America’s
Fifth Column Will Destroy Russia
America’s
Fifth Column Will Destroy Russia
This
is the lecture I would have given if I had been able to accept the invitation
to address the St. Petersburg International Economic Forum in Russia this
weekend.
Paul
Craig Roberts
Executive
Summary: From the standpoint of Russia’s dilemma, this is an important
column. Putin’s partial impotence via-a-vis Washington is due to the grip
that neoliberal economics exercises over the Russian government. Putin cannot
break with the West, because he believes that Russian economic development is
dependent on Russia’s integration within the Western economy. That is what
neoliberal economics tells the Russian economic and financial
establishment.
Everyone
should understand that I am not a pro-Russian anti-American. I am anti-war, especially nuclear war.
My concern is that the inability of the Russian government to put its
foot down is due to its belief that Russian development, despite all the talk
about the Eurasian partnership and the Silk Road, is dependent on being
integrated with the West. This totally erroneous belief prevents the Russian
government from any decisive break with the West. Consequently, Putin continues
to accept provocations in order to avoid a decisive break that would cut Russia
off from the West. In Washington
and the UK this is interpreted as a lack of resolve on Putin’s part and
encourages an escalation in provocations that will intensify until Russia’s
only option is surrender or war.
If
the Russian government did not believe that it needed the West, the government
could give stronger responses to provocations that would make clear that there
are limits to what Russia will tolerate. It would also make Europe aware that its existence hangs in the
balance. The combination of
Trump abusing Europe and Europe’s recognition of the threat to its own
existence of its alignment with an aggressive Washington would break the
Western alliance and NATO. But Putin cannot bring this about because
he erroneously believes that Russia needs the West.
America’s
Fifth Column Will Destroy Russia
If the
neoconservatives had self-restraint, they would sit back and let America’s
Fifth Column—Neoliberal Economics—finish off Russia for them. Russia is doomed,
because the country’s economists were brainwashed during the Yeltsin years by
American neoliberal economists. It was easy enough for the Americans to do.
Communist economics had come to naught, the Russian economy was broken,
Russians were experiencing widespread hardship, and successful America was
there with a helping hand.
In
reality the helping hand was a grasping hand. The hand grasped Russian
resources through privatization and gave control to American-friendly
oligarchs. Russian economists had no clue about how financial capitalism in its
neoliberal guise strips economies of their assets while loading them up with
debt.
But
worse happened. Russia’s economists were brainwashed into an economic way of
thinking that serves Western imperialism.
For
example, neoliberal economics exposes Russia’s currency to speculation,
manipulation, and destabilization. Capital inflows can be used to drive up the
value of the ruble, and then at the opportune time, the capital can be pulled
out, dropping the ruble’s value and driving up domestic inflation with higher
import prices, delivering a hit to Russian living standards. Washington has
always used these kind of manipulations to destabilize governments.
Neo-liberal
economics has also brainwashed the Russian central bank with the belief that
Russian economic development depends on foreign investment in Russia. This
erroneous belief threatens the very sovereignty of Russia. The Russian central
bank could easily finance all internal economic development by creating money, but
the brainwashed central bank does not realize this. The bank thinks that if the
bank finances internal development the result would be inflation and
depreciation of the ruble. So the central bank is guided by American neoliberal
economics to borrow abroad money it does not need in order to burden Russia
with foreign debt that requires a diversion of Russian resources into interest
payments to the West.
As
Michael Hudson and I explained to the Russians two years ago, when Russia
borrows from the West, the US for example, and in flow the dollars, what
happens to the dollars? Russia cannot spend them domestically to finance
development projects, so where do the dollars go? They go into Russia’s foreign
exchange holdings and accrue interest for the lender. The central bank then
creates the ruble equivalent of the borrowed and idle dollars and finances the
project. So why borrow the dollars? The only possible reason is so the US can
use the dollar debt to exercise control over Russian decision making. In other words, Russia delivers herself
into the hands of her enemies.
Indeed,
it is the Russian government’s mistaken belief that Russian economic development
is dependent on Russia being included as part of the West that has caused Putin
to accept the provocations and humiliations that the West has heaped upon
Russia. The lack of response to these provocations will eventually cause the
Russian government to lose the support of the nationalist elements in Russia.
Putin
is struggling to have Russia integrated into the Western economic system while
retaining Russia’s sovereignty (an
unrealistic goal), because Putin has been convinced by the element in the
Russian elite, which had rather be Western than Russian, that Russia’s economic
development depends on being integrated into the Western economy. As the
neoliberal economic elite control Russia’s economic and financial policy, Putin
believes that he has to accept Western provocations or forfeit his hopes for
Russian economic development.
Russian economists are so indoctrinated with
neoliberal economics that they cannot even look to America to see how a once
great economy has been completely destroyed by neoliberal economics.
The US
has the largest public debt of any country in history. The US has the largest
trade and budget deficits of any country in history. The US has 22 percent
unemployment, which it hides by not counting among the unemployed millions of
discouraged workers who, unable to find jobs, ceased looking for jobs and are
arbitrarily excluded from the measure of unemployment. The US has a retired
class that has been stripped of any interest payment on their savings for a
decade, because it was more important to the Federal Reserve to bail out the
bad loans of a handful of “banks too big to fail,” banks that became too big to
fail because of the deregulation fostered by neoliberal economics. By
misrepresenting “free trade” and “globalism,” neoliberal economics sent
America’s manufacturing and tradeable professional skill jobs abroad where
wages were lower, thus boosting the incomes of owners at the expense of the
incomes of US wage-earners, leaving Americans with the lowly paid domestic
service jobs of a Third World country. Real median family income in the US has
been stagnant for decades. The Federal Reserve recently reported that Americans
are so poor that 41 percent of the population cannot raise $400 without selling
personal possessions.
In the
US all 50 states have publicly supported universities where tuition is supposed
to be nominal in order to encourage education. When I went to Georgia Tech, a
premier engineering school, my annual tuition was less than $500. Loans were
not needed and did not exist.
What
happened? Financial capitalism discovered how to turn university students into
indentured servants, and the university administrations cooperated. Tuitions
rose and rose and were increasingly allocated to administration, the cost of
which exploded. Today many university administrations absorb 75% of the annual
budget, leaving little for professors’ pay and student aid. An obedient
Congress created a loan program that ensnares young American men and women into
huge debt in order to acquire an university education. With so many of the
well-paying jobs moved offshore by neoliberal economics, the jobs available
cannot service the student loan debts. A large percentage of Americans aged
24-34 live at home with parents, because their jobs do not pay enough to
service their student loan debt and pay an apartment rent. Debt prevents them
from living an independent existence.
In
America the indebtedness of the population produced by neoliberal
economics—privatize, privatize, deregulate, deregulate, indebt, indebt—prevents
any economic growth as the American public has no discretionary income after
debt service to drive the economy. In America the way cars, trucks, and SUVs are
sold is via zero downpayment and seven years of loans. From the minute a
vehicle is purchased, the loan obligation exceeds the value of the vehicle.
The
Wall Street Journal reports that Mike Meru, a dentist earning $225,000
annually, has $1,060,945.42 in student loan debt. He pays $1,589.97 monthly,
which is not enough to cover the interest, much less reduce the principal.
Consequently, his debt from seven years at the University of Southern
California grows by $130 per day. In two decades, his loan balance will be $2
million.https://www.wsj.com/articles/mike-meru-has-1-million-in-student-loans-how-did-that-happen-1527252975
If neoliberal economics does not work for America, why
will it work for Russia? Neoliberal economics only works for oligarchs and
their institutions, such as Goldman Sachs, who are bankrolled by the central
bank to keep the economy partially afloat. Washington
will agree to Russia being integrated into the Western system when Putin agrees
to resurrect the Yeltsin-era practice of permitting Western financial
institutions to strip Russia of her assets while loading her up with debt.
I
could continue at length about the junk economics, to use Michael Hudson’s
term, that is neoliberal economics. The United States is failing because of it,
and so will Russia.
John Bolton and the neocons should just relax.
Neoliberal economics, which has the Russian financial interests, the Russian
government and apparently Putin himself in its grip, will destroy Russia
without war.