System liberals admitted to a number of mistakes, but not all of them

I won’t talk about those who escaped, much less argue with them. Their assertions that the whole world is against us do not stand up to criticism at the level of arithmetic. CBOs formally condemn states that collectively have fewer than one billion people. We are supported or treated with friendly neutrality by countries that are home to more than seven billion people. As they say, feel the difference… But, I repeat, we are not talking about traitors or relocants now.

Let’s talk about the speculations of those who are commonly called “system liberals” (or “sislibs”), that is, that part of the political and economic elite that formally supports the SVO (or does not speak out openly against it), but ideologically is still within the framework of the Western liberal discourse. Historically, they are still represented in the leadership of the financial and economic block of the Government of the Russian Federation, as well as in the Central Bank, a number of universities and the media.

Let’s start with the fact that the “sislibs” have already at least formally admitted to some misconceptions or mistakes. I’ll say right away that there are not so many such topics, but they exist nonetheless. For example, system liberals nevertheless realized that it was impossible to store the country’s foreign exchange reserves in foreign banknotes or foreign assets. Now all these reserves have been frozen (consider them stolen) by the very Western democracies that until recently the “Sislibs” openly prayed for. They now prefer not to remember that systemic liberals in the government and the leadership of the Central Bank have been warned for almost 20 years in a row about the inadmissibility of converting domestic reserves into foreign currencies and securities. But in fact, today we do not have the ability to manage the 300 billion dollars that belong to our state. And this is not counting the seizure of assets of the corporate (private) sector of our economy, where the losses are also colossal. Considering how “Western partners” work with such assets (for example, Iranian property), one cannot count on the return of these funds. But! “Sislibs”, at least now, admit their mistake in that they once placed our assets “there”.

Another aspect where they became enlightened was the need to ensure the technological sovereignty and food security of the country. This has always been obvious to us, socialists, and we tried to convey these values ​​to our colleagues from the liberal democratic flank and convince them of the need to work in these directions. But the argument “we will bring everything we need from the West” seemed unkillable to the “Sislibs”. And our country, with their help, brought everything (or almost everything) from the West, starting with civil aviation (with its own quite competitive aircraft industry) and ending with poultry crosses (again, with quite successful domestic selection). Here we can also recall nationally oriented education and science, which the “sislibs” in government positions have been pushing into Western formats for the last thirty-odd years.

Now domestic “sislibs” are already confidently talking about import substitution and even success in this field. They learned the concepts of “industrial policy” and “strategic planning”, they learned to condemn the Bologna system and even recognized that education and enlightenment are not services, but are necessary government functions. Even the development of Siberia, the Far East and the Arctic is discussed on many liberal discussion platforms.

I will say more, the topic of defense spending and the military-industrial complex is no longer taboo in the “sislib” discourse. And the military-industrial complex is already officially officially considered in this intellectual environment (who would have thought!) as a significant locomotive for many sectors of the national economy, including the most advanced, complex and future-oriented.

But, as they say, not everything is so wonderful! There are also a number of serious misconceptions. And we, socialists, still need to be convinced not to reinvent the wheel, but to start using well-proven universal models and solutions.

Let’s start with the theory… Over the last thirty-odd years, we have constantly heard from liberals that resources are limited, that money flows from one source to another, that it is impossible to make everyone feel good… It seems that the “sislibs” have never heard anything about the theory of open systems, neither about the Nash equilibrium, nor about the win-win strategy… In their world, winning one is possible only if everyone else loses, in their opinion, fortunes are made only under monopoly conditions, and they consider the infinity of resources to be naive fantasy.

The scientific world has already gone very far, and it has even been theoretically proven that financial resources can grow almost endlessly, and the capabilities of nature, coupled with science and technology, make it possible to ensure, if not wealth, then at least prosperity for all humanity. You will say that all this looks like theory, but I will answer that science is the trinity of theory, methodology and practice.

Domestic systemic liberals constantly tell us about the redundancy of the money supply in the Russian economic system, that it spurs inflation, and also that the surplus of this same money supply must be constantly withdrawn from the economy. It is for this reason that we have the National Welfare Fund (NWF). By the way, part of the National Welfare Fund, that is, our funds, is stuck in foreign assets with an unlikely scenario of their return to their homeland.

What does the experience of the global economy tell us? And exactly the fact is that the volume of money supply and inflation are simply not directly related. I will say more, the presence of an excess amount of money supply stimulates economic development and increases business activity in the country, since financial capital does not like to sit idle. Today, the volume of money supply in Russia (M2 aggregate) barely exceeds 50% of GDP, although in the world as a whole in 2022 it amounted to almost 150% of GDP, and in a number of countries (Hong Kong, Macau, Japan and mainland China) it exceeded exceeds GDP by two or more times. In South Korea and Singapore, M2 exceeds 1.5 GDP. A number of other countries are striving for this level, including Malaysia, the UAE, Qatar, etc. Something tells me that this “club” includes only states that have demonstrated sustainable and even faster economic growth in recent years. Why am I saying this? And to the fact that the presence of a money supply higher than the level of GDP in a dynamically developing economy is normal. We are reinventing the wheel again, dooming the economy to lack of money and a shortage of financial resources so necessary for development.

The key bet is another “sacred cow” for Russian “sislibs”. Let me remind you that now in Russia it is as much as 15%. The Central Bank of Russia cites the fight against inflation as the main reason for its constant increase. To be honest, I don’t know what the logic is here, but the Central Bank is confident that it is right. Apparently, it also “dries out excess” money supply. Let’s look at other countries and find out what the key rate is for our neighbors and competitors. So, in the Group of 20 (G20) only four countries have a two-digit key rate: Turkey, Russia, Brazil and Mexico (Argentina has a three-digit one). For some of our BRICS partners, the situation with the key rate is as follows: in South Africa 8.25%, in India 6.5%, in Saudi Arabia 6%, in the UAE 5.4%, in China 3.45%. At the same time, unlike our neighbors and competitors, we are experiencing sustainable economic growth. Something tells me that it could be even more impressive if we increased the money supply and did not raise the key rate.

Another misconception that domestic “sislibs” cannot free themselves from is the impossibility of combining state planning and a market economy. The fact that for the normal functioning of Gosplan 2.0 there are all the technological solutions and the necessary computing power does not convince system liberals, of course. But what is surprising: they are also not convinced by the economic successes of a number of countries in the world, from China and Vietnam to Malaysia, Singapore and our neighbors, Belarus and Kazakhstan.

I would also like to say something about the so-called social expenditures of the state. On measures to support demographic growth, as well as on the financing of education, health care, sports and culture. For systemic liberals, all this is a cost, and costs from the point of view of their economic theory must be reduced. We will not argue about theories, but I would like to note that everything that contributes to social development is not expenses or costs, but direct investments in socio-economic growth and improving the quality of life of citizens.

I don’t even want to prove this obvious fact. I will give just two eloquent quotes that reveal the priority of public policy, as well as public investment. On Children’s Day, the President of Russia said: “A family with many children is the basis of the future of Russia, it is the continuation of our thousand-year history as a country, as a nation, as a single people.” My colleague and senior comrade, Deputy Chairman of the State Duma Alexander Babakov, in his book “Universal Economic Machine” added: “We have to make a prosperous large family a national idea and a preferred social norm.” Obviously, this requires social investments, but for the “syslibs” they still remain costs…

In general, sometimes you really shouldn’t reinvent the wheel. Yes, Russia always goes its own way, and the success of the nation is always unique. But sometimes it is useful to look at the achievements of our neighbors. Perhaps they have already corrected the mistakes that we still want to make.