Russia, Through the Looking Glass
Filed under: Russia
Vladimir Putin's Russia has smashed through the looking glass and is now hurtling into the void of utter neo-Soviet insanity.
The Moscow Times reports that Putin has announced, while paying a state visit to France during which he's been treated as if he were still the nation's prime authority, that "through raising wages, pensions, social benefits and subsidies, we will try to minimize negative consequences of our anti-inflation policy for the people."
So, not only is Russia's "prime minister" able to simply wave his hand and raise the nation's wages (so much for the idea of capitalism in Russia! -- and so much for the idea that Putin no longer rules it!) but he thinks the way to combat devastating double-digit consumer price inflation is to . . . wait for it . . . give people more money. Economist Putin doesn't seem to quite get it that the problem is that they have too much money already, and are using it to bid up the price of goods they can't produce enough of to satisfy demand. What Russia needs to do is the opposite of what it is doing, namely produce more products. Putin is, in effect, throwing gasoline on a fire.
Then again, maybe he does. He stated: "We understand that [rising wages] means an inflow of money into the economy, but we are simply obliged to do it and we will do it." If that means he understands he's doing the opposite of what the country needs regardless of reality, he's a fully realized neo-Soviet man.
The MT notes: "Food makes up more than 40 percent of the basket of goods and services used to calculate Russia's consumer price index, a typical feature for poorer nations, where the population spends a large proportion of income on food." Poorer nation? Gosh, that's odd. I thought Russia had a "booming" economy and was a member of the G-8? Apparently not, since the MT states: "Wages grew by 28 percent year on year in April, and some officials have warned that the country risks falling into an inflationary spiral as Latin American countries did in the 1990s and have said wage controls could be necessary." No Latin American countries in the G-8 last time I checked. Wages grew by 28% and Russia is still a "poorer nation" with people spending most of their ready cash on food? Gosh, that's amazing. Guess before the hike wages must have been practically nothing, huh? Which would pretty much mean they still are.
This kind of just-plain-crazy economics is exactly the thing that brought down the USSR. Like the Emperor with his New Clothes, there is nobody around Putin to tell him can can't simply "do it" and so he does.
NOTE: To comment on this post for publication, write to: kimzigfeld@gmail.com
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