The article suggests an alternative with Russian roots - to the Russian policy so far (1912-1998). The article deals with the socio-economics of markets, trade, and communication in a very wide and historical sense.
Below you may find the list of contents and the abstract.
I would be grateful for ANY comment of relevance. I may include it in a later version and make it available on the web - for everybody to enjoy(?). Write me at mailto:arno at daastol.com
Best wishes! Arno
Arno Mong Daastøl Utsiktsveien 34, N-1410 Kolbotn, Norway,Ph: +47.6680 6373 / 6680 6523, Mobile and answering machine: +47.9002 4956, Fax: +47.94035650, PC-Fax : +47.6680 6373, ICQ# 11869628 Email: arno at daastol.com URL: http://daastol.com
Doctoral Candidate, University of Maastricht, Department of Public Economics, P.O. Box 616, NL-6200 Maastricht MD, The Netherlands, Ph: +31.433 883636, Fax: +31.433 258440 and: SUM - Centre for Devlopment and Environment, University of Oslo, P.O.Box 1116 Blindern, N-0317 Oslo, Norway, Ph: +47.2285 8900, Fax: +47.2285 8920
************************************************************************ Shock-Therapy Rent-Seeking or Mercantilist Rent-Creation? Transportation, Credit, and Raw Materials in the Russian:
Published in: On Political Economy of Transformation: Country Studies, edited by Jürgen G.Backhaus and Günther Krause, Metropolis Verlag, Marburg, 1997, a three volume work on transformation of planned economies.
This article may also be found at the Internet site of EAEPE (European Association of Evolutionary Political Economy): http://eaepe.tuwien.ac.at/conf97/daast.doc
Arno Mong Daastøl Department of Public Economics, University of Maastricht, Postbus 616, NL-6200 Maastricht MD, The Netherlands. Ph: +31.433 88 36 36, fax: +31.433 25 84 40
CONTENTS
Abstract 2 Approaching a necessary perspective 3 Civilisation and the need to industrialise 3 The infrastructural situation in Russia 4 "Primitive Socialist accumulation" 5 Bukharin and Stalin 5 Planning-instruments of the bureaucracy 6 Western subsidies and the scissors dilemma: food as a weapon 7 Star Wars and Perestroika 7 Privatisation 8 Shock-therapy rent seeking: Mafia privatisation 9 A short story on credit 11 The new credit cartel 12 Transition so far 13 Monopolies and inflation: SAP-monetarism 14 Removal of a protectionist curtain 14 A breakdown in infrastructure, industry, and the armed forces 14 What kind of policy is preferable? A-priori utopianism and generalisation of strategies 16 Testing by experience 16 Experience - in Russian history 16 What characterised the success stories in history: How did they do it? 18 The emergence of markets -spontaneously or willed? 19 Administration: Co-ordination, tax and credit systems 20 Possible strategies: Basic necessities- or high-tech. production 21 Demystification of "The Asian Miracle" 21 The forgotten role of public goods 22 Railroads and space-programs: Expanding the frontiers of knowledge 22 International development of infrastructure and the Delors-plan 23 A major obstacle: crowding out? 24 Another major obstacle: Inflation? 24 A non-inflationary investment policy 25 Technology-orientation is the clue 26 A tax-revenue and welfare creating approach 27 Austerity against Europe 28 The TEN and Park Corridors 28 Obstruction of the IGCs and the historical experience 29 Maastricht and the divided Europe: A straitjacket and a scapegoat 30 The shock and the hope of the army 30 Taxation and credit 31 Banking: National or "independent" credit? 32 Cheap export or internal development through a Eurasian transport link? The Russian tradition 33 Development corridors 33 Look to China: another path 34 Internal Eurasian development: not exclusively coastal 35 Helped to develop rather than pushed into defence 35 East and West suffer from the same problem: Change the financial landscape 36 Summary or
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Abstract
This article has intentionally been written "without focus" trying instead to gain perspective. It is about geopolitical economics and concerns economics as an ingredient in international power politics. The article addresses the failed efforts to reform the communist system as well as the failed efforts to introduce a radical market system. An alternative is suggested with strong roots in Russian and Western historical experience. This alternative is based on Minister Count Sergei Witte's (1849-1915) successful and state-led grand investments into infra-structure, as a vehicle of economic growth and general welfare. On the road to US President Clinton`s 2nd inauguration, the "most-likely-to-become-Russian President", General Lebed, claimed January 12th in a TV6-interview, that the whole of the Russian society is on the edge of collapse. (Aftenposten, Jan.13, 1997). January 15th, at a press conference in Bonn, Germany, he claimed that, "Russia has to proceed on the basis of the Stolypin reforms, and the reforms of Sergei Witte." This article will look into the nature of these reforms. Witte was inspired by Russian experience, but especially by Friedrich List (1789-1846), and thereby indirectly by Alexander Hamilton (1757-1804) and James Steuart (1712-1780). Witte believed that this policy in particular had three characteris-tics. First, invest-ments in infrastructure would unify Russia, and also unify Eurasia into one market promot-ing international division of labour and economics of scale. This would eventual-ly promote international friendship across borders. Secondly, investments in infrastructure would create public and private demand for capital goods and later on demand for consumer goods, and thereby act as a locomotive for general economic growth. Thirdly, the policy was deliberately protec-tionist according to the infant industry argument, so as to establish Russian industry in the face of strong foreign competition.
A little acknowledged problem in economics nowadays, but still a key theoretical problem, is the nature of rent, rev-enue, or sur-plus. This is in this article is seen mainly as a result of exclusive compara-tive advantages in knowledge and (knowledge based-) production, and less as a result of compara-tive advan-tages in, for instance, natural resources. The theoretical basis for this article may be termed, a statist trickle down and double-step rent-creation strategy. The double step concept refers to the process through which a government may arrange the rent-seeking process by regulating individual actors on the market, so as to create a rent-gener-ating pro-cess: rent-creation. The direct rent or revenue emerging from these individual activ-ities may be taxed, thereby yielding a tax-revenue. These activities can also indirectly, and over a longer period of time, generate social- or general industrial rents emerging from (actual and poten-tial) produc-tiv-ity gains from improved infrastructure of all kinds. This may create an even larger base for tax-revenue in a future positive feedback process. The statist trickle down concept refers to the initi-ating role of government in this process: creating demand and innovation in infrastructural goods and thereby likewise in capital goods and consumer goods, thereby creating a tax-revenue base.
The general policy-approach - rent creation by means of governmentally initiated investments into infrastruc-ture and in this case a material part of it, transportation - is a matter of general consideration. It is, however, likely to be especia-lly applicable to the Russian situation because of the vast distances of this country. The existence of low population densities requires a special twist to this approach: infra-structure corridors, so as to reap the advantages of an "arti-ficial" high population density.
The article discusses infrastructure and new technology as public goods that generate, in particular, high rents or surplus to a national economy, partly due to so-called externa-lities. It is claimed that the Soviet system tended to under-invest in these activities, as does current economic policy, in Russia as well as in the West. Obstacles to "a Witte-strategy" in Russia, and a similar and connected attempt in the EU and China / Central-Asia, both within economically rooted ideas, and within politi-cal circles, are also discussed.
Keywords: Russian transformation, Eurasian transportation, railway, rent-seeking, public goods, credit-creation, intervention, regulation.
JEL numberss: B 15, N 17, O 010