By good fortune, I turned on our satellite receiver of Russian state television today just in time to catch key moments from the Prime Minister’s annual report to the State Duma on the work of the Government in the year gone by. Mishustin described in substantial detail the Government’s funding for domestic social and economic needs in 2021, but went on to say how the appropriations are being greatly increased in the current year to counter the negative effects of the “sanctions from hell” which the USA and the EU unleashed after the start of the Russian “special military operation” in Ukraine on 24 February.
Mikhail Mishustin is a heavy-set man but radiates energy, mastery of the subject matter of the day and enormous confidence in the ability of his team to manage effectively all of the challenges, challenges which would have already sunk most every other nation on earth save China. Instead, Russia recovered from a brief collapse of the ruble exchange rate, attaining once again in the past few days the level from before the sanctions. Of course, the exchange rate is not the only measure of success in coping with the sanctions, but it is a good initial barometer of business and public confidence in the government’s financial management.
At his appointment by Putin a couple of years ago, Mikhail Mishustin had going for him a reputation as what the Russians call a хозяйственник, meaning a technocratic manager who can keep tight reins on government spending and get things done. Following the trials of seeing Russia through the Covid crisis, Mishustin has filled out his inventory of skills to be a very impressive manager of men as well as means. He is a good public speaker. What he is not is a politician: he does not pose a threat to the occupant of the Kremlin; instead he is deferential and mentioned at every turn how this or that initiative of the Government or the legislature is made in response to directives from the Head of State.
He spoke a good deal about support for the people in these trying times, in particular about subsidies for mortgage loans to ensure that housing construction remains at the highest levels of output ever seen in modern Russian history. This is good for employment and good for people’s well being. In farming communities, the mortgage will be held at 3%.
He spoke about the massive funding being realized for infrastructure build-out, in particular for roads having regional importance. He talked about several industries having national importance which are being given special assistance – ship-building and civil aircraft production. The latter is being given every support to complete import substitution of all critical components, a task which began already several years ago following earlier waves of sanctions against Russia when Russia was denied supplies of the materials for composite wings on its newest passenger airliners.
But the greatest attention appeared to be to assist industry and commerce with subsidized credit for both investment and working capital. This takes on special importance under conditions of the very high prime rate (20%) which the Bank of Russia recently imposed to rein in inflation. The inflation was sparked by the sanctions and pull-out of foreign suppliers and manufacturers from the Russian market. It also related to the collapse of the ruble in the early days of the ‘special military operation.’
Such high prime rates would normally put a halt to the currency exchange crisis which it did very nicely. However, it would normally also starve the economy of capital and so lead to sharp reduction of supply as well as of demand. The measures that Mishustin set out, feeding capital at affordable rates directly to enterprises through subsidy arrangements with the banks, provides oxygen where it is needed at this critical moment. The objective is to keep enterprises afloat, workers employed, and give a breathing space for the enormous challenges of import substitution to be resolved. It all makes good sense.
In general, despite its statist overarching policies, which include, in present circumstances, naming champions in the target industrial sectors for import substitution, the government’s emphasis remains on encouraging private entrepreneurship at all levels, from small and medium sized enterprises, to the industrial giants, which are also under great stress from the sanctions. That is to say, Russia remains predisposed to free markets as the best response to foreign pressure.
The statist, interventionist side of the present Government shows itself in the measures Mishustin listed with respect to facilitating closer cooperation between universities and other centers of research on the one side and industry on the other. Going back to Soviet times, this was always a weak point in the Russian economy. Now, listening to Mishustin, it appears that there are people in charge who know how to fix the problem just when the Russian economy will be in greatest need of innovation and new technological talents.
My take-away from Mishustin’s speech is that Russia has in place a world class management of the economy and finance. Those in Washington who thought the country could be crushed misunderstood Russians and underestimated the capabilities, determination and sang froid of their Government.
But then there is nothing to be surprised at in this state of affairs. Russian studies in the United States have been virtually useless to anyone for at least two decades. Taking the well known and respected Harriman Institute of Columbia University as a marker, I can say that apart from LGBTQ issues in Russia or Ukrainian films, the monthly program of events for the student body has zero on offer. The lectures and round tables on the Ukraine war today are talk between tweedle-dum and tweedle-dee, with all panelists reading from State Department briefings, no different from what the journalists in mainstream media are doing. Not an original perspective or thought to be found there. The field has been totally politicized into an anti-Putin street party and otherwise trivialized. There is no way that this esteemed institution could help anyone in Washington planning economic warfare on Russia to understand the resilience of the Russian side and the futility of their mission.
©Gilbert Doctorow, 2022
P.S. – On the issue of the failure of Russian Studies in the United States to produce anything of value, I refer the reader to my 2013 essay in The Moscow Times: https://www.themoscowtimes.com/2013/11/18/defunding-russian-studies-may-be-a-blessing-a29668