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Mikhail Khodorkovsky: Global Perestroika

The following is a translation of an article written by Mikhail Khodorkovsky published in Friday’s edition of Vedomosti. mbk.jpgА TURN TO THE LEFT, 3 – Global perestroika By Mikhail Khodorkovsky Published in Vedomosti Barack Obama’s victory in the US presidential elections is not simply the latest change of power in one individual country, albeit a superpower. We are standing on the threshold of a change in the paradigm of world development. The era whose foundations were laid by Ronald Reagan and Margaret Thatcher three decades ago is ending. Unconditionally including myself in that part of society that has liberal views, I see: ahead – is a Turn to the Left. Chance and necessity In recent times I have been getting more and more questions from the broadest range of people: do I consider that the Kremlin has armed itself with the ideology of my articles «A Turn to the Left» and «A Turn to the Left-2»? The authors mention the “priority national projects”, and the “leftification” of official rhetoric, and even the notorious «programme-2020» (certain propositions of which really did appear in «A Turn to the Left-2» three years ago).

Inasmuch as the traditional reaction of our power bureaucracy to my thoughts is the punishment dungeon no matter what, I will attempt to respond through the newspaper «Kommersant», which in the year 2005 had resolved to publish my reflections on variants of a socio-economic strategy for Russia. I would like to thank in advance those who have helped me in the preparation of the new article.Indeed, over the past 3 years certain changes in Russian domestic policy have become noticeable. Although not exhaustive. However, the matter here, of course, is not about me. But about the fact that the power objectively was not able to ignore the logic of the «turn to the left», as a system of objective demands that reality makes of the ruling elite. Indeed, the raw-materials boom has given rise to a very pronounced need to overcome the glaring gap between the demonstrative consumption by the elites and the oppressive poverty that is usual for today’s Russia. And the question of the responsibility of the elites and of the need for long-term planning has become acute from the point of view of the very survival of the state.The Kremlin – it was just a coincidence that [it was] after the two «Turns to the Left» had come out – undertook certain steps in the socio-economic sphere, which could not but have been welcomed, irrespective of the general attitude towards today’s Russian power. Although it is important to understand that these steps were not the consequence of a profound conceptualization by the power of a new strategy for the development of Russia, but the sum of the reactions of the Kremlin – contradictory pulling in different directions – to external challenges, the most important of which was the threat of social instability, especially after the series of most eloquent «color revolutions» in the post-Soviet space.Crisis phenomena in the Russian economy today show that in and of itself, the «reactive model», assuming a logic of behavior by the power that follows the old Russian saying «until the thunder crashes, the peasant won’t make the Sign of the Cross», can not work for long. To identify system-formational problems and the sources of likely crises needs to be done proactively, long before these problems have become critical for the country. In other words, one needs to understand where we are, where the historical road is leading us, what will be beyond the next several turns in this road, which will make themselves felt in full measure only tomorrow, if not the day after.That is what my three-year-old «Turns to the Left» were really all about. To the amazement of some, the basic forecasts and assessments formulated in those articles, it seems, are holding true.And today the whole world has already found itself on the threshold of a turn to the left. Serving as evidence of which is the triumph of Obama, and as security – the global financial crisis. Which, despite the excessive (and, likely, completely genuine) optimism of many of our top officials, has thoroughly become our, Russian crisis. In acute and serious form, albeit for now in a sufficiently narrow banking and stocks segment, as ought to have been expected. I insist on such an assessment, despite the processes I am aware of that have begun in the social sphere and in the branches of the «real sector» – metallurgy, construction, the automotive industry, etc. These are still for now but portents of recession, even if they are menacing.Whether the crisis will spread «wide and deep» throughout the economy in the short term depends on the literacy of the financial authorities. But the medium- and long-term consequences lie beyond the scope of their authority.The crisis: sources and component partsMany leading politicians, experts and businessmen agree in their assessments of the main reasons for the global crisis. These reasons are as follows:- a sharp increase in the inefficiency of systems of state regulation in the past 10 years; having become particularly blatant is the «great gap» between the global character of the principal economic processes in a mono-centric world and the local character of regulatory systems, which turned out in the end to be unstable and vulnerable in the face of shocks that extended beyond the confines of nation-state spaces; in a global economy, the regulatory mechanisms too must be global, but they are not so today;- the chasm between the concepts of «responsibility» and «the right to adopt decisions», which had already appeared a decade and a half ago and has only been expanding since then, until the first victims of the crisis fell into it; in the neo-liberal economy, decisions were being adopted, ever more, by supra-national and trans-national structures (first and foremost by corporations, but likewise by the International Monetary Fund, and by the World Bank), but the ultimate responsibility for the social consequences of a decision fell on national governments and taxpayers;- the diktat of portfolio investors in the global economic system; we have become accustomed to looking at the world with the eyes of an investor, assessing the most diverse processes, problems and risks exclusively from the point of view of «how this will affect the financial markets», which by their nature are «nearsighted» and «hysterical» (i.e. they spring effortlessly from rapt amorousness to the deepest disgust, often without any study of the essence of the matter); as a result, cracks were growing behind the façade of the edifice of thriving (for a long time) markets, and in the year 2008 these cracks began to spread without constraint;- the social and national irresponsibility of the «corporation of managers», the moral erosion among people adopting key economic decisions; over the past 25 years, managers have become a de facto separate caste, not dependent either on society, or even on the results of their managerial activity; the horizon of corporate planning for such managers has dwindled down to just months, practically – indeed, who needs long-term planning if their personal success is determined only by status, place in the managers’ corporation and the outside impression of them and their quarterly report, but not on the objective economico-social results of their activity, and most certainly not on their medium- and long-term consequences?- an uncritical attitude on the part of the elites towards the results of the implementation of economic theories; in exactly the same way as when in the 1970s, the leaders of the Soviet Union slept through the coming crisis that in the end destroyed the USSR, in the beginning of the 2000s, the theoreticians and practitioners of the neo-liberal model that had triumphed in the 1980s and 1990s decided that this model is inexhaustible and, despite individual unpleasantries, a systemic crisis does not threaten it; thereby were ignored the fundamental laws not only of economics (for example, the cyclical nature of development), but also of dialectics (development along a spiral: any theory or model at a certain historical moment plays itself out, so as to make way with all inevitability for the progenitress that had yesterday been defeated, but now already on a new historical level);- betting on the unrestrained exploitation of accessible and «simple» natural resources, first and foremost hydrocarbons; this approach has led also to a leap in prices for energy sources, a radical cross-flow of capital in the direction of countries – exporters of oil and gas and a disproportional increase in the relative weight of purely raw-materials (i.e. non-innovational, systemically weak and critically dependent on external factors) economies n the world economy.The world has now run up against, in part, those same problems as did F.-D. Roosevelt in the America of the end of the 1920s. It goes without saying that there are fundamental differences as well. The world of the times of Roosevelt represented an aggregate of regional projects – and America of those times in full accord with the Monroe Doctrine extended its decisive influence on the Western Hemisphere, but not more than that. Today’s world – is global, and therefore it has become a hostage to the problems of Wall Street. Any slightest movement – or even just an intention – of the American power, gives rise a huge wave of consequences practically everywhere, except, perhaps absolutely isolated countries like North Korea. This confirms that the world has become neither multi-polar nor, all the more so, non-polar. Despite all the problems and difficulties in the economic, political, military and intellectual spheres which America has today.Self-deception, particularly in the question about the modern-day economic world order, is dangerous, because it dictates incorrect decisions, while the desired change, in order to become real, demands serious and long-term efforts and outlays.The response to the global crisis will inevitably become a global «perestroika». We will call it anew, like 20 years ago, in English transcription – perestroika, because precisely this historical Russian term is more comprehensible and easier to explain. It is not by accident that the financial crisis, which escalated in September of this year, immediately led to a jump in the popularity of Barack Obama, who for voters in the US in many ways embodies – at the conscious and unconscious levels – the idea of perestroika (Change we need) and, to a certain degree, can be perceived of as a modern American analogue of our Mikhail Gorbachev of mid-1980s vintage.We have the full moral and expert right to state that 30 years of the dominance of libertarian ideas have come to an end. Yes, at the beginning of the 1980s to power in the US and Great Britain came leaders – I am referring to Ronald Reagan and Margaret Thatcher – who saw that «real socialism» was becoming flagrantly uncompetitive economically and politically and socially. And that meant the bipolar world was not eternal, and the «cold war» was winnable. Moreover – with the backing of good old liberalism. Inasmuch as social democracy could not at that time as distinctly and unambiguously counter-position itself against communism, in which it saw much that was productive and positive. Furthermore, the European and American leftists of that day proceeded, in the main, from the position that the communist camp – is eternal, and that struggle with it must not assume a rigid orientation towards victory.Now the opposite situation is shaping up in the world. Having lived happily for more than a quarter century, Reaganomics have exhausted themselves in the given historical moment. Neo-socialism has come up to the threshold of contemporaneity. In the nearest future, Keynes is going to be more in demand than Friedman and Hayek. The tangible hands of states and inter-state alliance – more than the «invisible hand» of the market.A Turn to the Left – but not narrowly national and not regional any more, but global – will become the world’s response to the challenge issued by the crisis, or, more precisely – to the problems accumulated over the past two and a half decades.The 12 theses of perestroikaWhat awaits us in the startup epoch of world perestroika?1. A qualitative strengthening of the role of states as regulators in the economy (but not as players and, all the more so, not in the capacity of instruments of the redistribution of property and financial flows; the latter is precisely the modern-day Russian corruptional model, creating the illusion of «increasing the role of the state» in a situation when state institutions are becoming tools for the satisfaction of decidedly private interests, as this was in the case of the YUKOS affair).2. A bringing of regulatory systems into accord with the demands of a global economy and the equilibrium of its key players. National governments will not only strengthen control over their «canonical» territories, but will also be compelled to more rigorously coordinate actions among themselves, in point of fact laying the foundation for a «world economic government».3. A revival of the values of solidarity as an alternative to economic egoism and out-of-control competition. It will concern not only market players, but also whole countries and regions. The new level of cooperation between Europe and China for the sake of overcoming the crisis – is already the first example of this.4. An introduction of more rigorous requirements of the owners and managers of corporations on the part of the state and society. A return to management of certain traditions, which could be called «neo-patriarchal»: morality, personal responsibility for the results of the activity of the corporation before the state and society, family succession, long-term planning, stringent criteria for the assessment of the effectiveness of corporate governance, moreover from the point of view not only of the shareholders, but also of a milieu that is external in relation to the corporate world.5. A new system of managing financial markets and of regulating these markets, which will shift the balance of their activity in the direction of a socially necessary goal: supporting the development of the real economy. A different goal, which had come to the forefront in recent years – the opportunity for the rapid enrichment of the actual operators of the financial market – will become secondary.6. A restriction of the growth of material consumption of the «golden billion», which over the past 15 years has become simply unrestrained. A return of the values of self-restraint, a rejection of the constant consumption boom as the economic and life philosophy of developed countries.7. An accelerated development and introduction of concrete technologies for reducing the consumption of non-renewable natural resources. Among such technologies a special place will be taken by alternative energy, which assumes a rejection of the priority stake placed by raw-materials consumers on crude oil and natural gas. It is obvious that everybody from national governments to inter-state organs of administration to corporations is going to have to treat nature and its resources much more responsibly than this has been accepted in the conditions of «Reaganomics triumphant» and an uninterrupted «stock-market rally».8. A partial rehabilitation and restoration of the values and standards of the industrial era as a counter-weight to the expansion of the virtual sector, which has acquired some kind of grotesque self-value. A restoration of certain positions and advantages of the «real» in its competition with the «virtual». An intensification of the factual control of states over the largest corporations, including legislative regulation and even partial nationalization. An inevitable – in consequence of this – reduction in the market efficiency and flexibility of such structures. A creation thereby of new opportunities for small and medium-sized business, and this means – a base for a future «turn to the right».9. Certain restrictions on the order of the movement of capitals, goods and labor between large economic zones (regions), to prevent the possibility of unexpected catastrophic fluctuations. I assert that the struggle with illegal immigration, which in Russia has for some reason become synonymous with radical nationalism, in the next few years will intensify in various parts of the world – at the very least on the strength of the growth in unemployment on the territory of the «golden billion» and the readiness of many inhabitants of developed countries to come back again to «unprestigious» jobs.10. An increase in the attention of national governments and intra-state regulators towards the creation of effective social «safety cushions». Which, in their turn, are capable of eliminating the most acute imbalances in the well-being of people and of whole peoples, which are becoming ever more dangerous for the world as a whole. In so doing, the problem of hereditary dependency [on the welfare system] and of the “lumpenization” of welfare recipients will stand tall and demand its resolution already at the stage of development of the necessary measures.11. An increase in the relative weight of the «human factor» and of intellect in the economy, which will already be unable to exploit various objective trends without a subjective, creative and critical approach to them. Objectively standing in first place among the prerequisites for economic development is the human ability for creative labor, and that means – the political and social conditions allowing for the realization of this ability.12. A retreat into the background of the logic of the priority of commercial profit, of the notorious economic egoism. A transition of states and (to a lesser degree) of large corporations to the development and funding of strategic projects, which may be unprofitable financially even in the medium term, but advantageous socially, and that means – expedient in the long term.What will Russia’s place be like in the conditions of the new perestroika? The answer has to be given by the ruling elite. If it confirms its readiness to bear responsibility for the necessary and unavoidable reformation of the country.A justification of liberalismDoes this mean that the crisis will lead to the collapse and obliteration of liberalism in the world? Unconditionally not.At the beginning of the 1980s, neo-liberalism turned out to be qualitatively more effective than the complex of socialist ideas and practices. The triumph of liberalism entailed tectonic geo-political and geo-economic changes and, for example, allowed Francis Fukuyama to formulate his famous prophecy about the liberal «end of history» and the «last global man».Now, at the end of the first decade of the 21st century, the victor will become neo-socialism. But this will no longer be the totalitarian socialism of the Yalta world – it is indebted to that same neo-liberalism of Reagan and Thatcher for much of what it is [today]. Further globalization is going to take place at a somewhat slower pace, but it is not going to stop. The golden billion is going to have to abandon hopes for an even greater improvement in its consumption status, but the high standards of consumption that had evolved at the end of the previous century will remain, on the whole, the norm. The yearning for the political freedom and open competition of individuals and ideas will not disappear. Fukuyama’s prediction formally did not prove true, but his assessments were, in many ways true, and this can not but be acknowledged, as we enter into the period of the worldwide «turn to the left».And at the next turn of history – probably in 12-15 years – after neo-socialism has cleared out the debris of the global crisis and has harmonized the world economy – there will begin a new stage of the advance of liberalism. After the «turn to the left» there will once again come [one to] the «right». But this – is already something for tomorrow’s agenda.