Putin Explains Why We Need New Economic Policies
Above photo: Mikhail Klimentyev / POOL / TASS.
This is why they attack him.
The President of Russia Vladimir Putin has given a great speech to the Davos 2021 online forum organized by the World Economic Forum. As usual it created little echo in the ‘western’ media.
Putin sees a new danger of large international conflicts. Economic imbalances have caused socio-political problems in many countries which, when externalized, can lead to international conflicts.
To solve this one has to reject the laissez faire doctrines that caused the economic imbalances. The nation states must intervene more in their economies. The people must be seen as the ends, not the means of such economic policy. There must be more international cooperation through global organizations to enable this everywhere.
There is more in the speech than that. But the above is the core idea. U.S. neo-liberalism will of course reject such a program.
Following are excerpts that reflect on the above points.
The big picture view points to great danger:
The pandemic has exacerbated the problems and imbalances that built up in the world before. There is every reason to believe that differences are likely to grow stronger. These trends may appear practically in all areas.Needless to say, there are no direct parallels in history. However, some experts – and I respect their opinion – compare the current situation to the 1930s. One can agree or disagree, but certain analogies are still suggested by many parameters, including the comprehensive, systemic nature of the challenges and potential threats.
We are seeing a crisis of the previous models and instruments of economic development. Social stratification is growing stronger both globally and in individual countries. We have spoken about this before as well. But this, in turn, is causing today a sharp polarisation of public views, provoking the growth of populism, right- and left-wing radicalism and other extremes, and the exacerbation of domestic political processes including in the leading countries.
All this is inevitably affecting the nature of international relations and is not making them more stable or predictable. International institutions are becoming weaker, regional conflicts are emerging one after another, and the system of global security is deteriorating.
Klaus [Schwab] has mentioned the conversation I had yesterday with the US President on extending the New START. This is, without a doubt, a step in the right direction. Nevertheless, the differences are leading to a downward spiral. As you are aware, the inability and unwillingness to find substantive solutions to problems like this in the 20th century led to the WWII catastrophe.
Putin then goes into the details of the above theses.
What caused the current economic imbalances?
These imbalances in global socioeconomic development are a direct result of the policy pursued in the 1980s, which was often vulgar or dogmatic. This policy rested on the so-called Washington Consensus with its unwritten rules, when the priority was given to the economic growth based on a private debt in conditions of deregulation and low taxes on the wealthy and the corporations.As I have already mentioned, the coronavirus pandemic has only exacerbated these problems. In the last year, the global economy sustained its biggest decline since WWII. By July, the labour market had lost almost 500 million jobs. Yes, half of them were restored by the end of the year but still almost 250 million jobs were lost. This is a big and very alarming figure. In the first nine months of the past year alone, the losses of earnings amounted to $3.5 trillion. This figure is going up and, hence, social tension is on the rise.
At the same time, post-crisis recovery is not simple at all. If some 20 or 30 years ago, we would have solved the problem through stimulating macroeconomic policies (incidentally, this is still being done), today such mechanisms have reached their limits and are no longer effective. This resource has outlived its usefulness. This is not an unsubstantiated personal conclusion.
According to the IMF, the aggregate sovereign and private debt level has approached 200 percent of global GDP, and has even exceeded 300 percent of national GDP in some countries. At the same time, interest rates in developed market economies are kept at almost zero and are at a historic low in emerging market economies.
Taken together, this makes economic stimulation with traditional methods, through an increase in private loans virtually impossible. The so-called quantitative easing is only increasing the bubble of the value of financial assets and deepening the social divide. The widening gap between the real and virtual economies (incidentally, representatives of the real economy sector from many countries have told me about this on numerous occasions, and I believe that the business representatives attending this meeting will agree with me) presents a very real threat and is fraught with serious and unpredictable shocks.
The economic imbalances create deep socio-political problems:
In this context, I would like to mention the second fundamental challenge of the forthcoming decade – the socio-political one. The rise of economic problems and inequality is splitting society, triggering social, racial and ethnic intolerance. Indicatively, these tensions are bursting out even in the countries with seemingly civil and democratic institutions that are designed to alleviate and stop such phenomena and excesses.The systemic socioeconomic problems are evoking such social discontent that they require special attention and real solutions. The dangerous illusion that they may be ignored or pushed into the corner is fraught with serious consequences.
In this case, society will still be divided politically and socially. This is bound to happen because people are dissatisfied not by some abstract issues but by real problems that concern everyone regardless of the political views that people have or think they have. Meanwhile, real problems evoke discontent.
The danger rises when the socio-political problems get externalized:
And finally, the third challenge, or rather, a clear threat that we may well run into in the coming decade is the further exacerbation of many international problems. After all, unresolved and mounting internal socioeconomic problems may push people to look for someone to blame for all their troubles and to redirect their irritation and discontent. We can already see this. We feel that the degree of foreign policy propaganda rhetoric is growing.We can expect the nature of practical actions to also become more aggressive, including pressure on the countries that do not agree with a role of obedient controlled satellites, use of trade barriers, illegitimate sanctions and restrictions in the financial, technological and cyber spheres.
Such a game with no rules critically increases the risk of unilateral use of military force. The use of force under a far-fetched pretext is what this danger is all about. This multiplies the likelihood of new hot spots flaring up on our planet. This concerns us.
What can be done to prevent the danger which arises from socio-political problems caused by imbalanced economies?
Clearly, with the above restrictions and macroeconomic policy in mind, economic growth will largely rely on fiscal incentives with state budgets and central banks playing the key role.Actually, we can see these kinds of trends in the developed countries and also in some developing economies as well. An increasing role of the state in the socioeconomic sphere at the national level obviously implies greater responsibility and close interstate interaction when it comes to issues on the global agenda.
It is clear that the world cannot continue creating an economy that will only benefit a million people, or even the golden billion. This is a destructive precept. This model is unbalanced by default. The recent developments, including migration crises, have reaffirmed this once again.
We must now proceed from stating facts to action, investing our efforts and resources into reducing social inequality in individual countries and into gradually balancing the economic development standards of different countries and regions in the world. This would put an end to migration crises.
The essence and focus of this policy aimed at ensuring sustainable and harmonious development are clear. They imply the creation of new opportunities for everyone, conditions under which everyone will be able to develop and realise their potential regardless of where they were born and are living.
Here Putin sets the goals for national strategies:
I would like to point out four key priorities, as I see them. This might be old news, but since Klaus has allowed me to present Russia’s position, my position, I will certainly do so.First, everyone must have comfortable living conditions, including housing and affordable transport, energy and public utility infrastructure. Plus environmental welfare, something that must not be overlooked.
Second, everyone must be sure that they will have a job that can ensure sustainable growth of income and, hence, decent standards of living. Everyone must have access to an effective system of lifelong education, which is absolutely indispensable now and which will allow people to develop, make a career and receive a decent pension and social benefits upon retirement.
Third, people must be confident that they will receive high-quality and effective medical care whenever necessary, and that the national healthcare system will guarantee access to modern medical services.
Fourth, regardless of the family income, children must be able to receive a decent education and realise their potential. Every child has potential.
This is the only way to guarantee the cost-effective development of the modern economy, in which people are perceived as the end, rather than the means. Only those countries capable of attaining progress in at least these four areas will facilitate their own sustainable and all-inclusive development. These areas are not exhaustive, and I have just mentioned the main aspects.
A strategy, also being implemented by my country, hinges on precisely these approaches.
What should be done globally:
We are open to the broadest international cooperation, while achieving our national goals, and we are confident that cooperation on matters of the global socioeconomic agenda would have a positive influence on the overall atmosphere in global affairs, and that interdependence in addressing acute current problems would also increase mutual trust which is particularly important and particularly topical today.Obviously, the era linked with attempts to build a centralised and unipolar world order has ended. To be honest, this era did not even begin. A mere attempt was made in this direction, but this, too, is now history. The essence of this monopoly ran counter to our civilisation’s cultural and historical diversity.
The reality is such that really different development centres with their distinctive models, political systems and public institutions have taken shape in the world. Today, it is very important to create mechanisms for harmonising their interests to prevent the diversity and natural competition of the development poles from triggering anarchy and a series of protracted conflicts.
To achieve this we must, in part, consolidate and develop universal institutions that bear special responsibility for ensuring stability and security in the world and for formulating and defining the rules of conduct both in the global economy and trade.
It is no wonder that the neo-liberal ‘west’ constantly attacks Putin and at the same time takes care that his speech gets as little attention as possible. It is dangerous because it could give the deplorables some ideas.
It is also sad that no ‘western’ politician I am aware of would ever give such a speech.