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Who is this Mr. Romney: a new remedy for the old ailment or a new symptom of the old diagnosis?

In November 2012 we are anticipating the sequel to the much-talked-about drama serial known as the US elections. The air is going to be filled with celebration:  flags, ribbons, ardent slogans from the pulpits and reciprocal exclamations from the crowd. Having completed the regular public debate ritual, US voters are going to line up in front of ballot boxes in order to entrust the urns with their most precious possession, namely their hopes for a brighter future. And judging by what is now happening to the American middle class, they hardly have anything else to entrust them with [1]. The danger of the middle class’ extinction is being seriously discussed in the US. One can think of some old truism about living in debt being fun until it is time to pay up. Households, corporations, banks, governments are all stepping up their debts while the resentment of the masses is growing bitter upon a realization at the outbreak of the on-going crisis that if there is a binge, there is going to be a hangover.

In times like this, the political farce gets unfurled in the most ruthless way. Any means which serves the purpose gets put to use. As highly-paid professional windbags publicly compete in slinging mud at one another, the voters, disunited into small interest groups, get distracted from the important matters and rail furiously for farfetched reasons.  

I would probably say that the novelty of the current political season in the US is Mitt Romney, a well-to-do Mormon with experience of a businessman and a governor. The American political machine has once again demonstrated to the whole world its ability to come up with unexpected arrangements. The winner of the previous season, the African American under the non-Anglo-Saxon name of Obama, is no longer a thrill. He already acquired the status of a political old-timer and managed to lose some of his appeal. Now the public is presented with a new office-running novelty – a Mormon millionaire.

It is not his millions that became the talk of the town (well-to-do candidates for high political positions are common in the US), but his religion. Romney’s opponents did not miss the opportunity to ridicule his faith. However, any sound-minded individual understands that religion does not occupy the number-one position in a politician’s list of priorities – a politician is not paid for religious views but for protecting somebody’s interests.  

It is also obvious that it is not theological preferences that will decide the outcome of the ultimate battle between Romney and Obama for the top position, but the future of the US economy. In crisis, this topic gets repeated more often thus implying that the number of economic promises pronounced from the lofty pulpits is going to increase. It would be interesting to count how many times during the debates each of the candidates will resort to some variation on the unofficial slogan of Bill Clinton’s campaign in 1992 – “It is the economy, stupid». [2]

Any unusual phenomenon, which disrupts the conventional order of things, is either a precursor of a change or an inertial consequence of existing problems. I am wondering what Mitt Romney is all about from this standpoint. Who is this Mr. Romney: a new remedy for the old ailment or a new symptom of the old diagnosis?

Mr. Romney’s official site will dazzle you with promises [3], the main one being a sharp turn away from the «current course», by which policies of the present occupant of the White House are implied. Romney recognizes the need to boost employment, and puts this issue as his number-one priority in his economic policy.   

So what is he suggesting?

1.       Tax cuts;

2.       Further deregulation;

3.       Opening new external markets for US industries;

4.       Producing more domestic energy in order to cut costs;

5.       Greater “flexibility” of the labor market;

6.       Retraining workers;

7.       Government spending cuts.

Honestly, there is nothing new here – it is the “good” old neoliberalism, which is called neoconservatism in the US. It is all in line with the western economics manuals, which Mr. Gaidar and his bunch used for reforming us in the early 1990’s. That same economic policy with certain alterations is preserved in Russia until this day. The local “Chicago boys” – the Russian pro-western neoliberal monetarists, whose notorious heritage we can still see today – had quite a fancy for such a policy.

Interestingly enough, Romney and the Russian neoliberal reformers have the same flaws in their economic reasoning. Allowances must be obviously made to the United States’ position as the global hegemon. There is a growing suspicion that the program that Romney revealed only constitutes a portion of the real agenda because a set of mutually contradicting items in it make it unfeasible in its current form. What are the contradictions?

Taxes vs. Budget Deficits. Tax cuts for the sake of economic growth and lower unemployment make sense, but budget deficits due to tax cuts do not. Over the last decades, the US budget has been passed with a constant deficit, which gets monetized by the Fed. Many economists attribute the growing public debt in the US to the lack of funds due to tax cuts. The debt increment started accelerating astronomically in the early 1980’s, precisely when neoliberalism as politico-economic project came into existence. That very period was also marked by the advent of Republican Ronald Reagan at the White House where he convincingly played the role of a US president as he advocated tax cuts for the rich. And reaganomics – the economic constituent of the neoliberal theory – received this informal name after him.

In other words, upon taking office, Romney will be able to cut taxes only by increasing public debt, which contradicts his commitment to cut the latter and teach America to live within their means.

Austerity vs. Growth. Budget deficits can be lowered by cutting government spending. Romney’s reasoning that supports this initiative is based on the well-known maxim that one must live within one’s means. This very principle is noble and proper, but the way the Republicans are going to implement it does raise questions. Thus, Romney insists on cutting non-security spending while it is security spending, which takes up the largest portion of the budgetary expenditures. The second largest is the servicing of the government debt. In the US federal budget for the year 2012, the security expenditures planned at $881 billion make up 23.82% of the total expenditures, the deficit working out at $1,090 billion. We can hardly expect Romney to cut security spending at least because his promises to maintain the US geopolitical standing and thereby show the world an American equivalent of Kuzma's mother are going to require significant financing. On the other hand, it is possible to cut the expenditures on the police, firemen and teachers as well as social programs like the recently adopted law on the mandatory medical insurance [4].

I agree that government spending does not automatically lead to economic growth. But the problem is much more profound than what we hear about it from the American establishment in general and Mr. Romney in particular. It is not a matter of whether to run into more debt or not – it is a matter of whether households’ aggregate solvent demand is sufficient to finance a way out of the economic impasse or else the government will have to make up for the deficiency. In this case, there are no other options but three: to raise taxes for the well-off, run into more debt or “print” more money. The last option does not only threaten to push up inflation but also increases the budgetary debt load since the Fed in actual fact issues money by monetizing the public debt. If national governments could do it without the involvement of their central banks, the currency issue would be quite a stimulus for the internal demand, but it does not mitigate the danger of inflation. So whether Romney likes it or not, the US public debt is going to grow bigger.

Internal growth vs. geopolitical expansion. In words, Romney believes that internal resources will make economic growth possible. In accordance with the neoliberal doctrine, the main task is to restore the functioning of business. It is believed that once supply is restored, demand will follow suit automatically. Encouraged by another tax cut, entrepreneurs should allegedly start hiring, and the country’s economic motor should kick start itself – this is the so-called “supply-side economics”, which currently holds sway over economists’ minds. But there is an alternative approach. The “demand-side economics”, represented by various schools, underlines the impossibility to boost the economy by stimulating supply unless the solvent demand is ready to foot the bill. Economists who share this viewpoint are speaking of a widening gap in the US between the growth of average wages and the growth of productivity, which has become evident since the mid-1970’s [5]. The old Karl Marx called this phenomenon a crisis of over-production, the essence of which is quite simple – wages grow more slowly than productivity and cannot pay for the ever-increasing supply of goods and services [6].  And the US households’ growing debt load only confirms this concept. As a result, we see sagging sales, falling revenues, lay-offs, bad debts, banks refusing to lend, and finally a depression.

One can draw the same conclusion about the falling solvent demand in the US economy by analyzing the statistics of income distribution among the population.

Income Distribution in the US from 1982 to 2006 [7]

Top 1 percent
Next 19 percent
Bottom 80 percent

Interestingly, the lowest rates for the majority of the population occurred at the beginning of the Great Depression in the late 1920’s and before the on-going crisis in the early 2000’s. And it is not a coincidence. The recent drop started in the early 1980’s upon the emergence of neoliberalism and is still continuing.

Can we expect that American debt-ridden consumers will start spending their evaporating incomes with renewed energy in order to bring up sales to the pre-crisis levels? This is at least naïve. According to economist Mikhail Khazin, the US household expenditures over the last 30 years have exceeded household incomes by 20-25% [8]. And Romney also seems skeptical about the internal economic growth in the near future since expansion by American industries into foreign markets has been put on his economic agenda. In other words, does that imply that, should internal resources turn out to be insufficient for economic growth, we are going to see new geopolitical crusades to expand markets and boost sales? Do the American elite realize that otherwise it will be difficult to restore internal consumption pre-crisis levels? I think they do.

Reindustialization vs. outsourcing. As Boris Kagarlitsky writes in his book The Revolt of the Middle Class, the very notion of a middle class appeared in the middle of the 20th century as a result of the implementation of Keynesian prescriptions in the economic policies of the West. By redistributing a portion of incomes in the economy for the middle class’ benefit, the elite managed to ensure high consumption levels for various goods and services. The western ideologists did not miss the opportunity to demonstrate this achievement as evidence that the West was at a more advanced stage of socio-economic development in comparison with the Soviet “socialism” while, in essence, it was a left-center compromise caused by the fear of popular discontent following the Great Depression.

When the elite’s fears finally subsided, a gradual right turn started bringing about falling incomes and growing inequality among the American common folk. The «fattening» of the middle class was no longer in fashion. In order to cut costs, corporations began relocating production facilities to countries with low wages. This resulted in the United States’ love and hate relationship with China where millions of workers were ready to toil for peanuts while China’s internal solvent demand remained immensely low.   

Now that the global demand is falling, China is trying to stimulate internal consumption, but this raises all production costs. So the US has already started talking about the production facilities moving back from China [9]. It is still too early to talk about the US reindustrialization. It is hard for me to imagine that the debt-ridden US middle class should consent to wages low enough to start attracting jobs in large numbers back from the third-world countries. Also, I cannot get rid of an impression that Romney’s initiatives to limit the clout of trade unions and improve workers’ re-training programs are all aimed specifically at labor cost reduction. The labor market’s “flexibility” – which, in essence, simplifies the hiring and firing of employees – can lower job security, intensify competition among the workforce and bring down wages as a result.

I think turning the US back into a leading industrial superpower in the near future will be quite problematic since a massive industrialization will require a significant reduction of the working population’s living standards. Is the American public ready for such a turn of events? Will they be able to increase spending and pay off their loans as their liabilities continue to rise merely because of accrued interest?

All initiatives aimed at reducing the middle class’ income in the US economy are likely to raise questions from the international community. As you know, the demand in the US is the largest in the world and “feeds” corporations in a lot of countries. Neither China alone nor all the BRIC countries put together have so far been able to offer the globalized transnational world consumption levels comparable with those of the US. If global consumption does not rise to the pre-crisis levels soon and continue to grow further, the danger of major financial meltdowns is going to remain acute because the world still has enormous amounts of debt previously extended in hopes that global demand should continue to expand.

When demand declines, economics manuals turn into worthless paper waste. The neoliberal economics deals mostly with the expansion of supply and believes that demand expands automatically. Our government and corporate strategies, educational programs, politics and ideology are all based on this view of the world. And Romney is one of the best representatives of this system. So, is Romney a remedy or a diagnosis? Alas, only a diagnosis. He is too symptomatic of his epoch to symbolize any kind of renewal. All his convictions on economics and foreign policies were voiced before. Carbon copied from previous republican candidates’ programs, they sound more like populist chants than a real action plan. Romney is obviously trying to win the favor of the American conservatives. You can hear him talk about “the American dream that built America” and “the spirit of entrepreneurship inherent in the American nation”, but all his talk of self-sufficiency is coupled with geopolitical rhetoric. Romney does raise the issue of the US public debt, which is now approaching $16 trillion, but fails to bring up the issue of the growing household debt, which financed the growth of corporate incomes over the last decades.     

A politician who tells his or her voters that their incomes are going to decline does not stand a chance in politics. Instead, a politician must shine with optimism and make believe that he or she knows how to fix things. This is exactly Romney’s case. He is a slave to the American conservative ideology of success. In reality, he can offer even less than Obama, who is striving to pass some center-left initiatives. From the ideological stand point, Romney is hog-tied. The policies he was pursuing as Massachusetts governor were more socially oriented in comparison with what he is promising to implement if elected US president. He is now trying to prove his hawkishness, but is only turning the steadily impoverishing middle class away.   

Boris Anisimov

P.S. The original article in Russian can be found at


Our historical experience has obviously taught us nothing. It is striking that the Russian elite’s desire to continue copying the West is only increasing! It is obvious that the neo-liberal policy has failed miserably, not only in the peripheral countries, but also in countries that were set as an example to us for the last 20 years. The imminent bankruptcy of the western economies clearly underlines the ideological bankruptcy of modern capitalism. It is natural to expect that companies, experts, international institutions and public officials admitted to feed at the global financial "trough" will fall over themselves to defer the reckoning. It may be quite possible that the next bubble will convince speculators all over the world that the crisis is over, and they will run with increased zeal to invest their money in respective assets and their derivatives. Thus, the illusion of their effectiveness will be preserved.

The Russian compradore elite are not going to stand by idly. Interestingly, the neoliberal convictions persist in their circles despite the regular bouts of anti-western rhetoric from the top political leadership. Unfortunately, the philosophy of their economic policy remains unchanged. We are hearing about privatization and social spending cuts again, while the state continues with its previous policy of reduced involvement in education, healthcare, R&D, etc. The crisis revealed overkill of dogmas pertaining to an unregulated, chaotic capitalism in the minds of economic professors and their students, but this doctrinism has officially been left undisturbed.

In many respects, the Russian elite are undertaking to imitate the West even more energetically because their legitimacy derives from the West. In its current form, Russia is a pro-Western project. The political and business elites’ unwillingness to trouble themselves with Russia’s autonomous socio-economic development is due to their overwhelming fear of falling into disgrace with Western "partners". Is it possible to imagine a Russian oligarch, who voluntarily gave up the comforts of Parisian hotels and services of London banks, yacht voyages in the Mediterranean and vacations on the French Riviera? After all, it was the possibility of moving capital out of the country and living in clover on it without any worries about a place under the sun that looked so enticing to the Soviet apparatchiks in the late eighties. This determined the further development towards the looting of state-owned property, the rupture of economic ties, the re-orientation of the existing economic system to the global market forces beyond our control.

Again, the Russian elite are legitimate as far as the West considers them as such. Therefore, losing face before Western "partners" is more dangerous for the safety of their capital than losing face before their own people. All the declarations in Russia’s Constitution that "the only source of power in the Russian Federation shall be its multinational people" (see the Constitution of the Russian Federation, article 3, 1) are merely words. In fact, the source of power is transnational capital, which "exercise[s] its power" "through the organs of state power" among other methods (see the Constitution of the Russian Federation, article 3, 2).

I am convinced that the number one task for us is to define a new, more rational socio-economic policy. To my mind, the course we are pursuing is very irresponsible and dangerously short-sighted. Taking into account the objective conditions, in which we live in our country, I am inclined to believe that the solutions to the most critical problems can exclusively be found as part of the leftist-patriotic initiatives. Solutions have not yet been found, but it must be clear to us that, within the framework of the current neo-liberal paradigm of development, these solutions shall never be found at least because this paradigm spares no costs to preserve the status quo, hence fails to address systemic issues and is content with a superficial review of the problems. Without raising proper issues, one cannot find proper solutions.


Наш исторический опыт нас явно ничему не научил. Удивительная вещь – стремление нашей элиты продолжать копировать запад только усиливается! Очевидно, что неолиберальный курс провалился с треском не только в периферийных странах, но и в странах, которые ставились нам в пример последние 20 лет. Неминуемое банкротство западных экономик ясно подчёркивает идеологическое банкротство современного капитализма. Естественно ожидать, что компании, эксперты, международные институты и государственные чиновники, допущенные до мировой финансовой «кормушки», будут лезть из кожи вон, чтобы отложить необходимость платить по счетам. Вполне может быть, что какой-нибудь очередной пузырь убедит спекулянтов по всему миру в окончании кризиса, и они с усиленным рвением побегут вкладывать свои деньги в соответствующие активы и производные инструменты. Тем самым, иллюзия их эффективности сохранится.

Наша российская компрадорская элита не будет стоять в стороне. Интересно, что в их кругах сохраняются неолиберальные взгляды вопреки регулярным приступам антизападной риторики у высшего политического руководства страны. К сожалению, философия экономической политики остаётся неизменной. Мы опять слышим о приватизации и урезании социальных расходов, а государство продолжает ранее взятый курс на снижение своего участия в образовании, здравоохранении, развитии науки и т.д. Кризис обнажил засилье аксиом нерегулируемого, хаотичного капитализма в головах профессоров-экономистов и их студентов. Но это доктринёрство на официальном уровне осталось непотревоженным.

Элита всё энергичнее пытается подражать западу во многом потому, что черпает свою легитимность именно там. Россия, в её нынешней форме, - это прозападный проект. Потому-то политическая и деловая элиты не желают заниматься вопросами автономного социально-экономического развития нашей страны, что как огня боятся немилости со стороны западных «партнёров». Возможно ли представить себе российского олигарха, который добровольно отказался бы от комфорта парижских отелей и услуг лондонских банков, прогулок на яхтах в Средиземном море и отпусков на французской Ривьере? Ведь, именно возможность вывести капиталы и жить на них припеваючи, не опасаясь за своё место под солнцем, прельщала позднесоветскую номенклатуру. Это и определило направление последующего движения в сторону разграбления государственной собственности, разрыва хозяйственных связей, переориентировки существовавшей экономической системы на конъюнктуру неподконтрольных нам глобальных рынков.

Повторюсь, что российская элита легитимна настолько, насколько запад считает её таковой. А значит, для сохранности их капиталов потерять лицо опаснее перед западными «партнёрами», чем перед собственным народом. Все слова в нашей конституции о том, что «единственным источником власти в Российской Федерации является её многонациональный народ» (Конституция РФ, ст. 3, п. 1), остаются всего лишь словами. На деле, источником власти является транснациональный капитал, который «осуществляет свою власть» в том числе и «через органы государственной власти» (Конституция РФ, ст. 3, п. 2).

Убеждён, что задачей №1 для нас является определение нового, более разумного социально-экономического курса. Нынешний курс мне кажется крайне безответственным и преступно недальновидным. Учитывая объективные условия, в которых мы проживаем в нашей стране, я склонен полагать, что ответы на наболевшие вопросы могут быть найдены исключительно в рамках лево-патриотических инициативи. Ответы ещё не найдены. Но нужно понимать, что в рамках существующей неолиберальной парадигмы развития, эти ответы не будут найдены никогда хотя бы потому, что она любой ценой стремится поддержать статус кво, а значит не задаётся системными вопросами, довольствуясь лишь поверхностным изучением проблем. Не задав правильного вопроса, получить правильный ответ невозможно .

Борис Анисимов


That’s why the emergence of an adequate crisis theory in the developed world is not possible even hypothetically.

Over the weekend, the lectures in “neoconomics” have been held for the first time over the last two years. During the lectures, the audience asked various questions such as why did the new interpretation of macroeconomics and, respectively, the crisis theory appear in Russia rather than the US, the UK, Germany or anywhere else. We have answered that question in one way or another, but it makes sense to address it one more time.

So let me remind you that the respective discipline – since its emergence in the late 18th century – has been called “political economy” for quite a long time. For one hundred years, its authors recognized that they were dealing with a social science, which is fundamentally connected with the interests of a large group of people who paid a close attention to its development so that it does not become adverse to their interests. It is hard to imagine a similar situation in mathematics. It did exist in physics, but it was of a particular nature and had a positive impact on the science itself – the enormous investments in science when nuclear arms were being developed.

The problems obviously start with Marx, who was the first one who proposed a thesis that the duration of capitalism was in essence limited, and who substantiated the mechanism of class struggle. Few people would be interested in such a scientific discovery besides experts, but the creation of communist parties and the emergence of the USSR did awfully frighten the capitalist world. So it began a campaign for a fundamental change in all social sciences with a purpose of finding (or fabricating) evidence of capitalism’s eternal existence. This effort resulted in the emergence of what we now call “economics”, while “political economy” was expelled from the academic curricula so that there would be no remembrance of it. By the way, such a transition took only two decades in Russia – do you happen to know any university or college that teaches political economy these days?

As part of the above mentioned effort, various economic and sociologist schools have come into existence (e.g. Monetarism and Keynesianism), and we now have the privilege of witnessing their combat with one another. But these schools are still based on the same common language developed over the last 100 years. It does not envisage any concepts of Marxism or political economy in general, which are capable of grasping the fact that the paradigm of technological progress can be limited in time.

It must be noted that the whole framework of the main economic school of our time, namely monetarism, was to a large extent created to address a particular issue. In the 1970’s, when the issue of money became the only way out of the economic calamity, there was a need to justify the precedence of the financial elite, which forms a separate group among the modern-day capitalist elite. It was their interests that the monetarist theory was developed to protect. After the implementation of Reaganomics focused on the credit-driven boosting of consumer demand, principles of Monetarism began to spread across the world.

And this is the root of problems we are witnessing now. At the same time, we realize that the objective issue which underlies them is the fact that the economic model based on the paradigm of technological progress has come to its end. But the common language of Western economists and their adherents does not allow for temporal finiteness of the model. Many decades ago it was made that way on purpose as part of the effort to fight Marxism. For this reason, neither monetarist nor Keynesian versions of that common language are adequate to reflect the actual causes of the on-going crisis.

Note that Marxism faced a similar problem. Let me remind you that Adam Smith in the 18th century described that technological progress is about intensifying division of labor, which in turn requires market expansion (even Pushkin in his Eugeny Onegin mentions some things in this regard). But at that time this was not yet a topical matter. It became very critical in the late 1800’s and early 1900’s, when the three technological zones of the time (i.e. Britain, Germany, and the United States) were no longer capable of extensive expansion thus bringing about reduction in capital efficiency. This resulted in a crisis, which was later repeated in the 1930’s, the 1970’s and is going on now.

Besides, it was Rosa Luxemburg who was defending Adam Smith’s position, while Lenin was her opponent. The reason for Lenin’s opposition lay to a large extent in political subtleties of a situational nature rather than in the uniqueness of his views on economic processes (he had never been an economist). As a result, Rosa Luxemburg’s works received no further attention in the USSR. And the theory (which could have helped the USSR to come out victorious in the Cold War, which the Soviet Union was close to winning in the early 1970’s) was developed mostly by efforts from Mr. Oleg Grigoriev in early 2000’s. The main point of the theory is that further intensification of division of labor is impossible in the conditions of globalized markets. In other words, we have returned the theory to its starting position, initially outlined by Adam Smith and later abandoned in the late 1800’s and early 1900’s for ideological and political reasons.

But the underlying issues are still there. In particular, the language of “economics” still refuses to allow for the “end” of capitalism. So its very framework will never allow one to arrive at conclusions similar to ours. This explains why we are witnessing a very peculiar thing – five years ago adherents of Western schools of economics would call our conclusions lunatic, but things have changed now. They acknowledge that our description of the crisis is generally correct, but they are absolutely clueless as to how we came up with such conclusions since there are certain intermediate points in our conclusions, which their scientific language cannot describe
The consequences of this are quite interesting. First and foremost, we must realize that the Western schools of economics will never be able to describe the on-going crisis and respective solutions properly since that will demand to dismantle their own fundamentals and think outside the boundaries. The historical experience shows that it can take not less than decades to do that. So the economic science will be developing outside the Western world within the next several decades.

Besides, if the West wants to play a serious role after the crisis, they will have to provide an objective description of their problems – in other words, they will have to take a look from the outside. But that requires people who view things outside their own paradigm. From the civilizational point of view, that means the West must expand their fundamental principles even though they may be required to sacrifice some of their identity. It is a matter of life and death for the West, but it is evident they are not quite ready for that.

It must be mentioned that, for example, inviting us over to, say, Harvard to work will be of no avail because we are going to face nothing but obstructions from the Western scientific community. Consider the way our theories are treated in such institutions as, say, New Economic School (NES) in Moscow, Russia. I regularly refer to it as a totalitarian sect because we must understand that, as a clone of Western institutions, it has no other option but to strive to “outpope the Pope”. Any attempts to “implant” us as researches in Western think-tanks will lead to similar results – there must be parallel scientific schools, but that is only possible, in the broad sense of the word, outside the West.

In conclusion, I would like to mention that our research on the theory of the crisis is only part of the necessary work to be done because it is not enough to simply grasp fundamentals. It is necessary to create a new scientific language capable of describing the modern world as a whole. To me, that seems to be the primary goal for social sciences today.

Mikhail Khazin

Read the Russian original here