This post is a translation of a REPORT by Sergey Glazyev, “О ГЛУБИННЫХ ПРИЧИНАХ НАРАСТАЮШЕГО ХАОСА И МЕРАХ ПО ПРЕОДОЛЕНИЮ ЭКОНОМИЧЕСКОГО КРИЗИСА“. It's a long but must read about the alternatives for Russia to combat the present chaos.
ABOUT THE ROOT CAUSES OF THIS GROWING CHAOS AND MEASURES TO OVERCOME THE ECONOMIC CRISIS[1].
Table of contents
INTRODUCTION 3
1.FUNDAMENTAL CAUSES OF THE GLOBAL CRISIS 4
1.1.GREAT DEPRESSION AND WORLD WAR AS A PHASE OF TECHNOLOGICAL AND WORLD ECONOMIC CHANGE 4
1.2. FEATURES OF THE CURRENT WORLD CRISIS AND WAR 9
2. THE INEVITABILITY OF A NEW WORLD ORDER 26
2.1. ADVANTAGES OF THE NEW WORLD ECONOMIC SYSTEM AGAINST THE BACKGROUND OF THE HOPELESSNESS OF THE EXISTING ONE 26
2.2. END OF THE WORLD HYBRID WAR 38
3. PROSPECTS OF DEVELOPMENT OF THE RUSSIAN ECONOMY IN CONDITIONS OF STRUCTURAL CHANGES IN THE WORLD ECONOMY…55
3.1. VULNERABILITY OF RUSSIAN ECONOMY IN CRISIS SITUATION 56
3.2. URGENT ANTI-CRISIS MEASURES 73
3.3. TRANSFER OF THE RUSSIAN ECONOMY TO A NEW WORLD ECONOMIC AND TECHNOLOGICAL ENVIRONMENT AS A PREREQUISITE FOR THE ANTI-CRISIS STRATEGY OF ADVANCED DEVELOPMENT 86
Introduction
The world economic system has reached a steep peak: it is no longer even a regime with aggravation, when transnational banks and corporations, driven by the desire to write off or minimize their liabilities, are provoking financial vortices on a planetary scale. This is the chaos of a hybrid war.
The world economy is crumbling under the impact of a new means of mass destruction and cognitive suppression – a pandemic of human fear of the coronavirus. Today the facts of using modern bioengineering technologies to synthesize viruses dangerous for humans, as well as to model the probable social, economic and political consequences of the spread of diseases caused by them are becoming known. To governments and special services the concentrated results of such “business games” were presented in the form of target reports with hypothetical scenarios. Now it looks like work done in advance to be proactive. There are reasons to believe that the secret “scientific search” in the field of virology was carried out under the coordination of the customers of these prognostic reports, which are now emerging.
Deciphering the technology of spreading the “genome” of the next turn of hybrid warfare allows to understand the essence of all its aspects: biological, political and economic, informational.
The current pandemic – man-made or not – is a crisis that appeals to the benefit of the world's subjective players to solve their problems. Under the guise of sanitary force majeure, the global economy has not just been driven into recession in a manageable manner, but has created a new economic reality. There is a profound restructuring of the entire system of economic ties and relationships. It is appropriate to recall the well-known definition borrowed by Lenin from the Prussian warlord Clausevitz: “War is nothing but the continuation of politics by other means[2]. And politics, in turn, is a concentrated expression of economics.
In order to understand the logic of the catastrophic events that are shaking Russia and the world today, and to forecast their further deployment, it is necessary to depart from understanding the long-term patterns of economic development.
1. Fundamental causes of the global crisis
Behind a kaleidoscope of seemingly random and unrelated events, there is often an objective pattern, the understanding of which makes it possible to anticipate crises, buy them in time and even use them for constructive purposes.
1.1. The Great Depression and World War as a phase of change in technological and world economic patterns
The fundamental feature of the period currently undergoing is the structural transformation of the world economy, which is caused by the change of technological and world economic patterns[3]. The life cycles of these macroeconomic reproducible technological and institutional integrity are manifested as Kondratyev's long waves[4] and Arriga's Centennial cycles of capital accumulation[5]. The regularities peculiar to these processes determine the epochal changes that take place periodically and are mediated by technological and social revolutions, economic crises and world wars.
The process of changing technological patterns takes place once in half a century and is accompanied by a technological revolution, which devalues a significant part of productive and human capital, causing a deep economic crisis and depression[6]. Exit from it to another long wave of economic growth requires state stimulation of investment and innovation activity in the promising growth directions of the new technological mode. So far, under the influence of liberal ideology that condemns state interference in the economy, this stimulation has been carried out through an arms race that justified a sharp increase in state spending on R&D, and has been accompanied by growing military and political tensions in the world. The latest historical example is the U.S.-Soviet space arms race, which gave a powerful boost to the development of information and communication technologies and the electronic industry, forming the core of a new technological pattern that expanded until the beginning of this century.
The process of changing the world economy takes place once a century and is accompanied by social revolutions and world wars, which will mediate the change of institutions regulating the reproduction of the economy. The reason for these upheavals is the desire of the ruling elite of the dominant country to preserve global hegemony in the face of the loss of competitiveness due to the emergence of a more effective system of economic development management in a peripheral country. It is creating a new centre of the world economy, whose expanded reproduction is gradually replacing the old one and creating a new century of capital accumulation. The last historical examples of this kind are the First and Second World Wars, which were provoked by the special services of Great Britain for the purpose of mutual destruction of Russia and Germany, which were considered by the British ruling elite as the main competitors to its geopolitical domination. However, as a result of the socialist revolution and the formation of the USSR, as well as the flight of capital from Europe to the United States, two varieties of a new, more effective system of economic development management on a global scale appeared. The colonial world economic system was replaced by the imperial one with global vertically integrated research and production systems of economic reproduction. The English centennial cycle of capital accumulation was replaced by the American cycle, the completion of which occurred after the collapse of the world socialism system.
The modern situation is characterized by the superimposition of processes of change of technological and world economic ways, the consequence of which is a resonance strengthening of crisis phenomena. Typical for the change of technological patterns, the arms race with the aggravation of military and political tension turns into a world war, which is a natural phase of change of world economic patterns.
In terms of historical analogies, the current decade is similar to the Great Depression preceding World War II. Although, thanks to the colossal pumping of money, issuers of world currencies were able to soften the structural crisis and avoid a sharp fall in production, the economies of the leading countries are in a state of prolonged stagnation. The accumulated losses of potential GDP over a decade are quite comparable to the damage from the production decline in the 30s, which was relatively quickly overcome (Fig.1).
Fig. 1 – GDP of developed economies, % growth to 1929 and 2007 levels.
Source: J.Ross, Madisson Historical Statistics of the World Economy1-2008 AD; IMF World Economic Outlook, October 2016.
The current global crisis is aggravating the economic situation and the account of GDP losses in the modern period is likely to exceed the failure of the corresponding period of the last century. If then the recovery from the Great Depression occurred quickly and dramatically due to the huge increase in government demand due to the militarization of the economy in the run-up to and during the World War, the hybrid war that is happening today is mainly in the field of humanitarian technologies and does not need to produce large amounts of weapons and military equipment. And, fortunately, it is not accompanied by huge losses of population and material wealth, which saves the cost of its restoration. At the same time, the threats to humanity posed by deep structural changes in the world economy should not be underestimated.
In the last century the ruling elite of Great Britain tried to preserve its global hegemony by provoking wars between its main competitors: Japan against Russia; Germany with Austria-Hungary against Russia and the USSR; Japan against the USA. To curb the development of the latter, the British Empire even imposed an embargo on imports of American goods in the 30s. Today, the US leadership is trying to do the same with regard to Chinese goods. In the same way, American security services provoke conflicts between their main competitors, pushing Vietnam and Japan to conflict with China and growing Russophobic regimes in the post-Soviet space in order to destroy historical Russia.
This historical analogy is very instructive, as it reflects objective regularities of structural changes in the world economy that affect the reflexes of the ruling elite of the Anglo-Saxon world. The previous period of changes in the world economy began with World War I, which resulted in the collapse of all Eurasian empires (Russian, German, Austro-Hungarian, Ottoman and, finally, Chinese), and strengthened the United States, Japan and Britain, which reached the peak of power of its world colonial empire. The current period of change in the world economy began with Perestroika in the USSR, which ended in its collapse, as well as the collapse of the world system of socialism. At the same time, China, India and, most of all, the United States, which reached the peak of power of their global financial and corporate system, consolidated themselves. Thus, in the first phase of transition, the dominant country of the existing world economic order reaches the peak of its power, and the evolutionary limit of this world economic order is fully revealed in the global hegemony of this country. The illusion of “the end of history” emerges: but in fact, only the life cycle of the existing world economic order ends, which enters the final phase (“era of stagnation”). At the same time, a fundamentally new, qualitatively more effective system of institutions for managing reproduction and development of the economy is emerging on the periphery of the world economic system.
In the next phase of transition, there is a transition to a new world economic order. Thus, as a result of the Second World War, the British colonial empire collapses and a new bipolar world economic system is formed, with centers in the USSR and the USA. We can assume that in the current situation, the destruction of the existing world order of liberal globalization in the interests of the United States will be accompanied by the formation of a new world economic mode, the development of which will take place in competition with integration structures with the centers in China and India, while maintaining a significant influence of the EU, the United States and, hopefully, the EAEC.
Despite victories in two world wars, the British Empire disintegrated, reaching the peak of its power by the middle of the last century. This was due to the hopeless backwardness of its system of colonial management, which by its ability to ensure the development of the economy was an order of magnitude less effective than the institutions of the new world order, formed in the USSR and the United States. The latter now find themselves in a similar position – having reached the peak of their power after the collapse of the USSR, the U.S. hopelessly loses the economic competition to China, which has created an order of magnitude more effective system of economic development management. The imperial world economic system is giving way to an integral one with a much more complex mixed system of economic development management.
By combining government planning and market self-organization, government control of money flow, and private enterprise, and integrating the interests of all social groups around the goal of improving public welfare, China has demonstrated record growth rates of investment and innovation, leading the world in economic growth for over thirty years. While the U.S. economy has continued to stagnate despite a five-fold increase in dollars over the past decade, PRC combines the highest levels of monetization of the economy, savings rates and growth rates. The U.S. financial oligarchy, which is focused on maximizing current profits, is clearly inferior to the Chinese Communists in terms of efficiency in managing economic development, who use market mechanisms to improve people's welfare through increased production and investment. As well as Indian nationalists who have created their own version of an integrated economic development management system with a democratic political system.
All countries, from Vietnam to Ethiopia, are on the path of building a convergent model that combines socialist ideology and state planning with market mechanisms and private enterprise, and regulating the latter to increase production of material goods, and are now demonstrating faster sustainable development against the backdrop of stagnating leading capitalist countries. The American century of capital accumulation has been replaced by the Asian century, and the centre of the world economy is shifting to South-East Asia.
1.2 Features of the current world crisis and war
Due to the inexorable laws of world social and economic development, the United States is doomed to defeat in the trade war it waged with China. But the American ruling elite will try to fight for global leadership by all available means, regardless of international law. However, it has already destroyed the latter: ignoring the WTO norms in the trade war with China; violating the UN Charter by armed aggression in the Balkans and the Middle East, as well as by organizing gospel coups in a number of countries in Europe and South America; the IMF Charter – by financial sanctions against Russia; engaging in the development of biological weapons, cyberterrorism and military build-up in other countries and in space, contrary to international conventions; sponsoring religious extremism and neo-Nazism in order to organize and manipulate terrorist organizations. In full accordance with the theory[7], this war is initiated by the ruling elite of the United States in order to retain its global hegemony in the face of the emergence of a more effective system of economic development management in China. The question remains, what limits can American leaders reach in crimes against humanity in an effort to retain their dominance?
World wars differ significantly from one another in the technologies used. World War II was a war of motors, which gave a powerful impetus to the development of automotive and organic synthesis industries, which formed the core of a new technological mode for that time. By the mid-1970s, it had reached the limits of its growth and began the process of replacing it with the next technological mode, the core of which was the microelectronic industry and information and communication technologies. The doctrine of “Star Wars” and the U.S. arms race in the space rocket industry gave a powerful impetus to its growth, which continued until the beginning of this century. Today, the process of replacing this technological mode with the next one, the core of which is digital, nano and bioengineering technologies. As in the past, it is driven by an arms race. However, the basic technologies of the new technological mode being formed today are significantly different from those of the previous ones. To stimulate their development, high-precision missile, target biological, cyber and information-cognitive weapons are well suited to hit strategic targets, control systems, the population and the consciousness of the enemy.
It is not difficult to notice the use of these types of weapons at present: high-precision weapons – in combat operations; biological – in the form of coronavirus pandemic; cybernetic – in cyberattacks against financial and energy infrastructure objects; cognitive – in social networks. If it is impossible to use nuclear and chemical weapons, the modern world war becomes hybrid, including wide use of financial, trade and diplomatic methods of crushing the enemy. The U.S. uses its superiority in all these areas, seeking to strengthen its advantage in the global economy by weakening the enemy.
The war was launched against Russia on the financial front in the form of financial sanctions, the victim of which was, among other things, the aluminum industry, together with hydroelectric power plants owned by “Rusal”, control over which passed to the American “partners. Their next target was Rosneft, partially already controlled by the Western management. Arrests of assets of Russian legal entities and individuals undesirable to Washington, blocking money transfers, bans on transactions with them are carried out on a wide front in the entire dollar zone. About a trillion dollars of capital exported from Russia are “captive” in Anglo-Saxon offshore areas.
The instruments of trade war were used to weaken China, against which Washington, in violation of WTO rules, introduced additional import duties totaling $300 billion, as well as sanctions against leading manufacturers of computer equipment. Tested in the 80s against the USSR, the reception of the trade war was the collapse of oil prices by Saudi Arabia, provoked by American agents of influence in order to undermine Russia's trade balance. In addition to this, Saudi Arabia began an open dumping of oil in the European market in order to oust Russian companies from it, for which the U.S. simultaneously imposed sanctions.
An example of the use of cyber weapons was the accident at an Iranian nuclear power plant, which was caused by a computer virus embedded in the automated process control system. Another example is the disabling of the power management system in Caracas, the capital of Venezuela, on March 7, 2019 to provoke riots in order to organize a coup d'état. Every minute there are several cybernetic attacks from the U.S. NSA on targets in China, Russia, Venezuela and other countries outside Washington's control. It is no longer necessary to speak about the global network of wiretaps embedded in the computers “bugs”.
This year a new front of the world hybrid war with the use of biological weapons has opened – according to many Chinese and Russian experts, the coronavirus was synthesized and thrown into Wuhan by the American special services. The development of bioengineering technologies for military purposes was an expected “driver” for the development of a new technological mode. Scientists of the Pushchino Scientific Center of the Russian Academy of Sciences spoke about the possibility of synthesizing viruses with targeted effects against people of a certain race, age or sex back in 1996, justifying the need to develop and adopt a program to ensure the biological safety of Russia. “The “First Swallows” in the form of Ebola, SARS and possibly avian influenza and HIV have long fledged.
Back in 2010. the Rockefeller Foundation developed the viral pandemic scenario[8] (below), which is currently being implemented. There is no doubt that in the vast network of American secret bio-engineering laboratories scattered around the world, bioengineered weapons are “smoking”. Its development and application stimulate the development of advanced bioengineering industry, generating demand for medical research and instrumentation, new vaccines and drugs. Healthcare, as a leading sector of the new technological system, is receiving additional impetus for growth.
The widespread introduction of quarantine measures and restrictions on the movement of citizens provides a strong impetus for the development of information technology and computing through a surge in demand for e-commerce services, distance education, home and remote work equipment. States are investing huge amounts of money in equipping cities and public places with the means of video registration and tracking of citizens, recognition of their identity, control over their movement and health condition. On this basis, artificial intelligence systems operating with large data are being formed, for the processing of which supercomputers and ultra-high performance software are needed. This, in turn, stimulates the development of nanotechnology for the production of computer technology with appropriate performance, compactness and energy efficiency.
The arms race, as always during the technological revolution, is unfolding in the promising directions of growth of the new technological mode. It threatens humanity's existence when technology matures to the development of weapons of mass destruction, at the disposal of immoral politicians. The atomic bombings of Hiroshima and Nagasaki are a prime example of the crimes they have committed against humanity. The use of the coronavirus, which has affected millions of people, shows a resurgence of this criminal activity on a modern technologically advanced basis.
The difference from the atomic bombardment of Japanese cities is the opposite effect of biological weapons, affecting not only the enemy population but also their own. It can be assumed that the ruling apex of the United States or the so-called “deep state” has additional motives for its use in the part of the world controlled by Washington. After the terrorist attacks of September 11, 2001 in New York, committed with the connivance of the CIA, the power structures have been significantly strengthened, getting out of public control and gaining wide powers. Then the justification for this partial usurpation of power and restriction of civil liberties was the “war” with the world terrorism, sponsored and directed by the same American special services[9].
The pandemic creates even broader grounds for restricting civil liberties until their complete elimination. Changes in technological patterns are accompanied by capital depreciation and depression. A change in the world economic system adds to this a decline in the efficiency of institutions regulating economic reproduction and a political crisis. In order to maintain control over the situation, the ruling elite needs legal grounds to limit the rights of citizens. This is all the more important in the conditions of the world hybrid war, during which the puppeteers of the American ruling elite aim to deprive their victims of freedom of action and confiscate their assets. The slamming of financial bubbles and the collapse of the financial market devalues the assets of tens of millions of American citizens, for the neutralization of potential protests, a quarantine regime is ideal. It is quite possible that the U.S.-owned financial oligarchy is sacrificing vulnerable segments of the American population to paralyze with the horror of death from the coronavirus the protest of millions of citizens who have lost their assets and savings. Let us not forget the traditional commitment of the Anglo-Saxon ruling elite to the Malthusian ideology that justifies the need for population reduction in order to preserve the habitat of the “golden billion”. The same Rockefeller Foundation and Bill Gates support and fund global projects aimed at reducing fertility and sterilizing women. On the wave of the current pandemic, Gates is promoting a project for total vaccination of the population using the latest bioprogramming technologies[10].
Studies of the facts preceding the Coronavirus pandemic show that it was systematically prepared.
The chronology of Operation COVID-19 dates back to 2010, when the Rockefeller Foundation and Global Business Network Report Scenarios for the Future of Technology and International Development was released[11]. One of the scenarios of the report, named in the spirit of special operations of U.S. secret services from Hollywood blockbusters – Lock Step – in fact, presented a simulation of global destabilization through a pandemic virus. In 2015, Nature Medicine magazine reported on a successful laboratory experiment conducted by American microbiologists to create a hybrid form of coronavirus of bats, capable of infecting humans. The experiment confirmed the hypothesis that it is possible to directly infect humans with bat coronavirus”, – said in an article [12], signed by 15 authors, 13 of which are related to the University of North Carolina at Chapel Hill, and two more are employees of the leading laboratory of special pathogens and biosafety Wuhan Institute of Virology. The article shows that both American and Chinese scientists have participated in the experiments jointly. And it is emphasized that “despite the temporary moratorium imposed by the U.S. government to fund research to strengthen the functions of pathogens, including influenza viruses MERS and SARS, work in this area was specifically authorized and continued. ABC news now finds out that last fall U.S. military intelligence medical units warned D. Trump about the consequences of coronavirus.
This is a brief summary describing the history of the virus's origin (a detailed look at environmental, historical and geopolitical aspects of its spread – in the appendix). But what is behind the “behind the scenes” of its creation and what did the authors of the forecast reports issued in the past ten years “warn” about, including just before the announcement of the epidemic by WHO? Attention is drawn to the substantive accuracy of the forecasts and scenario modelling organized by large capital entities: “In 2012, the largest pandemic that the world has been waiting for for years has broken out. Unlike H1 #1 2009 (swine flu pandemic virus of 2009), this new strain of influenza proved extremely dangerous. Even some countries that had prepared for such a pandemic were affected and about 20% of the global population was affected by the virus. 8 million died in the first 7 months after the new strain appeared…[13].
Since the report was prepared in the immediate aftermath of the global financial crisis of 2008 and at the time of its publication, the authors believed a rapid transition to a catastrophic scenario was likely. However, the policy of “quantitative easing” was successful: after unprecedented money pumping, the financial market stabilized and went up in price. Maybe this time the forces manipulating it decided that they would not hold the situation and pressed the trigger of biological warfare, which will be attributed to losses of bankrupt citizens, corporations and states.
It wasn't just the Rockefeller Foundation that developed the scenario for this disaster. Bill Gates has repeatedly announced the approaching pandemic[14]: in his speech in 2015. Gates said the world was “not ready for the next epidemic,” and in a discussion on epidemics in 2018, organized by the Massachusetts Medical Society and the New England Journal of Medicine, Gates said that a pandemic could occur within the next decade and presented the results of the Institute of Disease Modelling. They showed that the new flu could kill 30 million people within six months. And on October 18, 2019. – when no coronavirus cases have been reported, the Johns Hopkins University Center for Public Health Security in New York City, which is now the world's resource for tracking the Coronavirus epidemic, in partnership with the World Economic Forum and the Bill and Melinda Gates Foundation, hosted Event 201[15] on the response to a high-level pandemic. The meeting was held as a strategic game that simulated the spread of a pandemic of a sustained airborne virus as well as by handshakes and other tactile contacts. A specific feature of the virus, according to the scenario of the strategic game, was the lack of an effective vaccine and selective mortality of the population, mainly related to persons with reduced immunity.
It is also appropriate to mention the “Infection” blockbuster, which was released in 2011 and then widely promoted, and which was designed to prepare the public's panicky expectations about the rapidly spreading deadly airborne lung disease.
Synchronously with opinion leaders, international financial institutions began preparing for a simulated pandemic. Thus, back in June 2017 it was reported that the World Bank had issued specialized bonds aimed at financial support of developing countries as a channel for emergency assistance in case of (attention!) pandemic[16].
The question arises: for what purposes were such efforts, which required the participation of highly influential structures, spent? The question is, of course, rhetorical. To answer it, let us look at the image of the future in the mentioned Rockefeller Foundation report. It[17] states: “During the pandemic, national leaders around the world strengthened their authority and established strict rules and restrictions… Even after the pandemic passed, this more authoritarian control and supervision of citizens and their activities remained and even increased. To protect themselves from the spread of increasingly global problems – from pandemics and transnational terrorism to environmental crises and growing poverty – leaders around the world have begun to rule more harshly.
The transit of society to a ‘wondrous new world' requires an appropriate transformation of state structures, a reconsideration of the place and role of punitive and repressive instruments at the disposal of national systems of governance,” Rockefeller's prediction hints transparently. As written, the following happens: the establishment of totalitarian control, in some places accompanied by the formal introduction of a state of emergency; unprecedented measures of supervision over all spheres of economic and economic activity; subordination of the public body to strict rules in the name of security.
In all “prophecies” – from the report to the film – it was announced that the epidemic would come from China, a country that had presented the world with a new, highly effective and attractive model of organizing productive forces and production relations. It is this, the brightest model of the new world economic order, which brought the world the economic miracle of the XXI century, the organizers of the virus-psychological attack intended to torpedo. It is believed that the panic in Wuhan, supported by the world media, was organized by U.S. agents of influence in the Chinese leadership to provoke chaos in order to organize a coup d'etat. But China's leadership was honored to have emerged from this ordeal by buying the spread of the pandemic and to have begun to restore production, trade and foreign relations with even greater enthusiasm. As a result, the supporting structures of the new world order were strengthened by strengthening the discipline of all social groups, mobilizing resources, joint responsibility, as well as increasing the authority's authority, whose will has demonstrated firmness.
So, first shooting through a forecasting report, five years later, the first successful experiment, and another five years later, an economic and household devastating pandemic. And all this without guns, soldiers, and armies – as the US ruling elite's response to the 2007-2009 financial and economic crisis and the threat of losing global hegemony as a result of China's rise to the wave of a new technological pattern and the formation of the core of a new century of capital accumulation cycle in Southeast Asia.
The above logical sequence of facts and the description of the meaning field of the crisis confirm the validity of treating coronavirus as a biological weapon, and pandemics as a key campaign of the world hybrid war, which may become a trigger for global changes. This hypothesis fits well with the traditions of the Anglo-Saxon ruling elite. In order to launch the First World War was organized the murder of the Crown Prince of Austria-Hungary, as well as eliminated the most influential opponents of Russia's involvement in the war, including Stolypin and Rasputin. To launch World War II, American and British intelligence services helped Mussolini and Hitler not only to come to power, but also to keep them in opposition to the generals, as well as to start the war, sacrificing the Czech Republic, Poland and other European allies. We can also remember the operation with the self-bombing American warship “Maine” in the Bay of Havana, which the U.S. used as a basis for declaring war with Spain to seize its American colonies. Or a provocation with the firing of military ships in the Gulf of Tonkin to invade Vietnam in 1964.
These provocations, which took place at different times, had fatal consequences by launching the flywheel of irreversible global change processes. They dragged power-holders into making predetermined decisions with disastrous consequences. As on the notes, the decisions of the heads of the Austro-Hungarian, Russian and German Empires on the outbreak of World War I after the political assassination in Sarajevo were raffled off. Hitler's actions to usurp power in Germany and, later, to unleash war in Europe were also calculated and fit into the logic of the “customers” of this war. The latter prepared and launched a chain reaction of military conflicts in secret not only from the peoples involved in them, but also from parliaments and governments, set to make decisions predetermined by political logic.
Having thrown in the coronavirus and promoted panic, the organizers of the hybrid war put national governments to the need to make decisions that exactly match the scenario of the Rockefeller Foundation. Players with “secret knowledge” immediately before the collapse of the market moved their capital from securities to precious metals, strengthening their positions and preparing to buy repeatedly cheaper assets. Probably, they used their influence to continue the development of coronavirus contrary to the official termination of this scientific program by the U.S. government, as well as its delivery to Wuhan.
This creates a historical analogy with the strange escape of Napoleon from the British blockade of the island of Elba, which predetermined further developments in France up to the enrichment of the Rothschilds in the collapse of the British bond market with their subsequent purchase during and after the Battle of Waterloo. The British army had to pay for the deaths of many thousands of soldiers, and the British treasury – millions of pounds. In general, Napoleon was a profitable political tool for the English oligarchy, through which France was deprived of its colonies and relegated to a secondary land country. On this historical episode, the formation of the English century cycle of capital accumulation and the formation of the colonial world order, in which Britain occupied a central place, was completed.
It is quite possible that the financial oligarchy that ruled in the U.S. is sacrificing vulnerable segments of the American population to paralyze the horror of death from the coronavirus protest of millions of citizens who lost their assets and savings. Perhaps the American “deep state”[18] simply did not think about it before organizing an experiment with the coronavirus. Just as the English “deep state”, indulging Hitler before World War II, did not think about the future victims of the bombing of London and the defeat of the British army in France.
However, not always fatal in its historical consequences of provocation achieve the desired results for their organizers. World Wars are conceived by the countries, the ruling top of which seeks to maintain its dominant position within the established world economic order and burdened with the overstocking of capital in the production of the existing technological mode. However, they are won by countries that have managed to form the institutions of the new world economic mode and master the basic production of the new technological mode in a timely manner. For them in this period there is an opportunity to make a leap in economic development, having saddled a new long wave of Kondratyev earlier than others and launching a new century cycle of capital accumulation.
The last world war was provoked by the British intelligence services in order to retain Britain's global dominance. The winners in this war were the USSR and the United States, which managed to quickly develop the basic production of the new technological mode by creating a more efficient management system based on the institutions of the new world economic mode. The ability to mobilize resources by vertically integrated ministries and corporations organizing large-scale production in the USSR and the United States, respectively, was much greater than in the decrepit colonial empires of Western Europe with their family firms and pampered aristocracy. In the first phase of this war, Germany easily defeated all European states through the concentration of resources in the corporate and administrative structures of the Third Reich. However, the national economic planning system created in the USSR proved to be more effective: having an order of magnitude smaller production potential than in fascist united Europe, the Soviet Union destroyed the misanthropic model of the new world economic system in the form of a Nazi corporate state.
The world wars of the last century went after the possession of territory. In any case, on the part of the main aggressors – Germany and Japan, who proclaimed the goals of expanding the living space for their nations, which wanted to enslave the rest of humanity. The current world hybrid war is unfolding by the ruling elite of the United States for control over the world economy, primarily its financial system. Thanks to privatisation of function of issue of world currency the American ruling oligarchy has possibilities of operation of all mankind by an exchange of fiat money created by it on real material benefits and assets. The aim of its aggression is to complete the process of liberal globalization, in which all countries must ensure the free circulation of the dollar as the world currency and exchange all national inventories and assets for it. Therefore, the hostilities in the current hybrid war do not take place through the use of tanks, ships and aircraft, as was the case in the last century, but through the targeted use of financial instruments, trade restrictions, cyberattacks and the manipulation of public consciousness. The armed forces are used in the final phase of hostilities for punitive purposes in order to finally demoralize an already defeated enemy. And biological weapons are used to create panic among the population in order to disrupt governance and stop economic activity. Ultimately – to devalue the assets of millions of investors and citizens for their subsequent purchase by the global oligarchy.
Victory in this war would mean for the United States the widespread formation of puppet regimes, which are not required to do much: strict adherence to IMF recommendations to ensure economic openness and free flow of capital while refusing to establish a national system of money emission management; privatization of state-owned enterprises in favor of American corporations; transfer of control over media and telecommunications to American agents; acquisition of American military equipment and adherence to Washington's foreign policy killwater. The American empire does not need to keep the occupation troops in the countries under its control: the native ruling elite, educated in the universities of the USA and Great Britain, enthusiastically follows the instructions from Washington and gets its part of the income from the exploitation of the national wealth by the American capital. In exchange, American curators relieve her of the concern for the development of the national economy, which is entrusted to foreign investors.
As the historical experience of many years of U.S. control over Latin American countries shows, it is enough for Washington to keep its agents in the leading positions of the Central Bank, the Ministries of Finance, Defense and Foreign Affairs to conduct macroeconomic, defense and foreign policy in its interests[19]. Typical examples of such occupation in the modern period are the US-controlled regimes of Ukraine, Georgia, Iraq, Brazil and many other states, including the EU members[20].
The economic consequences of such a “soft” occupation are comparable to the damage caused to the defeated countries during the world wars of the last century. For example, the economic losses of Russia during the Yeltsin regime controlled by Washington are comparable to the consequences of Hitler's aggression[21]. Only in contrast to fascist Germany, which lost its life force and equipment in the occupied territories, the American ruling elite gained control over trillions of capital removed from the post-Soviet space and the assets remaining in it without any losses.
Hybrid warfare is much more profitable and comfortable than the armed conflicts of the last century. It fits well into the business logic of the American ruling elite, whose power structures and influential clans profit from the occupied countries: the CIA – on drug trafficking from U.S.-controlled Afghanistan and Colombia; the Pentagon – on oil trade from the defeated U.S. military Iraq and Libya; the Biden family – on the privatization of the Ukrainian gas transportation system; Bush – on the oil fields of Kuwait.
And these are just some examples. American banks and corporations digest the assets and resources of the occupied US countries, whose macroeconomic policy ensures a significant part of national income to the benefit of the Americans. Their entrepreneurs are forced to use American technologies. American collections are replenished with unique exhibits from looted museums. Medical clinics receive human organs from chaotic countries for transplantation to wealthy patients. But the American financial oligarchy earns the most by manipulating the financial markets of the controlled states. Even on the bonds of impoverished Ukraine, Soros's clients manage to squeeze out up to 60% of their annual income.
Perhaps the largest example of neocolonial exploitation of the US financial periphery is the squeezing of national income and wealth from Russia. In the 90s, super profits from financial speculation were generated and grew through the redistribution of state property through spontaneous voucher privatization, the state budget through the GKO financial pyramid, and the population's savings through private financial pyramids. The intensity of this redistribution in the interests of American “partners” and final beneficiaries was extremely high, making up to half of the country's total savings fund every year, and was accompanied by the formation of huge financial bubbles[22].
Each ruble invested by speculators close to the privatization agency in the purchase of privatization cheques later brought them tens of rubles of profit on resale of shares of initially repeatedly underestimated enterprises growing in price, which meant corresponding damage or lost profit for the state. At the financial pyramids of the 90s, the apotheosis of which was the bankruptcy of the state in August 1998, international financial speculators received astronomical profits. Taking out hundreds of billions of dollars from Russia and collapsing the country's financial system, they then came back again, buying up thirty times cheaper assets. Another pumping of the Russian securities market by them, fueled by rising oil prices, was mistakenly perceived by Russian authorities and business as an economic boom. The rapid growth of stock market capitalization turned out to be a financial bubble. It burst immediately after the fall of oil prices and outflow of foreign speculative capital, once again plunging the Russian financial system into a deep crisis in 2008. This example already showed the financial front of the global hybrid war declared by the US.
Neocolonial exploitation of peripheral countries through monetary, financial and price instruments of non-equivalent foreign economic exchange is a characteristic element of the American cycle of capital accumulation. But its reverse side is the impoverishment of the countries controlled by the United States, which leads to the exhaustion of the global reproductive contours of the established world economic order. Despite the superprofitableness of the American aggression in the Middle East, the CIS and Latin America, in this hybrid war the US is doomed to defeat due to the exhausted possibilities of their governance system to ensure sustainable economic growth and improve the welfare of the population.
The impoverishment and degradation of the countries that became victims of the ongoing Washington World Hybrid War (Iraq, Libya, Ukraine, Georgia) is a clear evidence of the decline in the effectiveness of the American-centric imperial world economic system against the background of the successful development of the countries integrated by China under the “One Belt – One Way” project. (States of Indochina, Pakistan, Mongolia, Sri Lanka, Ethiopia). To maintain global dominance, the American ruling elite is everywhere destroying the reproductive contours of the countries it does not control through the use of the instruments of hybrid warfare discussed above. But it does not seek to create new opportunities for the development of the countries under its control by handing them over to its corporations. Having knocked out the Chinese from a number of African countries with Ebola fever, the Americans did not complete the social, transport and engineering infrastructure facilities started by China, limiting themselves to establishing control over their national income sources. Having cut off Ukraine from Russia, the American puppets did not replace the broken cooperation ties and stopped investment projects with new ones, but handed over the most profitable objects of Ukrainian economy to the American-European capital. For the peoples of peripheral countries, the difference in the prospects of embedding a new world economic order or neocolonial exploitation by American corporations into the integration structures is becoming more and more evident. The imperial world economic system, which has lost its effectiveness, is becoming less attractive and is being destroyed as the mechanisms of reproduction of the new, integral world economic system become more and more widespread.
2. The inevitability of the formation of a new world order
2.1. Advantages of the new world economic system against the background of the hopelessness of the existing one
The change of world economic ways takes a significant period of time necessary for the change of generations of the ruling elite of the world's leading countries. In the last century it took more than three decades, from the beginning of the First to the end of the Second World War. During this period, the ruling elite of the world's leading countries have radically changed. Instead of hereditary aristocrats and capitalists, the leading power and economic position was taken by the technocracy, and the state administration was transferred to the professional bureaucracy. Competition between private companies was replaced by competition between global organizations, the reproduction of which became regulated by two world political systems of states.
The beginning of the modern transition to the change of world economic ways should be considered the collapse of the global system of socialism[23]. Today it enters the final phase, in the course of which there should be the final destruction of the imperial world order, which after the collapse of the USSR passed under US control, and the transition to a new one. The contours of the latter have already been formed in China and other countries of South-East Asia, which are mastering institutions and creating systems for managing the reproduction of the economy of the integral world economic order. They prove their effectiveness not only in the dynamics of macroeconomic indicators, but also in the successful reflection of American aggression during the hybrid world war.
Over the past decade, China has successfully resisted cyberattacks by U.S. intelligence agencies, attempts by the mass media and bloggers under their control to manipulate the public consciousness with the aim of political destabilization, resisted the trade war launched by Trump and defended itself from monetary and financial threats. Washington's sanctions against Chinese high-tech companies forced them to force their own research and development into building a national technology base: the Chinese have become the world's number one in terms of inventive activity. The Chinese leadership brilliantly managed to mobilize the population to neutralize the coronavirus epidemic, creating an advanced biological security system in the shortest period of time.
Reflecting the Coronavirus epidemic, China has launched a counter-attack, offering the affected countries assistance in supplying medical equipment, protection and disinfection. Thus, they intercept the initiative from Washington on the ideological and political front, promoting their concept of harmonious international cooperation of the “community of the common destiny of mankind[24]”. The US attempts to discredit China as a source of the pandemic failed under the pressure of evidence about the artificial origin of the virus in American bio-laboratories[25].
There is no doubt that China will continue to deploy its international cooperation project “One Belt – One Way”, the core of which is the implementation of joint investment projects to improve the competitiveness of the participating countries and the welfare of their people. It is not the liberalization of markets for the benefit of transnational corporations and foreign investors, but rather the growth of production through joint investments and the creation of joint ventures that combine the competitive advantages of the participating countries, which is the main motive for international integration in the new world economic order. Mutual respect for national interests and the inviolability of the sovereign rights of States to pursue independent policies, the principle of mutual benefit in international trade and financial and economic relations and the norms of international law are being restored. Based on this approach, the SCO, ASEAN and EAEC countries are shaping a new world economic system that is attractive to all developing countries. As they integrate into the projects of the Greater Eurasian Partnership, a new world order is being created.
Meanwhile, the American-centric world order is plunging into chaos. The invasion of migrants from the crushed Middle Eastern countries destabilizes its European periphery. The actual collapse of the concept of multiculturalism that inspired the Euro-integrators undermines the basic values of the EU, where the trend of disintegration is gaining strength[26]. Another spasm in the U.S. financial market paralyzes the reproduction of the core of the American centuries-long cycle of capital accumulation, much of which is devalued, taking away the savings of millions of citizens. The boomerang coronavirus brought to China is returning to NATO countries, causing panic among the population and stopping the mechanisms of economic reproduction. Judging by the disastrous consequences of the epidemic in Italy, the governments of those countries, deprived of their sovereignty, are far less effective than China in mobilizing population and resources to combat biological weapons.
Although many observers believe that the unfolding financial crisis is being managed by the leading oligarchic clans in order to sterilize the surplus money supply and redistribute assets in their favor, its scale may exceed the stabilization capacity of the American monetary authorities (Fig. 2).
Fig.2 – Budget deficit and balance forecasts of the Federal Reserve
Source: Chetan Ahya, Morgan Stanley chief economist.
As can be seen from the forecast, the budget deficit in the USA may be much higher than in the 1930s. (when the dollar was pegged to gold), twice as high as 2009 and comparable to the level of World War II. The doubling of the Fed's balance sheet for the year has never happened in history, so the consequences of such monetary pumping can be very deplorable. This scenario has the risk of a rapid transition to hyperinflation (modelled on Germany in the early 1920s or Russia in 1992).
The acceleration of the already unprecedented monetary emission of the last decade may cause the spread of galloping inflation from financial to consumer market. The collapse of incredibly inflated financial bubbles of derivatives, which became even bigger after the global financial crisis of 2008, will entail bankruptcies of many funds and banks, which may paralyze the banking system and will surely stop investments (Fig. 3).
Fig.3 – The largest (top-5 and top-25) American financial holdings – holders of derivatives: volume of derivatives, assets (trillion dollars) and their ratio (several times)
Source: M. Ershov, according to the Office of the Comptroller of the Currency.
The modern information technology system of the financial market works on automatic algorithms made by robots whose operations are programmed according to certain rules. The application of these rules is strict, generating periodic failures of the financial market (Fig.4).
Fig.4 – “Cyclicality” of failures (S&P 500 Index dynamics, %)
Source: M.Ershov, Bloomberg.
Over the last decade, the volume of dollar money base has grown almost fivefold, with the bulk of the increase in the amount of money held in the financial market, forming a money canopy, which inevitably should have collapsed (Fig. 5).
Fig.5 – Growth of the monetary base of a number of currencies (2007-March 2020), several times*.
Note:
*calculated in US dollars at the appropriate rate.
** is calculated at M0.
Source: M. Ershov, based on data from central banks of the respective countries.
The coronavirus pandemic has become an occasion for key players manipulating the American financial market to start clawing the inflated financial bubbles. Thanks to the “well-coordinated” work of financial robots according to the established algorithms of decision-making on the sale of securities, the market decline quickly became avalanche-like and uncontrollable, amplified by a chain reaction of “margin columns” through bank credit networks.
It should be noted that the deepest collapse of the world financial market always takes place on its periphery – on the so-called “newly emerging markets” with free capital movement, including the Russian one. According to automatically operating algorithms, financial robots, when securities exchange rate collapses in the USA, first of all drop assets of these markets, collecting liquidity to keep the main assets in the center of the world financial system.
Unlike Russian regulators, whose brains are paralyzed by the virus of the Washington Consensus, China and other countries forming the institutions of the new world economic order, there are strict restrictions on the export of capital, which protect them from spasms of the global financial system. They operate on the principle of a nucleus – they let in foreign investments without restrictions, and let out according to certain rules, blocking speculative attacks against the national monetary and financial market. These countries have a financial storm of “nothing” in the United States. Against the backdrop of the U.S. stock market falling one and a half times and almost twice in Russia, the Chinese market sank by 10%.
There is no doubt that China's system for regulating the reproduction of the economy will emerge from this crisis even stronger. Its monetary authorities took advantage of the decapitalization of the financial market to consolidate national control over segments of the Chinese economy that are dependent on foreign shareholders. It will inevitably become even more effective due to falling energy and commodity prices, and more attractive to foreign investment. Although the drop in production due to business interruption during the epidemic is estimated at $50-70 billion, it will recover quickly, while the US and EU have yet to survive. At the same time, China has managed to avoid bankruptcies of systemically important banks and enterprises owned and supported by the state, which fully controls the country's banking system and its transport, energy and social infrastructure.
And leading European, American and Japanese banks, even before the current crisis, could be closed according to Basel-3 criteria due to insufficient or even negative equity capital. They were kept afloat and could only serve their obligations thanks to a giant money issue. In a situation of financial bubbles, even larger than during the global financial crisis of 2008, the covenants of most of their corporate borrowers will be “breached” and the growing chain of non-payments may cause a transverse insolvency of the banking system. To prevent this, the Fed decided to inject $2.5 trillion-3 trillion into the system, along with $2.2 trillion to support households by the American Government. The bulk of these funds will be concentrated in the financial sector and will not be spent on maintaining production, but on pumping financial bubbles. Thus, a one-and-a-half increase in the monetary base will not be associated with the growth of commodity production and, according to traditional monetary assumptions, should inevitably cause macroeconomic destabilization.
To curb the negative consequences of the previous world financial crisis in 2008 unprecedented measures were taken to rescue the systemically important banks. The US Federal Reserve issued 16 trillion dollars according to the assessment of the Congressional Commission, which were injected into twenty American and European banks[27]. In order to prevent the bankruptcy of European countries, the rest of the G20 countries discounted $430 billion transferred to the IMF to finance the anti-crisis program.
Today, the situation has changed. Firstly, the scale of financial bubbles is much larger than the pyramids of derivatives that collapsed in 2008. Over the past period, the monetary base of dollars, euros and pounds has increased five times and most of this issue (with money and credit multipliers) has gone into inflation of financial bubbles. Pyramids of derivatives became 30-50% more. Accordingly, the fall of the financial market will be deeper. Already today, its capitalization has fallen by more than a third, and the amount of unfulfilled obligations is estimated at $ 15 trillion, which is 70% of the U.S. money supply.
Secondly, one should not expect the international solidarity in the fight against the financial crisis, which manifested itself last time in the creation of the “twenty” leading countries of the world. Today, it is already clear that the G20 is being manipulated by Washington, as all its decisions are prepared by American experts, while officials from other countries are persuading their political leadership to follow the US kilwater. The promised reform of the IMF has actually turned out to be an imitation. Established at the suggestion of the G7 countries, the Financial Stability Bureau essentially performs the functions of supervising the financial authorities of other countries and controlling the “free” movement of their money. It is unlikely that China, Russia, Argentina, India and other countries, which were last “fed off” by the US and its allies, will accept the role of donors again in the conditions of the hybrid war launched by Washington against them.
Third, U.S. financial sanctions have discredited the dollar as a world currency. For Russia, Iran, Venezuela, China and many other countries affected by these sanctions, the dollar has become a toxic currency, all operations in which have acquired an increased risk. The measures they have taken to de-dollarize foreign currency reserves and mutual trade have provoked a flight from the dollar, which may take an avalanche-like form and drastically narrow the financial base for servicing the US national debt. In this case, the inevitable decline in external demand for their treasury liabilities will have to be replaced by money issue, which may lead to the growth of the US national debt in the “aggravation regime”, in which the system loses its stability and “breaks into a corkscrew”. The necessary prerequisites for this have been created by the previous period of accumulation of the American state debt (today its volume makes up $23.6 trillion), which has long been served by the principle of “financial pyramid” at the expense of unlimited money emission.
Fourthly, there is a high probability of galloping inflation from the US financial market to the real sector and the consumer market. Against the background of disorganization of financial market, the money remaining after the collapse of financial bubbles may flow to the sphere of consumption of material goods. On the one hand, this will contribute to investment growth and economic recovery. But, on the other hand, their volume is so large that it will inevitably cause inflation and disorganization of economic reproduction.
Thus, there is a high probability that the dollar financial system will collapse. China, Russia, Iran and other countries against which the U.S. is waging a hybrid war are already taking measures to reduce dependence on the dollar. They are building their interbank information exchange systems, replacing SWIFT, switching to settlements in national currencies, diversifying currency reserves and exchanging currency and credit SWAPs. Thus, they protect themselves from the consequences of uncontrolled deployment of the financial crisis, which drags liquidity to the center of the American financial system. In any scenario, the latter will weaken and the alternative, emerging in the Asian capital accumulation cycle, will develop. This means an inevitable contraction in the financial capacity of the US and a reduction in the scale of non-equivalent international economic exchange in its favor. This, in turn, will entail a sharp decline in U.S. military and political power, which will have to dump the exorbitant military spending that is creating a huge government deficit.
Further deployment of the global financial crisis will objectively be accompanied by China's strengthening and weakening of the US. The countries on the periphery of the US-centric financial system, including the EU and Russia, will also be significantly affected. The question is only on the scale of these changes. In a favorable coincidence of circumstances, the Great Stagnation of Western economies, which has been going on for more than a decade, will continue for several more years until the capital remaining after the collapse of the financial bubbles will be invested in the production of a new technological mode and they will be able to “ride” the new long wave of Kondratyev. In the event of an unfavorable course of events, the monetary pumping of the financial system will spill out into galloping inflation, which will lead to a disorganization of economic reproduction, a decline in living standards and a political crisis. The ruling elite of the U.S. will have two possibilities: to accept the loss of global dominance and take part in the formation of a new world economic order or move to an escalation of the world hybrid war they are already conducting. And, although they will not be able to objectively win in this war, the damage to humanity can be catastrophic, even lethal.
So far, the course of events in the United States is characterized by growing chaos. On the one hand, after Trump's decision to withdraw from the Transatlantic Trade and Investment and Trans-Pacific Partnership agreements, the trend of liberal globalization has been stopped. It was reversed by his own decisions to launch a trade war with China. By doing so, the U.S. actually undermined the foundations of the existing world economic order, in which, after the collapse of the USSR, it occupies a central position.
On the other hand, there was a split within the ruling elite of the United States: the so-called “deep state” counteracted Trump, seeking to turn the state machine into the former trajectory of serving the transnational financial oligarchy. The crisis strengthens its position, promoting capital concentration, and weakens Trump's position, which is politically responsible for the inevitable decline in the standard and quality of life of most Americans in this situation.
The nomination of Biden as a presidential candidate from the Democratic Party means that there will be no fundamental changes in the American ruling elite. Both with Trump and Biden at the head, she will seek to maintain world domination. The only difference between them is the tactics of this retention. Trump stakes on strengthening the American manufacturing sector by resorting to protectionism and sacrificing the principles of liberal globalization. The democrats, on the contrary, are determined to resuscitate the latter in the strategy of American leadership. But in foreign policy they will follow the same course of escalation of American aggression against China, Russia and other countries uncontrolled by American intelligence services.
However, no tactical maneuvers will not ensure the U.S. victory in economic competition with China and other countries in Southeast Asia. Trump's aggressive policy only reinforces the desire of China and other countries to get rid of monetary and technological dependence on the U.S., stimulating them to force the formation of a new world economy and the development of key industries of the new technological mode. They manage to do this much more efficiently and faster than the US, whose ruling elite resists institutional changes. If the Democrats manage to return the USA to the wheel of liberal globalization, it will immediately lead to a decrease in the competitiveness of their economy. Failure to maintain productive leadership will in any case push the U.S. ruling elite to use non-economic methods against its competitors, including a combination of soft power tools against well-armed and politically independent countries and hard power to retain control over the weak and politically dependent.
Thus, the developments in the United States tend to be unfavorable. Coronavirus psychosis reinforces this trend, as it creates conditions for usurpation of power by law enforcement agencies. As soon as Trump's simple methods of scattering money to the needy show their ineffectiveness, panic and public discontent may provoke a political crisis that will increase the aggressiveness of the American ruling elite.
It is quite possible that the financial oligarchy that has shifted from securities to gold will have to sit on this gold for a long time: the financial market will not recover, the usual assets will depreciate, investment funds and banks will burst. Instead of formation of long-awaited world government it will have to negotiate with national states on conditions of capital investment, as in the century before last.
2.2. End of the world hybrid war
The pandemic is eroding the mechanisms of reproduction of the American capital accumulation cycle. Its antipode in the outgoing world economy – the USSR – was destroyed by the mental epidemic of Gorbachev's “virus” of Perestroika, which broke the reproductive contours of the world socialist system. The blurring of the ideological contour caused the political contours to break, followed by the destruction of the legal and economic contours of reproduction of the Soviet Empire. The coronavirus pandemic eats away at the ideological contour of the American Empire, demonstrating its weakness against the background of magnificently mobilized China. The collapse of the financial market may become systemic due to the isolation of countries from each other, which will also affect the financial system. Going beyond financial sustainability through widening fiscal deficits, sovereign States will rely on building domestic sources of credit, protecting their markets from financial speculators' raids and capital flight. Restoring restrictions on cross-border capital transactions would break the economic reproductive loop of the American capital accumulation cycle. The legal circuit already broken off by the hybrid war will not protect it from the avalanche of nationalization of American assets in the countries affected by the US aggression. Their refusal to use the dollar will provoke the collapse of the financial pyramid of the U.S. national debt, which will entail the compression of their military spending and the destruction of the political reproduction circuit of their global dominance. The processes of destroying the system of reproduction of the American cycle of capital accumulation will accelerate as the countries exploited by the US get out of their control.
If one resorts once again to the historical analogies of the previous period of change in world economic patterns, its final phase (analogue – World War II) may take up to seven years. So far, these analogies have been surprisingly confirmed. The first phase of the transition period and it is the final phase of the life cycle of the current world economic system begins with perestroika in the USSR in 1985 and ends with its collapse in 1991. In the previous cycle it began World War I in 1914 and ended with the collapse of four European empires in 1918. This was followed by two decades of British hegemony, which lasted until the Munich conspiracy that started World War II. In this phase of transition, the outgoing world economic system reached the limits of its evolution, while on its periphery the core of the new world economic system was formed. In the previous cycle it appears in three political formats: socialist in the USSR, capitalist in the USA and national-socialist in Germany. At present it also emerges in three political formats: socialism with Chinese specifics; Indian democratic nationalism and world dictatorship of the mondialists, who pressed the trigger of escalation of the world hybrid war with the coronavirus throw in. As in the last time, this phase took two decades, starting with the collapse of the USSR and the temporary establishment of PaxAmericana in 1991.
After the socialist revolution in Russia, a prototype of a new world economic system with communist ideology and total state planning emerges. After a decade and a half later, in order to overcome the Great Depression, the New Deal is implemented in the United States, forming another type of new world economic system with the ideology of the welfare state and state monopolistic regulation of the economy. A little later, its third type is being formed in Germany – with Nazi ideology and private and public corporate economy.
All these changes take place at the end of the British capital accumulation cycle and the underlying colonial world order. Taking a central place in the world economic system, the British ruling elite is trying to resist changes that undermine its global dominance. An economic blockade is imposed against the USSR, and only grain is allowed to be imported from Russia to provoke mass starvation. A trade embargo is being imposed against the United States. In Germany, the anti-communist Nazi coup is encouraged and, in order to counteract the influence of the USSR, the British intelligence services protect and promote Hitler to power. With the same intentions and in anticipation of large dividends, American corporations are investing heavily in modernizing German industry[28].
The British are using the traditional “divide and rule” geopolitics, provoking the war between Germany and the USSR. They hope to repeat their success in unleashing World War I, which resulted in the self-extermination of all major British competitors in Eurasia: the Russian, German, Austro-Hungarian, Ottoman and, finally, Chinese empires. But immediately after the outbreak of the war, the qualitative superiority of the Third Reich over all European countries, including Great Britain, in the efficiency of economic management and mobilization of all available resources for military purposes is revealed. And although Great Britain, thanks to its allied relations with the USSR, was among the Victors, after World War II it lost its entire colonial empire – over 90% of its territory and population.
The most effective at that time was the Soviet system of management of the national economic complex, which performed three economic miracles at once: the evacuation of industrial enterprises from the European part to the Urals and Siberia, in six months, having rebuilt new industrial areas; access to the parameters of productivity and productivity that were beyond the limits of other countries, which exceeded the indicators of Europe united by the fascists; rapid restoration of cities and production facilities completely destroyed by the occupiers after the war.
Roosevelt's new course significantly raised the mobilization capabilities of the American economy, which allowed the United States to defeat Japan in the Pacific basin. In postwar Western Europe, the United States had no competitors: former colonies of European states became a rivalry zone for American corporations and Soviet ministries. Further world development took place in the Cold War format of two world empires – the Soviet and the American empires – which had similar technocratic and diametrically opposed political models of socio-economic development management. Each of them had its advantages and disadvantages, but at the same time cardinally surpassed the system of family capitalism with ruthless exploitation of hired workers and slaves in terms of efficiency of mass production organization and possibilities of resource mobilization.
A similar picture is now emerging. The emerging new world economic system also has three possible varieties. The first one is already formed in China under the leadership of the Communist Party of China. It is characterized by a combination of institutions of state planning and market self-organization, state control over the main parameters of economic reproduction and free enterprise, the ideology of the common good and private initiative, and demonstrates tremendous efficiency in managing economic development, an order of magnitude superior to the American system. This has been clearly demonstrated by the many times faster development of advanced sectors of industry over the past three decades and has been reconfirmed by performance indicators to combat the epidemic.
The second type of integrated world economic system is emerging in India, which is the world's largest functioning democracy. The foundations of the Indian variant of the integrated system were laid by Mahatma Gandhi and Jawaharlal Nehru on the foundations of Indian culture. The nationalization of the banking system by the government of Indira Gandhi has made it possible to bring the management of financial flows in line with indicative economic development plans. The right priorities gave a boost to the development of key areas of the new technological pattern and today India ranks first in the world in terms of economic growth rates. As in China, the government regulates market processes in order to improve people's welfare by stimulating investments in production development and mastering new technologies. At the same time, monetary and financial constraints keep capital inside the country, while government planning directs entrepreneurial activity towards the production of material goods.
A third type of the new world economic system can be seen in the fog of a growing pandemic of mass psychosis. Applications for formation of a new world order are initiated from the bowels of the deep US state. On the wave of a pandemic, institutions are created that claim to govern mankind. The B. Gates Foundation establishes control over WHO's activities in vaccination of the population. At the same time, vaccination is used to promote its long-developed biological programming technology in order to reduce the birth rate and total control over the behaviour of people being vaccinated. The technology combines advances in bioengineering and computer science: vaccination is accompanied by chipping, allowing any restrictions on human activity to be created.
In other words, the third variant of the new world economic mode assumes, in fact, the formation of the world government under the leadership of the American ruling elite in the interests of the financial oligarchy that controls the emission of world currency, transnational banks and corporations, the global financial market. This is a continuation of the trend of liberal globalization, supplemented by authoritarian technologies of controlling the population of countries deprived of national sovereignty. In the representation of traditional confessions, this is the scenario of an “electronic concentration camp” preceding the end of the world, described in many anti-utopias.
Each of the above-described varieties of the new world economic mode implies the use of advanced information technologies that constitute the key factor of the new technological mode and the material basis of innovation[29]. All of them use methods of big data processing and systems of artificial intelligence necessary for managing not only uninhabited production processes, but also people in systems of economic regulation and social behavior. The goals of this regulation are set by the ruling elite, whose method of formation predetermines the essential characteristics of each of the varieties of the new world economic order.
In China, power is vested in the leadership of the Communist Party, which organizes the regulation of the economy in order to improve people's welfare and directs social behavior towards achieving the political goals of building socialism with Chinese characteristics. Market mechanisms are regulated in such a way that the most efficient production and technological structures win the competition, and the profit is proportional to their contribution to the growth of public welfare. At the same time, medium and large corporations, including non-government corporations, have party organizations that monitor whether the motives for economic activity are in line with the moral values of communist ideology. On the one hand, they encourage the improvement of labor productivity and production efficiency, the modesty and productivity of managers and owners, and punish the abuse of dominant position in the market and speculative manipulation, wastefulness and parasitic consumption. A social credit system is being developed to regulate the social behaviour of individuals. According to its design, the social capabilities of each citizen will depend on his or her rating, which is constantly adjusted on the basis of the balance of good and bad deeds. The higher the rating, the more trust a person will have in his or her job placement, promotion, credit, delegation of authority. This kind of modernization of the system of personal affairs familiar to Soviet people, which accompanied a person throughout his working life, has its positive and negative sides, the evaluation of which is beyond the scope of this article. Its main problem area is the dependence of the mechanism of forming the productive elite of society on artificial intelligence.
The second type of the new world economic mode is determined by democratic political system, which can differ significantly in different countries. It is most developed in Switzerland, where the main political decisions are taken at national referendums. In most countries, it is seriously affected by corruption and is subject to manipulation by large businesses, which can be patriotic or comprador. The introduction of modern information technology in the popular representative election system can significantly improve the effectiveness of this political system by eliminating vote fraud and ensuring equal access to the media for candidates. The distribution of the latter in the blogosphere creates competition for information sources, increasing their credibility and objectivity. With due legal support for the use of modern information technologies in the election process, an automatic mechanism for holding government agencies accountable for their performance in the public interest is being established. The more educated and active citizens are, the more effective is the democratic political system. Its main problem area is the dependence of the formation of the ruling elite on clan-based corporate structures that are not interested in transparency and fairness of elections.
Finally, the third type of the new world economic order is determined by the interests of the financial oligarchy that claims world domination. It is achieved through liberal globalization, which consists in blurring national institutions of economic regulation and subordinating its reproduction to the interests of international capital. The dominating position in the structure of the latter is occupied by several dozens of intertwined American-European family clans controlling the largest financial holdings, power structures, intelligence services, media, political parties and forming the so-called “deep state”[30]. This core of the ruling elite of the USA is waging a hybrid war with all the countries uncontrolled by it, using a wide arsenal of financial, information, cognitive and already biological technologies to destabilize and chaoticize them. The purpose of this war is to form a global system of institutions under its control, regulating the reproduction not only of the world economy, but also the entire humanity through modern information, financial and bioengineering technologies. The main problem of such a political system is its complete irresponsibility and immorality, the commitment of its hereditary ruling elite to the Malthusian, racist and misanthropic views.
The formation of a new world order will be in competition between these three types of new world order. In this case, the latter excludes the first two, which can coexist peacefully. Just as the victory of fascist Germany and Japan in the war against the USSR and the United States would rule out both Soviet and American models of the new world order of that time. After the common victory, the USSR and the United States created competing political systems that divided the world into zones of influence and avoided direct confrontation.
So, there are three predicted scenarios of transition to neononomy. The common material basis for them is the new technological mode, the core of which is a set of digital, information, bioengineering, cognitive, additive and nanotechnology. With their help, nowadays peopleless, fully automated productions are created, which control the boundless databases of artificial intelligence systems, transgenic microorganisms, plants and animals, clone living beings and regenerate human tissues. On this technological basis, the institutions of the integral world economic order are formed, which provide conscious management of the social and economic development of both sovereign states and, potentially, of humanity as a whole. This is achieved through a combination of State strategic planning and market competition based on public-private partnerships. Depending on whose interests it is in the regulation of autonomous economic entities, one of the varieties of the new world economic order described above will be formed. The first two, communist and democratic, can coexist peacefully, competing and cooperating on the basis of international law. The third – oligarchic – is antagonistic to the first two, as it implies the establishment of the inherited world domination of several dozens of American-European family clans, incompatible with neither democratic nor communist values.
Which of the three predicted scenarios the evolution of mankind will follow depends on the outcome of the hybrid war launched by the American ruling elite against sovereign states. The main goals of American aggression are China, which has become the world leader in the emerging new world economic order, and Russia, which leveled the U.S. advantages in the military and political field with its nuclear missile shield. The strategic partnership between Russia and China is an insurmountable obstacle for the American ruling elite to establish world domination of the financial oligarchy. The financial oligarchy's power is based on the emission of world money, the capabilities of which are limited by the political will of sovereign states capable of creating and using their national currencies in international cooperation. If China and Russia can form a dollar-independent monetary and financial system at least for SCO, the outcome of the world hybrid war will be predetermined. Without fueling its balance of payments with an endless issue of world currency, the American empire will quickly lose its military and political power.
A feature of novelty is the leading role of knowledge in the management of socio-economic development at the national and global levels. As soon as the mechanism of emission of world money ceases to be a secret for national monetary authorities of sovereign states, the dominating position of American-European oligarchic clans in the world financial market will come to an end. The weakness of their position consists in the fiat (fiduciary) nature of modern money which purchasing power is based on the trust formed by the state authority. Confidence in the dollar is based on the military, political and economic power of the United States, which is rapidly eroding as the hybrid war unfolds. Each act of American aggression, while yielding short-term political dividends, worsens the U.S. position in the long run and even in the medium term. Thus, thanks to an order of magnitude higher efficiency of China's system of economic development management, the U.S. is doomed to defeat in the trade war initiated by Trump. Financial sanctions against Russia undermine confidence in the dollar as a world currency. Another collapse of the U.S. financial market is destroying the American center of capital accumulation. The coronavirus thrown against China causes much more damage to the U.S. than to China.
As in the previous historical cycle, the ruling elite of the dominant country that initiated the world war soon faces the crushing power of more effective institutions of resource mobilization in the emerging core of the new world order. Two years after the Munich conspiracy, the British felt its consequences in the form of massive bombing of London and the defeat of their troops in France. And the United States already two months later received back the coronavirus thrown in Wuhan. And it turned out that their most expensive health care system in the world was much less effective than the Chinese one. The same is true for the financial system: against the backdrop of the American financial market collapsing one and a half times, the Chinese system remains stable and strengthening. There is no doubt that on the information and cognitive front the Chinese leadership is much more effective than the American and European ones: the unity of the Chinese people is admired against the background of panic and confusion in Western countries.
Perhaps, in an effort to hold on to global dominance, the US oligarchy has decided to use cognitive and biological weapons. In exact accordance with the scenario of the Rockefeller Foundation pandemic, written back in 2009, states are panicking to block the movement of people and paralyze business activity. The paralysis of the economy is causing a sharp decline in living standards and a disturbance of public financial systems around the world. With a monopoly on the emission of world money, oligarchic clans affiliated with the U.S. Federal Reserve offer obedient national governments financial assistance and a lifesaving vaccine to frightened populations. In the future, in accordance with the plan of the B. and M. Gates Foundation, the general vaccination will be used as a tool of bioprogramming of the population agreeing with the control of global institutions over the birth rate and access to life support resources.
Probably, this was the plan of the coronavirus sabotage against China. This is evidenced by a chain of “strange” events, from the Rockefeller Foundation scenario to the partial privatization of WHO by the B. and M. Gates Foundation, as well as the investigation of a global network of American secret bioengineering laboratories. However, the Chinese system of population mobilization and public health has proved to be much more effective than the American system. An attempt by the American authorities and the media to blame China for the pandemic has failed. On the contrary, the Chinese leadership has intercepted the global initiative and is assisting all countries against the backdrop of the social disaster in the US. This demonstrated the advantages of China's integrated world economic system over the system of global domination of the American-European financial oligarchy.
Of the three scenarios described above for the formation of a new world economic order, the option of world government looks least likely. Although it is in its course that the world hybrid war is unfolding today, the ruling elite of the United States in it is doomed to defeat due to the qualitatively higher efficiency of mobilization capabilities of China and the disinterest of all countries in the world in this war.
In any scenario of further deployment of the crisis in the world economy, the mechanisms of reproduction of the American cycle of capital accumulation are eroded and, consequently, the economic power of the United States is weakened. There is no doubt that the American ruling elite will use any means to maintain its global dominance. It will seek to direct the course of events towards the formation of a world government, which was recently mentioned by former British Prime Minister G. Brown[31]. The pandemic of fear of the coronavirus, global warming, ecological disaster inflated by the mass media under her control prepares public opinion for this scenario. However, the lurking interest of the US financial oligarchy in strengthening its hegemony in the global financial system and preserving the latter, which leaves no chance for independent development to other countries. To keep them in dependence, the Anglo-Saxon geopolitical tradition has such tools as stripping rival countries, provoking social and political conflicts, organizing state revolutions and encouraging separatists to chaoticize uncontrolled countries and regions. In order to minimize the risks arising in this regard for Russia, the EAEC, Eurasia and humanity as a whole, it is necessary to immediately form an anti-war coalition capable of causing the aggressor unacceptable damage.
The primary task of the anti-war coalition should be to stop American aggression and create an economic security zone in Eurasia. The easiest way to do this is by dedollarization of mutual trade and joint investments, which will lead to the collapse of the dollar pyramid and military-political power of the United States based on the emission of world money. In the future, this will lead to the creation of a new international monetary and financial architecture based on the principles of mutual benefit, fairness and respect for national sovereignty. The new architecture of international monetary and financial relations should be formed on a contractual and legal basis. Issuing countries of the world's reserve currencies should guarantee their sustainability by complying with certain restrictions on the size of public debt and the balance of payments and trade deficit. In addition, they should comply with international legal requirements for transparency in the mechanisms they use to ensure the issuance of their currencies, allowing for their free exchange for all assets traded in their territory.
It would be advisable to classify national currencies that claim to be world or regional reserve currencies into categories depending on compliance by their issuers with the requirements established in the international treaty. The new monetary and financial architecture should also cover settlements in digital currency instruments using the block-chain methodology, which implies the introduction of appropriate requirements to ensure their transparency and identification of participants, as well as harmonization of national regulations. In the future, it is possible to issue a world settlement currency in digital form linked to a basket of national currencies of coalition members, gold prices and major exchange commodities.
In the formation of a new architecture of international monetary and financial relations, except Russia, objectively interested in all countries at risk of a hybrid war on the part of the U.S. and issuers of other world currencies, as well as wishing to get rid of colonial dependence and the non-equivalence of foreign economic exchange. The anti-war international coalition for the transition to a new world economic order could unite the SCO and ASEAN countries, as well as the Latin American countries of the Bolivarian Alliance and the countries of the Middle and Near East that preserve their sovereignty.
Another fundamental basis for forming an anti-war coalition should be the international convention on cyber security. In order to protect themselves against the use of cyber weapons, its parties must agree to an embargo on the import of computer equipment and information technology from countries that renounce their obligations to combat cyberterrorism.
An open international inquiry into the origins of the coronavirus could provide a starting point for an anti-war coalition. According to its results, the countries-participants of the Convention on the Prohibition of the Development, Production and Stockpiling of Bacteriological (Biological) and Toxin Weapons and on Their Destruction, which entered into force in 1975, could bring charges against the USA for its violation, which in 2001 refused to adopt the Protocol to it, providing for the mechanism of mutual control. Within the framework of this charge, disclosure of data on the network of secret bioengineering laboratories established by the U.S. intelligence agencies in various countries on all continents could be required. As a result of the investigation, the protocol could also be supplemented with sanctions against countries that hide their activities in this area.
Creation of an anti-war coalition is a necessary but not sufficient condition for peaceful transition to a new world order. A positive strategy, both international and domestic, is needed to form its reproductive contours as soon as possible. The economic contour of the new world economic mode is formed in combination of various forms of public-private partnership in order to maximize investments in the development of production sphere. The political contour is based on restoring the fundamental importance of the institutions of the nation state as a regulator of social and economic activity, as well as an integrator of different classes and groups of the population on the basis of common goals to improve people's welfare and quality of life. The ideological contour, which in the integration world economic mode, unlike the imperial one, will be formed with significant national and civilizational specificity, should provide the necessary motivational guidelines. Its common platform for different countries and civilizations can be the concept of social-conservative synthesis, which provides a harmonious combination of traditional religious values, ideals of social justice, national interests and progressive technologies.
Thus, if we proceed from the most probable outcome of the world hybrid war unleashed by the ruling elite of the United States not in its favor, the new world economic mode will be formed in the competition of communist and democratic varieties, the results of which will be determined by their comparative efficiency in mastering the opportunities and neutralizing threats of the new technological mode. This competition will be peaceful and governed by international law. All aspects of this regulation, from monitoring global security to the issuance of world currencies, will be based on international treaties. Countries that refuse to undertake commitments and international control over their compliance will be isolated in the relevant areas of international cooperation. The world economy will become more complex, the restoration of national sovereignty and the diversity of national systems of economic regulation will be combined with the fundamental importance of international organizations with supranational powers.
Competition between communist and democratic forms of the integrated world economy will not be antagonistic. For example, China's One Belt Initiative – One Way with the ideology of the “Single Destiny of Mankind” involves many countries with different political systems. The democratic countries of the EU are creating free trade zones with Communist Vietnam. The landscape of competition will be determined by the relative effectiveness of national governance systems. All of them will face the following challenges of the new technological mode.
The first one. Massive release of routine labour, which will be replaced by automatic control systems in both material production and services. These people will either have to master new creative professions or give them the opportunity to retire early.
Second. Divide the society into a creative class of people engaged in creative self-realization and pre-cariate, contenting itself with the role of service personnel and consumers. For social harmony between these two groups, social elevators and social security systems must be in place to enable the poor to receive good education and the poor to enjoy a normal standard of living.
Third. Fragmentation of society into social networks differentiated by worldviews, moral values and needs. The state should integrate these network communities by harmonizing their interests in achieving common goals of improving public welfare.
Fourth. Concentration of power in the Nocrates, whose knowledge creates unlimited opportunities to use potentially dangerous technologies for society. These people must agree to limit their creativity in areas that are dangerous to humanity, including bioengineering, nuclear physics, system programming, fine chemistry, etc.
Fifth. The erosion of social groups based on a physical sense of solidarity due to autism and sociopathy of a growing part of the population enclosed in virtual space. These people need special conditions for survival and self-realization, requiring appropriate mechanisms for social adaptation. Their integration into society becomes an important national security objective.
Sixth. A growing share of free time due to the release of people from labour-intensive areas of activity. To use it for creative purposes, it is necessary to develop areas of creative self-realization that are not related to work for consumption. On the threshold of this challenge, the door to neononomy opens.
The challenges of the modern technological revolution can be continued. Institutions capable of accepting them and using them constructively are being formed within the framework of the integrated world economic order. The common denominator of its two basic varieties is nonomics, which determines the ability of the control system to create and regulate automatically reproduced processes of social and economic development[32]. The effectiveness of both the democratic and communist hypostasis of the integral world economic order will depend on leveling the negative influence of subjective factors of governance and stimulating their positive role. The positive selection of these factors is achieved through an automatic mechanism of responsibility of decision-makers to society. China is experimenting with a system of social credit imposed on traditional Chinese Confucian ethics. Switzerland has developed automatic direct democracy mechanisms that force the authorities to submit to constant popular control and expression of will through referendums.
It is likely that the main competition between the communist and democratic varieties of the new world economy will unfold between China and India, which today lead the way in economic development and claim, together with their satellites, to the good half of the world economy. The institutions of the new world economic mode based on newonomics are being successfully formed in Japan, Korea and ASEAN countries. The question remains about the future of other countries, including Russia, whose ruling elite opposes the principles of neononomy. It is impossible to create institutions of the new world economic system in both democratic and communist hypostasis without the creation of automatically operating mechanisms of responsibility of the authorities to society and positive personnel selection. And without them, it will be impossible to master the production of a new technological mode that requires high professionalism and social harmony.
In order to join the emerging core of the new world economic order, Russia must break out of its peripheral state and dependence on the American-centric monetary and economic system[33]. This requires an early restructuring of the system of economic development management on the principles of the new world economic system, as well as its modernization on the basis of a new technological mode. So far, however, Russia's position in the face of structural changes in the world economy is deteriorating, and the prospects for its further development remain uncertain. Anti-crisis measures taken by the Russian government should be complemented by a strategy of long-term development based on the new technological mode, as well as the formation of a system of management of economic development based on the institutions of the new world economic mode.
3. Prospects for the development of the Russian economy in conditions of structural changes in the world economy
The Government announced a package of anti-crisis measures, which include the introduction of a mechanism to subsidize the interest rate on loans to trade organizations received for the formation of stocks of foodstuffs and essential goods, as well as to developers under project financing; providing credit organizations with the possibility of temporary non-decrease in the assessment of debt service quality; providing deferred tax payments to industries affected by the deterioration of the situation; expanding the program of subsidizing access to natural resources; and the expansion of the program of subsidizing access to natural resources.
For all their reasonableness and, probably, efficiency for separate segments of economy, these measures do not affect fundamental reasons of vulnerability of Russia from world crisis and American aggression. The main of them is full openness of the Russian financial system to attacks of currency speculators and subordination of monetary policy to their interests. Without bringing the policy of the Bank of Russia in line with the requirements of national security, constitutional obligations to ensure the stability of the ruble and the goals of advanced economic development, the efforts of the President and the Government will be in vain.
3.1.Vulnerability of the Russian economy in a crisis situation
The vulnerability of the Russian economy to external threats is predetermined by its peripheral position in the world financial and trade system. Implementing IMF recommendations, the Russian monetary authorities keep the national financial market open to international speculators and closed to the real sector of economy. By keeping the key rate above the average profitability of the real sector of the economy and limiting its operations to exclusively attracting money from commercial banks, the Bank of Russia blocks lending to manufacturing enterprises. At the same time, the monetary authorities artificially keep the money supply in speculative turnover, actually subsidizing, at the expense of the state, the attraction of foreign speculators by overestimating the profitability of government debt obligations, which is three times higher than the market risk assessment. Borrowing dollars, pounds and euros at quasi-zero interest rates, international speculators invest in Russia's many times more profitable liabilities. This practice, well known for its negative consequences, works as a pump pumping Russian national income abroad. The annual volume of such “state subsidies” to speculators is 2-3% of GDP.
In fact, monetary policy in Russia is conducted in the interests of financial speculators. The monetary authorities guarantee them superprofits and encourage the flow of money from the real sector to the financial sector and further abroad. At the same time, the bulk (from 60 to 90 percent) of the turnover on the Russian currency and financial market is made by American hedge funds and their affiliates. After the Bank of Russia has let the ruble exchange rate float freely, it is they who manipulate it, swinging it to extract excess profits from the depreciation of ruble revenues and savings of Russian individuals and legal entities.
The total damage caused by the Bank of Russia's monetary policy, since the implementation of the IMF recommendations on the transition to free floating of the ruble exchange rate and key rate appreciation in 2014, is estimated at 25 trillion rubles of unproductive products and over 10 trillion rubles of imperfect investments[34]. At the same time, speculators manipulating the ruble exchange rate have “boiled” tens of billions of dollars, and the export of capital amounted to about $250 billion over this period. Only the attack on the ruble in December 2014 brought its organizers speculative profits in the amount of $15-20 billion. It can be assumed that the losses from this year, 2020, the attacks will be no less extensive.
Another consequence of this policy was the unprecedented offshoreization and vulnerability of the Russian economy from financial sanctions. They easily achieve their goals, as was clearly demonstrated with the establishment of American control over Rusal. Taking into account the fact that more than half of the ownership rights to industrial enterprises are issued to non-residents from Anglo-Saxon offshore jurisdictions, American customers can absorb a significant part of the Russian economy. The Russian mega-regulator does not take any measures to protect it from the ongoing US hybrid war, actually indulging the aggressor.
The rise and fall of the Russian financial market by Western speculators in 1997-1998, 2007-2008 and 2012-2014 each time cost Russia up to 5% of GDP and tens of billions of dollars of national income abroad. Despite this negative experience and contrary to the world's generally accepted practice of currency regulation, the Central Bank continues to withdraw from its constitutional obligation to ensure the stability of the national currency. The transfer of the ruble exchange rate into free floating, combined with the abolition of restrictions on cross-border capital flows and the privatization of the Moscow Stock Exchange in favor of interested financial structures have led to the loss of state control over the monetary and financial market, which began to be manipulated by speculators in order to extract extra profits to destabilize it.
Uncontrolled “turbulence” of the ruble exchange rate destroys the reproduction contours of the Russian economy closed to the foreign market, generating inflationary waves and disorganization of production. The loss of values and the feverish state of the financial market lead to the fall of investments and the export of capital. Attempts by the Bank of Russia to stabilize the macroeconomic situation by overestimating the key rate (as it was in 2014-2015) against the background of the termination of the external credit turn into the fall of investments and production, decrease in income and trade, increase in unemployment and worsening of the living standards of the population…
Attempts by the Central Bank to stabilize the monetary and financial market by raising the key interest rate cannot be successful in a fully open cross-border capital flow account. As soon as the market collapses in the center of the global financial system, automated financial robot algorithms pull liquidity from the periphery by selling, among other things, Russian assets. No increase in interest rates can change their behavior. Such decision only causes money outflow from the real sector, blocks production investments and aggravates the economic crisis.
Without restrictions on cross-border speculation, the Russian financial market will remain a toy in the hands of American speculators who profit from its swinging. The continued infinite emission of the dollar, euro, pound and yen (as shown above, their volume has more than 5 times increased since the beginning of the global financial crisis in 2008, to almost $20 trillion) creates flows of speculative capital of giant capacity, even a small spillover to the Russian market causes its destabilization, and also creates risks of hostile takeover of Russian assets, threatening national security.
Unfortunately, no conclusions have been drawn from the sad experience of the 2008 and 2014 crises, during which the Russian economy suffered much more than any of the G20 countries. Today, the monetary authorities are making the same mistakes, the consequences of which have had a negative impact on an already stagnant economy for five years. At the same time, the mechanism of organizing a speculative attack on the Russian monetary and financial system remains the same and includes the following algorithm of actions.
1. Introduction of sanctions by the U.S. and the EU in order to close down external credit sources for Russian companies. Today, they have hit Rosneft, Gazprom, Rusal, and Rostekh, which generate the majority of foreign currency revenues.
2) The collapse of the value of shares in Russian companies in order to devalue collateral and prematurely terminate loan agreements, and the launch of a chain reaction “margin calls” that provokes an avalanche of bankruptcies. Given the criminalization of the institution of bankruptcy, this leads to a long-term decline in the efficiency of the Russian economy and predetermines a decline in its competitiveness.
3. the collapse of the national currency in order to reduce the possibility of refinancing companies' external debts from ruble assets. The Central Bank's decision to switch to free floating of the ruble exchange rate in 2014 allowed speculators to work without any risk to lower the ruble and destabilize the macroeconomic situation. Today they do the same. Both then and now, the ruble depreciation has far exceeded the possible impact of lower oil prices. This is evidenced by the relative stability of national currencies of other oil-producing countries (Fig.6).
Fig.6 – Volatility of exchange rates of national currencies of oil-producing countries in January-March 2020.
Note: The volatility of exchange rates of national currencies of oil producing countries in January-March 2020 is indicated by the relative stability of national currencies of other oil producing countries (Fig.6):
1) standard deviation of daily change of exchange rate to the US dollar, calculated for the period from 01.01.2020 to 25.03.2020;
2)* the US dollar index (DXY) is given for the USA
Source: Bloomberg, EEC calculations.
If we compare this graph with the distribution of countries by exchange rate regulation regimes (Fig. 6), it becomes obvious that it is they, not oil prices, who determine the volatility of national currency rates.
Fig.6 – Change in exchange rates depending on their regimes
Note:
1) rate change is calculated for the period from 01.01.2020 to 25.03.2020, where 01.01.2020 = 100
2) currency exchange rate regime is indicated for 2017. (last available at IMF AREAER 2018)
3) * the US dollar index (DXY) is given for the USA.
Source: IMF AREAER 2018 (April 2019), Bloomberg, ECE calculations.
The “leaders” in this indicator are Russia, Brazil and Norway, which have free floating exchange rates. Four other oil-producing countries – Saudi Arabia, Uzbekistan, Azerbaijan and Vietnam – have maintained the stability of their currencies because they apply pegging regimes to another currency at a set value and a fixed rate within a horizontal corridor.
The Bank of Russia, with twice as much gold and foreign exchange reserves as the monetary base, could easily repel a speculative attack by setting the rate at any reasonable level. This is evidenced by the experience of the past crisis, when instead of stabilizing the ruble, the Central Bank gave the opportunity to swing it (Fig. 7). If desired, it could stabilize it at the level of about 70 rubles per $1 at the end of 2014 and keep it stable until now, ensuring a normal investment climate and reducing inflationary expectations.
Fig.7 – The official rate of the Bank of Russia, Rb to Dollar (July 2014 – March 2016)
Source: S. Blinov
In March 2020. The Bank of Russia also withdrew itself, providing a course for speculators. The latter use oil price fluctuations as a natural binding of algorithms of financial robots operating on the market. Therefore, there is an illusion that the ruble exchange rate is determined by oil prices. But to think so is like to think that the speed of a car is determined by the speedometer movement, not the engine operation. Money authorities perceive market manipulation as an action of fundamental market forces, which is evidence of their incompetence or engagement.
Then, as now, the collapse of the rate and destabilization of the currency and financial market became possible due to self-removal of the Central Bank from control over the situation. The Moscow Stock Exchange (hereinafter – MB) and the Central Bank did not use any of the tools generally accepted in the world practice to stop speculative attack on the ruble: the ruble trading did not stop, the guarantee security for fixed-term contracts did not increase, the currency position of commercial banks was not fixed, the speculators' money was not reserved, temporary restrictions on the export of capital were not introduced. The currency interventions of the Bank of Russia followed belatedly after the speculators' game of lowering the exchange rate had already been made.
It should be noted that currency interventions without fixing the target level of the exchange rate do not stop, but, on the contrary, support speculative attack against the ruble. As if mocking the helplessness of the mega-regulator, today the most impudent players instead of it announce the targets of the ruble exchange rate, openly manipulating the currency market, while the state TV channels bring these targets to the public, provoking the panic needed by the speculators and the rush to drop the ruble[35].
At the end of March 2020, the total trading volume in the MB markets increased by 48.8%, amounting to 98.8 trillion rubles – the highest value in the history of exchange trading[36]. All the main segments of the exchange demonstrated positive dynamics as compared to the same period of 2019: stock market (4-fold growth), derivatives market (2.3-fold growth), money market (50% growth), currency market (32% growth) and bond market (21.5% growth). And this is against the background of a sharp contraction of foreign trade turnover, which indicates the dominance of speculators in the Russian currency and financial market (Fig. 8).
Fig.8 – Exchange trading volume and some indicators of the real sector of economy (billion rubles)
stocking: EEC data and calculations
In 2014, the destabilization of the Russian monetary and financial system was the result of a well-planned operation in which the enemy used the Central Bank and the IB as instruments of financial service of a speculative attack to undermine the mechanisms of reproduction of the Russian economy. For this purpose, the target parameters of monetary policy were changed in advance, among which, contrary to the Constitution, the obligation of the Central Bank to ensure the stability of the national currency was excluded, as well as a false concept of “targeting inflation” was introduced to the Russian leadership[37].
According to the same scheme, the ruble exchange rate collapsed in March 2020. International speculators attacking the ruble are fully aware of the situation in the Russian monetary and financial market, receiving it from the MB staff, knowing the algorithms of the CB operation, controlling depository clearing centers and real-time monitoring of the movement of funds and securities on stock exchanges trading Russian assets. The passivity of monetary authorities, which publicly disclaimed responsibility for the ruble stability, provides speculators with risk-free manipulation of the Russian currency and financial market.
It should be reminded that as a result of the speculative attack of 2014, the Russian economy suffered colossal damage: the capitalization of the stock market decreased by $400 billion; savings were depreciated; the banking sector lost one trillion rubles; the national currency was depreciated twice and inflation was increased; lending to the production sector was stopped and the economy was dragged into a stagflationary trap[38]. The destructive impact of the current monetary and financial crisis on the Russian economy has yet to be assessed: the stock market has already fallen by $300 billion, the inflation wave is taking over the consumer market, foreign trade is shrinking, and investments are falling.
It is obvious that the inflation targeting policy pursued by the Bank of Russia is doomed to failure. Even if it manages to achieve a reduction in inflation by compressing final demand, the stabilization period does not last long. Overestimation of interest rates and unpredictability of the ruble exchange rate block investment and innovation activity. This leads to a growing technological lag and a decrease in the competitiveness of the Russian economy, which inevitably, in a short period of time, leads to ruble devaluation and a new inflationary wave. This period for the Russian economy is about five years, which corresponds to the average duration of the scientific and production cycle.
If the Central Bank tries to redeem the inflationary wave, which begins due to the ruble devaluation, with another increase in the key rate and a reduction in money supply, we will obviously face a repeat of the investment and business spasms of 2014-2015 and 2008-2009. In a few years, this will lead to an even greater technological lag of our economy, a decrease in its competitiveness and the next ruble devaluation (Fig. 9) followed by an inflationary wave. It is necessary to break this vicious circle of self-destruction of the Russian economy and take it, finally, to the trajectory of advanced development on the wave of growth of the new technological mode with the help of proactive formation of institutions of the new world economic mode.
Fig. 9 – Volatilities of the Russian Ruble in the Period 2000-2020.
Note: Y-axis standard deviation
Source: EEC calculations
The current collapse of the currency and financial market could have been prevented if, after the announcement of the U.S. sanctions, the Central Bank had introduced currency control measures to protect our financial system from external attacks. However, the economic interests of speculators, which dominate among monetary authorities, prevented us from doing so. The turbulence of the currency and financial market is supported by manipulations made by several major participants using insider information. Inaction of the Central Bank ensures that they have no risk in carrying out operations to artificially inflate the ruble in order to extract speculative excess profits. This is done through chains of pre-planned operations to buy and sell currency with a sequential reduction of the ruble rate to a certain level, upon reaching which manipulators hold it until the sale of the accumulated currency. After that, they invest the superprofits received in the purchase of repeatedly depreciated assets, and the ruble rate rises to the equilibrium level. A few years later, operations to overstock the Russian national currency are repeated, for which artificially inflated reasons are used: a decline in oil prices, aggravation of international conflicts, announcement of new sanctions, epidemics, etc., and a number of other things. At each cycle they extract hundreds of percents of profit from depreciation and subsequent purchase of Russian assets, much of which is thus reallocated to foreign capital.
The financial market thus swayed loses its connection with the real sector, its prices do not reflect the real value of assets, and it ceases to be a benchmark for honest investors. It is not the supply and demand of economic entities but the actions of automated algorithms performed by financial robots that determine the price and rate formation in the modern monetary and financial market. A group of major players, which is well integrated into the system of financial market regulation, manipulates it by extracting huge super-profits on periodic ruble depreciation. They use the waves of bankruptcies arising as a result of market swaying to appropriate other people's assets, including the use of sanitation procedures and instruments of credit support of the Central Bank.
As in 2008-2009, the Russian financial market shows the deepest fall of the G20. The monetary authorities are not taking necessary measures to stabilize it and are aggravating the country's economic losses through ridiculous actions. The events that began after International Women's Day – the announcement of a pandemic, the collapse of oil and financial market prices, another “unpredictable” ruble devaluation, a panic surge in consumer demand and, to top it all off, a strange deal to resell Sberbank shares from one state pocket to another, in which trillions of taxpayers' funds accumulated in the National Welfare Fund should disappear – create the impression of growing madness. None of them has a reasonable explanation.
First, the measures taken to combat the spread of the coronavirus are shockingly crowded with excesses that provoke panic and justify police measures to restrict citizens' mobility and rights. They are clearly inadequate to the degree to which the vast majority of the population is at risk of an epidemic.
Secondly, the reasons stated in the media for the collapse of the oil cartel are striking in their apparent absurdity. The explanation of the meaning of this operation by creating conditions for the bankruptcy of American shale oil producers is striking in its madness. It's like sawing the bitch you're sitting on to throw off the one who's sitting next.
Thirdly, the Bank of Russia, having every opportunity to keep the ruble stable due to the amount of foreign currency reserves exceeding the amount of rubles in the financial market, gave it an opportunity to collapse and only then declared its readiness to carry out currency interventions. However, without declaring a clear goal to prevent the ruble from falling below a certain level, these interventions only help speculators to plan an attack by disclosing their plans and supplying them with currency.
Against the background of the collapse of the financial market, a strange deal to sell Sberbank shares to the Government looks quite surreal. According to the Central Bank Act, all its property is federal property. Consequently, the government can operate on it at its own discretion. In this case, it may adopt a regulatory act obliging the Bank of Russia to transfer its shares free of charge to Rosimuschestvo, since it is no more than their nominal holder.
The ultimate meaning of this operation is, on the one hand, to sterilize (liquidate) at least a quarter of the 2.8 trillion rubles accumulated in the National Welfare Fund to cover losses incurred by the Bank of Russia as a result of its insane activities to raise funds from the financial market for deposits and bonds.
On the other hand, speculators who are able to manipulate Sberbank's shares can become fabulously rich by buying them up after impairment and selling them at a higher price after completion of the transaction. There is also an assumption that there is a secret plan to privatize these shares, which are not transferred to the Rosimushchestvo balance sheet, but remain “on the balance sheet of the National Bank” (the latter is not a legal entity and has no balance sheet, i.e. the shares hang in the accounts of the Depot of the Ministry of Finance).
Doubtful operations on manipulation of the currency market and sham transactions at the expense of the state exacerbate the already difficult situation in the state financial system after the collapse of oil prices. The reasons stated in the media for the collapse of the oil cartel of Russia and OPEC in order to bring American producers of shale oil to bankruptcy are striking with the madness of this plan. It is like sawing the bitch on which you sit in order to throw off the one who sits next. After all, oil prices have been kept at a level that is many times too high relative to the balance of real supply and demand, thanks to financial speculators and this cartel agreement. After its collapse, the collapse of oil prices can take a long time.
Fluctuations in oil prices are subject to long-term patterns of change in technological patterns. Their rise in the zero years is a typical manifestation of the beginning of a change in technological patterns. When the dominant technological stage reaches maturity, the growth rates of the economy together with the profits of leading corporations fall. To preserve the latter, monopolists raise prices. This is best done by corporations in the fuel and energy sector, which is characterized by maximum capital intensity and minimum elasticity of demand from price. After the structural reorganization of the economy based on a new technological mode, provoked by a sharp jump in prices for energy resources, is completed and its energy intensity decreases many times, the demand for energy resources will inevitably decrease and prices will fall[39].
This is what is currently happening. The next technological revolution, which unfolded after the rise of oil prices, turned into a rapid growth of the new technological mode, which, starting from the crisis of 2008, began to replace the old technological mode everywhere. Now it is entering a phase of rapid growth, which is accompanied by many times less growth in demand for energy resources. In this upward phase of Kondratyev's long wave, energy prices remain relatively low.
The recent collapse of oil prices was objectively due to these regularities, and one should hardly expect their change. Substantial increase of energy efficiency and reduction of energy intensity of the economy as a new technological pattern emerges, as well as rapid development of solar energy entails a relative decrease in demand for hydrocarbons as an energy carrier, which, given the limited demand from the chemical industry, will put a long-term downward pressure on oil prices. The Russian negotiators with OPEC obviously did not know these patterns and made a fatal mistake, provoking the collapse of the cartel of oil-producing countries. Given the ability of the US to manipulate the oil market, its unlimited lending to the oil industry, and the objective interest of its manufacturing industry and consumers in low oil prices, it is unlikely that this mistake can be corrected.
It follows from the above that hydrocarbon prices will remain relatively low in the next decade. This means a significant deterioration in Russia's trade and balance of payments. It can be mitigated by measures to halt capital outflows and outpacing the development of non-resource exports, which, however, cannot be secured under the current monetary policy, as it requires large-scale long-term lending to very capital-intensive investments in the development of petrochemical and other high-tech industries. If monetary policy is not radically changed, the ruble will have to undergo further devaluation and the inflationary wave caused by it. Against the backdrop of shrinking state budgets, this will cause a significant drop in household incomes. It will be repeatedly aggravated by continuing to fight against inflation by reducing money supply and final demand. This, in turn, will cause growing discontent of the population and aggravation of social and political tension. By 2024, it will peak and significantly weaken the ability of the state to resist American aggression.
By that time, China will have further increased its demand for Russian resources and invested in rebuilding the Russian economy to meet its needs. In this way, the Russian economy will find itself on the periphery of the old and new world economic patterns simultaneously. It will definitively lose its capacity for independent development, and its economic space will become a rival field for Western and Eastern corporations. This will create additional political tension that could lead to the loss of national sovereignty.
To avoid this trap of double dependence, an immediate fundamental change in economic policy is needed. It should ensure the restoration of macroeconomic stability at the same time as putting the Russian economy on a trajectory of outpacing growth based on a new technological pattern. This requires a forced transition to the formation of a new world economic mode with its characteristic institutions of strategic planning, subordination of monetary policy to the tasks of increasing investment activity and public-private partnership aimed at improving people's welfare.
Forecasts of the development of the Russian economy, as well as of the global economy, look very alarming. The quarantine and self-isolation regime has affected almost 50% of the world's population (about 3.9 billion people). Maintaining strict social distance measures costs 2% of GDP every month. The decline in the world economy in 2020 may reach 2%, with an unfavorable development of the situation – 4-6%. Decrease in production volumes in the most vulnerable sectors of the economy reaches from 40% to 90% (Figure 10).
Fig.10 – Impact on economic activity of partial or complete production stoppage, in % of GDP
Source: OECD
Anti-crisis measures will exacerbate the already tense state budget due to falling oil prices. They will cut its revenues and increase its spending. This inevitably leads to a deficit for which the sovereign wealth fund may not be sufficient to pay. If the government takes them back into the market, it will thus reduce its already scarce liquidity and reduce its ability to sustain business activity. This is only the most obvious problem and there is no solution to it in the macroeconomic policy framework. Its continuation will involve the Russian economy in a new spiral of deepening crisis.
Based on the patterns of change in technological and world economic patterns, we can assume that the global hybrid war is entering its final phase. The peak of confrontation between the leading powers is expected by 2024[40]. By that time it is necessary to reconstruct the system of economic development management in accordance with the principles of the integrated world economic system and to break out of the hopeless state of financial and raw material periphery of the American cycle of capital accumulation.
3.2 Urgent anti-crisis measures
In the conditions of business recession caused by the collapse of the financial market and depreciation of assets, the monetary authorities of all developed countries sharply expand lending to the economy in order to mitigate the decline in production and prevent an avalanche of bankruptcies of enterprises. However, the effectiveness of these measures varies greatly depending on the national currency regulation system and monetary policy. In the countries-issuers of world reserve currencies, monetary injections are held by the financial and banking system, which increases the stability of their economies, but does not always ensure overcoming the reduction in production and investment. In other countries, if it is not canalized for the needs of the production sector, money emission may flow to the currency market, increasing pressure on the national currency rate and aggravating macroeconomic instability. This was exactly what happened in Russia in 2008-2009 and 2014-2015, when government support for the banking system only added oil to the fire of the crisis. At that time, banks, including state-owned ones, used the obtained credit resources to purchase foreign currency, increasing the ruble devaluation and playing against the country's interests (Fig. 11).
Figure 11 – Dynamics of net foreign assets
and net debt to the Central Bank of Russia of credit institutions (trillion rubles)
The situation could happen again today. On March 27, the Bank of Russia increased the maximum aggregate limit on irrevocable credit lines (LCD) from 1.5 to 5 trillion rubles[41]. This additional liquidity exceeds the entire amount of the federal budget funds envisaged for the support of the economy. Before it can be injected uncontrollably, it would be necessary to stop operations on liquidity absorption, buy out your bonds and close your deposits (this measure will give another 3 trillion rubles from the reduction of the “structural surplus of liquidity” caused by the overstatement of the CB's key rate).
According to the experience of previous episodes of large-scale liquidity provision by the Bank of Russia during financial crises (episodes of 1998, 2008 and 2014), this increase in credit may lead to the loss of almost 10% of gold and foreign currency reserves and further fall of the ruble, which is written off by the projected fall in oil prices. To prevent this from happening, it is necessary to protect the financial market from attacks by currency speculators. This implies the introduction of selective restrictions on the cross-border movement of speculative capital. As such, both direct (licensing, reservation, fixation of the currency position of commercial banks) and indirect (capital export tax) regulation can be used. It is necessary to stop using foreign currency as a means of accumulation by residents, as well as lending by the Central Bank of foreign exchange speculation. For this purpose, along with the introduction of electoral restrictions on cross-border speculation, it would be advisable to strengthen measures aimed at deofshoring the economy, its dedollarization, stopping capital flight and stabilization of the ruble exchange rate. Serious efforts are also needed to regulate the financial market and protect it from fraudulent manipulation, including objective investigations into signs of market manipulation and punishment of criminals. It is necessary to restore state control over the MB and the financial market as a whole and radically improve the competence and efficiency of the Bank of Russia as a mega-regulator.
Based on international and domestic experience, the first thing to do is to block the channels for capital export and financing of speculative attacks against the ruble. This is exactly what V. Gerashchenko did after the 1998 default by introducing a rule of fixing an open currency position (OVP) of a bank on every operational day, preventing banks from using OVP funds to buy currency. In addition, timely measures should be taken to introduce restrictions on speculative currency purchase operations (reservation of funds, delays in transactions, total control over legal origin and payment of taxes, etc.); and in the case of foreign speculators dominating the currency market – temporary bans on exchange operations. It is also advisable to establish minimum terms for the withdrawal abroad and in foreign currency of financial resources released after the sale of government bonds and other ruble liabilities of Russian issuers.
It is necessary to introduce “dormant” norms providing for punishment for market manipulation. A thorough investigation of all episodes of the collapse and sharp appreciation of the ruble should be carried out in order to identify mechanisms and facts of market manipulation. Take measures to punish the criminals who organized the ruble exchange rate collapse in 2014 and at present.
In order to stabilize the ruble exchange rate and the financial market in the long run, the following measures should be taken.
1. Close the channels of capital outflow. Ensure free currency conversion only for current transactions. At the same time, import payment for foreign currency should be made only upon delivery of goods to Russia or provision of services. Limit the export of capital only to operations necessary for expanded reproduction of the real sector of the economy and direct investments that contribute to Russia's social and economic development. To this end, introduce licensing for cross-border capital transactions.
2. Eliminate preferential taxation of profits from financial transactions, and introduce a tax on currency speculation (the so-called “Tobin tax”) in the amount of 0.01% of the transaction amount. This measure will not be burdensome for financial transactions for productive purposes, and the activity of financial speculators will make almost unprofitable. It will protect the financial market from manipulation and speculative attacks).
3. 3. To restore full sale of foreign currency proceeds, as well as to encourage exporters to sell foreign currency through the use of a wide range of measures (tax levers, reserves, balance sheet regulations), which form more favorable conditions for storing and conducting operations in rubles in comparison with operations in foreign currency.
4. 4. Temporarily prohibit the purchase of securities of issuers from the U.S. and its dependent states, as well as to dump state investments in these instruments. This step will reduce the risks of Russian participants in terms of freezing or arresting their funds invested in foreign government securities[42].
5. The Russian Ministry of Finance should stop buying foreign currency and cancel the “budget rule”. The oil and gas revenues of the budget will be used to finance anti-crisis measures, including the purchase of critically needed imported goods, primarily for medical purposes.
6. Terminate the deposit insurance system for foreign currency deposits. Offer citizens to exchange these deposits for rubles on market terms, and offer commercial banks to sell available foreign currency to the Bank of Russia at the current exchange rate.
Given the circumstances of the hybrid war, it is necessary to allow borrowers to apply force majeure to loans provided by entities of countries that have established and impose financial sanctions against Russia. Introduce a moratorium on obligations of sanctioned companies to lenders and investors from their respective countries, as well as seizure of their shares and interests. In the event of seizure of foreign currency assets of the Ministry of Finance and the Bank of Russia, state banks and corporations, as well as the threat of total application of sanctions against Russian enterprises, a moratorium on repayment and servicing of loans and investments received from states that apply sanctions against Russia should be introduced. For the duration of the sanctions measures, subsidiaries of banks from the countries applying the sanctions shall be prohibited from attracting new funds from Russian depositors.
As part of the measures to restore national sovereignty in the monetary sphere, exchange rates should be quotes pegged to the rouble rather than to the dollar and euro as is currently done. Quotations themselves should be carried out in relation to the currencies of the countries – Russia's main trading partners, excluding the dollar from the currency basket.
Among the measures to protect the Russian financial market from the threats of external destabilization we should add: ensuring transparency and regulation of off-balance operations of banks and companies, elimination of dependence on American rating agencies to assess the reliability of certain borrowers; creation of a publicly available system of market information disclosure (issuers and professional participants), which is owned by the state and is free for users.
Implementation of the above measures will ensure a sharp reduction of currency speculation, subordination of the foreign exchange market to servicing cross-border operations of the real sector and creation of necessary conditions for long-term stabilization of the ruble exchange rate. After they are adopted, the Bank of Russia should clearly define the target parameters of the ruble exchange rate, introduce a “rule of exchange rate policy” – to keep the ruble rate at a given level for a long time through timely interventions and measures to neutralize speculative attacks. If there is a threat of exceeding the established limits, conduct a one-time exchange rate change unexpected for speculators and then hold it in the same way. This will make it possible to avoid an avalanche-like “capital flight” and currency speculation against the ruble in case of its rate adjustment due to changes in fundamental conditions of exchange rate formation[43].
Stabilization of the ruble exchange rate is necessary to normalize the investment climate, expand opportunities for international cooperation, national security and give the ruble the functions of a regional reserve currency in the EAEC and adjacent Eurasia. The Chinese experience can be used as a model for building an effective system of currency and financial control to ensure advanced economic growth.
Along with the above measures to stabilize the financial market in order to avoid unreasonable price increases by domestically produced goods of the EAEC member states, price indexation at the exchange rate of the national currency should be recognized as an unfair trade practice subject to antimonopoly regulation.
After all the above measures are taken to eliminate the risks of using the money issued for speculative purposes in order to overcome the crisis, it is possible to increase the money supply as a necessary condition for maintaining domestic demand, raising investment and innovation activity. In contrast to the issuers of world currencies, the crisis in Russia is not caused by an excess of money supply and related financial bubbles, but by chronic undermonetization of the economy, which has been working for a long time due to an acute shortage of loans and investments. The Russian economy needs a substantial expansion of the money supply in order to revive the domestic market and boost innovation and investment activity for modernization and advanced development. At least 12 trillion rubles withdrawn by the Bank of Russia from circulation during the last 5 years should be returned to the economy, and its operations to absorb money by issuing bonds and accepting money for deposits should be stopped immediately.
To prevent a spasm of business and investment activity, the instruments of targeted lending to production enterprises should be widely used. The Bank of Russia should deploy special instruments of refinancing commercial banks at 1%-2% per annum for sectors critical in the conditions of the crisis (medicine, education, agricultural industry, etc.) for a total amount of up to 3 trillion rubles under the obligations of enterprises and banks on the targeted use of funds (for example, through escrow accounts); as well as for lending to investments, including in the framework of national projects, on special investment contracts. This type of financing will not create an inflationary effect. Wide use of the mechanism of special investment contracts will reduce unreasonable costs of banking services by up to 10% and provide sustainable and full-scale financing of investment projects significant for Russian regions.
There is also a need to create a mechanism for targeted refinancing of development institutions, which would repeatedly expand their opportunities for lending to investments, including the replacement of ‘dry' foreign sources of credit.
In order to reduce the Russian economy's dependence on sanctions imposed by the US and its allies and to ensure its sustainability in the conditions of a hybrid war, the following immediate measures should be taken to de-dollarize the economy.
1. To dispose of all debt obligations of the USA, Canada, Great Britain, as well as securities nominated in the currencies of these countries from the gold and foreign exchange reserves with the acquisition of equivalent assets of the SCO, BRICS and gold. To increase the share of gold in reserves from the current 20% to 55% (as in the EU countries).
2. Buy foreign currency assets of state-controlled banks and corporations (more than $50 billion) in gold reserves at the rate held before the speculative attack due to the fall in oil prices.
3. Cease lending to non-financial organizations in foreign currency by Russian banks. Prohibit by law loans to non-financial organizations denominated and provided in foreign currency.
4. exclude the use of the dollar in foreign trade and investment transactions by state corporations and banks, and recommend that the same be done by private enterprises. Gradually switch to paying for major export goods in rubles. This will eliminate the risks of confiscation of Russian exporters' foreign currency earnings, remove the problem of their repatriation, and create conditions for reducing the volume of capital outflow. At the same time, it is necessary to provide for the allocation of rouble-denominated credits to importing states of Russian products to maintain trade turnover and to use for this purpose credit and foreign exchange swaps. The Bank of Russia should implement targeted preferential refinancing of commercial banks for ruble-denominated lending of export and import operations at acceptable rates on a long-term basis, as well as take into account in the main directions of monetary policy additional demand for rubles due to the expansion of foreign trade turnover in domestic currency and formation of foreign ruble reserves of foreign states and banks.
5. To radically expand the servicing of settlements in national currencies between the enterprises of the EAEC and CIS countries through the EDB and the CIS Interstate Bank, and with other countries using international financial institutions controlled by Russia (the IBEC, the IIB, the EDB, etc.).
6. Limit borrowing by state-controlled corporations in countries that apply sanctions. Gradually replace foreign currency loans from these countries with ruble loans from state commercial banks through their targeted refinancing by the Central Bank on the same terms.
7. Withdraw securities of Russian issuers from depositories in NATO countries. The Bank of Russia should stop accepting securities held in foreign depositories as collateral for refinancing.
Along with the above mentioned urgent measures to prevent losses from sanctions for the state and Russia as a whole, it is necessary to take measures to minimize losses of private Russian capital “dependent” in offshore areas with predominantly Anglo-Saxon jurisdiction. The following conditions should be created for de-offshoring the economy.
1. Introduce preliminary foreign exchange controls on transactions with companies from NATO countries and offshore zones. Introduce licensing of capital transactions with dollars, euros and currencies of countries that have joined anti-Russian sanctions.
2. Clarify the legislative definition of a “national company” that meets the following requirements: registration, tax residence and carrying on core business in Russia, belonging to Russian residents who are not affiliated with foreign persons and jurisdictions. Only national companies should be granted access to subsoil and other natural resources, government orders, state programs, state subsidies, loans, concessions, property and real estate management, housing and infrastructure construction, operations with the savings of the population, as well as other activities that are strategically important for the state and sensitive to society.
3) Oblige the ultimate owners of shares in Russian systemically important enterprises to register their ownership rights to them with Russian registrars, leaving the offshore “shadow”.
4. To conclude agreements on exchange of tax information with offshore companies, to denounce existing double taxation agreements with them. Prohibit by law the transfer of assets to offshore jurisdictions with which there is no agreement on exchange of tax information, as well as controlled by the USA and other countries that apply sanctions.
5. To introduce requirements with respect to offshore companies owned by Russian residents to comply with Russian legislation on the provision of information on company participants (shareholders, depositors, beneficiaries), as well as on the disclosure of tax information for the purposes of taxation in Russia of all income received from Russian sources under threat of a 30% tax on any transactions.
6. 6. To establish a permitting procedure for offshore transactions for Russian companies with state participation.
7. To introduce restrictions on the volume of off-balance sheet foreign assets and liabilities to non-residents on derivatives of Russian organizations, to prohibit investments of Russian enterprises in securities and currency instruments of the countries applying sanctions.
8. To organize the Moscow Club of Creditors and Investors to coordinate the credit and investment policy of Russian banks and funds abroad, procedures for returning problem loans, and to develop a unified position in relation to default borrowing countries.
In the shortest possible time it is necessary to create a payment system in the national currencies of the EAEC Member States on the basis of the EDB and the CIS Interstate Bank with its own system for the exchange of banking information, assessment of credit risks, currency exchange rates quotations. Transfer commercial banks to the Bank of Russia's financial messaging system, and propose its use for international settlements in the EAEC, SCO and BRICS, which will eliminate critical dependence on the US-controlled SWIFT system.
First of all, it is necessary to do it in mutual trade with China, which bears the main burden for import substitution from countries implementing anti-Russian sanctions. Russian banks can also connect to the System of International Settlements of the People's Bank of China and exchange information through it with Chinese partners, making payments and settlements. A special channel of confidential communication can be established between major Russian and Chinese banks for the same purposes. NSPK “Mir” should provide co-branding of cards with the Chinese system “UnionPay”, for which it is also necessary to activate the work of Sberbank and other Russian banks issuing the card “Mir”. It would be expedient to create a network of specialized credit and financial organizations operating exclusively in rubles and yuan and immune from external sanctions. Launch the Vladex trade and payment system using a special digital instrument with a firm exchange rate for the dollar equivalent. This system can take over the service of mutual trade in goods that are sensitive to sanctions.
These measures can also be applied in relations with our other traditional partners, for which it will be necessary to establish appropriate clearing systems for settlements in national currencies and to agree on currency swaps between central banks. It is obvious that there is a need to establish such a system in the EAEC, which will require a corresponding expansion of EEC functionality.
In order to stimulate the processes of Eurasian economic integration, joint passage and subsequent exit from crisis regimes caused by the global pandemic and negative processes in the single markets of the EAEC, it is necessary to take urgent measures, including the following[44].
1. To ensure price stability in mutual trade in domestically produced goods among the EAEC member states, to recommend that central (national) banks take urgent measures to stabilize the exchange rate ratios of national currencies. In order to create the necessary conditions for the transition to the use of national currencies in mutual trade and financing of joint investments, to sign within the framework of the EAEC agreements on the borders of mutual fluctuations of national currencies (“currency snake” of the type that existed in the EU before the introduction of the euro) and on the mechanism of damping the fluctuations (through swaps and the EFSR mechanism, the size of which should be increased to 1.5-2 trillion rubles). In order to ensure long-term stability and financial stability, the EAEC states could create a payment union with the use of the CIS Interstate Bank, which was specially created in due time to serve it.
2. In order to reduce costs in mutual trade, it would be advisable to abolish currency control over current cross-border transactions conducted in rubles. This measure should be preceded by some harmonization of national currency regulation systems to avoid capital flight.
3. In order to avoid a negative impact of the world price situation on mutual trade, it is recommended that governments take measures to transfer payments for fuel and energy goods (natural gas, oil and petroleum products) into the national currencies of the EAEC Member States as part of the formation of a common energy market[45]. The necessary condition for this is the stabilization of the ruble exchange rate, as well as the deployment of a full-fledged exchange trading mechanism with ruble pricing indicators. To reduce external shocks of oil price fluctuations, it is advisable to switch to long-term contracts for oil and gas export to China at prices denominated in yuan and rubles.
In the conditions of growing chaos and turbulence on the world markets it is necessary to provide for the creation of a system of protection against threats to economic security, which, along with the currency control instruments described above, should have protective contours of financial, distribution and property systems[46].
The protective circuit of the financial system should guarantee payments and credits to the real sector in case of an emergency in the banking system. The Central Bank should be ready to catch up with the settlement system through cash settlement centers and state banks in case of a chain reaction of commercial banks' bankruptcies. Programs to support systemically important enterprises, regions, and industries in the event of a possible paralysis of the banking system should be carried out through the treasury, which can also assume the functions of servicing state enterprises.
In order to protect strategic assets in the economy and ensure the output of life support products (food, energy, transport, etc.) the state should be prepared to nationalize the relevant systemically important enterprises and infrastructure nodes (power plants, elevators, ports, warehouses) or to place them under strict anti-monopoly control. Enterprises from the list of systemically important enterprises should receive financial assistance only under the relevant business plans and transfer of shares (assets) to the state as security for their production obligations and return of funds. The purchase of strategic assets by foreign capital (or the conversion of debt into ownership) should not be allowed, except for the establishment of joint ventures or the combination of assets on a parity basis to improve competitiveness and technical level.
Protection of the systems of reproduction of ‘human capital' should be guaranteed by the transfer of the relevant budget items to the protected regime regardless of budget revenues. It is also necessary to create strategic reserves of essential commodities, food and medicines in order to maintain production and import of critical goods in sufficient quantities to stabilize prices.
In any scenario of further deployment of the global crisis, Russia should retain the possibility of independent policy and influence on the global situation. The availability of a reliable natural resource and defense potential gives us objective possibilities for this. Even in a catastrophic scenario of a global crisis, Russia has the necessary resources not only for independent survival, but also for advanced development. Therefore, in international initiatives it is necessary to focus exclusively on one's own interests and irrevocably abandon the previous policy of lending to the United States and other NATO countries and follow their lead. Under the worst scenarios of the global crisis, Russia will be able to improve its position in the world economy by pursuing policies in its own interests.
3.3. Transfer of the Russian economy to a new world economic and technological framework as a prerequisite for the anti-crisis strategy of advanced development
Modernization of the Russian economy on the basis of a new technological pattern and on the principles of a new world economic pattern is impossible without restructuring of the economic development management system. Many years of policies to transfer the Russian economy to an innovative way of development, ensuring advanced development, increasing the rate of accumulation, etc., have not yielded results. During the last decade, the Russian economy has continued to degrade, falling below the level of technical development and the share of production in the world gross product. The reason for this is its dependence on the periphery of the American-centric imperial world order, which condemns it to the role of a financial donor and a raw materials colony. As a result of its non-equivalent foreign trade exchange, Russia loses about $100 billion a year, which could have been used for investment, and at the expense of the natural rent contained in the export of raw materials it pays for the intellectual rent contained in imported high-tech goods, thus financing the STP abroad. Without breaking these reproductive contours of the non-equivalent foreign economic exchange, supported by the macroeconomic policy, it is impossible to put the Russian economy on the path of independent advanced development.
The transition to a new world economic order requires a radical complication of economic policy and an increase in the efficiency of both public administration and private enterprises. As mentioned above, it is based on a combination of strategic planning and market self-organization, state control over the banking system and free enterprise, state ownership of infrastructure facilities and private enterprises in competitive sectors of the economy. Through a system of economic regulation and public-private partnerships focused on investment and innovation, entrepreneurial activity is directed towards achieving the goals of increasing public welfare.
There is a need for a transition to a systemic policy of development of the Russian economy, which should be built as a mixed strategy of outpacing growth of a new technological mode, dynamic catch-up in areas with a slight technological lag and catch-up development in hopelessly lagging industries.
The key idea of forming a strategy of anticipatory development lies in the determinant establishment of the basic industries of the new technological mode and in the early conclusion of the Russian economy on the new long wave of growth associated with it. This requires concentrated investment of resources in the development of promising production and technological complexes of the new technological mode, which is impossible without a system of targeted management of financial flows. The creation of such a system, including mechanisms of monetary, fiscal and foreign exchange policy, aimed at establishing the ‘core' of the new technological mode, should become the core of the anti-crisis strategy. A necessary condition for its success is the achievement of a synergistic effect, which presupposes the complex formation of conjoint clusters of production of the new technological mode and the consistency of macroeconomic policy with the priorities of early technical and economic development. For this purpose, the formation of an anti-crisis strategy should provide for the creation of a subsystem for managing long-term socio-economic development in the public administration system.
The leading importance of the development subsystem in the system of state regulation of the economy is related to the key role of scientific and technological progress in ensuring modern economic growth. The development policy includes: determination of priorities of long-term social and technical-economic development; preservation and development of scientific and production potential of the country; formation on this basis of industrial, scientific and technical and financial policy. Indicative planning should become a necessary element of development policy. Development policy should ensure the growth of competitiveness of domestic enterprises and the cultivation of national leaders – “locomotives” of economic growth.
The creation of a development management subsystem includes:
– deployment of procedures for substantiation and selection of priorities for long-term socio-economic development;
– creation of a strategic planning system able to identify promising areas of economic growth, as well as direct the activities of state development institutions to their implementation;
– formation of channels for financing projects of creation and development of production and technological complexes of new technological mode and spheres of consumption of their products;
– adjustment of macroeconomic policy to provide favorable conditions for innovation activity.
These components of the development management subsystem are described in more detail below.
The choice of priorities for technical and economic development precedes the policy of economic development on the basis of modern technologies, development and implementation of programs for its implementation. Determination of priorities of technical and economic development in the main directions of STP should be conducted on the basis of regularities of long-term economic growth, global directions of technical and economic development and national competitive advantages. These priorities should be implemented through target programs financed with the support of the state, soft loans, government procurement and instruments of state economic policy. The selected priorities should be subject to the following requirements.
From the scientific and technical point of view, the chosen priorities should correspond to the prospective directions of growth of formation of the modern technological mode and the modern creation of the next. From the economic point of view, the state support of the priority directions should be characterized by two most important features: to have a significant external effect, improving the general economic environment and conditions for the development of business activity; to initiate the growth of business activity in a wide range of industries associated with priority production. In other words, it should create an expanding impulse for growth in demand and business activity. From the production point of view, state stimulation should lead to such an increase in the competitiveness of the relevant industries, in which they, starting from a certain point, enter an independent trajectory of expanded reproduction on the global market scale, playing the role of “growth locomotives” for the entire economy. From the social point of view, realization of priority directions of structural reorganization of economy should be accompanied by expansion of employment, increase of real wages and qualification of working population, general growth of welfare of people.
The priority areas whose implementation meets all necessary criteria include, inter alia, the following:
– mastering modern information technologies; development of information infrastructure based on modern satellite, fiber-optic and cellular communication systems in cities;
– development of biotechnologies in the field of genetic engineering and other areas of application of microbiological research, raising the efficiency of health care, agroindustrial complex, pharmacological and other industries;
– development of nanotechnologies and automation means based on them, which allow to increase sharply the competitiveness and efficiency of domestic mechanical engineering;
– creation of nanomaterials with predetermined properties;
– development of laser and additive technologies;
– renewal of the civil aviation fleet, the wear and tear of which has reached a critical value, based on the organization of production and leasing of modern models of aircraft of domestic production;
– complex development of the rocket and space industry;
– renewal of power plant equipment, the wear and tear of which has reached critical limits, as well as modernization of power grids;
– development of natural gas processing and utilization technologies;
– development of a complex of nuclear cycle technologies, expansion of the sphere of their consumption;
– development of modern transportation hubs, which will significantly improve the speed and reliability of combined transportation;
– development of housing construction and modernisation of the housing and utilities sector using modern technologies;
– modernization of non-production sphere on the basis of modern domestic equipment (diagnostic devices and lasers for medicine, computer equipment for education system, etc.);
– application of tissue regeneration technologies, including the use of stem cells in medicine;
– environmental health improvement based on modern environmentally friendly technologies.
This list of priority directions of technical and economic development is made on the basis of the analysis of the main tendencies of modern STP, taking into account the state of domestic scientific and industrial potential. It does not pretend to completeness and finality. But it is possible to start with it the formation and implementation of state development policy.
The system of strategic planning should determine the content of budget, foreign trade, industrial and other components of the state economic policy, which should be linked through forecasting, programming and indicative planning of the country's economic development.
Forecasting, programming and indicative planning of socio-economic development of the country should be echelonized according to the time horizon for a year, five years and twenty years forecast period. In the conditions of modern STP economic entities, public administration and society as a whole need scientifically grounded prediction of future trends in scientific and technical and socio-economic development. In the conditions of modern STP for successful work of enterprises is necessary at least ten-year horizon of planning their development.
In the current system of economic regulation, the forecasting of socio-economic development has rather decorative functions, and the system of goal setting is simply absent. Without eliminating these gaps it is impossible to formulate an effective system of economic development management.
First of all, it is necessary to change the technology of forecasting social and economic development. The extrapolation of past trends should not dominate the formation of future development plans. The task is exactly the opposite – to reverse the existing trends, to overcome depression and to initiate economic growth. The forecast should be determined by a combination of available opportunities and desired results. For this purpose, it should take into account the regularities of modern economic development, begin with the formation of clear goals of socio-economic development for the given perspective and inventory of available resources, which can be used by creating appropriate macroeconomic conditions and measures of state regulation. These measures should define the content of indicative plans of socio-economic development of the country.
Depending on the time horizon, the content of indicative plans should vary. In the annual forecasting cycle, the indicative direction should include characteristics of all major macroeconomic parameters (GDP, employment, balance of payments, investment, inflation, ruble exchange rate, etc.) and economic policy instruments (interest rates, taxes, customs tariffs, budget expenditures, including public procurement, depreciation norms, regulated prices, revenues, public investments, priorities and norms of development institutions, etc.). Part of the technology of indicative planning for the year is the formation of the state budget and the drafting of the public sector development plan.
In the five-year cycle of indicative planning, the main importance is given to identifying medium-term priorities for the country's scientific, technical and socio-economic development, on the basis of which targeted programmes should be developed, as well as the desired proportions of the economy. An important task of the five-year forecasting cycle is to identify expected disproportions and bottlenecks hampering the country's socio-economic development. Another task is to search for new opportunities that are breaking away from the global TTP and structural changes in the world economy. On the basis of a comparative analysis of emerging problems and opportunities, it is necessary to search for ways of raising the competitiveness of the national economy, measures to implement which will make up the content of five-year programmes of scientific, technical and socio-economic development of the country.
The twenty-year horizon aims to guide the early development of the country against the background of global trends in scientific, technical and economic development in order to identify strategic directions for improving the competitiveness of the national economy in the global economic development space. The key importance in this case is prediction of breakthrough directions of STP and modeling of a new technological mode, forming the trajectory of future economic growth and opening new opportunities of social and economic development. Proceeding from it, priorities of early economic development of the country should be defined, development of target scientific and technical programs should be conducted, development of scientific and production potential of the country should be stimulated. The measures planned for this purpose and the directions of the state economic and scientific-technical policy should be reflected in the concept of social and economic development of the country for the long-term period.
Unlike administrative directives planned from above in a centralized planning system, indicative plans and programmes for the development of the economy of the new world economic order should not contain enforceable and binding tasks for economic entities. The planning guidelines should be developed with the participation and taking into account the proposals of the business community and scientific community. The very procedure for developing a plan is aimed at forming a national consensus on the priorities of socio-economic development of the country and is based on the work of social partnership institutions.
Complementing the mechanisms of market competition by strategic planning, the state helps to reduce the uncertainty and volatility of market conditions, helps enterprises to navigate in the prospects of production and in time to redistribute capital in the development of new technologies and markets, to ensure the development of appropriate information environment. Indicative plans do not hinder the free goal setting of independent economic entities, but serve as beacons for them, indicating promising directions for changing the economic situation and the state's economic policy.
To introduce a system of responsibility for living standards and quality of life, Federal Law No. 172-FZ of 28 June 2014 “On Strategic Planning in the Russian Federation” was adopted more than 5 years ago. Many of its norms were never implemented: a package of basic strategic planning documents was not formed. The Government has not yet started to implement strategic plans. Despite more than 60 thousand adopted strategic planning documents, they do not have a significant impact on economic development, as they do not contain any measures of responsibility for their implementation. Instead of deploying a legislatively approved system of strategic planning, the Government took up national projects.
It has to be noted that this law proved too complicated for the former Russian Government, which immediately after its adoption initiated a three-year delay. To date, Russian officials have lacked the competence to implement the law's procedures. Strategic management is imitation. The official goals of socio-economic development are formulated by the President of Russia as general guidelines of a qualitative nature. However, there is no feedback between indicators of their achievement and real management mechanisms.
The need to mobilize the population and resources of the country to combat the spread and overcome the negative consequences of the pandemic gives a good reason to launch strategic planning mechanisms and procedures. International experience has clearly demonstrated the obvious advantages of countries with these tools compared to those relying on the “invisible” hand of the market. China has coped best with the epidemic, whose leadership has planned not only to impose a general quarantine but also to organize a sharp increase in the production of the necessary instruments, medicines, protection and disinfection.
In order for the strategic planning system to work effectively, norms of responsibility for achieving planned results must be introduced and macroeconomic policy instruments linked to it. The first task requires the establishment of legal norms of economic responsibility of organizations and administrative responsibility of managers for the implementation of development targets set by the Government. Solution of the second task presupposes formation of the contours of management of fiscal, monetary and tax policy regulated by the state.
The orientation of the fiscal policy towards the development goals implies the reduction of the tax burden on all types of innovative and high-tech activities, as well as the priority allocation of budget allocations to support critically important for the formation of new TP public expenditures.
In the tax sphere, it is necessary to proceed from the structure of formation of national income, the main source of which at present is natural rent. For its withdrawal by the state as the owner of subsoil, the tax on additional income from subsoil users, which in Russia is replaced by the tax on mineral extraction, is usually applied. However, the latter, according to the laws of market pricing, is included in the price of products and is actually a tax on the consumption of energy resources and natural raw materials, worsening the competitiveness of the manufacturing industry. In domestic conditions, the best way to withdraw natural rents into state revenues is through export duties, which do not burden domestic consumption.
Another fundamental disadvantage of the tax system is universal taxation of citizens' income at a rate twice as low as the corporate income tax. This violates the basic principle of social justice for the public and stimulates the flow of income from production to consumption. There is a need for a tax maneuver to introduce a progressive income tax rate, compensated by the introduction of accelerated depreciation, which reduces the taxation of profits directed to the purchase of equipment. This will make it possible to increase investment by 5 trillion rubles while restoring public support for government fiscal policy.
The technological revolution currently undergoing requires exemption from taxation of all R&D costs. Many countries pay tax bonuses to enterprises implementing innovative projects in the promising areas of growth of the new technological mode. Based on its structure and the experience of advanced countries, there is a need for at least a one-and-a-half increase in public spending on health and education, which are the carrying sectors of the new technological mode, as well as a two-fold increase in spending on R&D. At the same time, increased funding should be focused on promising areas of development of the new technological mode, in which Russian organizations have competitive advantages. In particular, funding for scientific developments in molecular biology, genetic engineering and cellular technologies, manufacturing of nanotechnology equipment, digital, laser and additive technologies, helioenergy, nanopowders and new materials should be increased by an order of magnitude. An obvious direction of budget expenditures with high economic efficiency is modernization of transport, telecommunications, energy and housing and communal infrastructure on the basis of a new technological mode. Many of the costs critical to the formation of a new technological mode, including financing fundamental and exploratory research, can only be implemented with budget support.
An important component of budget policy should be the orientation of government procurement towards the purchase of high-tech products, mainly domestically produced.
During the implementation of the anti-crisis policy, the budget deficit should not be strictly limited by financing it from domestic sources and covering the growth of government borrowings by means of an equivalent issue of money to refinance commercial banks against the pledge of government liabilities. At the same time, the profitability of the latter should not exceed the average rate of return in the manufacturing industry. This is the way all developed countries – issuers of world currencies – operate. For example, the main channel of money emission of the US Federal Reserve (up to 95%) and the Bank of Japan (about 85%) is the purchase of government debt in the domestic market. The European Central Bank issues trillions of euros for the purchase of government liabilities of the euro zone countries, and, for anti-crisis purposes, even bonds of systemically important corporations. At the same time, the central banks carry out preferential refinancing of government agent banks under government guaranteed investment projects, mortgages, national and regional programs. Moreover, money emission under government obligations is carried out for a long period of time up to 30-40 years, during which securities purchased by the Central Bank are kept on its balance sheet and the money issued under them operates in the economy.
The insignificant role currently played by Russian federal loan bonds in the formation of the ruble financial system (less than 5 per cent of the accumulated ruble issue of the Bank of Russia), as well as the expanding volume of the Russian government's debt obligations in euros, indicate that Russia is excessively dependent on the global situation and external sources of financial resources, on the one hand, and shows great opportunities for expanding the Russian financial system on a national basis. In order to expand the market of government borrowings it is also necessary to stop using Bank of Russia bonds and deposits and return the invested funds to their owners.
Monetary policy instruments should ensure an adequate money supply for expanded reproduction and advanced development of the economy in the promising areas of formation of a new technological pattern. Simple “Keynesian” methods of stimulating demand by means of a large-scale injection of financial resources, as suggested by Roubini and Mim[47] with regard to methods of combating the current crisis, although they will contribute to mitigating the recession, but will not be able to provide an exit from the recession[48]. This requires a sharp increase in science, technology and innovation policy. Under these conditions, money emission should be targeted and channeled by the state in the priority directions of economic activity growth.
It is necessary to create an emission mechanism for the Bank of Russia to refinance commercial banks in order to increase their credit requirements to enterprises of the real sector in proportion to the growth of financial needs of the developing economy. Our own and world experience makes it possible to construct optimal mechanisms of money supply, closed for crediting the real sector of economy and priority directions of its development. For this purpose it is necessary to link the conditions of access of commercial banks to refinancing by the Central Bank with the obligations on target use of credit resources received from the state for financing the production enterprises and priority directions of economic activity. This can be done by a combination of indirect (refinancing secured by bonds and promissory notes of solvent enterprises) and direct (co-financing of government programs, provision of government guarantees, crediting special investment contracts) methods of money supply. Through the pawnshop list of the Central Bank and state guarantee limits, the government will be able to selectively influence cash flows, ensuring expanded reproduction of systemically important enterprises, favorable conditions for growth of economic activity and attraction of investments into priority development areas. At the same time, the refinancing rate should not exceed the average rate of profit in the manufacturing industry (according to international practice, in the conditions of a structural crisis it should be within 1-4%[49]), and the terms of granting loans should correspond to the typical duration of the scientific and production cycle of machine-building products (5-7 years).
Along with the reduction of the refinancing rate, normalization of the price of money requires an active policy of limiting the profitability of the public debt market controlled by the Bank of Russia and large banks with state participation, application of low interest target loans for public purposes (for mortgages, small businesses, educational loans), temporary administrative regulation of interest rates and bank margin. It is also advisable to significantly increase the resource potential of existing development institutions and create new ones that provide long-term investment loans at quasi-zero interest rates.
In the conditions of the world crisis the development of the Russian financial sector is possible only on the basis of the outrunning growth of the internal solvent demand as compared to the external one. In this connection, restructuring of the financial sector should be focused not on the stock market, but on the growth of the banking system combined with the restriction of financial speculation and stimulation of long-term investments, development and venture financing institutions[50]. At the same time, government support to commercial banks should be limited to the provision of targeted loans only, observing the following principles: equal access; limitation of support in time and on a large scale; participation of banks themselves in anti-crisis measures; inadmissibility of receiving benefits from government support by shareholders. In exceptional cases, state support of the banking sector's own capital could be provided through the acquisition of preferred shares of commercial banks by the Bank of Russia[51].
The concentration of money emission on refinancing of commercial banks under the obligations of production enterprises creates competition between banks in the struggle for clients among production enterprises for the sake of access to refinancing by the Central Bank. As a result, the credit market will turn from a seller's market monopolized by large commercial banks into a buyer's market, the competition on which will entail a decrease in interest rates. But for this to happen it is also necessary to completely stop operations of the Bank of Russia on absorption of the so-called excess liquidity, since it artificially sets the minimum interest rate on the credit market by issuing its bonds and opening deposit accounts.
Historical experience of a successful development policy shows that a certain GDP growth requires twice as much investment growth, which requires a corresponding increase in the volume of credit as the main instrument of advance growth of the modern economy. Along with the dogmatism of the monetary authorities, the launch of this mechanism in Russia is objectively impeded by the lack of effective foreign exchange control, as a result of which the credits issued under the anti-crisis programs were used by commercial banks to purchase foreign currency rather than to lend to the real sector of economy. The implementation of the strategy described above should be carried out with the help of appropriate instruments. This requires the widespread use of digital technologies. First and foremost, this should be done in the area of money circulation.
Modern technologies for creating digital currencies and controlling their circulation through a distributed registry system (blockades) are proposed to control the targeted use of money issued for crediting investments. To organize targeted lending – to create a Specialized Institute of Development, funded by the Bank of Russia in the amount not lower than the amount of money withdrawn from the economy. Thus, in order to compensate for credit compression, about 15 trillion rubles are needed from 2014, of which 5 trillion rubles can be allocated at the initial stage. The Special Development Institute, modeled on the German KFW[52], will be able to issue the equivalent amount of “investment rubles” protected by digital technologies without any inflationary consequences. Target loans in investment roubles are granted exclusively under special investment contracts at 1% (for state corporations) and 2% (for all other) per annum for the final borrower. At the same time, there is no need for bank guarantees and no need for credit ratings, which makes it possible to keep the interest rate for the final borrower at the level no higher than 3%. All further movement of money issued in this way is automatically controlled by the distributed register system – up to the payment of wages, dividends and loan repayment.
At the same time, investors can be used as a means of payment for any current operations, including payment of taxes and other mandatory payments, except for the purchase of foreign currency. Only the Special Institute for Development has the right to sell investors for foreign currency. It may also exchange them for ordinary rubles at par with a discount established by it. The Government may use borrowed investments to finance targeted programmes and capital investments, and provide loans to regional and local governments for expenditures for the same purposes. In turn, producers who have sold their goods for investment can, if they wish, exchange them for regular rubles at the Special Development Institute. The start of investment rubles turnover can be started by crediting special investment contracts concluded by federal and regional authorities.
At the next stage, the zone of use of investment roubles can be extended to mutual trade in the UAE as well as with third countries. Investors will be able to go to the Eurasian market as one of the international currencies. At the same time, the Special Development Institute will conduct automatic clearing of all transactions using investment rubles. Their legal status should be equivalent to the status of the rouble, allowing the investor to circulate in the territories of the EAEC states and third countries as an ordinary rouble.
Under the conditions of anti-Russian sanctions, the Blockchain technology underlying the investor's functioning has a special advantage in its application to international settlements. Platforms based on distributed registers (such as “Masterchein”) allow exchanging bank information and making transfers, bypassing SWIFT and ensuring the highest level of reliability and reliability. At the same time, there is no need for inefficient and corrupt administrative methods of currency control. The use of digital technologies for the emission of roubles circulating in international settlements creates conditions for the conversion of foreign trade transactions into roubles and the dedollarisation of the economy.
The launch of the investor turnover will give a powerful impetus to the development of digital technologies in the financial sector and will stimulate relevant R&D. It could become one of the UAE's pilot projects. As a result of its implementation, the world's first national digital currency with high potential for use in cross-border settlements will appear in international settlements. This will contribute to the establishment of the leading international platform for the development of IT technologies in the financial sector in the EAEC.
The introduction of the digital rouble will radically increase the opportunities for noninflationary and anti-corruption expansion of the loan, which will have a strictly targeted purpose. Providing production enterprises with access to targeted quasi-free loans will be unlimited without the risk of money theft. This will make it possible to load the idle capacity of the industry.
As mentioned above, the main reason for the large-scale underutilization of production potential is the artificially high cost of money created by the banking system. The circulation of the digital rouble through the distributed registry technology can do without commercial banks and do not require expensive and inefficient banking and currency control procedures. Accordingly, lending to production activities can be done on an interest-free basis. Artificial intelligence, blockchains and smart contracts will replace a multitude of controllers and intermediaries who profit from the overpricing of money, which becomes a state-owned tool to ensure that all resources available in the economy are bound to the production process.
Digital technologies make it much easier to solve the tasks of strategic planning, because they make it possible to link all the functions of state regulation of the economy into a single system and each of them is oriented to the common goal of improving the welfare of the people through modernization and growth of the economy on the basis of a new technological pattern. E-commerce, electronic declarations, a single window regime for all permits issued by regulators, an automatic system for controlling the quality of products and their compliance with UAE technical regulations, distance learning and work at home, cashless money circulation and many other achievements of the new technological mode will be mastered and will radically increase the efficiency of state regulation.
The formation of a financial and investment system based on internal sources will allow for the accumulation and maximum use of savings, more than a third of which were exported abroad during the entire post-Soviet period. This will create conditions for increasing the rate of savings.
As our own and foreign experience shows, the savings rate should be at least one third of GDP for advanced development. For Russia, this means the need for an accelerated increase in investment in order to double the rate of accumulation. The main source of funding for this upturn at the initial stage should be the full-scale use of existing savings, which are one and a half times higher than the volume of investment, as well as the repeated expansion of credit, organized by the state through a controlled issue of money under the obligations of the state and enterprises in order to finance investments in modernization, development and expansion of promising industries. Later on, in order to increase the savings rate accordingly, it would be advisable to apply measures to discourage wasteful and demonstrative consumption (introduction of progressive taxes on super incomes and property of individuals, excise taxes on sale of luxury goods, etc.) and to stimulate savings (including through accelerated depreciation). It is also possible to increase the premium on the savings part of pension savings by using it to finance long-term investment projects under state guarantees.
As part of the ongoing work to amend the Basic Law, it is necessary to clarify and expand the functional responsibilities of the Bank of Russia, setting out Article 75, paragraph 2 of the Constitution in the following wording: “Protection and stability of the “exchange rate” of the ruble, “emission of the necessary amount of money to ensure the expanded reproduction and sustainable growth of the economy and investments in fixed assets; ensuring the development and stability of the banking system of the Russian Federation; ensuring the development and stable functioning of the national payment system and the financial market of the Russian Federation; creating conditions for the growth of production, income of the population and high employment; maintaining the balance of the budget system of the Russian Federation.
In addition to adequate monetary policy, the anti-crisis strategy should include an active industrial policy that stimulates ‘points of growth' in the general depressed environment. At the same time, the most important are points of growth with a large multiplier, stimulating economic activity in a large number of technologically related industries: production of full-fledged domestic aircraft (Il-96, Tu-204/214, Tu-334, An-140/148), housing construction, space communication systems, modernization of transport and energy infrastructure, etc.
An important element of industrial policy, along with the formation of large integrated corporations supported by the state, should be to stimulate demand for domestic equipment through the appropriate regulation of government procurement and purchases of controlled and state-supported enterprises (primarily, Aeroflot, Gazprom, Rosneft, Russian Railways, etc.). This is especially important in the bearing industries of the new TU (healthcare, aviation, telecommunications), as well as in the extractive industry and infrastructure industries with a guaranteed market.
The significant increase in money supply envisaged by the anti-crisis strategy requires a radical improvement in the effectiveness of the antimonopoly policy in order to suppress inflation. Along with intensification of application of its standard measures to suppress price collusions, a systemic policy of price regulation is needed. The notion of normal profitability, which includes the costs of innovation, improving the quality and reducing the costs of products, as well as the progressive taxation of excessive profits, should be legally enshrined[53]. In order to equalize profitability of different sectors of the economy it is necessary to implement a restrictive pricing policy with respect to natural monopolies, up to freezing tariffs for their services for the period of implementation of the anti-crisis strategy, introduction of measures to reduce the interest rate as part of production costs. It is also necessary to adopt a federal law establishing forms, limits and procedures for price regulation.
Maintenance of price proportions favorable for modernization and development of the economy requires restoration of export tariffs for raw materials and increase of import tariffs for finished products, as well as measures to protect the domestic market from unfair competition from outside. Profitability of raw materials supply to the external market should not exceed the profitability of their processing inside the country, and the profitability of investments in the development of promising industries should be sufficient for their expanded reproduction. At the same time, it is necessary to break the information circuit of formation of prices for exchange commodities at quotations of the world market.
To ensure competitive pricing in the raw materials sector, it is necessary to form a system of exchange trade in rubles. For this purpose, it is necessary to develop and approve the Concept of formation of common commodity exchange market with inclusion of measures aimed at formation and use of exchange and over-the-counter price indicators in rubles and other national currencies of the EEU.
Studies of the existing scientific and production potential (fixed assets – output growth potential – 40%, labor resources – 20%, natural resources – up to 80%, scientific, technical and intellectual potential – more than 50%) indicate that there are objective prerequisites for sustainable and rapid development of the Russian economy in the medium term, with a rate of at least 10% of GDP growth per year and up to 20% increase in production capital investment based on the activation of its competitive advantages and intensive opportunities.
In the conditions of technological multiplicity of the Russian economy, a mixed strategy (Table 1) is optimal for its development, which provides for the advanced formation of basic production of the new technological mode. This requires concentration of resources in the spheres of production of the new technological mode. There is also a need to stimulate innovation activity in order to dynamically catch up with those industries that are slightly behind the world's best. Finally, in the hopelessly lagging industries, there is a need to implement a strategy of catch-up development based on imported technologies and foreign investment embodying the advanced technological level. The implementation of such a mixed strategy of advanced development requires stimulating demand for new products, including through government procurement, as well as securing financing for new technology growth through long-term affordable credit.
Table 1 – Emerging Development Strategy (sum of the contribution of key activities to the annual growth of production and investment)[54].
Source: S. Glazyev
The implementation of a mixed strategy of forward-looking development implies the following economic policy objectives.
In the technological field there is a need to grow competitive enterprises in the world market, mastering the technologies of modern technological mode. At the same time there should be created conditions for the advanced formation of the newest technological mode, including state support for the relevant fundamental and applied research, deployment of the infrastructure for training the necessary qualification, creation of information infrastructure.
In the institutional sphere there is a task to create such economic mechanism, which would ensure the redistribution of resources from outdated and unpromising industries, as well as super profits from the export of natural resources to production and technological systems of modern and new technological patterns, concentration of resources in key areas of their development, modernization of the economy, increasing its efficiency and competitiveness through the spread of new technologies. This task should be achieved through the formation of development institutions, restructuring of insolvent enterprises, privatization programs, regulation of foreign trade, scientific and technological, industrial and financial policies of the state. It is important to stimulate such forms of integration of financial, manufacturing, trade, research and education organizations that could develop sustainably in a highly competitive international environment and ensure continuous improvement of production efficiency through the modern development of new technologies. There is a need to eliminate the backlog of innovation management methods and introduce advanced standards as soon as possible.
Macroeconomic policy should provide favorable conditions for the solution of perspective tasks, guaranteeing profitability of production activity, good investment and innovation climate, maintenance of price proportions and other parameters of economic mechanism favorable for the development of new technological mode, contributing to the overcoming of disintegration and dismantling of economy.
The combination of macroeconomic, structural and institutional policy measures should solve the task of overcoming the investment crisis, which implies a threefold increase in the volume of investments in production development. At the microlevel, it is necessary to restore the link between the creative socially useful activities and the incomes of economic entities, to create conditions that stimulate constructive motivation of entrepreneurial activity to increase production efficiency, to introduce progressive innovations and master modern technologies, to transform incomes and savings into investments.
The implementation of the above strategy of advanced economic development implies a cardinal increase in the responsibility of the federal executive authorities for the level and quality of life of citizens. In 2003, the author submitted to the State Duma a draft federal law (No. 220170-3) “On the responsibility of federal executive bodies for ensuring the constitutional right of citizens of the Russian Federation to a decent life and free development”. The draft law introduced for the first time in the legal practice of modern Russia the concept of living standards: a system of sixteen objective indicators that characterize quite objectively such a versatile concept as “living standards”. It introduced a procedure for setting target indicators of living standards, and, importantly, this procedure involved the deployment of negotiation processes between social groups that have different interests, represented by public organizations representing them. The draft law proposed responsibility of the parties to the political process for failure to implement or improper implementation of agreements on living standards, which set targets and benchmarks for the improvement of public welfare. The time has come to adopt it.
Sergei Yurievich Glazyev
Glazyev Sergey Yurievich
[1] Author: Academician of the Russian Academy of Sciences, Scientific Director of the Center for Research of Long-term Laws of Economic Development at the Financial University Sergey Yurievich Glazyev.
The report was prepared as part of the work on the state assignment of the Financial University under the Government of the Russian Federation on fundamental research work on the theme: “The cyclical development of world economic ways”.
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[29] According to the definition of S.D. Bodrunov, who created the theory of neononomy, the latter is understood as a non-economic way of organizing the economy to meet the needs of a person who has gone beyond material production. Unlike all previous stages, the essence of the nooetap of civilizational development consists in the fact that not individuals enter into relations with each other in the process of material production, but two different spheres of civilizational construction enter into relations with each other – production (but production reduced to technosphere) and human society. (Bodrunov S. Nonomika. M.: Cultural Revolution, 2018. P. 171).
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[35] According to the head of Sberbank, in case of the most stressful scenario, the oil price is expected to drop to $20 per barrel, the ruble will fall to 100 rubles per dollar, as well as some macroeconomic changes. – Official portal of TV channel “Russia 24” (https://www.vesti.ru/doc.html?id=3248905 – circulation date: March 20, 2020).
[36] Official website of the Moscow Exchange, April 2, 2020. (circulation date: April 8, 2020) [36] Official website of the Moscow Exchange, April 2, 2020
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[42] The possibility for the USA to cancel foreign assets in case of aggravation of the situation was discussed recently by the former chairman of the Bank of England M. King: “in case of serious aggravation of relations foreign assets can be cancelled”. Just now, the U.S. and its NATO allies have confiscated Venezuelan currency assets, sending them to finance the state revolution in this country. In recent years, there has been a freezing of funds placed in the U.S. by a number of countries in the Arab East. Let us recall the blockage of funds even of the U.S. allied countries, placed in U.S. banks, during World War II and other precedents of this nature.
(Gold Investor. (Gold Investor.) June 2016. M.King. Misguided and economic risk. P. 14-17).
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[44] Some of these measures were approved on April 8, 2020. Instruction of the EEC Council “On measures taken within the framework of the Eurasian Economic Union to ensure economic stability in the context of the coronavirus pandemic COVID-19”.
[45] Back in the Message to the Federal Assembly on May 10, 2006. V.V.Putin suggested organizing oil and gas exchange trade with settlements in rubles. “Ruble should become a more universal means for international settlements, and should gradually expand its area of influence,” said the President of the Russian Federation in his address. Since then, they have been instructed to convert energy trade into the national currency on several occasions, including in the context of harmonization of monetary and financial relations with partners in the EAEC.
[46] Glazyev S.Y., Lokosov V.V. Estimation of the extreme critical values of the Russian society state indicators and their use in the management of social and economic development (in Russian) // MPEI Vestnik. RAS. 2012. Т. 82. № 7.
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[52] The German State Development Bank (KfW) was established in 1948 to restore the monetary factor of economic growth in postwar Germany. By means of targeted credit emission, this development institution provided credit for investments in economic development, including infrastructure modernization, renovation of fixed assets, housing construction. The state owns 80% of the bank.
[53] Petrakov N.Ya. About the possibilities of minimizing the consequences of the global financial crisis for the Russian economy // URL: http://www.econorus.org.
