Manipulation of the ruble exchange rate destabilizes the economy

By Vestnik Kavkaza
Manipulation of the ruble exchange rate destabilizes the economy

Yesterday, the socio-economic plan of development of Russia for 2016 was discussed at a session in Gorki. The plan requires measures of response activity due to the worsening external situation and support for some industries. The document contains steps for supporting exports, including exports of high-tech and innovative products, and on a reduction of limits for the development of promising technologies. “Last year we unofficially called the plan ‘anticrisis.’ It was fair. Of course, the new document can be characterized by the same words. On the other hand, it differs from the previous one by the fact that, along with anticrisis decisions, it contains suggestions which are aimed at the stable development of the economy in the mid-term,” Premier Dmitry Medvedev said.

However, an Academician of the Russian Academy of Sciences, Sergey Glazyev, thinks that a way out of the economic depression cannot be found without a settlement of the problem of crediting the industrial sphere.

According to him, the average level of the production capacity utilization is about 60%: “40% of the production capacity is idle, including in the high-tech sectors, the proportion of idle capacity reaches 60-70%. And talk about the fact that these facilities are no good and they cannot produce competitive products do not hold water, because even newly introduced facilities that have been introduced over the last 10 years are idle.”

Glazyev says that today Russia's GDP would have to grow by 10% per year on the basis of existing production capacity; and business is ready for such a pace of growth: “The fall that we have seen in the economy in recent years is not due to a lack of opportunities for growth, but to the unfavorable macroeconomic situation,” the expert is sure.

There is an opinion that Russia does not have enough working people, but the expert doesn’t share this view: “Considering the high rate of hidden unemployment, which is estimated at 20% in various industries, taking into account the unlimited labor pool within the EAEC, given the large influx of migrant workers from Ukraine, we have no limit of labor either. I'm not talking about the huge possibilities of increasing productivity.”

Glazyev states that Russia also has no restrictions on raw materials: “If you look at how much we produce finished products from one ton of oil or from one cube of round timber, it is easy to see that we are producing several times less than other countries.”

“None of the factors of production that we have today limits the growth of the economy,” the Presidential Advisor concludes.

He reminds that the main factor of economic growth is technological progress. It accounts for the up to 90% increase in output in developed countries. “As for the intellectual resources, scientific and technical potential, utilization of this factor exceeds 25%. Talk about the fact that we do not have enough smart qualified experts, or have a lack of innovative projects, are refuted by the enormous emigration of highly skilled young people from our country. This emigration is growing, unfortunately. Last year over 300 thousand citizens left the Russian Federation. Among them there are a lot of talented young guys, who successfully implement their projects in America and Europe, and now also in Korea, Japan and China. Therefore, from the point of view of the scientific and technological capacity, we have enormous reserves that are unrealized,” Glazyev says.

According to him, the main problem that prevents ensuring the economic growth is associated with the unstable macroeconomic situation, with the high volatility of the exchange rate that varies and makes it impossible to plan investment processes, planning of foreign trade activities: “Chaotic random fluctuations of the ruble hint at a certain logic that allows to speculate, to make profit. This manipulation of the ruble exchange rate is extremely destabilizing for the economy and undermines the entire investment process and all possible technological planning.”