Sergey Glazyev: Responsibility and Competence
The tragedy that occurred in the capital at the Menshevik factory, raises the question of the current system of governance in the country, which is called, frankly. If an entrepreneur goes to a fatal crime to protect his plant and openly applies weaponblaming the prosecution authorities for harassing their property, this means a pathological dysfunction of the management system. If it were not for the live interview given to them, then the motives of this crime would have gone unnoticed - just as thousands of inadequate decisions, taken daily by our authorities despite their functional duties, remain unnoticed. Their victims do not try to fight the system, but pretend to submit to it, or leave the country.
If an investigation is still to be done with respect to this tragedy, there is no doubt about the chronic dysfunction of macroeconomic policies. Macroeconomic regulators make inadequate decisions without bearing any responsibility for their results - even if they force entrepreneurs to commit crimes in order to preserve their business or create a corrupt environment within the regulators themselves. A glaring example is monetary policy.
The central bank, according to the Constitution, responsible for the stability of the national currency, throws it into free floating. The speculators controlling the Moscow Exchange are organizing a collapse in the ruble exchange rate, earning up to a trillion rubles of profits to destabilize the macroeconomic situation. Devaluation causes an inflationary wave that depreciates the incomes and savings of citizens. All blamed on the fall in oil prices, although none of the countries-exporters of oil did not allow such a collapse of its national currency.
Contrary to common sense, the head of the Central Bank states that all this is intended to dampen external shocks. In fact, speculators use such shocks to swing the ruble, which is becoming one of the most volatile currencies in the world. Against the background of its highest global wealth of foreign exchange reserves, it looks like absurd. Further, despite international experience and the same common sense, the Central Bank sharply raises the refinancing rate, stopping lending to the production sector. Thousands of enterprises go bankrupt, investments stop, production falls, incomes of the population decrease. And from the high tribunes of state power, biased deputies say about bold and the only correct decisions.
Let us analyze this situation from the point of view of control theory. The objective facts proved by fundamental science are as follows.
- The Central Bank makes decisions contrary to its functional responsibilities. Having excess foreign exchange reserves, he openly refuses to ensure the stability of the national currency. The consequence of this decision is the rate collapse twice lower than the level objectively determined by the fundamental factors, which accelerates the inflationary wave.
- The Central Bank does not pay attention to the obvious signs of manipulation of the currency market by speculators affiliated with the Moscow Exchange. For three years now they have been swinging the ruble exchange rate, giving it a record volatility among other currencies of the world.
- Raising the refinancing rate three times higher than the average profitability of the production sector, the Central Bank stopped the transmission mechanism of the banking system. Instead of transforming savings into investments, it began to suck money from the real sector, driving it to the foreign exchange market and further offshore.
- Refusing to act as a lender of last resort, the Central Bank took the path of bankruptcy of non-affiliated commercial banks, which led to the loss of savings and assets of hundreds of thousands of individuals and legal entities on 4 trillion. rubles.
- Finally, the Central Bank stopped lending to the economy and removed from it 8 trillion. rubles. Thus, it aggravated the negative impact of external sanctions, which resulted in an outflow of 200 billion dollars in loans and investments.
Thus, starting from 2013, the policy of the Central Bank diametrically contradicted all its legally established duties and generally accepted functions of the mega-regulator in world practice. To cover its inadequacy, the Central Bank management partially changed the concepts: the stability of the national currency was interpreted as a low increase in consumer prices; instead of the stability of the ruble exchange rate, emphasis was placed on the volume of foreign exchange reserves; the development of the banking system was interpreted as its cleansing from problem banks; The concept of a transmission mechanism was applied not to the banking system, but to monetary policy, reducing it to the reasoning about the positive effect of rising interest rates on lowering inflation.
Having pushed the economy into a stagnation trap, the Central Bank began to make “heroic” efforts to “target” inflation, leaving the economy without a loan and sacrificing its growth. The reduction in inflation achieved through the contraction of demand is temporary, as the price to pay for credit reduction is to draw the economy into a vicious circle of degradation: interest rate increase - credit squeeze - investment reduction - technical decline - competitive decline - devaluation of the ruble - price increase.
The total damage from the exotic (of the world's major economies, only Brazil pursues a similar policy under pressure from the US and the IMF - with disastrous social and economic consequences), the Central Bank's policy is estimated at more than 15 trillion. rubles of underproduced products and 10 trillion. rubles of undone investment. To this should be added the three-year fall in incomes and the depreciation of citizens' savings, the bankruptcy of tens of thousands of enterprises deprived of access to credit, the loss of confidence in the ruble and its loss of the status of a regional reserve currency in the EAEU.
The inadequacy of the policy of the Central Bank disorienting the work of the entire state banking system. Taking advantage of the lack of control, state-owned banks set a record-breaking banking margin in the world, profiting from sucking revenues from enterprises in the real sector and inflating financial bubbles. They actually curtailed the lending of productive investments, making the goal of their activities the extraction of short-term profits, from which giant bonuses are paid to managers. The raiders, who are close to the latter, capture the companies that have gone bankrupt due to the deterioration of the loan conditions, and their owners are sent to prison for their lack of cooperation with creditors. The state banking system operates in the private interests of its controlling clans, who have appropriated the authority to dispose of state capital and the fate of private enterprises that have risked taking loans.
The share of productive investment in the assets of the banking system fell to 5%. With a reduction in the volume of foreign trade, the size of currency speculation has almost doubled in five times, already exceeding the volume of Russia's GDP by an order of magnitude. The management of the Central Bank has launched the activity of the banking system in the direction diametrically opposite to its intended purpose: instead of transforming savings into lending to the development of the production sector, banks suck money out of it, send them to monetary and financial speculations and further abroad. The Central Bank itself extorts money from the banking system by opening deposit accounts and issuing its obligations under 7% per annum, while at the same time crediting several approximate commercial banks under 0,5% per annum. The latter, as the bankruptcy of Otkritie Bank showed, used hundreds of billions of rubles received from the Central Bank to seize the “problem” banks with the support of it in order to assign their assets and withdraw money squeezed from them to offshore. The collapse of this financial pyramid revealed the shortage of more than half a trillion rubles of disappeared loans of the Central Bank, which is now compensated by new injections from the budget and other public sources.
Despite all this, the State Duma praised the work of the Central Bank, reaffirming its chairman with a record majority. Similar examples of a positive assessment of the failures of state regulators are not to be considered. They are especially characteristic of the results of large-scale reforms imposed on the country from abroad. We list some of them.
- The reform of the technical regulation system of the state control of the quality of manufactured and imported products, as a result of which the consumer market is overwhelmed with unsuitable goods.
- The reform of forestry led to the elimination of the system of state control over the state of forests and their operating conditions, resulting in endless forest fires.
- Reform of land use has led to the landlessness of the peasants and the emergence of landowners, barbarically exploiting land.
- Reform of water management has so limited the restrictions on the use of the banks of reservoirs, that the president of the country has to intervene to protect the rights of people to access rivers and lakes, not to mention the observance of environmental standards.
- The health care reform has created a channel for the appropriation of public money by irresponsible insurance companies, acting as intermediaries between the state compulsory health insurance fund and the state medical institutions.
- Monetization of privileges deprived citizens of deserved and honestly earned privileges and caused a threefold increase in government spending.
- The elimination by reformers of payments for pollution of the environment and environmental funds left the environment without adequate state protection.
- Reform of the power industry has deprived the country of its most important competitive advantage - cheap, high-quality and affordable electricity, the sale of which has become a source of profit for private monopolies.
- Reform of currency regulation legalized the export of capital, the volume of which over the past two decades is more than a trillion dollars. Up to this unprecedented in the world stories The privatization of state enterprises turned into the criminalization of the economy and the transformation of the industrially developed regions of the country into factory cemeteries.
The list of these destructive, in fact, reforms, for which their initiators received awards, assets, new powers and other bonuses, can be continued. Obviously, there is a mismatch in feedbacks that orient the control system towards the achievement of target parameters. Worse, negative results are supported by positive stimulation. Therefore, there is nothing surprising in the fact that the system is not capable of solving any complex and vital tasks facing our country.
Typical example - failed management results aviation industry. Having the ability to produce the entire line of modern passenger airplanes after the collapse of the USSR, Russia flies today on imported ones. The reason is that all the components of the state management system responsible for regulating this area of activity work in the interests of importers and against domestic industry. Instead of taking advantage of the existing design and production facilities, as well as lending loans to domestic civil aircraft of all sizes, state-owned banks buy foreign aircraft, leasing them to the state airline. At the filing of Russian ministries, the Eurasian Economic Commission, contrary to established functional responsibilities, exempts imported foreign aircraft from paying customs duties and taxes. Only the direct economic damage from these decisions for the budget of the Russian Federation is estimated at $ 8 billion. They contradict the instructions of the President of Russia to restore technological sovereignty in the field of mass production of civil aircraft, fix the critical dependence of the domestic civil air transportation market on imports, 90% of which is already occupied by foreign air courts.
In all complex areas of activity, the existing management system demonstrates its inefficiency. Russia has lost almost all the high-tech markets, with the exception of military equipment and nuclear energy, but these exceptions only confirm the rule, since these areas are under the personal control of the president. Setting the head of state to switch to an innovative development path is emasculated in imitation of the boisterous activities of officials in inflating show-off projects. Russia remains the only country in the world where there is an absolute reduction in the number of scientists and engineers, and R & D costs are reduced. The reproduction of the economy moves to a foreign technological base.
It follows from the above that the level of the existing control system remains substantially below the diversity of the control object. The national economic complex, inherited from the USSR, even after its considerable degradation, remains more complicated than the ability of the management system created during the period of “shock therapy” to regulate its reproduction. The inability of the management system to solve complex problems is primarily due to the lack of responsibility of officials for objective results of work. If the real result is indistinguishable from its imitation, then the entire management vertical is subjected to rapid corrosion. Personnel are selected not by professional qualities, but by the principle of “friend or foe” and the parameters of personal loyalty. As a result, incompetence is growing in the management system, which turns into corruption. The place of highly qualified personnel is occupied by the so-called “teams”, which in fact often turn out to be organized criminal groups.
The control system has reached such a degree of degradation that it rejects attempts to complicate it with both centralized directives and system innovations. So, she was unable to fulfill the presidential decree "On the long-term state economic policy", she also rejected the law on strategic planning adopted on his initiative. The latter was never put into action, because the government was unable to ensure its implementation. Also, the repeatedly proclaimed project financing has been stalled, and the Central Bank has turned down special refinancing tools designed for targeted lending of socially important activities.
In fact, the economic management system has lost its integrity, and its individual fragments began to serve the interests of influential clans and foreign centers of influence. For example, the policy of the Central Bank shows how the symbiosis of these interests works. Washington financial institutions provide recommendations for the self-destruction of the most important elements of economic regulation. And the “teams” affiliated with the Central Bank, which manage the banking system, use the regulator's self-exclusion from the performance of their functional duties and insider information to manipulate the market in order to extract excess profits. As a result, the country strayed from the trajectory of economic growth, falling into a stagflationary trap, and the "commanders" receive astronomical revenues and hide in offshore jurisdictions.
Similar examples can be seen everywhere. The above mentioned dysfunction of the aviation industry control system occurred due to the fact that part of its units were reoriented towards serving private interests that were the subject of manipulation by foreign competitors. The European consortium "Airbus" and the American "Boeing" pay generous fees for the opportunity to occupy the Russian market with minimal costs. All participants in this process receive their share of the profits, while their own equipment is being ousted from the domestic market.
In order to bring the economic development management system in line with the target parameters set by the Russian president, it is necessary to restore its pivot: the mechanism of direct responsibility of all regulatory agencies and their officials for achieving the target parameters of the country's socio-economic development must be end-to-end in the management system. It is necessary to begin with the federal authorities.
In 2002, the author of this article prepared and submitted to the State Duma a draft law “On the responsibility of executive authorities for the level and quality of life of the population of the country”. He was called to fill the legislative vacuum connected with the definition of the right of citizens to a decent life and free development directly following from the Constitution. For the first time in the legal practice of modern Russia, the draft law introduced criteria for the level and quality of life - a system of sixteen objective indicators and a procedure for achieving targets for living standards. The draft law described the procedure for negotiations between the state, business, public and professional associations to develop appropriate agreements. The draft law provided for a norm according to which parties to the political process are responsible for the failure to fulfill or improper implementation of these agreements. If a country’s living standards are allowed to decline and the target standards for raising living standards established by the agreement are not met, this is the basis for the responsibility of federal officials, right up to the resignation of the government.
A similar law was adopted in the Chelyabinsk region and, during the course of its validity, proved itself quite well. Ideally, such laws should cover the entire control system, defining the objective functionality of each authority and establishing responsibility for its achievement. So, the law on the Central Bank must be supplemented by the obligation of the mega-regulator to target not only inflation, but also economic growth, employment of the population, and above all - the growth of productive investment.
The assembly of the end-to-end core of the responsibility of the executive authorities for the results of the country's socio-economic development can be carried out on the basis of the implementation of the above-mentioned law on strategic planning. When it is deployed by areas of activity, sectoral and regional target indicator systems should be built, the achievement of which should be the responsibility of the relevant government and administrative bodies. According to the results of the achievement of planned indicators should be evaluated the activities of their leaders.
Fundamentally important is the automatism of the mechanism of responsibility of state authorities and authorized officials for the objective results of their activities. Although it is impossible to achieve complete formalization of the relevant procedures, it is necessary to minimize the impact of the subjective factor. If facts of failure of planned targets, unfair fulfillment of duties or making inadequate decisions entailing significant damage to public interests are established, the sanctions should be followed immediately and be irreversible.
In order to exclude a collective guarantee, the right to reasonably demand the resignation of any official should be granted to every citizen, and a simplified judicial procedure for examining such requirements should be established. Citizens should also be involved in the fight against corruption, ensuring that they are automatically provided the necessary benefits if they reveal the facts of extortion of bribes.
Finally, the most important thing is the positive feedback of personnel selection. The criteria for promotion should be positive results of work, the evaluation of which is comprehensive and objective. For this, modern information technologies of automated calculation of ratings of the results of the activities of officials based on objective indicators of the results of their activities, expert assessments, and public opinion can be used. The assessment procedure should be protected from the influence of interested parties, be open and collegial, ensuring that the decision-making personnel committees are fully informed. Depending on the nature of the activities of government and management, it can be built in different ways.
For example, first managers should not appoint their deputies. If we are talking about ministers, then their deputies should be appointed not at the suggestion of ministers, but on the recommendations of the personnel commission, formed from among independent competent experts under the presidential administration. The ministers themselves should be approved individually at the suggestion of the head of state in the State Duma. Boards of directors of state corporations should also be formed publicly, through the approval of candidates in the State Duma at the suggestion of the government. The heads of state budget institutions of federal importance and their deputies could be appointed on the proposal of the relevant ministries by the relevant committees of the State Duma. Similar procedures for the appointment of personnel would be advisable to implement in the subjects of the Federation and in local governments.
The system of responsibility of the executive branch must be complemented by the mechanism of responsibility of the participants in a public-private partnership. To this end, modern information technologies can also be applied to automatically calculate the integrity ratings of private companies on the basis of their fulfillment of government orders, obligations to partners and hired employees, tax payments, etc. Only companies with a fairly high conscientiousness rating should be admitted to various forms of cooperation with the state.
A promising form of public-private partnerships are special investment contracts that provide for the mutual responsibility of public authorities and private business for achieving jointly established plans for the implementation of investment projects. The advantage in admission to government orders and purchases, loans and tax benefits should be used by enterprises with the full responsibility of their founders for the results of their activities.
Within the compressed newspaper space it is not possible to make detailed recommendations on the creation of liability mechanisms in all government bodies. The general approach is to observe the principles of objectivity, openness, public involvement, the use of modern information technologies for building integrated performance indicators and confidence ratings. Of course, it takes time to build such a system. Perhaps even a change of generations of managerial personnel. But it is necessary to start it immediately.
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