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Sovetnik Pravitelstva CWA, Tovarichestvo Palmsa, Inc.
Investment Bankers. Washington, United States of America.
The improvement of the Russian economy is of the greatest importance to the future of Russia and its participation in world economics. It is a matter of high priority to all private western investors because we wish Russia a good and strong future so it can become a good customer for our production. This purpose is the primary reason for Palms & Company, Inc. activities in Russia.
Some Russian Nomenklatura politicians claim that the West wants to see a weak Russia but this is nonsense. It is clear, from the many billion of dollars of international economic aid which, has been "donated" in the past four years, that the West loves Russia as much as any Russian does. Therefore please look at this question by reviewing the past history from 1991 to 1995.
The creation of a strong Russian economy requires, as an absolute necessity that the Russian population be enabled to reach their fullest potential productive capability. For this to happen capital, is a useful tool to combine with the labor of the population and the natural resource of the country. However, of far greater importance is the liberation of the economic activity and potential of the Russian population from economic suffocation by regulations and laws of the Nomenklatura and the formation of a real government of Mother Russia and its people. The greatest need is not capital but Freedom. The freedom of the population to make individual choices to FIRST produce GDP in a profitable manner and improve their personal economic lives. If this occurs then the population will grow in wealth to the point where it can support the costs of a government.
Unfortunately, Nomenklatura policy so far has taken the shortsighted approach to first provide for the Nomenklatura in a manner which takes from the people the tools of production (labor, capital and resources) through exploitation, high taxes, an counter productive monetary policy and exchange rates. In the last three years the Russian Nomenklatursa has used its power to establish taxes, import and export duties, tariffs, export license actions, VAT, currency regulations, customs regulations and other regulatory mechanisms in a manner which removes from the population all the economic incentives, as well as possibilities, for increased production of Gross Domestic Product (GDP). The nomenklatura blames the efeect of this theft on bad advice from the West which is nonsense. Also, through a combination of monetary policy which allows the printing presses in Perm to run day and night, the earnings from wages of the population have been reduced 75% compared to 1988, through inflation and devaluation of the exchange rate. This allows a financial elite, who have access to goods in Russia at prices below their real value in world-markets, to buy and export goods and realize their real value, while the population which produces these goods receives payment in wages which buy less and less due to Nomenklatura sponsored inflation activity. The result is that the population is being bled dry to support a financial elite.
As a result, a business which obeys all current Russian nomenklatura laws is doomed to bankruptcy. These economic policies are killing the Russian economy, resulting in decline in GDP production, unemployment, and the non-settlement of wages and non-settlement of obligations between industries. Banks are becoming bankrupt because loans cannot be repaid. Interest rates are higher than profits from using borrowed money. It is clear that Nomenklatura policy is destroying the economy and as a normal result evasion of nomenklatura laws is growing and the collection of taxes is perhaps only 30% of forecasts. Russian economic policy is creating a society of criminals because obeying these laws created by criminals is economic suicide for honest people.
These Government actions are possibly symptoms of fear of scarcity and lack of confidence in Russia itself by those in power. Fear, prompted by a false believe in shortages. Fear prompted by the belief in the principle of scarcity, which is the belief that one party's gain are at the cost of another party's loss and that there is not enough for everyone. It is based upon lack of confidence that Russian population cannot evolve and develop into a highly productive work-force that has the capability and potential to support, with its production, the consumption requirements of the country. And finally, it is based upon lack of confidence in the long term future of Russia itself. These are false beliefs, as the Russian population has demonstrated by its tenacity, perseverance, endurance and indomitable spirit. The Russian people can never be defeated economically if free to perform their tasks. But reform will never begin until the parasitical Nomenklatura is removed from the Russian people.
These are not the beliefs of the Russian population but of those who control the power in Russia. As a result the Nomenklatura is not at this moment an instrument of the will of the people but the instrument of a nomenklatura which is not a true government of the people but rather the tool of a class of exploiters. In this sense the Russian people have at the moment no government of their own in the classic sense of what is meant by government on this planet. But, if instead, the Russian were to be left free to accomplish their task, the Russian population could rescue their country from its financial difficulties and create a government ny 1999.
The mistake in thinking, which underlies these Nomenklatura actions, and is destroying the country, may be deliberate, prompted by greed and corruption, or accidental, resulting from ignorance of the normal functions of a market economy, which is to first create personal individual wealth of the general population, so that such personal wealth can then be used to support economic stability of the Mother Russia by the population. It is the norm that the population is the only one able to support the government. The reverse is impossible. The government, which produces nothing, cannot support the population. Government services are an expense which cannot be afforded by a poor population. Current government policy continues to ignore this reality.
As a result, more than $22 billion in available Western capital, which is specifically reserved for investment in Russia, sits idly waiting in Western Private Investment Funds until the barriers created by the Russian government can be removed. These funds cannot invest their capital as long as Russia has no government and the Nomenklatura policies of Russia would result in the unavoidable bankruptcy of investment projects.
Alternative Mechanisms to Private Investment Created by Western Governments
Some Russians believe Western private capital is unwilling to take the normal business and economic risks of investment in Russia. This is not true. What has prevented private capital investment has been the presence of Nomenklatura policies which introduce additional political risks which so heavily tax commerce that commerce cannot succeed even with the best management and strategies. So, while the absence of market norms prevent private investors from participating in the market, a temporary substitute mechanism of donating taxpayers budget money to Russia has been created by Western governments. This temporary mechanism of Western governments is much smaller than available private capital. Private capital should and could be at least ten times the amount of Western government capital. Such large amounts are necessary in order for Russia to reconstruct economically.
The main difference of Western government capital is that unlike investors of private capital, Western governments are willing to loose all their investment capital, even if the projects in Russia, which it supports with capital, go bankrupt. The thinking in the West in government circles appears to be the hope that perhaps Russia will learn about the true functions of the market place from the experience of loosing this money. Obviously this policy is possible only for governments and not for private investors who have obligations to individuals to protect their capital from loss. Tax payer money may be "spent" rather than invested.
This is a very great gift of the West to Russia, the willingness to loose so much in an effort to help a neighbor develop understanding. That thinking is certainly not fully appreciated nor understood by the Rusisan people, or they would not toelerate the theft of these gifts by the nomenklatura. Nevertheless it is an unprecedented demonstration of love which the universe will not ignore and to which the planet will ultimately respond. So there is reason for hope and optimism in this strategy, which at first glance, appears naive, but appearances can be deceiving.
You will have noticed that Western governments are providing budget money from their tax incomes to Russia through many organizations such as The European Bank for Reconstruction and Development, Regional Investment Funds established in Russia, and transfers of Western budget tax revenues to private investment managers, who have the experience to distribute these funds to Russian projects in a way that at least meets the norms for a logical business plan. These investment decisions are being made in spite of the unavoidable consequence of loss that continues to exist due to Russian Nomenklatura corruption and theft policy about commercial activity.
Only if the Russian people eliminate the Nomenklatua corruption in commercial matters and liberates and frees the Russian population create a government for Russia, will actual "investment" instead of "economic aid" become possible. So this is the situation I see at the moment. When finally the Nomenklatura brigns about the economic disintegration of Russia, the Russian people will be able to start to rebuild their country.
Dr. Pyotr Johannevich van de Waal-Palms, Sovetnik Pravitelstva CWA, Tovarichestvo Palmsa, Inc.
For discussions in Russian language
Comments: Russian General Directors will benefit from the advice of an experienced American Investment Banker in preparing investment capital proposals and dealing with questions about disclosures. we invite your inquiries
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