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Dmitriy Sorokin

Good afternoon, dear colleagues. I want to start by expressing sincere gratitude to the organisers of today's meeting for the invitation. I want to say that we, in our institute, appreciate such cooperation. While politicians talk about a single economic space and custom areas, we are actually creating a single research area, and actively cooperate with similar institutions not only in Ukraine, and also in Georgia, where I am a member of the editorial board of their magazine, but also with Armenia, the Baltic states, Kazakhstan, etc. Therefore, we appreciate very much such invitations and I sincerely thank you the more.  I have been very interested today to hear the speakers.

Now I go to the topic of my region.

I would like to start my speech with the last question which is indicated in the list provided for our session. The question: Is a perfect model of anti-crisis policy possible? I just want to say that from my point of view, and even from the point of view of our institute, this model is impossible in principle.

It's not that there is nothing perfect in our world in general.  It’s that it can not be perfect, especially when talking about economic policy.

When we talk about practical economic policy, you should remember what politicians say: politics is the art of the possible.  The ideal economic policy will look very different from the perspective of different interest groups. Something ideal from the standpoint of, let’s say, the export-oriented raw materials producers will not look as ideal from the standpoint of those working in the woodworking industry who are focused on domestic demand, and vice versa. If you take the representatives of science, they would even say the ideal anti-crisis economic policy is when the money is not given to banks, but to the sciences. How can we avoid science here – for it is the knowledge economy.

Generally, I would say that to put such a question: “Is there an ideal economic policy?” is the same as asking the men present here if there is an ideal woman? Since I am here without my wife, I would risk answering the truth.  Every woman believes that she should hear from her husband one thing, that she is the ideal one. And, as you know, there are no such ideal ones. What is perfect for one person, to another may not look very good.

A real economic policy is a compromise between various, often conflicting, economic interests, plus a compromise with the prevailing moods of the society.  These mainstream mentalities usually do not target any strategic issues, but some temporary ones. Plus, the prevailing moods are subject to all kinds of myths and the real politician should consider those myths that exist in the public consciousness. Therefore, any real anti-crisis policy will be the fruit of such compromise, and thus will not be perfect. So, virtually, it will be subjected to criticism from all sides, because everyone sees something that they do not need.

Is a theoretical scientific model possible? In my opinion, it is not. A theoretically ideal model on the point of view of, let’s say, neoclassical schools will undergo a very reasoned criticism from those who rely, for example, on dirigisme in the economy. And so on. Whenever representatives of different economic schools will argue so well only their right answer, one would want to say by the words of Solomon: “You are right, and you are right, and you are right too...”

And finally, it is most important to see the real world today. I want to use very carefully the words "global economic crisis"; one must be very careful using them. Is there the same crisis also in China and India? The term "crisis" for economists has absolutely certain value. Recession is when for two consecutive quarters there are falling rates, i.e., if there is one quarter, it is not a recession. But what is in China then? There is growth slowing, but not a crisis. There is, of course, no doubt, that there is a crisis of the global financial system, but it runs differently in each country .  I would say, then, that each country has its own crisis. I want to show an example from Russia.

When, then, did the crisis begin in Russia, I ask? No, not at the end of 2008.  The Russian crisis began at the turn of the 80’s and 90’s.  In 1998 it reached the peak - "a bottom", as now they like to describe it. So we reached the bottom in ‘98, but not now. Then the trajectory of recovery began.  Now for the twelfth year this is the forecast of the Ministry of Economic Development, adopted officially by the Government of Russia. All that we see in the twelfth year, even if this forecast comes true, is that Russia only returns, but does not get out of, the crisis.  It returns to the trajectory of recovery and restoration, which was not over until 2008. Thus, the GDP exceeded the figure, but we do know what the GDP is. We look at the real sector of the industry and see that this excess of GDP is really one of financial bubbles. 20% of Russian GDP is created in the wholesale and retail trade. Put another 10 resellers between manufacturer and consumer – and there will be even more GDP. So, before the current financial economic crisis, Russia had not yet recovered from its own crisis. Thus, returning to 2008 figures is not getting out of the crisis in Russia, but only a return to the path of restoration, which was the same path it was on before.

The point is not in that same path of restoration. The main point is not that in 2008 Russia had not completed its restoration, but the quality of this recovery. In fact, if you look at the numbers, you will see that Russia during recovery reflected the largest scale of that structure of the economy which had led it to the crisis. So will the restoration of so-called before-crisis 2008 figures demonstrate that  Russia is getting out of the crisis? No. This movement will mean practically that Russia is not moving out of the crisis, but it has just deepened it. Industries, upon which the entire development engineering is based, continue collapsing, and the raw ones broadening. As a result, the budget (which is a law already, it is approved by our Parliament and signed by the President) still has an oil share. In other words, perfect Russian anti-crisis policy should solve very different problems than the anti-crisis policy of the European Community, or the United States, or China.

Moving to the final part of my speech, I want to dedicate it to the first issue of our session. Are we really going to a new financial architecture? Here I answer: Yes. Yes, if we accept the thesis that the world develops. If the world develops, it means developing its financial and economic institutions. We go, but what will this new financial architecture be? We can assume, in my opinion, at least two things. There will be movement towards unification of financial and economic institutions, i.e. national financial and economic institutions will be unified. And second, of course, is another question.  How quickly will it move?  There will be the movement to improve the handling of global financial and economic systems. It's also likely to happen.

How would it look: unification and improving manageability? In my opinion, the question of how the new financial architecture of the world will look will not be resolved in Moscow, in Kyiv, not in the Black Sea region, but by “big guys”. Thus the world appeared on the eve of world crisis.

Should Russia solve the issue of global financial architecture? With its very share! But it is going out from the financial markets, and nobody even notices that. When building a new model of financial architecture one should have in mind, in my opinion, two circumstances. First, you should not rush to write off the dollar as a world currency and, accordingly, rush to reduce America's role in the new global economic and financial architecture. It is easier for my generation not to rush into this area. We are used to this kind of rhetoric.  For at least half a century, we were told that the USA was in decline. This rhetoric was part of our upbringing.

The case is also based in reality.  With the diminishing of the role of the United States, they, being in front of all, fell less than others. This shows the stability of their economy, and their role. This is the first circumstance.

The second circumstance is to not exaggerate the possibilities of China, and moreover not talk about the Chinese threat. There is no need. Our Institute has been working for many years, and I am personally responsible for this direction, with the Institute of Economics of the Peoples' Republic of China, and the Academy of Social Sciences of China. We must understand that extensive growth continues in China. It was in the last 30 years of the USSR that crisis was all over the world, and the Soviet Union grew. That is when we had to shift from extensive to intensive, as it is said now, to innovative increase – and all the deficiencies became obvious. In China, by the way, the leadership understands this, yet they grow extensively. The problems will start later.

And finally. In our first session, many colleagues said that the current crisis perhaps is not just a financial-economic crisis, but a civilization crisis. The crisis of civilization. What civilization? The old civilization? Then the current crisis is not just a crisis of the old civilization, but the birth of some new ones. And is it right to ask: “let's make anti-crisis policy: a policy against the birth of a new civilization?” We have mentioned Marx here, and I will not refuse my pleasure to remember when he wrote that society, even knowing the laws of its natural development, can not either cancel them, or skip over the stages that these laws determine. It can only alleviate the pain of childbirth. Maybe what we need is not anti-crisis policy, but the development of national policies to adapt our societies to the new world. You see, this is a totally different angle.  The role that science can play here is a separate conversation.

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