braindead

I said that countries in less favourable climate zones can have a really succesful economy and high industrial potential . Because they are specialising in certain areas and are highly competitive there . Finnish Nokia ended making rubber boots and started making cell phones . And they did it without any accumulated wealth from ´former Finnish colonial empire´ , nor robbing 3rd world countries . They have high potential because they use their brains , although they have to build factories basicly in the same climate conditions as your 3-brick-thick-walls-factories . So your theory that Russia is doomed without protective measures is BS , because if you are living in unfavourable conditions , you will either adapt or die out . If everyone else in these climate zones can adapt and have good productivities / living standards (without closed economy) why cannot Russia ?
Don´t complain , just invent better insulation from cold and get on with production ....





And I apologise if my posts didn´t make much sense , because Christmas is taking it´s toll .

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Alex_Ivanov

Let me begin from the end. By implementing any sort protection for domestic goods you admit that your products are not able to compete with import by definition, and (that is more important) you freeze the situation, so you can't expect your goods will become any better in the future. Is that success you're talking about? I doubt it.

Next, how are money distributed between industries? Almost all profit of resource-minig industries is taken by the government to different funds. They kill two rabbits at once: 1. they take extra cash out of economy, so inflation isn't that high 2. Profits in non-resource industries become greater or equal than profits of resource-mining industries.

That allows to attract investments to many branches of economy instead of resource-mining only and provide average annual growth of 6-7%. Some industries enjoy must higher growth rate (20% in electronic industry, for example), while mining industries grow 1-2%, export of raw materials does not grow at all, because any extra barrel pumped is consumed by growing Russian economy. Europe is already a bit nervous about that and call to invest more. But that is not our way.

Laws of market still work. Nobody tells "let's invest in growing corn beyond polar circle". Businessmen do not spend money on anything that won't bring them their money back with profit. So, as I said in my edition of previous post, subsidizing is not an accurate word here. But we still have to understand basic law of business - before you can build profitable and effective enterprise, you should spend a lot of money without immediate return.

Some industries need long-term investments and they aren't too attractive for private capital. That's where state appears on the stage again. State coprporations are created to develop such industries. Putin recently confirmed that in the future those corporations can be sold.

The same with infrastructure. Business needs infrastructure anyway, but often can't afford large projects or is afraid of massive long-term investments. So state takes part in such projects, for example Federation pays 25%, region 25%, so business needs to invest only half, plus state involvement lowers risks.

Import isn't very much restricted, at least not as much as you propose. So Russian products compete not with other Russian products only, but with foreign ones as well and that stimulates qualitative growth, instead of just quantitative.

Do not say the picture is too bright. I knowingly left all problems aside to show the general way of our economy, which is absolutely correct at the moment, regardless of any problems we face. Russia has very sane economic policy, for the first time in many many many years.

Feanor

They can and will become better simply based on a) internal competition and b) technological progress.

What mechanism is used to accomplish this?

Siphoning off extra profits from the resource sector doesn't make the other sectors more attractive, it makes the resource sector less attractive. What remains most attractive in investing the money in foreign economies (stab-fond anyone) which is where capital is heading out of our country.

Understandable but hardly the case. Russia still has very little, if any, actual industrial growth. Most of the factories that do operate in Russia sell export consumer goods made out of pre-fab materials that are imported, to Russians. Those imported goods are paid for in (f*ck my english sucks) валюта. That means that the capital flows out of Russia to pay for cheap import goods that are practically preventing domestic consumer good production.

Privatizing the profitable industries, and keeping the unprofitable ones. Again?

Why not just have the state build all of it, and just raise taxes? Progressive taxes

Internal competition also stimulates qualitative growth. In fact there is no real difference in that regard between internal and external competition. The difference is that import goods are cheaper, but have to be paid for in валюта, leading to a siphoning off of capital from Russia.

That you did

Alex_Ivanov

a) They will become better than before but worse than foreign goods. b) technological progress will go slowly than in foreign countries. Finally we'll get backward economy and backward country.

True, but it doesn't really matter if result is the same.

You should invest extra-cash in your own economy carefully, not to lose all the money due to inflation. Actually we can spend oil dollars only where we get them from. That's why they're mostly invested abroad in form of buying enterprises, real estates, stocks, etc. If you think it doesn't bring us profit, you're wrong. You wouldn't be so afraid of capital movement if you drop your isolationist thinking.

It's just a load of BS. I don't even know what to say except "учи матчасть" А то ерунду загоняешь.Наш преп по экономике тебя с таким анализом оптравил бы на пересдачу.


What again? I don't quite understand what are you talking about. State develops industries private sector is not able to develop, then privatizes them to make more effective, what's wrong? Remember, in most ideal case state should own 0% of economy.

Repeat 1000 times and learn by heart: "Progressive taxation is death for any growth". And do not ever bring this topic back Look, why should one work hard, if the more he earns, the more he gives away? That eliminates any reason to grow.


The difference is when new technology appears somewhere, your economy remains anaware of it, then it repeats again and again, until one morning you realize that your country is 50 years behind most developped countries in the world.

Make difference between spending money on finished goods (like USSR did) and spending money on raw materials, parts and technology. In that case you got working enterprise, taxes, jobs. New jobs provide extra demand on market, that stimulates further growth. It's an ABC of economics. You want to keep currency inside the country. What do you need it for? To use it as wallpaper in your toilet? 1989 anyone?

Feanor

Obviously you can import new technology (or simply be at the forefront of innovation yourself ). And they might be worse then foreign goods, but keep in mind everything is relative. And when you work in that my proposition would also give a much higher degree of stability, along with independence from the world market and it's fluctuations, I would think in the long run (think decades) it would even out.

Oil shouldn't even be exported out of Russia. We're the coldest country in the world (don't give me Canada most of their population lives in climatically warmer zones) and one of our largest heating sources is oil-based and gas-based power plants. What happens when we run out?

Capital in the form of currency reserves (aha found the term ) should only be spent on additional capital.

Ínflation. How ironic. Only a little bit ago I recall reading an article that inflation projections for '08 went up again from 8% to 12%. Putin's really keeping it under control

You have reliable figures stating otherwise? Please post. I find very little reliable statistical information online and in books so if you have some I would love to see it. That way we're not just theory-bashing here.

Well the first privatization comes to mind when state kept control of the non-profitable industries and privatized the profitable ones. What's the point? You privatize to increase profits. Meaning if it's not profitable it should be the first to privatize. If it is profitable then maybe you might as well hand on to it for now? Otherwise you're once again subsidizing the unprofitable enterprises but keeping them with government backing.

Not quite. America has progressive tax. That doesn't stop it from being the financial capital of the world.

We were 50 years behind in 1921, and were a super power racing ahead of most in 1953. Whoa. We must've had a totally free market, and 32 years of peaceful development. And a democratic government of course. Otherwise our investment climate would have been too poor for that kind of performance


I want to keep capital from leaving the country. Lets review; what is capitalism? Activity directed at preserving and increasing the amount of capital in the system. That means that we only trade capital (in foreign trade) for more capital.

glyn

[quote=Feanor;440747]
We were 50 years behind in 1921,

Well, that was the big lie fed to the populace by the communists after they took power. Russia was lagging behind some countries, but by not nearly as much as the CP wanted you to believe. Russia had some of the finest engineers and academics in the world. The CP made life impossible for them and they fled the country, never to return. They became an asset for other countries. Let me mention just two, Igor Sikorski and Alexander Seversky. They were giants in the world of aviation and founded great corporations.

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Semper in excretum. Solum profunda variat.

medvedev

The Russian people deserve a brighter future and Medvedev is an academic who may be able to bring Russia into western politics more then ever and intergrate Russia into Europe and this has to improve world peace.
I hope.

Feanor

The bulk of Russian population were illiterate peasants. The country was ravaged by 7 years of war, from 1914-1921. Starvation and disease were rampant. There was very little industry left, and most of it wasn't running. The railroad network was in a state of disrepair. The USSR in 1921 was a mess.

glyn

Alex_Ivanov

It's hard to be "at the forefront of innovation" beign isolated. It's hard to produce everything citizens need in one country. That's why with the end of feudalism distribution of labour was invented. You propose to go back into middle ages. USSR could import technoogies and imported them. It didn't really helped a lot.

I don't know how about you, but I personally don't need "relatively good" things. I had enough of them in USSR.

From the other side, who needed oil 100 years back? Who will need it 100 years after? We should use opportunity, while preparing to live without oil export in the future.

Capital isn't just currency. If you spend currency to buy stock you don't really lose any of your capital, in fact you often make more.

At least it isn't 50%. I bet if you had ruled the economy it would've easily hit 100% level.

It's not about figures, it's about theory and practice. Here're some questions you have to undestand first of all: 1. Факторы производства 2. Добавочная стоимость 3. Спрос/предложение 4. Факторы и механизм экономического роста 5. Источники роста внутреннего спроса. etc. You said enterprise assemling something from imported parts doesn't contribute to economy, so I concluded you just don't know enough of the topic you're trying to discuss.


Read again what I wrote before. It's not about beign profitable/unprofitable, it's about short-term and long-term investments. Do you feel the difference? I bet you don't.


There's a difference between developped and developping. Though I think flat tax is universally good thing.


In 1921 - yes, thanks to 4 years of your comrades in power. 3,5 years of war 1914-1917 didn't do any damage compared to revolution, civil war and military communism.

Define capital, then we'll talk.

Feanor

In fact it did. Mir, S-300, Mig-29 etc. etc. etc.

Does Russia have an energy plan? We need one a lot more then anyone else.... in America power goes out people get pissed off. In Russia power goes out, people die.

If you're investing in someone else's economy then your capital is creating jobs somewhere else. Given the base inefficiency of industrial production in Russia, that means that capital will have the tendency to flow out of Russia and into other economies. Which might be why all the oligarchs were in a hurry to get their money out of the country.

If I was in charge I'd find professional economists.

That's not what I said. What I said was it damaged Russian industry because it was aimed simply at siphoning off the money earned by our resource export, and prevent any real indigenous production from developing.

The difference between short term investments and long term? Yes. But the mechanism of privatization exists for the purpose of taking unprofitable government run enterprises, and making them profitable by giving them to someone with incentive to make them more profitable. In the early 90s we have the opposite. Privatization of profitable enterprises, and at a fraction of their cost, while the unprofitable ones were kept government owned, or just shut down. You're suggesting that the government invest, and subsidize, unprofitable sectors of the economy until they become profitable, and then sell them off? No thanks.

Military communism was probably the least of the problems, between half of the country fighting the other half, and 14 foreign nations deploying troops to intervene. The 3.5 years of world war was what weakened the Russian economy, and created a group of people, war veterans, who were very upset with the current regime and capable of organizing.

Means of production in any form.

Alex_Ivanov

These are hardly 100% imported technologies. But anyway, all good things in USSR were huge. The bigger - the better. Trucks, tanks, ships, icebreakers, planes and spaceships. Impressive list, but all that is hardly usable for everyday life of common citizen.


Not exactly, we have very high survivability. In 1998 my town lived more than two months (november - january) without electricity, heating and water. It's not something to be really proud of, I just remember it reading your words.

As I explained, sometimes you don't have a choice. The other option is extra-cash in economy leading to hyper-inflation.

And what would you do if they try to disagree with your economic ideas? Would you find another ones, not profressional, but with 'correct' views?

Look, for cash you get: 1. working enterprise, real production 2. jobs 3. taxes 4. new technologies 5. possibility to research and develop your own goods. What to you get by keeping the money? Color pieces of paper with foreign monarchs and presidents printed on them? By the way, it's not correct to say that all Russian industry, or half of it works on assembling foreign goods from parts, but even if it was so, who said one country should host entire production cycle? It's global economy, after all.


We're talking about different things as always. Today state-owned industries are hardly unprofitable, go figure. But this industries need long-term investments to modernize. Business obviously can prefer exploiting to modernization or developping, just making profit of it. For example, something like that we saw in oil industry (highly-profitable) in 1990s, that wasn't modernized ny oligarchs since soviet years.

It was easy to avoid, look below:

Yeah, it was better for them to sit home that night. Most powerful weapon in the world is Avrora cruiser. One blank shot caused 80 years of devastation in the whole country.

Feanor

I think we need to refine our debate here somewhat. We seem to have two opposite views of the situation. So I'm going to reply in a simpler and more direct way to what you said. Currently the Russian economy works as follows: the resource sector exports for foreign currency, which is then spent on getting foreign goods that come into the country in the form of prefab, are given a minimal completion in Russia, and then sold to the population. Essentially the basis of the economy is the resource sector. The foreign consumer good production, on a limited scale, is what keeps the quality of life fairly high (compared to the 90s) and high resource prices allow the government to stockpile foreign currency reserves, increase the military budget etc. Is this the economic model you are defending?