Robert Skidelsky

21.03.2013. Пленарная дискуссионная панель III «Экономика для человека или человек для экономики: вызовы и уроки БРИК»

Skidelsky: Ladies and gentlemen, that’s as much Russian as I’m going to speak. I prefer to do my talk in English — it’s easier for me, it will be easier for you. I want to start by saying that I read your program, the program note of this Forum «An economy for human beings» with great interest and much agreement. In fact you have had a chance to read it because it’s very good. My criticism concerns one important omission which I will refer to at the end.

The document is a smashing attack on the present postulates of the economic policy based on what it caused radical liberalism, market fundamentalism, near classical orthodoxy. And much of this is familiar in the west, it’s echoed in the west. This wrong economic policy is held to be responsible, largely responsible for the defects of Russia’s post-communist experience. The program note, and again I’m referring to the document calls for more active role for the state in economic development. Essentially a third way between the state to the market which at one point it calls the Scandinavian model, but it also draws on Brazil and other Latin American countries. For example, it says that the share of gross domestic product redistributed by the state should reach 50 %. The authors of a document discuss the diversity of capital relationships. They advocate state-led innovation, private public partnerships, development of civil societies. Parasitic consumption should be replaced by qualitative and not quantitative measures of welfare. Parasitic finance should be curtailed and so on. Then economics should be made less mathematical and its imperial ambitions should be reduced. I endorse with most of this, I agree with most of this and preach with much of this doctrine at home, in the United Kingdom. For example, I’ve been a consistent critic of the doctrines of budgetary austerity in face of the slump, who’s shaky theoretical foundations, derived from simplified near-classical economics. I agree completely with the need for new banking, stronger banking regulations. I mean that’s been dramatized just now by the crisis inside Cypress. It was in 2004 that friends interfering then social democratic party in Germany called financials irresponsible local phones who measure success in quarterly intervals, suck off substance and that company died once they’ve eaten them away. At the time this was simply regarded as a left-wing criticism. Now it’s more generally accepted.

I would be much bolder for the banking reform than this paper which any cause for Tobin tax. I think that you need to do not only strengthening liquidity and capital adequacy ratios. You need to separate out commercial from investment banking. You need a more competitive banking system and you also need a cap on banking bonuses.

Nothing has so diminished, public respect for private enterprise in the recent years. Then the huge sums of money being paid for financial activities, many of which strike for public as a pure waste. I agree further that economics is not the same as physics. Most of its propositions are not true universally but only in context so I’m speaking as an economist. It suffers from the Ricardian vice, obsessive abstraction.

Now I’m on the Advisory Council of the foundation started by George Soros called I-net, Institute for new economic thinking. And Russian economists should take an interest in this organization and bring a Russian perspective to there on what’s now largely in America dominating and undertaking. I’m not much in favor of fixing percentage of national income to be spent by the state. I think that’s not right. Much more important is to distinguish between current and capital spending. The first should cover necessary social expenditure and should always be paid for by taxation. The second — state investment spending should be covered by borrowing, just as private firms borrow or raise equity to invest.

I would be careful about private public partnerships. It’s a good idea — a public private partnership differs from simple private sector and simple public sector provision in two ways. It’s based on sharing risk between the public sector, the private sector, but secondly effective private public partnerships align the interest of private firms and the government. So it’s quite a nice idea conceptually. But it depends on how the risks are divided and it also depends crucially on having an efficient and honest private sector and an efficient and honest government.

And that brings me to my last point which is the last omission of the Forum’s document. It leaves out the whole question of political risk. It assumes a state which in its own words represents the interests of society as opposed to private people they represent their own interest. But that’s not the state which Russia has today, unfortunately. Russia today is neither a state or a market economy. It’s inefficient mixture of the too, in which it’s impossible to disentangle the state from a network of private interests. Any development strategy where the state market, falls far in the way in which the Russian state actually works, which sociologist Alyona Ledeneva has called «the Putin-system». She starts with the observation that the 20 most powerful people in Russia today were all either KGB colleagues of the President or come from St.Petersburg mayor’s office where President Putin worked from 1989. The system she describes consists of 3 elements. This is the academic, I’m not making a political point here. The system she describes consists of 3 elements. First — perfusion of personalized networks which leaves institutions undeveloped. Second — distribution resources through these networks rather than through market mechanisms. The benefit is going to those who adapt benefit and can manipulate the blurred lines between public and private. The chinovniki, biznesmeni, oborotny. And thirdly, lack of check imbalances because of the passivity of the people, dependence of the judiciary on the state, lack of information — very important and the weakness of civil society.

And to get a coherent development program of the kind of this document it will be very difficult out of this system. But in addition there’s been no real incentive for reform as far as the commodity boom continued. So you have inherent effects on the system and then lack of incentive as long as energy prices continue to rise. So the program of economic reform is conditional on political reform. Otherwise, it’s just a set of aspirations doomed to continuous disappointment.