Staunton, July 22 – Faced with the economic crisis that has intensified as a result of the collapse of oil and gas prices and the coronavirus, the Russian government is seeking to restore the status quo ante, Oleg Deripaska says. But that is a mistake: it needs instead to launch a New Deal every bit as sweeping and transformative as Franklin Roosevelt’s in the US in the 1930s.
That will require an intellectual and policy revolution focusing on the creation of resources, even by “fiat money,” to build infrastructure, create processing industries that will add jobs and incomes, and put Russia in a position to withstand the shocks from abroad it will otherwise continue to suffer from, the businessman says (bfm.ru/news/448931).
Planning only for recovery and not for a breakthrough to a new course of development is not only a confession of failure but will leave Russia ever further behind the rest of the world and lead to disasters, he suggests. For too long, Russia has allowed others to pass it by. It must transform itself to prevent that from continuing to happen.
In the best cases, Deripaska says, the newly adopted constitutional amendments can become the occasion not for annulling anything but rather for a new approach, one that must resemble what FDR did. His efforts to overcome the depression led to the creation of the modern US; the Kremlin now must do the same in Russia so it can grow rather than stabilize.
Recovery is not enough; a breakthrough is required. That requires both a plan and the resources to carry it out. The plan should reflect the best thinking of those in power about developing infrastructure so that roads and rails won’t be a bottleneck but a means of becoming competitive.
And it should include a shift from selling unprocessed raw materials abroad to processing them at home and selling the results, something that will give Russians jobs, add to purchasing power, and earn the country far more than it has earned up to now. Despite the recession, Moscow hasn’t done this but simply tried to hold on and stabilize.
A major reason for that is the lack of the resources necessary to take these steps. That lack in turn reflects the attitudes that infect policy makers in the government and the Central Bank who want balanced budgets rather than development. But as FDR showed, deficit spending can be the basis for a future growth in earnings by the society and the state.
In this new deal, the government must set goals and the Central Bank must realize that the achievement of those goals is more important than simply maintaining its balance sheets. The former must define its budget in terms of the needs for transformation; the latter must come up with the funds, by borrowing or even “fiat money.”
Despite what many in Moscow think, Deripaska continues, deficit spending or printing money when in a deep recession will not spark inflation – there is too much unused capacity for that – but can be the basis not simply for recovery but for real growth. FDR proved that. It’s time, the businessman says, for Russia to follow that lead.