Globalization and Russia

Boris Kagarlitsky


often happens with such terms, the word “globalisation” has become popular

in our country (Russia) only belatedly. To be exact, it has become popular among

us at the very moment when people around the world have ceased talking about the

rise of a new global economy, and instead have begun talking about its crisis.

The fact that our commentators and theoreticians have begun speaking of

globalisation later than those in the West does not indicate that the process

has passed us by or that its impact has been delayed. It simply testifies to the

backwardness of our social thinking.


is worse to come. In discussing globalisation, our press split immediately into

two camps. Some commentators see it as an irresistible “process of nature”

that we are compelled to join in. Others see it as a conspiracy against Russia

by sinister forces that must be fought against. Both views are quite wrong.

Globalisation is the result of the neo-liberal economic policies that have

triumphed on a world scale. As a result of these policies, not only are Russian

workers in most sectors now on the verge of starvation, but American workers are

receiving smaller wages than twenty years ago after inflation is taken into

account. These policies are not aimed against Russia, any more than against

America. It is simply that international finance capital has been victorious

over industrial capital. The working class throughout the world has suffered

from this. It is clear that poorer countries have suffered more than richer

ones, but there is nothing new in this; such is the logic of capitalism.


that a world economic depression is ripening, Russia cannot remain on the

sidelines either. Most likely it will suffer less from the crisis than the US or

Western Europe. But what does “less” mean in practice?


situation is already grave. If it deteriorates further, will it be any

consolation for us that things are also bad for others? In the economic and

financial sense, the Californian energy crisis is a far greater shock for

America than the catastrophe in the Maritime Region, where thousands of people

have been left without heating in fierce winter weather, has been for us.

Nevertheless, the residents of the Maritime Region would nevertheless be

delighted to change places with the citizens of California.


market economy is basically cyclical, and in this sense, predictable. In

post-war Europe, and to some degree even in the United States, the state

regulated economic life in accordance with the ideas of J.M. Keynes,

implementing “counter-cyclical investment policies”. The essence of these

policies consisted of sharply increasing state spending and investment during

the period when market demand was falling, and then reducing them when growth

resumed. This was aimed at evening out the swings of demand and supply, and

ensuring stable development.


economists criticised these policies on the grounds that they would lead to a

gradual rise of inflation, and also noted that in warding off crises, the state

was preventing the “junking” of inefficient enterprises. Crises are

essential for capitalism to maintain its competitive dynamic, and to allow a

periodic “cleansing” of the economic organism. It is precisely during a

period of depression that the principle of “survival of the fittest” is

realised in full measure.


local currencies began to collapse in the countries of Southeast Asia, and

production volumes then started declining just as steeply, everyone expected

that this would mark the beginning of a world crisis. Subsequent events seemed

to confirm this assumption. The crisis began to spread. After Southeast Asia, it

seized hold of Russia. After the ruble had collapsed, financial difficulties

took hold of Latin America. The Brazilian real, which had not only been the

strongest currency in the region, but also a symbol of economic recovery on the

continent, lost half its value. The international financial centres then began

to panic; voices rang out calling for a return to regulation and control over

the global movement of capital.


crisis of 1997-98 did not, however, spread throughout the world. Where financial

monsters had fallen on hard times, huge sums were thrown into saving them from

bankruptcy. Governments began printing money. Multi-billion-dollar credits were

allotted to a wide range of stabilisation programs, which at times duplicated

one another. Whether the methods employed were good or bad is not so important,

but the situation stabilised. As we know, the position in both Russia and Brazil

started to improve after the devaluation of the national currency.


second “warning signal” appeared in April 1999, when share prices in the US

fell steeply for the firms that made up the “new economy” (these prices are

listed on the Nasdaq index). It had emerged that few of these firms, which were

involved in supplying a range of services on the basis of internet technologies,

were yielding significant profits; the fall in share prices thus led quickly to

a wave of bankruptcies. Nevertheless the Dow Jones Index, which records the

share prices of more tranditional companies, held up. Nasdaq, after being

shaken, also levelled out. The fall in share prices was characterised as a

necessary correction, though to everyone’s surprise, a correction did not

occur. The share prices of the surviving companies remained extremely high.


the shocks that hit the stock market in the spring of 2000, the spectre of a

major crisis was firmly installed in the US. However, no-one knew when, where or

how it would begin. So long as the economy of the US continued to grow, a world

crisis was impossible. For Russia, it is true, the crisis on the American stock

market was even a boon. In 1999, when renewed economic growth in Asia caused

world oil prices to rise steeply, no-one expected this increase to last for



to the credit and stock market inflation in the US, vast funds had been taken

out of the “real economy” throughout the world over the previous fifteen

years, and had been pumped into the area of financial speculation, mainly of an

international character. Russia in this case was no exception; on the contrary,

it was situated in the first ranks, moving in the same direction as the US. The

governments sincerely believed in the monetarist theories which contended that

the only sources of inflation were state spending and the printing of paper

money. As a result, no-one was taking measures to restrain credit and

stock-market inflation; indeed, it was considered beneficial, and was stimulated

in all sorts of ways. The point is not just that American firms were over-valued

on the stock market. All this was occurring in circumstances where for almost

ten years the paper money had not been devalued. In other words, speculative

financial capital was growing out of all proportion to the growth of production,

and the devalued “non-cash” money could for the time being be converted

freely into folding greenbacks. All that was needed was a mechanism that would

allow this to be done without quickly ravaging the stock exchange (if everyone

started selling their shares, the effects on Wall Street would be nightmarish).

Whoever found a solution to the problem first would come out the winner.


rise of oil prices ensured that such a mechanism of redistribution would

operate. In the economy of the West, a sort of “inflationary overhang”

emerged, similar in its way to the Soviet “conserved inflation” (readers may

recall how everyone’s bank savings kept increasing in the USSR, while prices

were stable). In the Soviet economy, “excess” money was bound sooner or

later to create an insurmountable problem of “shortages”. In the US the

“excess” money has poured, in the final analysis, onto the oil market. To

the degree that the dollar “overhang” collapses, inflation will sooner or

later run out of control, and the “excess” money, having burst free, will in

any case sooner or later spread throughout all sectors of the economy. The

buying power of ready money will be doomed to fall, and a devaluation of the

dollar will be on the agenda. Throughout the second half of the 1990s, the

dollar grew constantly stronger in relation to the German mark and the Japanese

yen. Now the Europeans and Japanese will be able to take their revenge.


is a quite different matter that the price of this victory could turn out to be

too high for everyone’s liking. The irony lies in the fact that the first oil

shock disorganised the system of state regulation, and undermined the

“socialism of redistribution” that held sway in the West. The second oil

shock, by contrast, will disorganise the system of market-corporative

regulation, and will strike a blow at neo-liberal capitalism. The response to

the oil shock of 1973, albeit with a certain delay, was the beginning of a shift

of the world economy to the right, toward the liberal model. This time, the most

probable response (also after a certain pause) will be an analogous movement to

the left. The wheel will have turned full circle.


processes will not pass us by. On the one hand, modern-day Russia is

characterised by an incredible openness, an extraordinary degree of integration

into the world economy. On the other, the discrepancy between the approach

chosen by Gref, Putin and company and the new, growing global dynamic will

become more and more obvious. At a time when predictions of a major impending

crisis are becoming almost universal, criticism is growing of the governments

and international financial institutions that are responsible for pursuing the

neo-liberal course on a global scale. On the level of the mass movement, protest

against the International Monetary Fund, the World Bank and the World Trade

Organisation became a reality in Seattle in 1999 and Prague in 2000, when

thousands of people blockaded the work of the WTO, IMF and World Bank. The

enlightened Russian intelligentsia gazed in disbelief at what was happening,

asking itself why, in the “advanced West”, hundreds of thousands of people

would come out and protest on the streets, as if driven mad by too much good

living. In America and Europe, meanwhile, there is a growing understanding that

we are far from living in the best of all possible worlds, and that it is

necessary to change something urgently before it is too late. Russia is at risk

of becoming, in five or six years, the last bastion of economic liberalism, of

“globalisation” and “free capitalism”.


is quite natural for a backward state. Tsarist Russia repeatedly played the role

of the decisive bastion of international reaction; one need only recall its role

in suppressing the European revolution of 1848-49. But even with the whole

strength of the Russian bureaucracy, it is hard to put a stop to history. Sooner

or later, therefore, the new radical anti-capitalist movements that are

developing in the West will “infect” our country, just like the ideas of the

French revolution and Marxism. And the sooner the better.


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