Saturday, April 4, 2020

A Million Muscovites in Service Sector May Be Jobless after Pandemic, ‘Business Russia’ Says


Paul Goble

            Staunton, April 1 – Denis Nazarov, head of the Moscow section of Business Russia says that the pandemic may lead to the loss of 500,000 to one million service industry jobs and is calling on the Russian government to offer interest-free loans to such enterprises so that they can remain in business and keep their workers employed.

            His organization has appealed to the government and to the Kremlin to take such a step to prevent the collapse of the service sector with its direct cost of the loss of jobs for so many and the indirect cost of depriving other residents of the capital of services (finanz.ru/novosti/aktsii/okolo-1-mln-moskvichey-mogut-ostatsya-bez-raboty-1029053774).

            The Russian capital is not limited to the government or big business, Nazarov points out. There are some 400,000 workers in communal services, 300,000 in cultural and creative ones, 200,000 in the fitness and sports industry, 160,000 in hotels, 30,000 in the exhibits sector, and 30,000 in healthcare.

            “Now, all these workplaces are under threat,” he says. “In certain branches, if nothing is done, 50 percent of the companies will leave the marketplace and some will die completely. Our common task is to preserve to the maximum extent possible these workplaces” and the services and lives they make possible.

            Moscow has been hit harder by the pandemic than any other city particularly with regard to the economy and largely because of the high concentration of service industries now at risk. The most important step the government can take is to offer interest-free loans to such firms who retain their workers.

            Business Russia has also made 26 other proposals including a delay in tax deadlines to September 30 or in some cases to December 31.

Putin Now Faces Plethora of Problems He Can’t Solve with His Accustomed Means, Krasheninnikov Says


Paul Goble

            Staunton, April 1 – For most of time in power, Vladimir Putin has been able to address the problems Moscow faces by propaganda campaigns, force or money. But now, Fyodor Krasheninnikov says, he must deal with problems beyond their reach. And after the coronavirus ends, he will face an even more unfavorable environment as far as those means are concerned.

            Indeed, the Russian commentator suggests, the pandemic is “destroying Putinism” as it has existed up to now (newtimes.ru/articles/detail/192637). “For the first time in 20 years, Putin’s regime has had to change its habits and approaches to running the country.” Its past typically successful ways simply aren’t working, as the epidemic and economic crisis now show.

            The epidemic is happening everywhere and it touches people in immediate and dramatic ways, overwhelming concerns about geopolitics or “’the falsification of history,’” the commentator says. And even more, it is forcing Putin to appear and thus “again and again” to take responsibility for problems, a strategy he has avoided in the past.

            Of course, the Kremlin leader continues to try to shift responsibility and to ensure that others announce the harsh measures and bad news so that he can later announce the lifting of restrictions and good news.  But will the measures announced work if they don’t become all-Russian? And when will there be good news to talk about?

            Moreover, Krasheninnikov continues, there is this: “the main skeptics and violators or quarantine measures are not opposition figures who are dissatisfied with Putin but that very ‘deep people’ on which he is accustomed to rely.” If the pandemic passes quickly, he may be able to win them back; but the economic shadow it is casting suggests that too will be hard.

             “If all the measures declared so far don’t stop the epidemic, the president will have to introduce a real quarantine or full-blown martial law – but with a delay and after valuable time has been lost … Moreover, that step is his last card, and if for some reason, it doesn’t work, this will finally undermine the authority of the powers that be.”

            To be sure, “the epidemic sooner or later will end, but this hardly means that the worst will be behind” Russia and Putin. “In a certain sense, what will be ahead will be still worse because people will cease to worry about their health and will return to their daily concerns” – and it is not clear that Moscow will be able to help them with those anytime soon.

            As a result, 2020 will be a disaster for the Putin regime. “Instead of a rapid and effective change of the Constitution crowned by the celebration of the 75th anniversary of Victory in the company of world leaders, instead of messages in honor of fallen heroes and curses of falsifiers of history, [Putin] will have to spend all spring” dealing with doctors and the virus.

            And at the same time, he will be compelled to “think about what is to be done further,” when the pandemic has passed but “the economy lies in ruins.” The virus isn’t going to harm Putin’s health, but one can see that it is “killing off before our eyes [Putinism] in the form in which it existed in recent years.”

            “For the first time in all his years in rule, Putin has encountered a whole complex of problems not one of which can be solved only by public relations, force, money or simply by waiting it out until it somehow resolves itself.” That means Putin is going to have to take responsibility for “everything bad, horrific and sad” which lies ahead.

            It is already widely recognized that “the world after the coronavirus epidemic will not be what it was,” Krasheninnikov says. And that is especially likely to be the case for Russia which was caught unawares by the pandemic and with a leader completely unprepared to cope.


Economic ‘End of History’ Now Even More Consequential than Political One Fukuyama Spoke of 30 Years Ago, Inozemtsev Says


Paul Goble

            Staunton, April 1 – Given the retreat from democracy around the world, many people have rejected the notion of the kind of political “end of history” Francis Fukuyama wrote of three decades ago; but perhaps more important, they have missed the economic “end of history” that has taken place more recently, Vladislav Inozemtsev says.

            The new “end of history,” he suggests, is an economic one, reflecting a remarkable development: “Beginning from the 1970s, Western countries have not so much adapted themselves t new economic realities as created them,” moving far beyond the model of the industrial era some like Russia are still mired it (echo.msk.ru/blog/v_inozemcev/2616891-echo/).

            And it has meant, Inozemtsev continues, that they, as “competitive and technologically flexible” economies have stolen a march on those based on the export of raw materials or technological borrowing. The latter countries briefly looked as if they were the winners and people talked about “the decline of the West.” But that isn’t how things have worked out.

            In fact, “China and Russia have prepared for opposition to the America of the end of the 1990s and not of the beginning of the 2020s.” And that is doomed to fail: “Reserves cannot today be an effective means of salvation” given that “the West has created its own ideal ‘economic fortress,’ any struggle with which today is practically impossible.”

            “The dollar is dominant in the world economy not because oil is traded in it as it seems to geniuses in Moscow and Tehran who want to shift accounts to rubles or euros. It is the world currency because the US is the purchasers and creditor of last resort – that is, as a result of its openness and recklessness that in Russia or China are considered risk factors.”

            The current use of the dollar is “a condition of stability” because the more dollars are in circulation, the lower the borrowing costs for the US and thus the greater ability of Washington to borrow and deploy money, as now, to defend against economic shocks and promote renewed growth.

             “But that is not all,” Inozemtsev says. “Besides the formation of almost an ideal balance in foreign accounts, one must not fail to see the radical change of the situation within the country.” In 1989, the capitalization of the stock market in the US was 58 percent of GDP; now, it is 159 percent. Some say this is a bubble, but it is not just that.

            According to the economist, “in the new ‘economy without complexes’ [of the US and other Western countries], the more and decisively you spend, the richer you become,” a sharp contrast with 20th century economies like the Russia where everything is exactly the opposite. This has enormous consequences for both the former and the latter.

            First, “today, the more developed economies have created a new model of production in which consumption itself is a form of investment.” Second, in response to crises, the Western world has learned to mobilize unlimited means at almost zero percent,” while Russia and China have to pay far higher rates.

            And third, “the new economic reality with a high degree of probability is destroying prices on globally traded goods … which is leading to an unprecedented redistribution of wealth in favor of the developed countries.” Very low prices for oil and other natural resources are likely to be the “new normal” for some time to come.

            “In this situation,” Inozemtsev continues, for Russia and China, “the optimal strategy is cooperation and even ‘integration’ into this new world.” But Moscow and Beijing have “in recent decades chosen the method of the USSR: seeking growth by exporting raw materials to the West or industrial production” and waiting for concessions.

            But neither capital seems to recognize that in the current competition, its resources are “not only unequal but not even comparable.”  They are fighting a war that no longer exists with weapons that no longer work.