The tale of how the Russian Federation abandoned the dollar
I think that all VO readers have heard about import substitution and de-dollarization. After all, only the washing machine and the iron are silent about this today. While all other electrical appliances broadcast about this almost daily.
Although, in all honesty, with import substitution in our Fatherland it turned out somehow awkward. After all, Russia for as much as 18 years has been striving in a completely different direction: not to isolate itself, but to effectively integrate into the world economy, by joining the World Trade Organization, that is, the WTO.
Maybe this process would have dragged on longer, but only the elites accelerated it as much as possible, believing that our country's accession to the WTO would give us a considerable advantage.
Russia in the WTO
Why did we have to go there?
Economic theory explains the utility of the WTO as follows. In competition, the most effective will be the one who can produce the best quality product at the lowest cost. Quality will ensure demand, and low cost - high profit that can be invested in the creation of a new, even better quality product. And get a competitive edge again. Accordingly, there is no point in trying to produce the entire range of goods needed by society in a single country. It is better to introduce specialization, in which each power will focus on those groups of goods that they get best. Then other countries will also buy such products. And with the money earned from their sale, you can buy foreign goods that are not produced in our country. Accordingly, with this approach, it will turn out that people all over the world will be able to get the very best that can be produced.
In general, in theory, the WTO is an excellent thing. And our entry there in August 2012 was broadcast to us as a great victory for Russian diplomacy. But only bad luck - after only three years, in August 2015, it was necessary to create a state commission for import substitution at the highest level, headed by the Chairman of the Government of the Russian Federation.
Somehow unexpectedly (for our leadership) it turned out that free trade is such a thing that does not apply to countries that dare to conduct an independent foreign policy and oppose the center of democracy around the world. And the Russian Federation - dared and spoke. And, of course, it immediately became clear that supporting a coup d'etat in Ukraine is very democratic. But giving the population of Crimea the opportunity to vote for which country they want to live in is just the height of despotism, authoritarianism and other brazen defiance of Western values. Which, as you know, are the best that a reasonable person can only strive for.
In general, the sanctions began. And it became clear that we do not fit into the world market at all. And if we fit in, then with certain features. That is, what the Americans and the West need from us, they buy. And what is not necessary - they are trying to disrupt the deal (direct pressure from the United States on potential buyers from our weapons is an example of this). And at the same time, far from everything that we need, they are ready to sell to us. Awareness of this (generally simple) truth led us to the need to support our own sectors of the real sector of the economy.
In this regard, sanctions for the Russian Federation have become an absolute boon. The problem is that the victory of Russian diplomacy in the form of joining the WTO threatened to turn into a total defeat for our industry. For one very simple economic reason. Even if we imagine that the WTO is a crystal-fair organization (although the fact that some WTO members are much more “even” than others is well known), then its usefulness is based on the concept of fair competition. Which implies the well-known equality of the initial conditions. The availability and cost of investment loans, for example.
And it was clear to anyone who had even the smallest relation to production that, having survived the "wild 90s" and somehow recovered in the early 2000s, our industry is far from being on an equal footing with the western one. For example, the same more or less affordable investment loans appeared in our country closer to 2010 (more precisely, to 2008). But the crisis that broke out that year put an end to them. And the banks recovered closer to 2010. Moreover, at a price and on terms from which any Western businessman will immediately hang himself on the nearest aspen.
In other words, before entering the WTO, it was necessary to first modernize production. And what is characteristic, all the countries that are successful in the WTO did just that. But the leadership of the Russian Federation did not want to think about it. Although the warnings were sounded more than once.
In the period 2012–2014, the WTO has not yet hit us too hard. Because then there was a grace period for us. But it’s scary to imagine what would come with its end. But it didn't happen. There would be no happiness, but misfortune helped. And, in general, all is well that ends well.
No, Russia is still a WTO member. But then political nuances arose. For example, support for agriculture, which is carried out today within the framework of the import substitution policy, generally speaking, is not at all in the spirit of the WTO. And could be challenged by its members. But we are already under sanctions. So the Western world has obviously decided not to squeeze. And he closed his eyes to it. The same, in essence, applies to other import substitution programs.
So all that remains is to say a huge thank you to the United States and Western countries. For the fact that with their sanctions they suggested to our president at least some correct direction of domestic economic policy. Thank you so much dear ones. Well, not comrades, of course. But nonetheless.
Well, what is the result of our accession to the WTO today? It turned out something like the following. By entering the WTO, we counted on obtaining foreign technologies, facilitating trade, settling disputes for our exporters and attracting capital from foreign investors. For this, we sacrificed a certain part of customs duties (that is, we reduced them), thereby ensuring unfair competition between foreign and domestic goods.
And what happened as a result? The sanctions imposed in 2014 cut off our access to the many technologies we were counting on. There have never been foreign investments in our country. And there are two reasons for that.
What investor, making dollar investments in ruble production, wants to wake up one (far from perfect) morning and find out that the ruble has fallen by a factor of 100? And with it - and the cost of the business in dollar terms? Let me explain with a very simple example. Suppose I am a foreign bourgeoisie, I took and invested $ 30 thousand in the Russian Federation, creating a small bakery. With a dollar exchange rate of 3 rubles per dollar, it will cost 60 million rubles. And the next day, the exchange rate collapsed, and the dollar began to cost 3 rubles per dollar. And my bakery (selling bread for rubles) costs the same 50 million rubles. But even if I can sell it at this price (which is extremely doubtful during the crisis), then I can only get back XNUMX thousand dollars. That is, half the amount invested.
The second reason is sanctions. Which, of course, do not at all improve the investment rating of the Russian Federation.
Today all investments in the Russian Federation can be divided into 3 categories. Investments in the production of oil and gas (which foreigners used to do quite readily before) - this time. The second is "screwdriver" production, which is not too dependent on the ruble exchange rate. Simply because, along with the rise in the exchange rate, the cars assembled at such industries will rise in price. The third is speculative capital for playing at the rates of our currency and securities. (That is, it cannot be attributed to investments at all).
Thus, we received neither technology nor investment. As for the simplification of foreign trade operations, then (in fairness) I would like to note that there is still some benefit. Oil and gas suppliers did not receive any special preferences. But the same metallurgists were really able to trade metal in better conditions than they had before. However, the share of metallurgy in exports is about 10%. That is, on a national scale, this positive influence of the WTO was not so noticeable.
But it seems that no one really considered the losses incurred by the domestic manufacturer from the appearance of cheaper imported goods. Well, according to A. Tkachev (now the Minister of Agriculture), during the WTO period until 2014, when the state was concerned about supporting the domestic peasantry, farmers suffered losses en masse and without exception. Other industries also suffered, first of all - light and manufacturing industries, because they failed to defend customs duties on them. But who is interested in calculating the consequences now? There are some estimates, except for the losses of the budget of the Russian Federation from the reduction of customs duties. In the period from 2012 to 2017, they amounted to approximately 800 billion rubles.
Of course, if we had a two-party political system in Russia, the opposition would have calculated every penny. And I would present the relevant reports for the widest possible review. After that, the positions of the ruling party would be shaken, as in a 12-point earthquake. Alas, there is no real political opposition in the country and is not expected. So our leadership can continue to indulge in various economic experiments. To infinity and with impunity.
Okay. Let's not talk about sad things. Let's talk about fun. Import substitution programs, combined with ensuring the food security of our country, is a matter of paramount importance. And it's very good that we finally got down to it. But then something arose with a non-Russian name "de-dollarization". What kind of beast is this?
About de-dollarization
In fact, everything is very simple. De-dollarization is a complete rejection or reduction of the use of the dollar as a currency in foreign economic transactions. In addition, we also understand de-dollarization as a decrease in government reserves invested in dollars. Why are we doing this? This question was answered well by V.V. Putin:
“The dollar was very trusted all over the world. It was almost the only universal world currency. For some reason, the United States began to use dollar settlements as an instrument of political struggle, to impose restrictions on the use of the dollar ... By the way, we have never set ourselves the task of leaving the dollar as a payment instrument. But we just have to think about how to protect ourselves. "
In essence, Russia today has at least two reasons for striving to move away from the dollar. Moreover, their weight is such that one would be quite enough.
First, there are possible sanctions. We may well find ourselves in a situation where our dollar reserves will be withdrawn or blocked so that we will not be able to use them for their intended purpose, that is, as a means of payment in foreign trade.
Secondly, it is the stability of the dollar as a reserve currency. Earlier, the US dollar stood firm like the Cheops pyramid. And by his inviolability he guaranteed the preservation of the capital invested in it. But today, the enormous external debt of the United States (growing at a truly gigantic pace in combination with the regular launch of the Fed's printing press) has led to the fact that the dollar has become apprehensive. And not only and even not so much here as abroad. The same Deutsche Bank, for example, predicted the possibility of a strong drop in demand for US dollars in the event of a second wave of the pandemic. And the reasons for this are called the budget deficit, national debt and the Fed's policy. And the general statistics speak for themselves: over the past 20 years, the share of the American currency in the reserves of countries has decreased from 70 to 60%, and world settlements in dollars are also falling.
In fact, the mechanism here is very simple: seeing, let's say, the not very reasonable monetary policy of the United States against the background of regular budget deficits, the world fears that at some point the dollar will simply fall in price, and with it all contributions to it will depreciate. relative to other currencies.
Thus, it turns out that our, domestic de-dollarization is both a reasonable and timely business. But the question is that many of our fellow citizens really want to see in it not just the protection of our foreign trade and government savings, but much more. And the Internet is replete with remarks about the decline of the era of the dollar in international settlements, about its end as a reserve currency, and, in fact, about the economic collapse of the United States.
Just a couple of numbers.
In 2018, the export of goods from the Russian Federation accounted for as much as 2,3% of the world export of goods. Our country's share in the world export of services is even lower - in the same year it amounted to only 1,1%. At the same time, it should be understood that even before the de-dollarization, some of the RF settlements were carried out not in dollars, but in the same euros and in other currencies. For example, in the same 2018, the share of Russian settlements in foreign trade in dollars was 56,1%.
Thus, even a complete refusal of the Russian Federation from the dollar will lead to a decrease in dollar settlements in the world for goods by about only 1,3% in commodity payments and by 0,6% in payments for services. And, obviously, this is not at all the order of numbers that could seriously affect the global stability of the US dollar.
In fact, only the United States itself can shake the dollar's position as a reserve currency and the main means of international settlements both today and in the foreseeable future. After all, if the local leadership does take up their minds, and approaches the matter strategically, not limiting themselves to the horizon of the next elections, then they will be able, even if by unpopular measures, to correct the situation. For example, if the United States still manages to balance its budget, if not to a surplus, then at least to a minimum deficit, then the whole world will again rush to buy evergreen "made in USA" papers.
How much time does the United States have left to stabilize its position? A carriage and a small cart. Taking into account that the decline in the share of the American currency in savings amounted to as much as 10% over twenty years, this period can be measured in decades. Another question is that the further the Americans pull, the more difficult and painful it will cost them to return the economy to normal. And if it is tightened too much, then yes, its complete collapse is possible.
My personal opinion is that the Americans will bring their country to the "Big Badabum" in the economy. The situation, which is already very bad today and is infinitely far from the chimeras of the capitalist paradise, as it seems to our would-be professors from the Higher School of Economics. Whatever one may say, but the slowly maturing American crisis is of a systemic nature, and will not dissolve by itself. Economic theory already postulates the inevitability of crises through which any capitalist economy must pass with a certain regularity.
It is understood that the mechanisms of its self-regulation (the very “invisible hands of the market”) are gradually shaking its balance. And in the end there is a collapse. But then, thanks to the same "invisible market hands", there is a revival of the economy like a phoenix from the ashes. After which the aforementioned phoenix rushes to new, previously unattainable heights and unthinkable victories. Then another collapse follows. And so on ad infinitum. But on the whole, capitalist society is still going forward and upward. Because each subsequent peak of development is always higher than the previous one. America has gone through this before. Let's remember the "Great Depression". However, this time, in my humble understanding, everything will be much more complicated and difficult.
But what does it matter to us? No, I, of course, understand that happiness is not when one's own cow calves, but when a neighbor's one dies. But still, I propose, instead of once again predicting an economic catastrophe for the United States, look at our own problems in this area. And first, to figure out whether de-dollarization will help remove the dependence of our country's economy on the American currency?
To be continued ...
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