For Russia to Be Sovereign, Moscow Must Restore Soviet Banking System, Katasonov Says

Paul Goble

            Staunton, Jan. 6 – Many are unhappy with the current banking system in Russia, and there have been proposals for an Orthodox Christian approach and some steps taken to introduce Islamic banking, both of which have focused on doing away with the current focus of Russian banks on interest and profit.

            But if Russia is to be fully sovereign, it must do more than that: it was break the ties which link Russian banks with those abroad and ensure that they promote Russian national interests rather than the profit of their owners, according to Valentin Katasonov (svpressa.ru/economy/article/400551/).

            And the best way to do that, the Russian nationalist commentator says, is not to engage in cosmetic changes like those of Orthodox or Islamic banking but to replace the current system with the one that was in pace in the Soviet Union from 1930-32 until 1987, one that gave the state a monopoly on banking activity.

            The Soviet system centralized banking management with all short-term lending resources concentrated in the State Bank of the USSR and longer term lending functions divided among a dozen state banks with specialized responsibilities in industry, energy, transport, agriculture and communal services.

            In addition, the Soviet banking system introduced and maintained a monopoly on currency operations, something that was overseen by the Bank for Foreign Trade. That meant, Katasonov says, that the banks served the country rather than the selfish interests of particular banks and their owners.

            As a result of this system, he continues, “we industrialized in the 1930s, prepared the country for war and then won it, restored the national economy, successful resisted the West during the Cold War, created atomic and hydrogen bombs, explored space, and helped dozens of countries in their fight against imperialism.”

            Exactly the same system is needed today, Katasonov argues. It appears unlikely that the Kremlin is prepared to go that far at least in the near term. But the commentator’s argument undoubtedly reflects the thinking of many in Moscow and may very well be a harbinger of things to come in part if not for some time in whole.