How to Solve the Economic Crisis in Russia?

Ariel Reinheimer areinh2 at
Sun Oct 18 01:38:18 PDT 1998

False Premise, in almost every way.

Ju-chang He wrote:

>How to Solve the Economic Crisis in Russia?
>The tumbling of the Russian stock index and the exchange rate of Rubles
>to US Dollars sends the signals on the surface that the Russian economy
>is in a great crisis. However, in my opinion, there is no crisis at all
>in Russia. What is happening is that there emerge some temporary
>difficulties due to the shift from the centrally planned economy to the
>free market economy. I believe that such difficulties will be overcome
>eventually and the transfer from the centrally planned economy to the
>free market economy will succeed.
>In my opinion, there are only two types of economy patterns. One is the
>centrally planned economy exercised by the former USSR, and the other
>the free market economy exercised in the US and West Europe. In the
>former USSR, centrally planned economy has dominated the country for
>nearly 70 years. During these years, the Russians people found that the
>free market economy had much more advantages over the centrally planned
>economy. The centrally planned economy pattern is a very backward
>featured by low productivity and efficiency. This economy pattern
>great waste of social resources. It was this backward, inefficient and
>wasting economy pattern that caused the collapse of the former USSR.
>Hence, I believe, the Russian people long to exercise free market
>economy in their country. In order to obtain this goal, the first task
>is to transfer the old-fashioned centrally planned economy pattern to
>the free market economy pattern. This transfer is not an easy job. The
>Russian people have to pay dearly to such a transfer and it will not be
>achieved in one day. I sincerely hope that the Russian people will
>complete this transfer at the earliest possible time.
>For helping the Russian people to fulfill this transfer as soon as
>possible, I'd like to put forward some of my suggestions, and I
>sincerely expect that the Russian people may get some inspirations and
>assistance from them.
>My suggestions are as follows:
>1. A general vote or a vote in the parliament to decide which economy
>pattern the Russian will choose: centrally planned economy or free
>market economy. Such a vote will help consolidate the determination of
>the Russian people to exercise the free market economy and force those
>who try to obstruct such a transfer to give up their attempt.
>2. To speed up private ownership and give up as much as possible public
>3. To give up control over the price of consumer goods no matter how
>high it is and let the market itself decide the price of all the
>consumer goods. Only in such a way, could Russian economy be defined as
>free market economy pattern.
>4. To give up control over exchange of Rubles to any foreign currencies
>and adopt floating exchange rate instead of fixed exchange rate. My
>article "How Did the Financial Crisis in Southeast Asia Happen?"
><http:/> has explained clearly the financial
>crisis taking place in the Southeast Asia last year. The Russian people
>should take a good lesson from this crisis.
>5. After opening prices, the Russian government should guarantee that
>the poor people are able to maintain a reasonable living standard in
>ways. On the one hand, it is necessary for the Russian government to
>make a law to define a minimum wage level and to stipulate that every
>worker's salary should be no less than this level. On the other hand,
>is necessary for the Russian government to provide the jobless people
>with relief funds. Relief funds shouldn't be supplied for the rich,
>which will cause a great loss of governmental funds. The purpose of
>defining a minimum wage and issuing relief funds is to make some
>adjustments of the social wealth and to make some reduction in the
>wealth of the over-rich people, so as to ensure the poor people a basic
>living standard. To do this, there must be enough wealth at home in
>Russia. Without sufficient wealth, the adjustment would not be
>successful. Therefore, the Russian government should instruct the
>Russian people to do well in their production and to produce more
>wealth, especially more necessary consumer goods of the first and
>grades, so as to make the adjustment carried out smoothly. The
>adjustment of the social wealth by the Russian government is the key to
>the realization of a transfer from the centrally planned economy to the
>free market economy. Such measures will avoid the social disturbance
>riot and, meanwhile, reduce the influence of price rising on the living
>standard of the low-income people.
>6. It is reported that there appears a great shortage of grain at home
>in Russia. When winter comes, the Russian people will probably suffer
>from hunger. This shortage of grain doesn't result from insufficient
>farmland. It is caused by insufficient manpower engaging in
>production and insufficient funds for developing agriculture in Russia.
>The Russian premier has appealed to international communities for grain
>aid. I don't think it practicable to count on foreign support merely.
>The Russian government should take the following steps at home to solve
>this problem:
>A. The Russian government should give its people a clear explanation of
>what is called market adjustment, which has been expounded in detail in
>my article "On What's Market Regulation and On Relationship between
>Market and Government" <>.
>B. The Russian government should open grain prices and let them have a
>rise, allowing the market to make its own decision of them and letting
>those engaging in agricultural production have a rise in their income.
>In this way, more people will be made to engage in agricultural
>C. The Russian government should encourage the jobless people to engage
>in agricultural production and give them proper help. For example, they
>can be provided with suitable houses in the countryside and free
>training of agricultural knowledge.
>D. The Russian government should manage to increase an investment in
>agricultural production, so as to make it carried on smoothly.
>E. If the unemployed people are still unwilling to engage in farmland
>cultivation, the Russian government should cut down their relief funds
>to make them rather willing to take up this job.
>7. To cut down all kinds of governmental expenses. To dismiss some
>governmental bodies which are not so indispensable nowadays. To make a
>reasonable use of the funds. These measures are helpful to the
>of inflation and devaluation of Rubles. However, salaries and routine
>expenses for the key departments of the government must be ensured.
>Among them the police and the juridical departments should be put in
>first place. Only when these departments are in good function, will
>crimes be controlled and the society be kept in peace. If the salaries
>and routine expenses for those key governmental departments are not
>guaranteed, their normal operations will be influenced, and the whole
>society will result in social turmoil.
>8. To increase taxes, especially the taxes on consumer goods of the
>third and fourth grades. Only when taxes are increased, will the
>expenses for the governmental bodies be guaranteed. Only with taxes
>increased, will the government have enough money to issue relief funds
>to the low-income people. Besides, taxation is an effective lever of
>regulating the market. It is because there is a rise in taxation level
>on consumer goods of the third and fourth grades that their exceeding
>growth will be restrained, thus allowing more capital to flow to the
>production of consumer goods of the first grade so as to produce more
>such materials to meet the needs of the society for consumer goods of
>the first grade.
>9. If the Russian Government is able to obtain enough taxes, the
>expenses for all the key government bodies will be guaranteed, and the
>government will have enough money to give relief to the low-income
>people. The Government, therefore, should do its best to obtain enough
>tax income. However, if the government fails to do so, there is no
>at all. On condition that there is enough wealth existing in the
>country, the government may take the financial-deficit policy, starting
>its printing machines to print more bank notes for the expenses for
>governmental bodies and for the relief funds issued to the low-income
>people. Starting the money-printing machine is only an abnormal way to
>increase the revenue, though such a way will bring about inflation and
>devaluation of Rubles. However, there is nothing horrible, as the
>inflation and devaluation are not caused by economic crisis. They are
>normal and will not cause social riot. Therefore, the Russian people
>should not be frightened by the so-called economic crisis theory.
>10. Presently, the Russian government seems much afraid of the economic
>crisis, worrying about the bankruptcy of banks or enterprises. In my
>opinion, this is nothing horrible. According to my economic theory, the
>development of social economy will naturally be accompanied by
>bankruptcy of companies or enterprises. During the economic growth in
>the US and European countries in this century, countless companies and
>enterprises were declared bankrupt and closed, yet their economy is
>still the strongest in the world. When some companies and enterprises
>bankrupt and closed, new companies will emerge. The Russian government
>has no reason to worry about the economic crisis.
>11. In China, it is reported in Shenzhen Special Zone Daily that the
>Russian government has defaulted salary, retirement pay and soldier's
>pay nearly to a total of 120 billion Rubles. If some factories and
>enterprises default the workers' salary and retirement pay, these
>factories and enterprises, I think, should be closed down. Their
>property will be auctioned off, with the money obtained from the
>used to repay the defaulted salary and retired pay. The bankruptcy is
>part of the free market economy. There would be no free market economy
>without bankruptcy and there would be no new enterprises and new
>companies formed without bankruptcy, and so the development of social
>economy would be impossible. The Russian government, following the
>example of the United States and the countries in West Europe, should
>draw up a complete set of bankrupt law. The unemployment relief funds
>should be offered to the jobless workers.
>12. If the governmental bodies default salary, retirement pay and
>solders' pay, the government should manage to increase the taxation to
>repay. If Russians people are not used to paying taxes or don't like to
>pay taxes, the Russian government has to start the printing machines to
>produce enough bank notes so as to repay the salary, the retirement pay
>and the solders' pay. This will be doomed to inflation and devaluation
>of the Rubles, which, however, are caused by the Russian people's not
>paying taxes rather than the economic crisis. The Russian government
>should give the Russian people a clear explanation about the fact so
>that they may prefer to pay taxes: starting the printing machines to
>produce bank noted is also a way of collecting taxes. Only this way is
>rather irregular.
>13. To control the import and export of merchandise. When consumer
>of the first grade suffer a shortage, failing to meet the demands of
>nation, the import duties of the first grade consumer goods should be
>reduced to encourage their import, and, meanwhile, the import duties of
>the third and fourth grade consumer goods should be raised to restrain
>their import. And measures should be taken to reduce the export so as
>increase the quantity of the goods inside the country to meet the
>demands. I found there are many economists in China holding the theory
>that the less the imports and the more the exports, the faster the
>economic development of one country. Such thought, I believe, is not
>reasonable. I hope the Russian people will not hold such unreasonable
>14. Press freedom and speech freedom should be encouraged in Russia.
>They are an effective means in attacking crimes, in promoting normal
>economic development and in keeping social justice, as many criminals
>will be scared if they are exposed to the open air by the press.
>15. The Russian Government should do its best to seek for international
>support and assistance, particularly the support from the
>countries such as the US and West-European countries. With their
>assistance and support, Russia is sure to accomplish its economic
>transfer more smoothly and rapidly.
>Finally, I sincerely hope that President Yelsin of Russia will be able
>to read my article and find the way from it to solve the current
>problems in Russia. I also hope President Clinton of the United States
>will give assistance to Russia and help them in its transfer from the
>centrally planned economy to the free market economy at the earliest
>possible time.
>Besides, "My Homepage" has published the latest and most complete
>economic theory in the world. I do hope the Russian people may obtain
>more inspiration and help from My Homepage at
>, and I do hope it will help the
>Russian people to solve their present economic problems.
>- --
>Ju-chang He
>Welcome to visit My Home Page at
>or <>
>End of lbo-talk-digest V1 #508

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