Putin Just Spelled Out a Radical New Economic Policy, And Nobody Noticed

  • He presented it in his recent State of the Union speech, and it went un-reported in western media accounts
  • Strong elements of economic liberalism, and European social state approaches
  • Increase trade with most of the globe
  • Liberalize domestic economy
  • Launch large projects to revitalize manufacturing

The State of the Union speech that Russian President Vladimir Putin delivered to a joint meeting of both houses of the Russian parliament on December 4 was the mirror opposite of the way the speech was patchily and superficially described in most major U.S. media outlets.

What little space was given to the speech was not merely hostile and often sneering but factually misleading. The speech was repeatedly described as rambling. Russian elite figures (usually code for political opponents of the president) were said to be unnerved by it.

The speech certainly came at a time of challenge, crisis and change for the Russian economy: A combination of Western economic sanctions and tumbling global oil prices has led to a fall of 40 percent in the international value of the ruble since March.

However, far from being vague, Putin’s speech was extremely detailed.

Far from proclaiming any policy of increased global isolation, Putin proclaimed Russia’s determination to increase its trade and strategic ties with most of the globe.

And far from turning Russia’s economy and society back into communist times and trying to recreate the Soviet Union, as the Russian leader is repeatedly accused of doing, he made clear his determination to liberalize the domestic economy and create a more effective internal free market, low tax system than the country has seen arguably in more than a century since the time of Prime Minister Pyotr Stolypin before World War I.

Putin sought to jump-start the Russian economy by proclaiming policies that, if they had been announced by any other world leader, would have been enthusiastically praised by the Wall Street Journal, Forbes and the Financial Times. He proposed a major amnesty to attract back flight capital from offshore accounts and announced tax breaks for small businesses.

In the speech, he announced a large-scale program for the liberalization of the Russian economy and set the target of bringing annual investment into the Russian economy to the amount of 25 percent of the country’s GDP by 2018.

Russia’s economic isolation has been imposed upon it because of its actions in taking over the Crimea and supporting the two secessionist eastern provinces of Ukraine Lugansk and Donetsk. Both policies have proved very popular with the Russian public.

They are also a reaction to aggressive NATO, European Union and U.S. policies have rolled back Russian sovereignty further than it has traditionally extended for a quarter of a millennium, and arguably, since 1652, when the tribal leaders of Ukraine petitioned the czar in Moscow to extend his sovereignty and protection to them.

This strategic context within which Putin operates has been recognized by some of the most eminent foreign policy practitioners and historians in the United States, most notably Henry Kissinger, Prof. Stephen Cohen and Prof. John Mearsheimer. But it remains virtually ignored in the mainstream U.S. media.

The consequence of this, as Putin acknowledged in his speech, is that Russian leaders are turning, not inwards to isolation, but to the wider world of Asia, the Middle East, Latin America and sub-Saharan Africa. This change is driven, not by an ideology hostile to democracy or free markets as was the case during the Cold War, but by what over the past year has come to overwhelmingly be perceived by ordinary Russians as well as Moscow policymakers as an escalating bias and even hatred towards Russia, based on profound ignorance by American policymakers especially.

Putin’s proposals, therefore, did not express any rejection of Western Conventional Wisdom in finance and economics, it was a recognition and acceptance of them. Simultaneusly Putin proposed launching large investment projects to try to generate a Russian industrial revival, showing that, like Roosevelt in 1933, to be a positivist and pragmatist in economic policy.

It remains astonishing that Putin’s State of the Union speech should have been so misunderstood and misreported throughout the West. It contained bold free market initiatives of the best and most classical sort combined with industrial policies in the tradition of Western European and New Deal social responsibility. But according to the Biblical Book of Proverbs, wisdom is always wasted on fools.

Posted in Financial and tagged , , , , .