>From Ju-Chang's home page. Just prize stuff allround...
This view in China, even in China, which has become a bastion of
neo-liberal economics, is whacky...
Steve
Article
(7) 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 is 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 model, featured by low productivity and efficiency.
This economy pattern caused 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 ownership.
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?" 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 two 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, it 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 second
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 and 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 agricultural 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 production. 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 reduction 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 the 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 panic 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 go
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 and companies 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 auction 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
soldiers' 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 soldiers' 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
goods of the first grade suffer a shortage, failing to meet the
demands of the 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 to 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 ideas.
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 industrialized 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 Yeltsin 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, and I do hope it will help
the Russian people to solve their present economic problems.
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