Privatization Is the Atlanticist Strategy to Attack
Russia
By Paul Craig
Roberts and Michael Hudson
NOTE: Readers are asking to know
who, in addition to the Western-financed
NGOs, are the Fifth Columnists inside
Russia. Michael Hudson and I left the
description general as Atlanticist
Integrationists and neoliberal
economists. The Saker provides some
specific names. Among the Fifth
Columnists are the Russian Prime
Minister, head of the Central Bank, and
the two top economics ministers. They
are springing a privatization trap on
Putin that could undo all of his
accomplishments and deliver Russia to
Western control.
http://thesaker.is/putins-biggest-failure/
February
08, 2016 "Information
Clearing House"
- Two years ago, Russian officials discussed plans
to privatize a group of national enterprises headed
by the oil producer Rosneft, the VTB Bank, Aeroflot,
and Russian Railways. The stated objective was to
streamline management of these companies, and also
to induce oligarchs to begin bringing their two
decades of capital flight back to invest in the
Russia economy. Foreign participation was sought in
cases where Western technology transfer and
management techniques would be likely to help the
economy.
However,
the Russian economic outlook deteriorated as the
United States pushed Western governments to impose
economic sanctions against Russia and oil prices
declined. This has made the Russian economy less
attractive to foreign investors. So sale of these
companies will bring much lower prices today than
would have been likely in 2014
Meanwhile,
the combination of a rising domestic budget deficit
and balance-of-payments deficit has given Russian
advocates of privatization an argument to press
ahead with the sell-offs. The flaw in their logic is
their neoliberal assumption that Russia cannot
simply monetize its deficit, but needs to survive by
selling off more major assets. We warn against
Russia being so gullible as to accept this dangerous
neoliberal argument. Privatization will not
help re-industrialize Russia’s economy, but will
aggravate its turn into a rentier economy from which
profits are extracted for the benefit of foreign
owners.
To be sure,
President Putin set a number of conditions on
February 1 to prevent new privatizations from being
like the Yeltsin era’s disastrous selloffs. This
time the assets would not be sold at knockdown
prices, but would have to reflect prospective real
value. The firms being sold off would remain under
Russian jurisdiction, not operated by offshore
owners. Foreigners were invited to participate, but
the companies would remain subject to Russian laws
and regulations, including restrictions to keep
their capital within Russia.
Also, the
firms to be privatized cannot be bought with
domestic state bank credit. The aim is to draw “hard
cash” into the buyouts – ideally from the foreign
currency holdings by oligarchs in London and
elsewhere.
Putin
wisely ruled out selling Russia’s largest bank,
Sperbank, which holds much of the nation’s retail
savings accounts. Banking evidently is to remain
largely a public utility, which it should because
the ability to create credit as money is a natural
monopoly and inherently public in character.
Despite
these protections that President Putin added, there
are serious reasons not to go ahead with the
newly-announced privatizations. These reasons go
beyond the fact that they would be sold under
conditions of economic recession as a result of the
Western economic sanctions and falling oil prices.
The excuse
being cited by Russian officials for selling these
companies at the present time is to finance the
domestic budget deficit. This excuse shows that
Russia has still not recovered from the disastrous
Western Atlanticist myth that Russia must depend on
foreign banks and bondholders to create money, as if
the Russian central bank cannot do this itself by
monetizing the budget deficit.
Monetization of budget deficits is precisely what
the United States government has done, and what
Western central banks have been doing in the post
World War II era. Debt monetization is common
practice in the West. Governments can help revive
the economy by printing money instead of indebting
the country to private creditors which drains the
public sector of funds via interest payments to
private creditors.
There is no
valid reason to raise money from private banks to
provide the government with money when a central
bank can create the same money without having to pay
interest on loans. However, Russian economists have
been inculcated with the Western belief that only
commercial banks should create money and that
governments should sell interest-bearing bonds in
order to raise funds. The incorrect belief that only
private banks should create money by making loans is
leading the Russian government down the same path
that has led the eurozone into a dead end economy.
By privatizing credit creation, Europe has shifted
economic planning from democratically elected
governments to the banking sector.
There is no
need for Russia to accept this pro-rentier economic
philosophy that bleeds a country of public revenues.
Neoliberals are promoting it not to help Russia, but
to bring Russia to its knees.
Essentially, those Russians allied with the
West—“Atlanticist Integrationists”— who want Russia
to sacrifice its sovereignty to integration with the
Western empire are using neoliberal economics to
entrap Putin and breach Russia’s control over its
own economy that Putin reestablished after the
Yeltsin years when Russia was looted by foreign
interests.
Despite
some success in reducing the power of the oligarchs
who arose from the Yeltsin privatizations, the
Russian government needs to retain national
enterprises as a countervailing economic power. The
reason governments operate railways and other basic
infrastructure is to lower the cost of living and
doing business. The aim of private owners, by
contrast, is to raise the prices as high as they
can. This is called “rent extraction.” Private
owners put up tollbooths to raise the cost of
infrastructure services that are being privatized.
This is the opposite of what the classical
economists meant by “free market.”
There is
talk of a deal being made with the oligarchs. The
oligarchs will buy ownership in the Russian state
companies with money they have stashed abroad from
previous privatizations, and get another “deal of
the century” when Russia’s economy recovers by
enough to enable more excessive gains to be made.
The
problem is that the more economic power moves from
government to private control, the less
countervailing power the government has against
private interests. From this standpoint,
no privatizations should be
permitted at this time.
Much less
should foreigners be permitted to acquire ownership
of Russian national assets. In order to collect a
one-time payment of foreign currency, the Russian
government will be turning over to foreigners future
income streams that can, and will be, extracted from
Russia and sent abroad. This “repatriation” of
dividends would occur even if management and control
remains geographically in Russia.
Selling
public assets in exchange for a one-time payment is
what the city of Chicago government did when it sold
the 75 year revenue stream of its parking meters for
a one-time payment. The Chicago government got money
for one year by giving up 75 years of revenues. By
sacrificing public revenues, the Chicago government
saved real estate and private wealth from being
taxed and also allowed Wall Street investment banks
to make a fortune.
It also
created a public outcry against the giveaway. The
new buyers sharply raised street parking fees, and
sued Chicago’s government for damages when the city
closed the street for public parades or holidays,
thereby “interfering” with the rentiers’
parking-meter business. Instead of helping Chicago,
it helped push the city toward bankruptcy. No wonder
Atlanticists would like to see Russia suffer the
same fate.
Using
privatization to cover a short-term budget problem
creates a larger long-term problem. The profits of
Russian companies would flow out of the country,
reducing the ruble’s exchange rate. If the profits
are paid in rubles, the rubles can be dumped in the
foreign exchange market and exchanged for dollars.
This will depress the ruble’s exchange rate and
raise the dollar’s exchange value. In effect,
allowing foreigners to acquire Russia’s national
assets helps foreigners to speculate against the
Russian ruble.
Of course,
the new Russian owners of the privatized assets also
could send their profits abroad. But at least the
Russian government realizes that owners subject to
Russian jurisdiction are more easily regulated than
are owners who are able to control companies from
abroad and keep their working capital in London or
other foreign banking centers (all subject to U.S.
diplomatic leverage and New Cold War sanctions).
At the root
of the privatization discussion should be the
question of what is money and why should it be
created by private banks instead of central banks.
The Russian government should finance its budget
deficit by having the central bank create the
necessary money, just as the US and UK do. It is
not necessary for the Russian government to give
away future revenue streams in perpetuity merely in
order to cover one year’s deficit. That is a path to
impoverishment and to loss of economic and political
independence.
Globalization was invented as a tool of American
Empire. Russia should be shielding itself from
globalization, not opening itself to
it. Privatization is the vehicle to undercut
economic sovereignty and increase profits by raising
prices.
Just as
Western-financed NGOs operating in Russia are a
fifth column operating against Russian national
interests, so are Russia’s neoliberal economists,
whether or not they realize it. Russia will not be
safe from Western manipulation until its economy is
closed to Western attempts to reshape Russia’s
economy in the interest of Washington and not in the
interest of Russia.
Dr.
Paul Craig Roberts was Assistant Secretary
of the Treasury for Economic Policy and associate
editor of the Wall Street Journal. He was columnist
for Business Week, Scripps Howard News Service, and
Creators Syndicate. He has had many university
appointments. His internet columns have attracted a
worldwide following. Roberts' latest books are
The Failure
of Laissez Faire Capitalism and Economic Dissolution
of the West,
How America
Was Lost,
and
The
Neoconservative Threat to World Order.
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