August 27th, 2015 –
By: Ilya Ukhov, translated for Fort Russ by J Arnoldski –
is the difference between Russian and Western economic crises?”
a look at current financial and economic developments, such as the sharp
fluctuations in the course of the ruble against the dollar and euro, the
feverish game of speculators in Asian and primarily Chinese stock exchanges,
and unprecedentedly low oil prices, there is the danger of getting carried away
with stupid alarmism and see mere momentary market fluctuations while
overlooking much more important and fundamental causes of the ongoing global
the rhetoric of economic “experts” has since 2008-2009 begun to trickle
cautious optimism, the deep causes of structural imbalances in the world
economy are far from eliminated. It reminds us of the time when the “Iron Curtain”
collapsed and many of our compatriots, having escaped to the “blessed” West,
praised with a vengeance the abundance of goods and the high level of domestic
comfort which, admittedly, the West and the United States were able to provide to a significant size (though not all) of their own population.
this abundance, as it turned out, was the product of a credit-pumped economy
and the consumer sector, as well as an unprecedented scale of the embezzlement
of savings and a kind of “loan” from future generations. What is the difference
between Western and Russian crisis models, and why does our crisis not have
fundamental financial reasons?
it is worth starting with the myth of a total debt load of the Russian
population which, according to liberal economists, will sooner if not tomorrow
lead the Russian economy to the brink of collapse.
the data for the USA.
1955, the total
salary of working Americans was $ 212 billion, while the total debt of
households, according to the statistical Yearbook of the US Federal Reserve
System, was 138 billion dollars. All debts at the time could be repaid by wages
for .65 years.
In 2015, this ratio was equal to 7.6 and 13.5 trillion dollars
respectively and the ratio requires up to 1.77 years to settle all debts. As
can be seen from the figures, the total debt of American households has grown
by more than 2.7 times. That is, frankly speaking, the US population and their
consumption is generated on the basis of eating away their own savings (through
spending on consumption rather than saving, for example, for a deposit or a
private pension plan).
And what about in Russia?
During the crisis of 2008, the salaries and debts of Russian
citizens accounted for 17.2 trillion rubles and 4.05 respectively, and debt
could be extinguished in .23 years. And in 2014, the ratio grew to .35, but
this still doesn’t compare anywhere near to the US for 2015, and amounts to
half of the American debt levels of 1955, when the United States still had its
own industry (not taken over by China) and a fairly rigid corporate tax system
was in action, such as the notorious Glass-Steagall Act, which considerably
restricted the speculative opportunities of banks.
And here is perhaps the most important thing for understanding
the fundamental differences of the current crisis in the West and in our
country. The key problem of the entire
Western industrial economy is that, because of the huge oversupply in the last
50-60 years and the continuous expansion into new markets (here the collapse of
the socialist camp and the collapse of the Soviet Union came in handy), Western
economies can not generate the rate of return needed to cover not only credit
costs, but also to reach an elementary level of profitability.
For the United States and Europe, this situation is not
something usual in which companies operate at a planned lost, covering their
costs with new lines of credit issued under increasingly complex financial
instruments or derivatives. Europe and the United States are full of transport
infrastructure – there is almost nowhere to develop a network of roads. They
are reaching the level of a nearly total specialization in industry, a
colossally developed wholesale and retail trade, and the retail market is
This is the overproduction which, by the way, even caused a
prolonged economic crisis in Japan in the 1990’s, when they reached the peak of
industrial production by means of a gigantically over-credited economy
overlapped by structural problems, the rise of new Asian industrial giants, and
If we look at Russia, we see, on the contrary, a lack of
saturation throughout whole sectors of industry and agriculture. We still have
to build and rebuild tens of thousands of roads, develop the production of
machines, automobiles, and agricultural machinery. A qualitative upgrade of the
the chemical and oil-refining industries, the mastering of the production of
electronics, and significantly increasing the efficiency of agriculture, fishery,
and forest industry is needed. As they say, there is no end to the list of
things to do.
Unlike the West, we have a huge potential of growth, as the
territory of our own country has not even been investigated and measured by the
same standards as in Europe. Now, falling oil prices and the level of the
dollar at 70-75 rubles a piece are prerequisites for economic growth within the
country as imports become significantly more expensive and the fall in
hydrocarbons provides an opportunity for reducing the share of energy resources
in the cost of our products. Here, a lot depends on the decisions of government
and financial authorities in the provision of credits available for industry,
while there is the danger of a decrease in inflation at too cheap of a cost of
borrowing, so that no ura-patriots would scream at them.
Undoubtedly, breaking the existing world order will be extremely
painful, however the main trump card of the West and its main export product –
the dollar – is gradually declining.
Expanding trade with our BRICS partners in national currencies
and the creation of the Asian Infrastructural Investment Bank are, in fact,
alternatives to the IMF, and the formation of new geopolitical alliances and
free trade zones which aren’t under Western control create opportunities for
the growth of the national economy even during times of recession in the US and
The West has exhausted the credit model development, and
attempts to drive economic growth based on new technology, in the framework of
the much-loved armchair theorist Kondratiev’s “fifth technological
order,” still look weak. Humanity will have to live by available
resources, and for a long time will still need oil, gas, uranium, timber and
And this means that Russia’s chances for a decent place in the
new world order, which will replace the hegemony of the West, increase
significantly. To summarize in one sentence – we should not indulge in the
meaningless and empty exchange of pessimism, but roll up our sleeves, work tirelessly,
and we will survive in the end like the frog that kept jumping.