I refer to Mike's posting of the article in today's Independent.
To reply briefly to the question above: It certainly seems like it.
Here's a country with a huge chunk of the world's resources and with a
superbly educated workforce falling through the grating.
The paradox is that, though it seems to be breaking up as a country -- that
is, as a nation state, it never really made it in the first place. Russia
qua the USSR was really an old-fashioned empire which existed by exploiting
its colonies and building an inpenetrable wall around itself. It never
developed as a nation-state able to give its citizens the freedom to travel
to, and trade with, the rest of the world. Russia, rather like the British
Empire and the Roman Empire and many other empires before it, is now
discovering that the whole assemblage cost a great deal more than it was
worth.
The curious thought that occurs to me is that, despite the appearance of
near-total breakdown, both politically and economically, Russia may
possibly short-circuit what would have been its normal development into an
orthodox nation-state, and proceed into a post-nation-state somewhat faster
than we're doing. As already mentioned, it has a highly-educated workforce
and there are resources a-plenty for it to do so. It could pick itself up
by its bootstraps pretty quicky once it has a proper financial system.
Russia is supposed to be bankrupt but, fundamentally, this is probably not
so. Its debts of something like $200 billion to the Western world are
covered by the hard currency that its oligarchs and Mafia have illegally
got out of the country and placed in Swiss banks and elsewhere. In theory
-- if Yeltsin/Chernomyrdin/etc really wanted to -- it could be got back,
but the Government really has no chance of pulling this off politically.
Only terror methods could do this effectively and those times have gone.
Western banks such as Barclays which happen to have been foolish enough to
trust such an inept government of the last five years will have to take the
loss.
Its internal debts -- the shortfall of the Government's payment of wages to
its own employees (about 60% of the total workforce) plus delayed wages
from private firms comes to about $30 billion. Yet there is estimated to be
about $40 billion in hard currency under people's mattresses. In theory, if
the Government could force this money to emerge, then some sort of workable
economy could re-start.
But the Government hasn't a chance of being able to do this. So what it
will undoubtedly do is to print sufficient roubles to get rid of its
immediate internal debts. What it then proposes to do, according to the
latest information, is to form a Currency Board whereby future printing of
roubles will only occur if it is backed up by hard currency reserves. But
this is most unlikely to work for very long because no Government will have
the political courage to stick to the hard remedy and allow the Currency
Board to maintain its independence. The fate of the members of the Currency
Board will be the same as has happened to the Chiefs of the Central Bank in
the last few years.
The only way a Currency Board could work is if it were situated right
outside the country with non-Russian Trustees and it alone were allowed to
print roubles. This is, of course, would be impossible for a Russian
Government to contemplate.
But yet something equivalent might happen if we assume that the rouble,
which has already devalued three-fold in the last last three weeks
continues to inflate. (Street prices that are now being quoted at this very
moment for resumption of dollar-rouble exchange tomorrow morning will make
it four-fold.) We are seeing the beginning of hyperinflation. You could say
that because hyperinflation has happened before in pre-war Germany and
elsewhere then the known consequences are so awful that the Russian
Government wouldn't allow this to happen. But there is probably no other
way out for them now.
But if the Government can't stop hyperinflation, the people can. As they
see more and more goods being quoted in dollar prices (illegal, but it's
already happening) and fewer and fewer goods being sold for roubles, then
they will probably abjure the rouble altogether (except for paying taxes),
because they know it will be worthless before too long, and start bringing
out their hard currency savings. The internal economy will start to operate
again. In effect, the people (mainly the people of the cities -- those in
the countryside have no money at all) will have started their own Currency
Board. and this happens to be controlled by the Federal Reserve Bank of the
US -- that is, by people quite outside any possible political pressure from
the Russian Government.
But the Russian Government will have no, or at least very few, taxes to pay
for its own operations. It will have to confine itself to the barest
fundamentals. In short, Imam suggesting that it is possible that the
Russians will "graduate" to a post-nation-state quicker than the rather
more slowly crumbling Western nations are already doing so.
... Just a few heretical thoughts before I go to bed.
Keith
<<<<<<
At 14:56 07/09/98 -0300, you wrote:
>
>---------- Forwarded message ----------
>Date: Mon, 7 Sep 1998 09:05:05 -0700
>From: mckeever <[EMAIL PROTECTED]>
>To: [EMAIL PROTECTED]
>Subject: Is Russia breaking up?
>
>#1
>The Independent (UK)
>7 September 1998
>[for personal use only]
>Russia's regions start to rebel as Kremlin's grip weakens
>By Phil Reeves in Moscow
>
> As Russia's political leaders meet today for another attempt to strike a
deal
>in the dispute over President Boris Yeltsin's chosen prime minister, evidence
>is growing that the Kremlin's grip over the country is weakening.
> A car bomb at the weekend in the southern republic of Dagestan, an Islamic
>republic that borders Chechnya, killed 16 and injured 80. It has deepened
>concern that Moscow is no longer able to impose its will across the land. The
>blast, described by Mr Yeltsin as "an attempt to tear apart the unity of the
>Russian Federation", was a reminder of the fragility of the relationship
>binding Moscow to Russia's regions, which has been placed under acute strain
>by the economic collapse.
> Evidence that some of the 89 republics, regions and territories are
using the
>chaos to seize more power has been mounting since the crisis began last
month.
>The upper house of parliament, the Federation Council, made up of regional
>leaders, last week symbolically voted to support the acting prime minister,
>Viktor Chernomyrdin, who faces a second vote over his job in the Duma today.
> But what they say in Moscow and do back home differs. The most stunning
>example is the decision of the Yakutia republic, in the Far East, to place
its
>gold production under the control of local authorities and limit sales to the
>federal government and banks. But there are others: the governor of
Khakassiya
>in Siberia is the brother and neighbour of General Alexander Lebed. Comparing
>Mr Yeltsin to "Genghis Khan and Hitler", Gen Lebed has announced his region
>will no longer transfer any funds to Moscow. The general himself has
imposed a
>price freeze in his region of Krasnoyarsk, banning increases of more than 10
>per cent.
> The governor of the Kuzbass, the Siberian region that produces half
Russia's
>coal, is threatening Moscow that miners will block rail lines across his turf
>if federal authorities fail to pay five months of back-pay. One governor, in
>Saratov, has mentioned introducing his own currency.
> Under the cover of the crisis, Tatarstan, a republic on the Volga River,
has
>tried to protect local producers by slapping a 10 per cent import tax on
flour
>from outside its borders, violating a federal constitutional clause defining
>Russia as one market. And in Voronezh, in the Red Belt part of southern
>Russia, city authorities have been seizing control of semi-privatised
>enterprises, such as the pharmacies, and returning them to government
control.
>Moscow's sway in the regions has always varied from strong to tenuous, but it
>was weakened last year when Mr Yeltsin lost the power to appoint governors,
>who are now all elected.
> Moscow often seems willing to let them go their own way, no matter how much
>corruption and illegality abounds, so long as they pay taxes. Now, however,
>they are in danger of becoming even more remote, and even more cavalier about
>the constitution and distant hand of federal power.
>******
>
>
_______________________________________________________________________
Keith Hudson,6 Upper Camden Place, Bath BA1 5HX, England
Tel:01225 312622/444881; Fax:01225 447727; E-mail:[EMAIL PROTECTED]
________________________________________________________________________
