WHAT'S NEW ----- 
About The Portal To Russia
-----
Email Dr. Palms
On August 24th First Premier Oleg Soskovets said that the Russian Government will not "freeze" prices to solve the problem of default by industry in paying their obligations to one another. Apparently The Premier assumes that freezing prices would solve the problem of defaulted payment. In reality nothing could be further from the truth. The reason defaults occur in payments is because it is profitable not to make payments and there is no penalty for withholding payment. Russian companies keep their money in hard currency and because of inflation and devaluation of the ruble and high interests rates, the longer one waits to settle debts the less it costs. It is that simple. The "Government's" policy makes this necessary for survival.
But there is no "Government" as the term is understood according to world norms. Officials are acting in their own personal best interests and not the interests of the Population of the country. It has been clear for some time that there is an "Organization" in Russia, rather than a government, which has usurped the title of "The Government" and which manages and controls the country in a manner that totally ignores the interests of the Russian population and industry. It used to be called the "Nomenklatura". Compared to world norms, the size of the "Organization" and its "personal budget" is much too large. The gross national production of the Russian population cannot support such an "Organization". The price that must be paid to support 1.5 million "Organization" members living in riches, is so high, that it forces the remaining population of 149 million live to in poverty. This could be changed by true reform, by a real government.
Vladimir Kokorin writes in Rabochaya Tribuna that, "The non-payments crisis can only be resolved by either cutting back production or restoring incomes". This assumes inability to pay, which is not the case. It also assumes lack of demand, which is also not the case. The problem is that you cannot have a little bit of market economy, just as you cannot be a little bit pregnant. In such a mixed-system there is no way to price anything, including labor. How can you calculate the wage for a worker who makes goods for "Organization" orders for which the "Organization" pays with notes? The only solution that will work is if the "Organization" must pay in advance in hard currency for everything it orders. The "Organization" already understands that if it pays its bills by printing rubles, that it would bankrupt Russia and destroy the Moscow Interbank Currency Exchange. The rubles dollar exchange rate would soon exceed R10.000 =$1.00.
The "Organization needs the MICE as one of its tools of exploitation and extortion. The Moscow Interbank Currency Exchange is a part of the system of expropriation by the "Organization". First they accomplish this by requiring mandatory sale of 50% of hard currency earnings at 40% below world market exchange rates. This assures the "Organization" of access to real money with which to buy what it wants. By establishing the exchange rate at 40% less than the world market price, it assures itself of a 20% "tribute tax" on all export earnings before income and other taxes.
Second, my allowing some purchases of dollars by businessmen it supports the illusion that the exchange rate is a market rate. The "Organization" more than recovers this temporary loss of money, by imposing license fees on those who wish to buy abroad with these dollars and import, and also by imposing an import duty when such goods are imported. This permits the entire Gross National Product, whether exported, or used to import, or consumed domestically, to be heavily taxed by the "Organization for its budget and disguised as "measures to protect domestic industry" or something else, and then the businesses are taxed again with income taxes and other taxes on what is left. As a result there is no market economy or reform. The system is no different from Gosplan and socialism. It is called a free market economy, but it is changed back to socialism by rules, regulations and duty and tariffs which confiscate all financial results. In such a system, where all economic activity is taxed at more than 100% of profits, real "investment" is of course impossible.
That is why the "Organization" is settling its defense orders with notes, which will bankrupt its suppliers. You can always assume that when there is a choice between bankrupting the "Organization" or bankrupting the Russia population, the "Organization" will chose to bankrupt the Russian population. That continues to happen because the "Organization" is not really a government at all but usurps the power of a government for its personal gain. This is what has been happening the past 24 months and will continue to happen as long as the population of Russia tolerates the yoke of the "Organization" instead of demanding a real government.
When the "Organization" takes money for itself without paying for it, the cost has to be paid by the Russian people in lower wages or delayed payment of wages. The "Organization" in this way transfers the cost to citizens and industry. Industry passes it on to their suppliers, and to the worker in unpaid wages. The worker has no one to pass it to. Of course Russian business managers also protect themselves. They can pay themselves millions in high wages each month. In most of the world that would be illegal. The business would be declared bankrupt, the salaries would be taken back, and the bills and wages paid. The problem is that in Russia, which has no rule of law, 1.5 million people have become parasites and the rest cannot survive. Only Russian businesses which export for hard currency and keep their money abroad can survive in such a system. The conclusion, which inevitably must be faced, is that the "Organization" contradicts real life and doesn't work. Someone has to pay for the "Organization". Right now the Russian industry and population has been chosen by the "Organization" to pay. In most of the world this is called injustice. Thankfully it cannot last and will end in self-destruction. The issue is simply this. People who know how to make money are not going to give total authority to anyone else to take it away from them. They will stop producing. This is what has happened in Russia.
Mr. Kokorin suggests that if all profits were passed on to the state you would have a healthy government. I remind him that Russia tried that already the past 70 years. Until the "Organization" is replaced with a real Government, there is no State except in the hearts of the people. A wealthy Russian government is of no benefit to the population.
The first interest of the "Organization" is to take care of themselves. Accordingly, the "Organization" uses import duties as a tool of extortion to get payments for itself. It is a form of hidden taxes on the Russian population. The proper use of import duty is to protect domestic industry from competition and not to generate revenue for the "Organization". Of course officials claim that protection of Russian industry is their motive for imposing import duties. But there is no industry to protect. Russia is a country that cannot feed itself and relies on imports for a sizable portion of its food supply in major cities. If Russian citizens want to eat they must first pay 15% import duty to the "Organization" for their food. If they want to drive a car they must first pay R40 million import duty to the "Organization" for the right to buy such a car. If Russians want to travel in Boeing jets they must first pay R60 billion rubles in import duty to the "Organization" for the right to import an airplane. So it is true that if you live in Russia you must pay "Organization" officials for everything you need for survival. Import duty does not protect Russian industry. If the "Organization" wanted to protect industry they would transfer duty payments to industries. Import duty feeds the "Organization" hard currency. The "Organization" policy is to let anyone compete with Russian citizens who wants to as long as they support the "Organization" members. If you pay the duty you can import as much as you want and no one says anything about protecting Russian industry after such payment is made to the "Organization". Real protection would be an embargo or quotas on imports.
The "Organization" insists that first it must live well and comfortably. Only after that is done can Russian citizen receive permission from the "Organization to try to make progress in their economic lives. You cannot ask the source of the problem to fix the problem. You would be asking the "Organization" to destroy itself and become a real government. No "Organization" in any country has willingly ever done that. The actions you are seeing in the "Organization" has nothing to do with "government" or reform. Holding the Russian people for ransom and extorting their production labor, is not "public service". If you want to export production you must pay the "Organization for permission at an "export license auction" In fact for almost anything you want to do with the life God gave you, you must pay these officials whom you have elected. Was that your intention when you elected them? Was it your decision that the elected should be rich and the electorate should be poor. Is that the decision of your vote? Everyone used to work for the government and in those days more was shared. Now less people work for the government but less is shared. The problem is those who are not receiving a share are being asked to support those who are receiving a share. A few with power are taxing the many so that a few can live well by exploiting the population.
Does The Organization have an unlimited claim to your labor and your obedience and loyalty? It is clearly against the best interests of the Russian population when the "Organization" charges a duty for importing a product of which there is a shortage and for which there is an emergency demand. In real life such an action is a criminal action. It is morally corrupt.
Andrey Illarionov in his recent article in Izvestia correctly concludes that Prime Minister V Chernomyrdin was inaccurate in reporting a stabilization in industry. Instead in reality industry continues to decrease production. As long as "Organization" policy levies taxes, such as import duty, that together exceed 100% in total, there can only be a continuing reduction in production. "Organization" policy guarantees that everyone will operate at a loss and therefore that production will continue to fall. Only by removing the "Organization" from the pockets of the population can there be reform to a market economy and the creation of a Russian government. Presently Russia has no reform policy or government. Its policy has the purpose to drain the population to support the "Organization" members (officials).
Logically the only real reform would be to free industry to produce and earn large profits and raise its workers wages from $200,000 rubles to R4 million per month. Then workers could consume the domestic production increases. In such a variant, the "Organization could receive a tax revenues of 12% of GDP (Gross Domestic Product), which would be more, at a lower rate of taxation, than it receives now under the present rates, and this would support a
real government, without the necessity for any import duty or export license fees or any of the other taxes, which are killing industry and the population. But such a policy requires that the "Organization" become like, and act like, a real "Government for the people" and at present the bureaucrats do not have enough confidence in either their country, or their people, or each other, to adopt such a policy at the risk of their own personal wealth. Everyone is waiting for someone else to become honest first. There can be no reform until the reformer become honest.
Based upon world norms, predictions can be made about the effect of this present "Organization" policy and absence of a real Russian government. The wheat harvest will be 25 million tons less than last year. Wheat imports will be required despite "Organization" protestations to the contrary. More than 20% of the crop will not be harvested. More will rot before it can be consumed, due to lack of storage. The "Organization" asks that the farmer trust them and that wheat be stored now and that they will discuss prices later. Is the history of the "Organization" one that has earned and therefore deserves the trust of the farmers?
Vice Premier Aleksandr Shokin says the "Organization" will pay defense industry orders with 600 billion rubles in notes instead of money. This will bankrupt those who receive the notes. The legal use of notes is before a debt is incurred. Forcing notes upon a company after a debt is due is rule by force. Notes that can not be exchanged to cash, from a bankrupt issuer, is not payment.
Only half of 1994 taxes will be collected and the deficit will exceed many times the predictions. People are fighting to be among the economic survivors of this parasitical policy. In such a variant no one volunteers to support the "Organization". It means economic suicide. In these matters the advice of the World Bank has been most unrealistic. It suggests if everyone obeyed the "Organization" conditions would improve. That is illogical. Feeding a parasite never improves the condition of the host. Oppression doesn't work and it should be resisted not supported.
Contrary to government predictions the ruble will fall against the dollar in 1995 from R2,156 to at least R9000. The reason industry production is dropping is not competition from imports, but the cost of supporting the "Organization" and the absence of a real government. The "Organization" does not explain to the Russian people the true understanding of notes. The printing of notes by Gozbank is in itself a force-majeure form of default and non-payment.
None of the statistics being reported are accurate. There is more business conducted unofficially than officially. No one knows the accurate figures any more. The combined parasitical "Organization" behavior of import duty, export licenses, and taxes are creating the non-payment problem and non-payment of wages problem. It is impossible to obey unjust laws.
What has become clear to every thinking person is that Russia has no government and there is no reform and there can be no real privatization as long as the "Organization" has unlimited power over the economy. Russia only has an elite class, posing as a government, which has a policy to exploit the population to assure survival of the "Organization". They cannot succeed because the Russian population have little blood left to be sucked out of them. Soon the "Organization" will have killed the goose that lays the golden egg.
Why hasn't the Russian public heard of this from western sources? While it is West's objective to bring about an improvement in the lives of the Russian population, the West recognizes that the "Organization" has the total power of Government. The West needs the cooperation of the "Organization" so it will have time to educate the Russian population. Therefore it cannot criticize the "Organization" for its lack of functioning as a government. Therefore the present situation is still one in which both the Russian population and the West are being blackmailed by the "Organization" into paying tribute to the "Organization" for permission to implement an improvement in the lives of the Russian people. In time, as education, training and power of the regions grow, and they learn how to identify the mechanisms by which the yoke of the "Organization" can be removed from their backs by evolutionary means, the situation will change. Until then the West does not speak to the "Organization" about its concern for the Russian population, except in a very soft voice. Only an enlightened and informed Russian population can elect the type leadership that is truly representative of the people and that can take up the work that is in the interest of the population. It is the patriotic duty of every Russian to educate himself to be able to vote in an informed manner for his country. When that has been achieved, and when politicians believe that their actions in support of the population will be understood and supported by the population, then patriotic and honest leaders can be expected to take up the fight on behalf of the population against the corrupt elements of the "Organization".
The future of Russia is in the hands of the population and it would seem that the "Organization's" days are dependent upon how quickly the public learns to exercise its responsibilities and rights. "People get the kind of government they deserve". True economic and political liberty must be fought for and defended. The alternatives, when viewed in historical perspective, are dismal. After so much pain and suffering surely the Russian population will chose to move forward rather than back to the past. The past may have been better economically, but was nevertheless decaying and declining. It also would have ended where we are now. What we have now is a chance to move forward. We didn't have that before. Down deep in everyone's heart that fact is recognized. The indomitable spirit of the Russian population is reason for optimism. The reputation of the Russian population for patience in bearing hardship is reason to believe it will could take another two years before the "Organization" loses power. "The "Organization" can fool all of the people some of the time, and the "Organization can fool some of the people all of the time, but the "Organization" cannot fool all of the people all of the time."
Go to TOP of this page
RETURN to Palms' Lobby
RETURN TO HOME
PAGE