Putin wants new economic "architecture"

[Joanne98]

Putin wants new economic "architecture"
By Andrew E. Kramer
http://www.iht.com/articles/2007/06/10/business/forum.php
Sunday, June 10, 2007
ST. PETERSBURG: President Vladimir Putin sought to reassure investors and foreign leaders that Russia remained committed to free trade and investment for businesses that work here, in spite of a chill in political relations with the West.

But Putin said Russia would integrate with the world economy on its own terms - and possibly not by embracing the current rules of the global economic order.

Speaking at a business forum here Sunday, Putin called for a new world economic framework based on regional alliances rather than global institutions like the International Monetary Fund.

The new system, he said, would reflect the rising power of emerging market economies like Russia, China, India and Brazil, and the decline of the old heavyweights of the United States, Japan and many European countries.

The developed countries, Putin said, were dominating the institutions of world trade in an "inflexible" manner, even as their own share of the global wealth is diminishing. He said the world needed a "new architecture of international economic relations based on trust and mutually beneficial integration."

Putin said 60 percent of the world's Gross Domestic Product was now produced outside of the Group of 7 countries - the United States, France, Germany, Britain, Italy, Japan and Canada.

Putin's combative tone came even as Russia was seeking membership in World Trade Organization, the Geneva-based regulator of the world economy, and perhaps reflected frustration at the long-drawn-out process of admission, over concerns of Russian violations of intellectual property rights.

"Today, protectionism, which the WTO is meant to fight, often comes from developed economies," Putin said.

In another swipe at the economic traditions that benefit the rich nations, Putin called for central banks to hold reserves in a wider selection of currencies. Now, banks largely hold their reserves in dollars and euros. Putin also said the world needed more cities that would serve as financial centers.

The speech reflected the theme of the gathering, which the Russian authorities have billed as a Davos of sorts for emerging markets. The forum is intended as an open exchange between
http://www.iht.com/articles/2007/06/10/business/forum.php

[Selatius]

1. Russia got burned by the IMF/World Bank privatization programs of the 1990s under Yeltsin.

Their blind dogma pushed Russia to continue privatizing state-run enterprises in auctions that were obviously flawed and rigged outright. Firms worth several billions or even tens of billions went on sale for mere hundreds of millions, and thuggery, assassination, and outright bribery ensured that the new owners of these enterprises would become the "oligarchs" that the people now call them in Russia today.

Hundreds of billions in wealth was siphoned out of the country in a short amount of time. Millions were left unemployed, and the economy, though neglected in Soviet times, was essentially reduced further under the new era of capitalist oligarchism. All the billionaires in Russia today got rich by being gangsters.

[sabbat hunter]

2. it thought it was

the G8 now with russia in the organization.

[Vidar]

3. I don't usually agree with Putin, but he's right on this one. Russia's

experience with capitalism has been disastrous.

[Igel]

5. It had help.

The environment and infrastructure were in horrendous shape. Oil pipelines were leaking hundreds of thousands of barrels of oil per year. Many of the factories produced things that could only be sold in the Soviet block and in 3rd world countries--they were that obsolete and shoddily made. Czech, E. German, Yugoslav, and even Polish wares were more highly valued that Soviet things (even those made in the middle of the month).

Gorbachev tried to get a grip on the disaster by instituting xozraschet, essentially forcing each company and commune to evaluate whether it was a profit center or a loss center, if it produced more value than it absorbed. Gorbachev was depressed with the results; what was going to take a few years to turn around wound up taking a few years to actually understand; and when it was understood, the horror of the situation sank in: there was no short-term solution. Thousands of factories would have to simply be shut down, the workers unemployed, until they could build a factory that would start at least breaking even; thousands more would have to bite the dust to build enterprises that could make products that could be sold elsewhere than in Siberia and Botswana. The amount of shrinkage, the inefficiently, the keeping of factories open producing trash just to make a politician or some workers happy ... it couldn't be stopped without at least an economic disaster--the pain might be spread out over 30 years, or dealt with in a decade.

The IMF made some mistakes; the privatization went poorly. But "capitalism", the idea that a factory should produce goods that people want and which could compete with goods from, oh, say Czechoslovakia, that a company shouldn't be a make-work program to keep a politico happy ... that would have happened anyway. Why do I say this?

Because before the first loan, before the first privatization, before the first real break with communism, under Gorbachev, the food supply dried up. There were shortages of coal and of raw materials, shortages of food and of finished goods. You could go to Gostinny Dvor and find the shelves mostly empty, go to food stores and find the shelves nearly bare and the only "fresh" food was low-quality lard. The USSR fell because they were entering a depression, and they were ready to follow anything that would give them food--Dostoevsky was partly right. It's popular to put the cart before the horse. Many Russians that look back with nostalgia to Gorbachev's time and before like to say precisely that--it *has* to be somebody else's fault. A few have even denied food problems in Leningrad, that there were lines, or even a bad Stalin (just a good Stalin). Push them, they admit it.

Putin's getting an oil industry that wasn't left by the Soviets, and which Putin's government didn't build--the oligarchs and other sundry nasty folk did. It's getting industries that, again, the market built. Many can compete with Western goods, something almost no government-build factory ever did.

I keep telling people that America--or the West--isn't nearly as important as they think it is, and they should empower others to actually be responsible for what they've done, and to have their own reasons. This is true also in this instance: The USSR was in economic meltdown and while the IMF may have made it worse, blaming the entirety or even most of the meltdown on the IMF and the West is like blaming the autocracy and illiteracy in the Middle East on the US--the US may well have made things worse, but most of the problem is home grown.

[Igel]

4. Putin understands the error of what Catalonia wanted.

If there are a lot of small (or a mix of small and large) entities, nobody exerts much control; it leaves the government in the hand of politicians and long-term bureaucrats ... the only way out is regional groups (such as Spain was).

Now, in a large mix with Russia, Russia doesn't exert much power. And Putin wants the greatest tragedy of the 20th century--the dissolution of what an 18th century empire became, killing tens of millions of its citizens--to be undone. He's especially annoyed that powers that Russia has traditionally copied and yet feared control much of the world's financial infrastructure.

Should things be decentralized, Russia will be more important in terms of infrastructure. Should regional groupings become important, Russia will again dominate E. Europe, levering the little power from each former satellite into a larger mass.