Going forward…without looking back

Le Russia Forum à Moscou cette semaine donne la parole au pdg des grandes sociétés russes. Le serment de Herman Gref, président de Sberbank était particulièrment impressionant…Il dénonce les américains pour le refus de refléchir sur les origines de la crise.

Une Note par Gilbert Doctorow


Going forward….without looking back



by Gilbert Doctorow, Ph.D.



This is the week of the Russia Forum in Moscow. Organised by investment bankers Troika Dialog back to back with Davos, it features many of the Russian CEOs who participated in the Forum at the Swiss ski resort, as well as the famous and the good from around the world. Yesterday Herman Gref, former RF Minister of Economic Development and present Chairman of Sberbank, turned in a stellar performance when he adroitly fielded a question about how long the current worldwide downturn may last and what cures are appropriate to it.


Gref explained to the audience in a program televised live on the Russian news channel VESTI, that before speaking of cures you have to understand the causes. The USA is where the mess came from and Gref expressed irritation with the reluctance of Americans at Davos to get involved in what they dismiss as the ‘blame game.’ Let’s not look back, they say, since that can only distract us from the work at hand, from putting the economy back on the rails.


So Gref offered his own analysis of what caused the financial meltdown that led in turn to the economic crisis we all see around us. In his view the problem arose from the overheating of the US economy starting in the year 2000 with a spiral of ever higher budget deficits and higher balance of payment deficits. The increased overseas borrowing by the US to cover these deficits via T-bond sales was made easy precisely by the status of the US dollar as primary reserve currency of the world. This unique position made the country invulnerable to the normal financial mechanisms that should bring the accounts into balance by a spike in borrowing costs, triggering a recession, lowering domestic consumption and so forth. Instead, funding of the economy remained readily available at very favorable rates and private spending on consumption continued to grow unabated. In Gref’s words, the party went on because others got their share of the pie: the Chinese accumulated vast currency reserves from their inflated sales of consumer goods to the robust US demand and the Russians profited from booming prices for hydrocarbons and other commodities fed by the global expansion. In that sense the guilt was shared.


The conclusion which Gref drew from this analysis is that it is absolutely false to try and spend your way out of the current recession/depression because there is no way for government projects to replace the artificially high consumer demand of the past seven years. He insists that such recovery packages will only compound the problem by running up massive new debt and so draw out the recession.


Apart from the cautionary message that governments should be prepared to stand firm at the tiller during what will be a full three years of recession and stagnation, the policy recommendation which Gref makes to the world community to fix the root causes of the crisis is that a new architecture for the world financial reserves is needed, something to replace the now seriously outdated Bretton Woods Agreement. He urged adding regional reserve currencies as one palliative.


Gref’s response to a questioner in Moscow was an expansion on the theme which Russian Prime Minister Vladimir Putin presented last week at the opening session of the Davos Economic Forum. At that time most Western media followed the line set at Davos by Former President Bill Clinton and indulged in complacent, ironic comments about the Russian leader’s recent conversion to raw market capitalism.


Putin’s call for a new architecture of world finance is, in turn, a variation on Russia’s broader call for regionalizing the management of international affairs. We see this in the initiative of President Medvedev to hold European wide security talks to move on from the Helsinki accords concluded during the Cold War. It was the guiding principle of the security group meeting of CIS countries held yesterday, which ended in agreements on the creation of a larger and fully integrated rapid reaction force.


The regional approach is not so much an alternative as it is a complement to existing but poorly functioning global institutions of security and economic cooperation such as the widely discredited United Nations, which clearly need reform if they are going to begin to satisfy expectations arising from their charters. If it is an alternative to anything presently on the table internationally, then it is an alternative is to NATO and to ad hoc ‘coalitions of the willing’ which the US has invoked to carry out mandates of behalf of an ‘international community’ without formal legitimacy.


The price of bipartisanship


Gref’s words about how Americans are overly keen to move on without a backward glance at what caused the economic storm can also applied to President Obama’s decision not to reopen and examine unlawful actions of the Bush administration in general and its violations of constitutional rights of citizens in particular.


Americans are normally most unforgiving with respect to perjury. Yet, the web of lies perpetrated by the President, the Vice President and the Secretary of State, just to name the leading officials, in the run-up to the invasion of Iraq and then in its aftermath provided one Congressman, Dennis Kucinich, with material for an impeachment motion against the Vice President in the summer of last year. His motion was quashed by the Democratic leadership in Congress for reasons of political expedience, to smooth the way for what became an electoral victory in November.


The incoming Obama team has thus far rejected all calls for reopening old wounds, for examining possible crimes of its predecessors. We are told that it takes this stand in the spirit of bipartisanship, in the name of the ‘new politics’ as opposed to ‘business as usual.’ They are intent on enacting the people’s business without delay. However, this willful refusal to examine what went wrong, what made possible the curtailment of our liberties as well as the initiation and prosecution of a war of aggression under George W. Bush makes it all the more difficult to re-establish America’s position of moral authority in the world.


A country that is very quick to bring up the ‘lessons of Munich’ to browbeat others seems to prefer amnesia about its own recent past.



G. Doctorow is an occasional guest lecturer at St. Petersburg State University. His latest book  Stepping Out of Line: Collected (Nonconformist) Essays on Russian-American Relations, 2008-12 is scheduled for publication in April 2013 and will be available from Amazon in paperback and e-book editions.