moon of alabama

Most of the commentators on yesterday's post were right. It was the Russian President Vladimir Putin who said this:

Many of us read The Little Prince by Antoine de Saint-Exupéry when we were children and remember what the main character said: “It’s a question of discipline. When you’ve finished washing and dressing each morning, you must tend your planet. … It’s very tedious work, but very easy.”

I am sure that we must keep doing this “tedious work” if we want to preserve our common home for future generations. We must tend our planet.

The subject of environmental protection has long become a fixture on the global agenda. But I would address it more broadly to discuss also an important task of abandoning the practice of unrestrained and unlimited consumption – overconsumption – in favour of judicious and reasonable sufficiency, when you do not live just for today but also think about tomorrow.

We often say that nature is extremely vulnerable to human activity. Especially when the use of natural resources is growing to a global dimension. However, humanity is not safe from natural disasters, many of which are the result of anthropogenic interference. By the way, some scientists believe that the recent outbreaks of dangerous diseases are a response to this interference. This is why it is so important to develop harmonious relations between Man and Nature.

It was a part of a talk he gave at this year's Valdai Discussion Club meeting.

I found the excerpt remarkable because it included this, on might say, anti-capitalistic statement:

.. an important task of abandoning the practice of unrestrained and unlimited consumption – overconsumption – in favour of judicious and reasonable sufficiency, when you do not live just for today but also think about tomorrow.

That 'green' statement will rile those people who argue for free markets and a right to sell bullshit in ever more flavors. In their view the fight against such 'communists' thinking must be renewed.

As the full English transcript of Putin's speech and the two and a half hour Q&A is now available I can also quote another interesting passage where Putin talks about capitalism and the role of the state. His standpoint seems very pragmatic to me:

Question: Mr President, there has been much talk and debate, in the context of the global economic upheavals, about the fact that the liberal market economy has ceased to be a reliable tool for the survival of states, their preservation, and for their people.

Pope Francis said recently that capitalism has run its course. Russia has been living under capitalism for 30 years. Is it time to search for an alternative? Is there an alternative? Could it be the revival of the left-wing idea or something radically new?

Putin: Lenin spoke about the birthmarks of capitalism, and so on. It cannot be said that we have lived these past 30 years in a full-fledged market economy. In fact, we are only gradually building it, and its institutions. [..]

You know, capitalism, the way you have described it, existed in a more or less pure form at the beginning of the previous century. But everything changed after what happened in the global economy and in the United States in the 1920s and 1930s, after World War I. We have already discussed this on a number of occasions. I do not remember if I have mentioned this at Valdai Club meetings, but experts who know this subject better than I do and with whom I regularly communicate, they are saying obvious and well-known things.

When everything is fine, and the macro economic indicators are stable, various funds are building up their assets, consumption is on the rise and so on. In such times, you hear more and more that the state only stands in the way, and that a pure market economy would be more effective. But as soon as crises and challenges arise, everyone turns to the state, calling for the reinforcement of its supervisory functions. This goes on and on, like a sinusoidal curve. This is what happened during the preceding crises, including the recent ones, like in 2008.

I remember very well how the key shareholders of Russia’s largest corporations that are also major European and global players came to me proposing that the state buy their assets for one dollar or one ruble. They were afraid of assuming responsibility for their employees, pressured by margin calls, and the like. This time, our businesses have acted differently. No one is seeking to evade responsibility. On the contrary, they are even using their own funds, and are quite generous in doing so. The responses may differ, but overall, businesses have been really committed to social responsibility, for which I am grateful to these people, and I want them to know this.

Therefore, at present, we cannot really find a fully planned economy, can we? Take China. Is it a purely planned economy? No. And there is not a single purely market economy either. Nevertheless, the government’s regulatory functions are certainly important. [..]

We just need to determine for ourselves the reasonable level of the state's involvement in the economy; how quickly that involvement needs to be reduced, if at all, and where exactly. I often hear that Russia’s economy is overregulated. But during crises like this current pandemic, when we are forced to restrict business activity, and cargo traffic shrinks, and not only cargo traffic, but passenger traffic as well, we have to ask ourselves – what do we do with aviation now that passengers avoid flying or fly rarely, what do we do? Well, the state is a necessary fixture, there is no way they could do without state support.

So, again, no model is pure or rigid, neither the market economy nor the command economy today, but we simply have to determine the level of the state's involvement in the economy. What do we use as a baseline for this decision? Expediency. We need to avoid using any templates, and so far, we have successfully avoided that.

Then comes a paragraph that shows where Russia differs from the current 'western' economic policies of negative interest rates and deflation:

Of course, the Central Bank and the Government are among the most important state institutions. Therefore, it was in fact through the joint efforts of the Central Bank and the Government that inflation was reduced to 4 percent, because the Government invests substantial resources through its social programmes and national projects and has an impact on our monetary policy. It went down to 3.9 percent, and the Governor of the Central Bank has told me that we will most likely keep it around the estimated target of around 4 percent. This is the regulating function of the state; there is no way around it. However, stifling development through an excessive presence of the state in the economy or through excessive regulation would be fatal as well. You know, this is a form of art, which the Government has been applying skilfully, at least for now.

Keeping inflation up by a bit will make it easier for Russian consumers and companies to pay back their loans. It is economically healthier than the deflationary policies of western societies.

Russia is well on its way to overtake Germany as the fifth biggest economy. Putin's pragmatic positions towards the role of the state in the economy and his relative generous policies of social programs and large national projects have contributed to that.

The many questions and answers on foreign policy in the Valdai talk show a similar pragmatism on other issues. For those interested in those here is again the link to the transcript.

Posted by b on October 24, 2020 at 18:00 UTC | Permalink

https://www.moonofalabama.org/2020/10/putin-on-the-role-of-the-state-in-the-economy-1.html#more