4 Anti-Crisis Measures

Economist Konstantin Sonin had a long post on his blog yesterday with four anti-crisis measures that the Kremlin could and should take to get the economy back on track.

To me these measures seem to be “necessary”, they are not just “appropriate” in the current situation. I am sure they will have to be implemented at some point. The transition to normal economic development without these measures is difficult to imagine. At the same time they contain nothing “game-changing” or “revolutionary” – on the contrary, it is necessary to take them in order to avoid revolution, fracturing, etc.

Sonin advises:

1. Cancel the counter-sanctions and the trade sanctions against Ukraine and Turkey. These measures cause direct damage to tens of millions of Russian families, raising prices (and so quickly). Particularly strong damage is being done to the “poor half” of the population because for them these products are a big portion of family expenses. Higher prices do not just mean eating less, but also consuming less of other, including vital, products.

He also notes that economic growth without an increase in international trade is “exceptionally rare”.

2. Appoint a Prime Minister who will be able to fully coordinate the world of the office, to make basic economic policy a priority and to formulate a meaningful short-term (“anti-crisis”) program.

Sonin does not advocate one particular candidate, though he says that Moscow Mayor Sergei Sobyanin “is in many ways a more suitable candidate” [than former Finance Minister Alexei Kudrin or than Mikhail Khodorkovsky].

3. Prioritize — cut military and military-related (for example, military science) spending, and increase spending on pensions and health care and education. It is better to do it sooner rather than later so that, as in 1992, it doesn’t become somebody else’s decision and the fiscal crisis has reduced the impossibly high overhead.

The increase in pensions and benefits is, of course, inflationary, but this is the best expenditure of money in the crisis instead of feeding a few owners of weapons producing factories. The Central Bank will cope with inflation…. Unemployment is low [projected to increase officially to 6% this year. -ed], so it is best to close unneeded production now when there is money for benefits than (see above) instead of when there won’t be any money for it.

In addition to dismissing the Prime Minister, Sonin advises:

4. dismiss ministers and officials convicted of corruption and ties to organized crime.

It would seem that the fraudulent dissertations of Ministers Sokolov, Nikiforov and Medinsky has no relation to their ministerial activity. A mere trifle, it would seem.

And maybe the corruption of the Prosecutor General’s son is not related to the work of the Prosecutor General, Sonin writes [you can watch anti-corruption activist Navalny’s investigation on the Chaika family in English here. -ed]. If these revelations had come to light earlier (in 2007 or even in 2011), Sonin says, they would be dismissed as nothing.

But not now. One of the problems for economic development in Russia is pessimism. The pessimism of millions, focused only on basic survival and not setting higher goals for themselves. The pessimism of hundreds of thousands, so that they don’t open new small businesses. The pessimism of tens of thousands not to invest. The pessimism funneling thousands of brains [brain drain]…

Once again, in a normal situation, in a stable development, the dismissal of certain people won’t change anything. But now there are abnormal levels of corruption and abnormal levels of pessimism. The dismissal of each particular con — even for plagiarism of their dissertation — is a signal. Pessimism will begin to dissipate with this series of signals. It will be immediately  obvious — a series of dismissals, change the prime minister and the stock market will rise.

Sonin concludes:

In order not to argue in vain, these four specific measures, or course, have no relation to “long-term development”, and “institution building”. Their advantage is that they can be achieved. And to talk about long-term measures without taking the necessary first steps is a waste of time.

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