---

Published: January 21st, 2016

Q: Many loud statements was made on Gaidar Forum-2016, in particular, the 2016 budget cuts of 10%, otherwise - a repeat of the 1998-1999 crisis. How do you assess these statements?

Konstantin Babkin: the so-called liberals of the economic bloc of the government once again proved that they are out of touch with reality. For example, as an industrialist I am concerned with different things, but not those of which they spoke. Moreover, they offer recipes that can only worsen the situation in the real economy.

We must understand that the impact of oil prices on the Russian economy is greatly overrated - but on the lion's share of the Gaidar Forum conversations was exactly that. In the same way, the fight against inflation that we also have as the linchpin of economic policy cannot be a ground for the adoption of major economic decisions.

Economic development is the development of production, the construction of new plants, thousands of hectares of plowed land, more than millions of machines purchased. That is the creative advance. In addition, the fight against inflation - is a secondary process, which does not really say anything about the success or failure of a policy.

Q: In other words the fight against inflation, the arguments about the price of oil - is only to create visibility of work?

Konstantin Babkin: we keep hearing Declarations of the fight against inflation, but because of the methods used in this struggle the real economy are dying and inflation for some reason only grows. We have seen a double devaluation a year ago, now also extends the decline of the ruble. When our "liberals" take up the fight against inflation – it only causes inflation. Moreover, as far as can be judged by the "result" it is not even a semblance of work, it is the work that brings real damage.

Let us look at recipes that are offered to us by "liberals" in the crisis: reducing government spending, cut the budget, reduce support for agriculture, industry - this will further exacerbate the situation in the economy. Add to this the increase in the retirement age, reducing pensions - it also reduces the purchasing power of the population, will have a negative impact on the development of the market, respectively, another plummet will be laid on the scales in a slowing economy.

I repeat, that things those gentlemen said on the forum – are detached from life. And the most unfortunate for the people is in their hands are the levers of influence - they pull for them and only do harm. And they're going to bring this harm further, since the proposed recipes are only dragging the country further down.

Well, and Gref's statement - is generally something else. He said that we are a country-downshifter - I realized that was not the meaning of "country-downshifter," but rather, "a country-loser", which is lagging behind other countries, and has no way out of the crisis. Maybe we can agree that we look like "losers", but the reason for this is that these gentlemen as Gref, these Gaidarians, have being guiding our economy for 25 years, and now we all suffer.

The world for these people is unclear, unpredictable - all they have revolve around the price of oil, which they cannot predict. And it turns out that we have no strategy, there is only a reaction to external stimuli - on the price of oil, sanctions - so we can not build a policy even for 3-5 years in advance.

Q: How come that the only thing economic bloc has to offer in the Gaidar Forum - is to cut the budget. Is there no other way to normalize the economic situation: the filling of the budget, the development of the real sector?

Konstantin Babkin: If we say that the development of the real sector, the development of production - is a priority, it becomes clear that it is necessary not to raise taxes but to reduce them, it is needed to protect the market, to support the export, you need not to cut spending on agriculture but to increase. We must allocate funds and all efforts to promote non-commodity production. It is clear, what to do if you put right goal.

Q: It turns out that the economic bloc did not put any goal? They openly say ot the forum that the government simply "customize" the budget under oil prices, and nobody says nothing against. Is there such a policy? And what it can lead to?

Konstantin Babkin: Yes, there is such a policy. We have the real sectors in a depressed state, respectively, oil revenues are important for short-term spending, so on them, as you correctly pointed out - they adjusted the budget.

According to the logic of the government, the main thing is not to change anything, but to just wait until the price of oil grows up, live on, nothing particularly developing. This strategy is belittling our economy. Pumped out the oil out of the ground, sold it- well, we Live. If cheaply sold or not sold at all - we must all be punished. It is not the economy, it is something like situational reflexes.

Q: Do you see the possibility of a repetition of the crisis of 1998-1999.? As a manufacturer, could you tell what is the difference between that crisis and the current one?

Konstantin Babkin: I feel that there is no difference. We are in a non-stop crisis for 25 years, and the root of this crisis is precisely in the wrong economic policies. Simply, we are confronted with different manifestations of the crisis like the default, the devaluation, the dismissal. 25 years we have a crisis. We destroyed the old system but did not built new one, and the levers of economic policy are twitching without a system, without ideas. Our ship is constantly thrashed on the waves but our economic leaders does not know where we are sailing.

Q: But the Government is committed to economic growth in 2016. Knowing the realities of production, can you see the conditions for it?

Konstantin Babkin: We are now at a low level of economic development. So our country won't be killed yet, and I do not exclude that in 2016 there may be some insignificant growth. But will that growth be stable, steady and serious, will it last for several years, it is impossible to talk about it now.

The ruble becomes cheaper and it's good for our manufacturers. But this is bad for the people, because the purchasing power decreases. Although the cost of the goods manufactured in Russia, is reduced. Maybe there will be growth, but another thing is that it should have being achieved without negative effects and made more sustainable and long-term. But for now there are no such preconditions.

Q: I would like to turn to the words of Dmitry Medvedev - he said that the anti-crisis plan had worked and in almost all areas brought results. Do you agree with him?

Konstantin Babkin: No, I disagree with him. For agricultural machinery subsidies were launched a few years ago - the effect is, in our industry, the increase in about 30%. But in other sectors there are no such growth - sadly all automakers, light industry, too. There are some local successes there, but no overall strategic promotion yet. Under the policy of the Central Bank, under that tax system it is not possible. Therefore, such a depressing impression this forum made, but I'm sure our Moscow Economic Forum will be more mentally healthy.

Q: MEF just gives a more realistic picture of what is happening in the economy and, importantly, offers an alternative to the model, which currently does not allow getting out of the protracted crisis. What will be the theme of the March MEF?

Konstantin Babkin: This is our fourth forum, but it will focus, in principle, on the same theme as the previous three - criticism of the existing economic policies and offering of a positive development path leading to another period of rapid growth.

One of the main ideas is that this year will be an anniversary - 25 years of Gaidar's reforms in Russia, which had begun in 1991, and still continue. Let us sum up "the results" of these reforms and say that 25 years - this is quite enough to "experiment". It is necessary to sum "outcome" and call it a day already.

Of course, the integration of the former Soviet Union will be discussed and the development of the Customs Union, so expect and speakers from CIS countries. Perhaps there will be the ministers of the neighboring friendly countries. This year we do not focus on the arrival of some well-known speakers from the West, we will try to gather key representatives from the real, the agricultural sectors of the industry. There will be scientists and public figures, and academics, and business leaders. Naturally, the three co-chairs remain - Greenberg, Sadovnichy and your humble servant.

Q: At the MEFs December section you began collecting signatures under the Charter of 2016, calling for a change in economic policy. Is there some progress, whether it will be discussed at the forum in March?

Konstantin Babkin: Now the Charter is being approved and, of course, in March, it will again be voiced. And my proposal, which is supported by the other members and the co-organizers, is that this Charter should be raised on the new MEF, at a plenary meeting to discuss it and to present officially as the position of the main participants. A quarter of a century is enough, fat years and the high price of oil could not be used in order to give impetus to the development of the real sector, the full potential of Russia has already overdue the change of course. The Charter precisely outlines the basic principles of this new required course. And of course, we will offer it to everyone's signature and implementation.

Q: That means, that March forum may be turning?

Konstantin Babkin: I would like to see it that way, but it does not only depends on us all. We would certainly like to see this change took place as soon as possible. But, unfortunately, the president is not ripe for such a turn – in his recent speeches at the press conference he said that in general, he is satisfied with the Government's policy, one he does not plan to change. So, unfortunately, based on the fact that the president voice, we can say that he is not ready. Perhaps, indeed, and society is not yet ready too. But we will continue our work  to convince millions of people that the turn is still needed. Everything can be much better than today.

Q: To sum up, I would like to ask - if you follow the recipes or the Gaidar Forum and Moscow Economic Forum, what awaits us in these cases?

Konstantin Babkin: If there will be such positive turn, which we mentioned, the 2016 may go down in history as the year of the beginning of the rapid growth and of a period of a new industrialization.

Many countries have already passed this way before our eyes, and we have everything to make such a technological leap. And there is everything so that in 2016 we have already begun to feel the positive effect of the new course. Because major decisions can be taken quickly enough in the area of ​​tax policy, the policy of the Central Bank, it does not require any serious rebuilding. You can do without a revolution, go all the way quite quickly and painlessly. 2016 can be a pivotal year for development will not throw us into the chaos of the 90s, as we are promised by the "liberals" from the government.

Source: Nakanune