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Melanie posted an article entitled "The Meaning of April 16" By Russell Mokhiber and Robert Weissman. I particularly noted the folowing paragraph: "Tens of thousands of people took to the streets, or joined
a permitted I was in Russia in 1995. The Russian Government had arranged a $6.8 billion loan from the IMF, which had prescribed certain "structural adjustments". Why would it do that? The following excerpt from my diary might suggest some reasons. It also raises the question of whether it is always the IMF that is hurting people. Ed Weick Moscow Times, June 3 (Geoff Winestock) notes the money supply grew by 25% in April according to a report published by an influential economist, Mikhail Delyagin, of the presidential economic analysis unit. In the previous three months it had grown only three percent for the whole period. It would appear that much of the recent increase reflects another "burst" of government spending in order to avoid a "social explosion". According to Delyagin, the government needed to compensate the public for a 25% drop in real household incomes that accompanied huge jumps in prices during the winter. Inflation will therefore continue unless the IMF exercises control via the leverage it has with respect to the monthly instalments on its $6.8 billion loan (drawing rights?) to Russia and the central bank begins to seriously maintain a low inflation stance. What this suggests is that the government "taxes" by inflation - i.e. if it cannot amass enough money via the tax system, it will do so by printing what money it needs. It spends that money at the currently prevailing price level, but in so doing drives the price level upward and the value of the rouble downward. Those who have the ability to raise their own prices can adjust, those who are on long term contractual arrangements, such as pensioners, cannot. As a method of taxation, inflationary bursts of government spending are extremely regressive. Real-wage incomes continue to fall behind, and more and more people are forced into liquidation or the shadow economy. Wages are currently believed to make up only about half of personal income, the rest coming from the shadow economy. But given the high rate of inflation, even the shadow economy provides little refuge. To maintain real value, prices there must also go up or people must work harder to maintain a livable income. Via inflation, government is not only able to tax the mainstream economy, but the shadow economy as well. |
