting budget, and so on. However, every measure realized in this direction only aggravated the devastation.

As a result, Franklin Roosevelt won presidential elections because he focused mostly not on macroeconomic showings but on interest of average Americans. A so-called New Deal by Roosevelt provided for the following measures:

- reconstruction of the bank system as based on large banks; - issue of banknotes in amount capable to beat the rush down; - establishment of governmental control over securities market to prohibit financial traders to prosper at the expense of smaller shareholders; - prohibition to export gold and silver from the USA; - failure to execute the instruction of the new administration provided for a fine at the rate of up to $10,000 or a ten-year imprisonment; - a law on reconstruction of rural economy was adopted, that practically destroyed 600,000 small farms and spared only large-scale competitive companies that cultivated large areas of land; - small farmers who lost property and job were to be joined into collective farms for work on unreclaimed lands; - a plan for complex economic development of the Tennessee valley was to be developed; that provided for construction of dams, hydroelectric power stations and also included land development and forest plantations; - a Civil Conservation Corps was to be formed of youth that was not working or studying, but at the same time was dangerous in causing a revolutionary or criminal outburst; - public works were expanded, in highway construction mostly; this saved millions of unemployed from starvation; - owners of houses were accommodated with loans to avoid bankruptcy.

When Japan attacked the USA, American economy was not ready for war at all. Roosevelt created a special council for control over economy. Production of cars and other civil produce was prohibited; the plants switched to military production. Rational food consumption and control over prices were established not to allow the rich to buy up critical commodities. Huge factories were built in the USA at that period, 15 millions of workers came to the cities from remote parts of the country for work. This was the way how the USA, industrial giant and the first power of the world appeared.

As we see, measures taken by Roosevelt are more far-reaching than senator Pugachov’s program. And Russia may choose among the three ways only. The first one is to keep up the present inconsistent liberal line that may result in degradation of the country. The second one is to switch over to radical liberal reforms (100% payment for public utility bills, free sale and purchase of land, etc), that is for sure to result in a social outburst. And finally, the third way is to form a mobilization economy to guarantee higher GDP growth and Russia’s incorporation into a post-industrial society.

Mikhail Antonov Especially for PRAVDA.Ru

Translated by Maria Gousseva

Read the original in Russian: http://www.pravda.ru/main/2002/07/26/44740.html

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