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05.09.2008

August 27, 2008 (the date of publication in Russian)

Maxim Kalashnikov

FAREWELL TO "ONE WORLD"

Russia's indifference to WTO entry heralds the end of globalization

WTO'S BROKEN HEARTS CLUB BAND

The biased approach of major Western powers to the military assault of the US-backed regime of Georgia on the civilians of South Ossetia has become an impetus for a serious revision of the implications of economic provisions that Russia had agreed to fulfill in the framework of recent agreements with the Western community. In this context, Prime Minister Vladimir Putin claimed that some of the earlier given agreements, related to Russia's supposed entry in the World Trade Organization, may be unilaterally suspended. He admitted in public that membership in WTO suggests significant costs for the Russian economy, while the benefits of membership in the "club of free trade" are doubtful.

Russia's reluctance to enter WTO may become the beginning of this club's end, indicating the ongoing disintegration of the current model of globalized economy, and heralding transition towards "economic nationalism".

Russian economic experts have repeatedly emphasized that this organization is nothing more than a club founded by the richest nations that managed to achieve economic prosperity yet before the era of free trade liberalism. In fact, they owed their success not to liberal policies but to strong protection of domestic markets, often combined with deliberate pursuit of planned economy, involving elements of socialist redistribution of national income. However, the ideology, substantiating the foundation of WTO, suggested that other nations not follow the same path; that economic nationalism never gain the upper hand in the majority of the world's countries; that other countries never become competitive and never avail a technological culture comparable to that of the West – as the Soviet Union managed earlier; that the whole world obey to standards profitable for the richest nations; that the global economy transform into a chessboard for easy transition of capitals to the coffers of the global "monetarist aristocracy"; that each country become a convenient source of benefit for this global aristocracy Ц a moneybox to be unsealed at any moment with an ensuing crisis.

The Russian Federation does not at all need to enter WTO. In case this country is going to continue to sell predominantly energy resources and weapons, membership does not mean much. But in case the Russians decide to revive other branches of industry, as well as agriculture, they will need measures essentially incompatible with the WTO rules.

WTO's conditionalities Ц particularly, elevation of domestic prices for fuel to the European level, and providing, on the contrary, domestic transit tariffs for foreign flights, are destined to loot the Russian people. Equalization of tariffs does not consider the distance between sites of extraction and enrichment of raw materials.

 

THE TRIUMPH OF THE "RUSSIAN DOCTRINE"?

Since 1994, when Boris Yeltsin's liberal ministers and the allied minority of economic scientists started a massive propagandist campaign in favor of WTO entry, insisting that this choice has no alternatives, other economists developed a strong movement of intellectual and practical resistance.

While the federal government caved in to a lot of "preparatory" concessions, the absolute majority of intellectuals, experts, as well as businessmen involved in technologically advanced industries, was speaking out their protest. This Resistance published lots of books and articles proving that the country's entry in WTO is fraught with nothing but industrial deterioration, complete financial dependence from outside interests, and massive unemployment, that this entry is favorable not for Russia but for the narrow minority of the West's richest powers. This sentiment culminated in the economic section of the Russian Doctrine*.

Today, top Russian officials admit that the Doctrine's authors were right, and that the country is not going to benefit from WTO entry. Thus, the latest statements of Russia's leadership converge with the view of the conservative trend in Russian public and economic thinking, while the pro-Western ultraliberals that had been steering Moscow's economic policy for seventeen years, are facing a scathing defeat. The Russians are at the threshold of the era of economic nationalism based on common reason, while the reign of liberal ideological patterns is over.

This change is taking place largely due to Moscow's profound disappointment in neoliberal policies pursued by the West since 1979-81. These policies have eventually brought the economy of the United States Ц which is gripped with fever since 2000 Ц to the brink of lapse, and undermined the once powerful US dollar. Unrestricted capital flows and free trade logically resulted in de-industrialization of those very richest states that once established the WTO regime. The doom of this order is obvious also from the failure to impede the burgeoning development of China that is ascending to the status of the global power No.2 with no respect to liberal methods of state management.

With is huge amount of exports, planned economy and relatively small costs of production, China managed to achieve a strong position in WTO. Other new members were less successful. Several post-Soviet states, entering this community, victimized their earlier competitive branches of economy. In particular, Lithuania's textile industry was suppressed by massive imports and practically ceased existence. Georgia's domestic production fell by 32% after entry in WTO, with an inevitable political instability eventually preparing the soil for a "colored" revolution. In Kyrghyzstan, domestic production collapsed by almost 60%, as the country was flooded by cheap foreign consumer goods instead of promised investments Ц in accordance with the well known economic principle: money flows into the country when its gates are not wide open for goods; the subsequent revolution only exacerbated the misery. In India, entry in WTO sparked massive deterioration of small and medium business, the market being flooded with cheap imports from China.

These facts were familiar to the community of Russian economic scientists. It was obvious that Russia's domestic production would not endure the winds of "free competition". Still, liberal ministers continued promoting the legislation demanded by WTO as a precondition for entry, and deliberately suppressing even the remains of the once strong branches of industry. Only the international confrontation over the "Georgian issue" put an end to the reign of liberal thinking in Kremlin.

 

REASON ENTERS

Openly expressing reluctance to join WTO under the obviously unfavorable conditions, and admitting that premature fulfillment of the institution's demands "only damages some branches of economy, especially agroindustry", the Russian Government will have to pursue an economic policy alternative to the liberal utopia.

This means reasonable protectionism, as well as state subsidies for innovative and high tech industries. This means revival of the dirigist approach and planning of economic development, along with establishing access of enterprises to long-term credits, provided by a number of "imperial" banks, and the ruble's ascent to the role of a regional currency. Certainly, this policy line suggests certain challenges. It requires a real crackdown upon corruption, increase of efficiency and intellectual capacity of state management that has to attain a designing and strategic quality. It requires a drastic change in corporate management, with involvement of the community of producers and scientific experts into federal decision-making. It requires revival of public discussion, and development of "economic parliamentarianism". This policy line enables Russia to generate an array of national mega-projects, serving as locomotives of healthy growth based on technological advantages and not on the conjuncture of fuel prices. This policy line dictates necessity of mobilizing a new generation of state officials, whose minds are not stuffed with the neoliberal "mental idols".

It is similarly obvious that Russia will have to revise the already approved Concept of Economic Development till 2020. God help Russians to overcome these challenges.

 

THE WEST'S MISCALCULATION

Moscow's public disobedience to WTO dictate exemplifies a scathing defeat of the West's leading circles. Dragging Russia into WTO had actually served as a guarantee from its attempt to regain the deprived status of a superpower. Degradation of Russian scientific and productive potential had been viewed as an efficient means of control over the Russian expanse.

This option was not realized, ironically, due to the West's own deliberate efforts to impose even more unfavorable conditions upon Russia by blackmailing the liberal ministers with delay of entry into the "high respected club of nations". Western strategists believed that entry in WTO has become an ultimate value for the leading circles of Russia, and that the desire to join the organization would induce any kind of compromise with no regard to the costs for the society and economy. This blackmail, like any kind of political pressure, eventually aroused a reverse reaction.

The healthy response of the Russian leadership is likely to ruin the system of US global domination, for which WTO has served as a major instrument. Meanwhile, the present WTO is unworkable without the territory that connects major markets and contains a unique treasure of natural resources. The organization, already battered with the failure of the Doha talks, is likely to fall apart. Pursuing national interests, nations will leave the club one after another, inspired with the Russian example, getting rid of the neoliberal blinkers and transcending to sober pragmatism in economy. This process will accelerate the doom of the self-discredited model of globalization, and emergence of a multipolar architecture, based upon an array of global currencies.

Such kind of transformation implies a qualitatively new scenario of human history.

* Russian Doctrine is a plan of transformation and development of Russia on the basis of traditional values and in the face of modern challenges of XXI century worked up by a group of some 70 experts and scientists in 2005. The project was initiated by Russky Predprinimatel (Russian Entrepreneur) Foundation


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