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Published: June 20th, 2016

A. Solomin― At the microphone Alexei Solomin, Alexei Naryshkin and Sergei Glazyev, advisor to the Russian president. Hello.

S. Glaziev― Hello.

A. Solomin― Member of the Russian Academy of Sciences. Sergey, to prepare for an interview, it is enough to open your Twitter that is real, we have found out, you are only in this social network. You express your thoughts very simple and clear. I propose to begin, at least, this interview with that promise, that you give there.

For example, one of the key themes of the past, one of the last major themes in the financial world - reducing the key rate, you write: "a small step in the right direction with the speed of a turtle. As we crawl, competitors are growing rapidly on credit with zero interest. " In this sense, you, I understand that completely coincides with the Minister Ulyukaev in this matter, anyway. Is it true?

S. Glaziev― You know, the issue of key rate importance in the current of the monetary policy, since it generates a minimum price of money. But generally speaking, it is more primitive excessive monetary policy, it is reduction to a question of the key rate that is one of the causes of stagflation trap, which turned out to be our economy.

The situation, when we have the norm for the industry profitability is different at times, and different terms of return on investment, monetary policy must be differentiated, it cannot be reduced simply to the average temperature in the hospital. And we see that where it truly differentiated, there is an economic success. For example, agro-industrial complex, where end borrowers get loans at 6% per annum. Conversely, in the manufacturing industry, internally oriented, the decline in production and investment, as businesses do not have the possibility to take out loans that are too expensive, short-term and require enormous collaterals.

Therefore, the proposals that we express as scientific and academic community as representatives of business, for example, "Business Russia", include a much wider and more complex set of tools. We are talking about the need to move to a flexible monetary policy, where, along with the key rate, which is important for short-term transactions in order to balance the demand and supply of liquidity, it is 2-3 days, an average of one week loans is issued on the key rate. Real sector needs long-term loans at rates that correspond to the profitability of the relevant industries.

A. Solomin― Do I understand you correctly: its needed to set a price for money for each industry specifically?

S. Glaziev― Not for each sector but for each direction of economic policy. For example, agribusiness today receives the money at 6% thanks to a wide range of instruments interest rate subsidies, subsidies for investment and much more.

A. Solomin― But there is also another tool - after all the there is a food embargo, which has opened our market for Russian products.

S. Glaziev― Yes. But I assure you that if the agricultural sector would receive loans at 18%, as internally oriented manufacturing industry receives today, no embargo would help. Because there are basic laws of economic logic - you cannot take the credit at a loss.

Therefore, when interest rates were raised, many companies were forced to abandon the credit, which is about half of the working capital in the industry today, loans and roll production. Or move the higher interest rates on the price of production, that is, where it was allowed by the ruble devaluation and rising prices on imported competing products to shift them to the consumer. Actually, because of this, our economy has been in a stagflation trap: some have raised prices, while others have reduced production. So, one area - agriculture.

Also, the direction of support of small business that has been used more or less today. There are special institutions that enable those entrepreneurs who know how to navigate in this complex model of state support for small businesses to obtain loans under 6-7%, too. There is project financing. These are the loans guaranteed by the government, where the figure 9% appears.

There is, I note, little advertised, but very powerful for the operation volume, loans to commercial banks by the Central Bank of credit issue by half a percentage point per annum.

A. Solomin― It is already very unclear.

S. Glaziev― When it comes to saving the banks of some privileged courtiers who are well connected, with a good relationship, they allocated money under the reorganization under half a percent per annum. And there were cases - by 0.1%. Such money is printed in about half a trillion rubles.

That is, we are told that we cannot resort to the emission of money, because it will supposedly boost the inflation, and at the same time issue loans from the back door under half a percent per annum, under 0.1% for the noble cause of saving the banks.

Well, I say that to the fact that in reality monetary policy is something much more complex, it is not restricted to the key rate. And we're talking about what should work flexible real sector lending system, and along with the key rate, which is important for purely financial market, mechanisms must work long-term purpose loan, which today is, the so-called special tools refinancing of the Central Bank. But they need to be much more powerful, much more differentiated and organized in such a way that the end-borrowers received loans at 2-3% per annum, if we are talking about the manufacturing sector, for example, or a long-term investment projects.

The talk about that emissions will cause inflation, in this case is neutralized by the fact that we are talking about the related credits that money is created specifically for the relevant projects of modernization and growth of production that do not compose officials, and are offered by the business and which are issued through special investment contracts, through another kind of agreement between the state and business, forming the fabric of indicative planning.

As part of this indicative planning corresponding model of the money supply, which provides the content of these indicative plans for modernization and growth in real production credit resources that are needed for the revitalization and economic recovery are forming.

A. Solomin― Can You just give an example of operating such a system in other countries for brevity and understanding?

S. Glaziev― Yes, of course. Western Europe after the war - the secret of the European economic miracle after the war was to target the emission credit under the rediscount industry. I can say that if our economic departments mentally have been moved to Germany in the 46th year, today Germany would probably have differed little from those ruins, which have been in the 46th year. Then everyone was given a 20 Marks, if we were waiting for these Marks to turn into long-term money in the pension funds and other long-term credit instruments, we would wait forever.

An example of post-war economic miracle in Europe - is an example of the controlled emission of money for the needs of the development of production, which was secured obligations of enterprises to increase the output. Of course, this system requires strict control over target use of money, even supplemented by targeted control in Europe this control in order to avoid abuse of monopolies, not raising prices to discourage loans and publicly guaranteed long-term loan, low interest rates. In exchange for this business guaranteed growth in production, decent prices, in the sense of not blowing the prices, and, of course, the Central Bank had to monitor the solvency of borrowers, a bill which he took under the refinancing of commercial banks.

Another such example - any country's economic miracle of the twentieth century - e.g. Japan, Korea, China today. If you look at where they started - impoverished population, the lack of long-term sources, and a sharp rise of investment and the volume of loans within just two decades, which wass implemented by the target credit issue in the interest of the growth of production.

Or take a modern example of the United States, Europe and Japan are the same. The so-called quantitative easing - emissions of money under the budget needs. Almost all the money that are issued today, the US Federal Reserve, are issued in order to service the budget deficit and public development institutions, such as mortgage companies, assume and others.

In Japan, money is emissed under the obligation besides the budget and public development institutions. The amount of money, which have been created in such a way for just 8 years, surpasses all imaginable limits - more than a trillion dollars a year, is a four-fold, so to say, a threefold increase in the monetary base volume in dollars, double - monetary base volume of the euro and the yen, and virtually all this money printing has gone through the budget deficit, through its financing, and the budget deficit was formed including at the expense of anti-crisis programs, most of which was directed not to save banks and to stimulate the advanced technological developments, to improve production efficiency, reduce energy intensity and etc.

A. Narishkin― Everything you are talking about now is very difficult for me. We have profiled minister who describes the current situation in the economy, using the term, the word "bottom" - we went to the bottom, the bottom is passed, not passed ... That's how you characterize what is now with the economy?

S. Glaziev― Economy - is a living organism, you know, and I would characterize as - you know, even if we assume that economic actors - a fish that swim or lie on the bottom, some of them all the time lying on the floor - there, gobies, for example, or sand shark - they are all the time on the bottom.

A. Solomin― Flounders.

S. Glaziev― Yes. And we may well turn into a flounder here, which will lie at the bottom.

A. Solomin― Her eyes flips.

S. Glaziev― Oh, and make sure that food from some external sources will be served in time. But seriously, I would compare the economy with the human body. That our economy today - you know, a disabled person ...

A. Narishkin― Which one?

S. Glaziev― I'll tell you. ... Who grew up a huge hump of excess government regulation, which is in sight, everybody talks about it. There is multiple concussion, who is beated all the time outside with the belt or the stick, and who require treatment with bloodletting. And, in fact, the program of the Minister of Economy and Kudrins program differs only by how much you need to put leeches on the body, to suck excess blood.

A. Solomin― As oil prices stopped - hence, the patient stopped beating, and then it is already possible to correct the hump, and to visit good chiropractor and so on. There are options.

S. Glaziev― But in order to heal our economy, we need investment in modernization, development of production, in restructuring. They do not fall from the sky. And the model that has been so far, focused on foreign investment, two-thirds of the monetary base has been formed under foreign loans, foreign investment. In the absence of our own sources of credit corporations went to borrow money abroad, and thus formed a giant external corporate sector debt. And we were in fact living on other people's money, and therefore could not manage own development. The major investment decisions for us all were taken abroad.

In the current situation, when it was decided not to lend us more, and not finance, we were immediately faced with the fact that we can not do anything. We can not plan anything because there is no money, and such a policy mans that we can only sit and expect that the West will help us and will decide everything for us. But this will no longer be, because we see that the result of this policy of non-economic sovereignty becomes a huge external dependence and degradation of the Russian economy.

In order to move to sustainable growth, we need to implement complex development strategy, mixed strategy. It consists of three directions. The first - a priority development of the new technological order, which needs a powerful infusion of today, it is growing with the rate of 35% per year. For this need and innovation, and research and development, and the demand for new products is a dynamic catch-up in those areas, which focus more on the market, and where we are a little behind, and overtaking development, where we do lag behind.

Here is a mixed strategy of growth, and it involves different mechanisms for financing this growth. Therefore, monetary policy and macro-economic policy as a whole must be taken into account here that the complexity of the current situation and to operate a large number of growth-support tools.

A. Narishkin ― If Vladimir Putin, for example, will make you Minister of Economy tomorrow, will say: come on, Sergei, burn. Monday will be your first day. What are the main solutions? Here is a complete carte blanche.

S. Glaziev ― Let's start with the fact that the Ministry of Economy today is devoid of any authority, except talk.

A. Solomin ― OK - imagine that the Deputy Prime Minister for economic policy does not exist, all the power is in your hands.

A. Narishkin― Do not be afraid of power.

S. Glaziev― No, I am not afraid of power, I worked as a minister and was able to convince my colleagues in the government of the need for a cautious liberalization of foreign economic activity, and still we live by those decisions, which were taken then, including export duties, including the formation of the same market exchange rates, I had to do everything with my own hands. And I'm not afraid of responsibility for decisions, because they are based, or rather, my understanding of reality based on scientific knowledge and understanding.

A. Narishkin― Well, look: here's power, here's mandate.

S. Glaziev― The first thing we need to do is to create a mechanism of strategic and indicative planning.

A. Narishkin― What is it?

S. Glaziev― It means that we must work together with business, science to determine the orientation of economic growth, where a promising direction, on which we can rely, on the basis of our competitive advantages.

A. Narishkin― It will be too long time, probably?

S. Glaziev― Why? It's fast. Perspective directions lie on the surface. This is, firstly, the development of our scientists, many of which are embodied in practice, which simply scale expansion. Secondly, this processing of the raw materials that we send abroad in its raw form. This makes it possible to raise, for example, the production of finished products per ton of oil in five to seven times.

A. Narishkin― And why is not it done now?

S. Glaziev― Per cubic meter of wood - ten times. Because it is difficult, do you understand? This is only the first part, you need to make plans together. Further, these plans need to translate into the fabric of the contractual-legal relations, where the state undertakes to guarantee the stability of macroeconomic and provide a mechanism for the provision of long-term loans at reasonable interest rates. And the business is committed to modernize and increase production on the basis of the agreed indicative plans. These agreements must have liability arrangements.

We walk a little bit on the way now-by-step, half-step. Special tools of investment contracts, under which the business is negotiating with the government on the level of the Federation are created today. And this experience is very successful, because mutual responsibility ensures success in the implementation of joint investment projects and business plans.

In addition, the control mechanism involves a very serious responsibility of officials for the performance of theirs functions, the bankers for money management and responsibility for control over the use of money. This mechanism excluded easy ways to make money on speculative instability.

That's like today, for example, we see a drop in investment and production, on the one hand, and on the other hand - a huge boom in the foreign exchange segment of the Moscow stock exchange. And when the central bank just raised interest rates, it became clear to all investors in the real sector have nothing to do, it is necessary to switch to monetary and financial speculation. As a result, there was a huge financial bubble, where people earn money easily enough, as they say, is not steaming and having all the possibilities to manipulate the financial markets and exchange rates.

That is, this system requires, except for knowledge and desire to work, quite rigid mechanism of the responsibility for the results of the implementation of the agreements and development plans.

A. Narishkin― The question may be strange, but nevertheless. Raising the economy out here that the current state - this is only the care of the state, or maybe people too can do something? To be honest, I do not understand anything in the economy, but maybe me and Solomin need to spend more or, conversely, spend less. Please explain. Can we somehow help the authorities?

S. Glaziev― In fact, the main source of economic growth - are people, and they have different roles in the economy. Of course, the whole economic life is made by human hands, and in this sense, the state only creates the conditions so that people implemented their creative potential, in order they may themselves reveal, to unleash their creativity, their skills and favorable for the development of business and economic conditions of activity sufficient to ensure that people continue to ensure economic growth.

A. Narishkin― But you are talking about a state that has obligation.

S. Glaziev― When the government creates an environment, then everything depends on the people. And if the state does not create such an environment, it is possible to rely on luck - no luck, be able to negotiate with the official - not been able, be able to get a loan or not. If you can not pay the debts, it will be able to restructure again, or not.

That is, in a situation of unfavorable macroeconomic climate business is doomed to a life of manual control. Because the economy is a living organism, it can not stop and, one way or another, even under tough talk about monetary policy is still someone is given money because it can not be otherwise. Well, as I said, give way behind closed doors, without mutual accountability and planning the expected results. So, almost everything depends on the people.

If we talk about the different roles, we are talking mainly about the role of the entrepreneur, who takes on the risk of the organization of economic activity. But apart from this, there are people who are employed. And I think that is a huge reserve of innovative activity, business activity - it is the involvement of people employed in enterprises management.

A. Narishkin― But the state should do this.

S. Glaziev― World experience shows that if the company engages workers in the management and enterprises to manage not only the shareholders, but also is a place of work collectives, engineers, workers, the company is more stable, it develops better. People feel joint responsibility for the results, and to plunder a company management is much more complicated because there is a joint control by the shareholders and labor collectives.

If we did the privatization of state property on the basis of advanced European models of Western models and eastern, by the way, in Japan, too, the mechanism of collective responsibility for the work of the company is the common rule. I can assure you that today, the effect would be hundreds of times higher.

Unfortunately, privatization has taken the path of looting businesses when people who accidentally seized control of the enterprise, buying stocks, then this company was used as a cash cow, to amass short-term profits. If labor collectives were given the right to participate in the management of enterprises, the casual owners who emerged as a result of privatization, could have been put in place in the control system in the interest of the overall development. And in fact it is common today the norm.

A. Solomin― I do not know, there were a lot of talks then: to drag every nail from work. Psychology of the enterprise's employee has been in some stuff like that, if we are talking about 90 years, for example. I just remember it, of course, in my childhood, the mood was like that.

S. Glaziev― Labor groups also have their own motivation - to get more wages. The fact and meaning of the control system is to find the harmony of interests. Because in the economic process it involves not only the shareholders, participating managers, hired workers, engineers, regional authorities. And the world experience in the modern management says that when we find a combination of these interests in harmony, optimizing them, then we get colossal effect.

Well, probably, most known successful company - an American Boeing, which is a collective enterprise, where the shares are distributed mainly among employees who work not only as employees, but as creators, as the people who create new high-tech products with their mind, their creative possibilities.

A. Solomin― Excuse me, we have very little time left, we will touch the last topic. You and your Twitter address to the referendum in Switzerland, but, in terms of monetization, right? And I wanted to ask you, I maybe do not quite understand, but, in my opinion, it is a different story - with an unconditional income that they too rejected, right? Here's how it seems to you, in Russia, it is clear that there are two and a half, perhaps thousands of Swiss francs, but it would be useful to introduce such an institution unconditional income to every citizen, regardless of the employed?

S. Glaziev― This is a good mechanism, when you have too much money, compared to the tasks facing the state. If there is such a surplus of money, it is better to give them to the people than to store, for example, in US obligations, as did our Ministry of Finance in the fat years of the 2000s.

A. Solomin― But there no sufficient number of the product present in the country, and it is a direct round of inflation.

S. Glaziev― Well, you know, when the monetization of benefits was carried out, it appeared that the damage from this in terms of monetization budget expenditures far exceeded the expected results. Since people do not enjoy the benefits every day, and are not all so, although benefits were recruited much, but the utilization rate was maybe 10-15%. When all of them have decided to monetize, as a result of the money poured into the economy and the consumer sector were much larger than previously passed through the actual use of benefits. But everything is relative. Here, for example, if we take two models that we had in the 2000s, the model that you suggest, and storage model profits from the export of oil in US Treasury securities, that is in reserve funds, the model of distribution of money to the population better than the model of keeping money abroad.

But we must understand that we did not have excess money. If we look at the structure of our state budget, it turns out that we spend on health care relative to GDP, not even in absolute terms and as a proportion of gross domestic product and government spending structure is three times lower than the advanced countries, and twice less than the average in the world. On education, we spend two times less than the advanced countries, and one and a half times higher than the world average. In science we spend three to four times less. Therefore, we have excess money in the 2000s formed not because they were nowhere to spend, but because we had under-funded socio-economic development, even when compared with the global average standards. It was an illusion of excess money. As a result, we have lost the zero years in terms of human development and recovery in investment activity. But the financed the US budget deficit.

A. Solomin― And also engaged our defense, do not forget those twenty trillion ...

S. Glaziev― It was after. What I mean is that if we take the different spending patterns, we must understand that we have never had extra money, extra money was an illusion. But if they do appear, as, for example, Saudi Arabia or the United Arab Emirates, where the whole of society, which lives in the area is 10% of the total population, 90% - migrant workers, those 10% can live on oil rent. But this is not our case.

A. Narishkin― Today while listening to Putin, for some reason I've been waiting for him to announce that he cancels anti-sanctions. What does the Russian economy suffers more from these western that's limitations that are imposed on Russian companies, or our response?

S. Glaziev― Our economy suffers from its own internal economic policy.

A. Narishkin― And from Ulyukayev?

S. Glaziev― If the policy has been focused on growth, on the basis of the objective limitations of growth, we have now developed rate of 8-10% per year, with sanctions, with no penalties. That is, if we created an internal source of loan financing and to orient monetary system on the promising area of ​​economic development through the mechanism of which we spoke, we would have today is not less than 6%, and in a favorable situation to 10%, regardless of the sanctions. Sanctions really brought the damage, but it is in the framework of the economic policy, which takes place now, because it depends on external credit sources. And since sanctions have blocked external sources of credit, that the economic development model that has been so far, immediately began to slip, because the economy has lost sources of long-term investments.

We would have to create our own, but instead of this we left as is, and introduced anti-sanctions. But entering anti-sanctions we had, once again, to give credit to our producers, so that they fill a niche market without raising prices. This was not done. So is such a difficult situation stagflation trap, high inflation and the decline in production is not due to the sanctions, but due to the fact that we can not create internal sources of development, and therefore it is very suffer from external factors.

A. Narishkin― You know, at the end of air it is always logical to talk about something optimistic. I, on the contrary, want to ask you to make a gloomy forecast. If the economic model will continue in its present form when everything will burst?

S. Glaziev― You have had your forecast by Minister of Economy. We will lie at the bottom if it comes. The whole world, by the way, going forward, there is rapid development of the new technological order, it grows with the rate of 35% per year, nano, bioengineering, information, communication technologies are transforming modern economy. The revival is everywhere, but at ours. Although we have the potential. And I assure you that ten years ago we could easily qualify for a leading position in the world on the light-emitting diodes, for example, but today we import them. And many other such examples, which ...

A. Narishkin― Ie it is already worse than ever?

S. Glaziev― Real sector needs long-term loans at rates

S. Glaziev― … which shows that there are opportunities for development. They are, why? And I still want to finish optimistically and draw attention of our listeners that today's forum, I think, will go down in history that our president announced the largest Eurasian integration. This is a significant expansion and understanding and capabilities of our economic development. Even regardless of western sanctions, we will learn a great Eurasian economic space, complementing the Eurasian Economic Union with new models of co-operation with our partners, not only in the West but in the East, in the South. And this big Eurasia, large Eurasian project - I think this is the most interesting event, which was announced by our president today.

A. Narishkin― Optimistically.

A. Solomin― Is not this a replacement of dependence on the US with dependence on China?

S. Glaziev― Yes, if we do not create a development strategy, would get from one dependence in to the other. Therefore, in order to profitably implement integration projects, it is important to have its own development strategy, to understand what we want from a partner, what we want to do to occupy niches which occupy together. And, in general, there are all possibilities for this today.

A. Solomin― Thank you very much. Advisor to the President of Russia Sergey Glazyev, Russian Academy of Sciences. Alexei Naryshkin, Alexei Solomin. Thank you!

Source: Echo of Moscow