/View.info8 S.F. Sharapov on the economic suffocation of Russia
I continue the conversation about the creative heritage of the Russian economist and public figure Sergey Fedorovich Sharapov (1855-1911). In his main work “The Paper Ruble” (1895), as well as in his other works, Sergei Fedorovich, on the one hand, sharply and very appropriately criticized many aspects of the economic life of then Russia and the economic policy of the then government; on the other hand, it offers detailed ways to overcome the identified problems.
It is surprising how many of the economic problems Sharapov identified at the time are similar to Russia’s economic problems today.
Who today in Russia does not know the phrase “inflation targeting”! It was adopted by the Bank of Russia from the lexicon of the “Washington Consensus” (an unofficial set of rules for economic liberalism promoted by Washington through the IMF). This means a course of the Central Bank to reduce the inflationary growth of prices. The infamous “Washington Consensus” suggests that the Central Bank compress the money supply as the only way to do such “targeting”.
When I studied at a Soviet university more than half a century ago, we were quite rightly told that price changes were a symptom of deeper causes, primarily an imbalance between the money supply and the mass of goods. The change in the ratio in favor of the money supply gives rise to inflation, in favor of the commodity mass – deflation. And if the former happens, then it would be more correct not to compress the money supply, but to increase the supply of goods.
However, in the “Washington Consensus” – the ideology of monetarism – it is not usual to think in terms of goods and the real economy. Monetarism is the art of monetary and financial manipulation. So the Bank of Russia, claiming to fight inflation, engages in monetary manipulation and strangulation of the real sector of the economy.
There is such an indicator – “monetization of the economy”. It expresses the ratio of money supply (monetary + non-monetary) to gross domestic product (GDP). According to IMF estimates, in 2020 this figure for China was around 200%, for Japan it was close to 200%, for many Western European countries it was in the region of 100% (plus or minus), for the United States it was 70% . But Russia has about 45%. At such a level of monetization, which the Bank of Russia maintains, referring to its “targeting”, a shortage of working capital is created, money becomes expensive (high interest rates on loans).
For many years, I have never heard Neglinka even once propose to eliminate the inflationary rise in prices by increasing the mass of goods. But this is not difficult: it is enough to offer loans to the real sector at a moderate interest rate, which is lower than the profitability of the borrower company. Alas, this is not even discussed.
But it was so in Russia during Sharapov’s lifetime, at the end of the 19th and the beginning of the 20th century. At that time there was no sign of the IMF or the “Washington Consensus”, but the rule of Western financial science to choke the real economy was already being applied by the State Bank of the Russian Empire and the Ministry of Finance.
This rule is nothing more than a religious dogma called “economic liberalism”. The rule is: it’s better to have less money than more than you need. By the way, Sharapov draws attention to the fact that the religion of “economic liberalism” cannot give a clear answer to the question: how much money does the economy need? Are there many in circulation now or just a few? Even today, the preachers of “economic liberalism” are confused in the answers to this question.
For half a century (from the time of the reforms of the 1860s to the revolution of 1917), the monetary authorities of Russia “drained the money supply”, that is, they strangled the Russian economy to the delight of our country’s enemies and Western usurers. In the middle of the 19th century, a resident of Russia had an average of about 30 rubles, which is equal to 120 French francs. By 1914, this amount was reduced to 10 rubles, or 25 francs. The same indicator for Western countries is equal to: in Germany – 115; USA – 125; England – 140; France – 140 francs (Antonov M. Economic doctrine of the Slavophiles. M: Institute of Russian Civilization, 2008, p. 299)
Here is a summary of four decades (1857-1906) of financial reforms aimed at “monetary strangulation” of the Russian national economy, made by Sharapov in his lecture “Land and Freedom … without Money”, delivered in 1907:
„ As of January 1, 1857, according to official records, there were… 2,048,297,000 rubles in public circulation. The state budget in 1857 was 255 million rubles, and the empire had 65 million inhabitants.
As of January 1, 1906, according to the balance sheets of the State Bank in circulation, there were… 2,260,800,000 rubles. – by only 212 ½ million rubles, or barely 10% more than in 1857, while the state budget grew by 700%, exceeding 2 billion rubles; the number of inhabitants increased 2 ½ times, reaching 145 million people, and agriculture, industry and trade, and in fact the whole population, which had completely passed from a subsistence to a money economy, needed significantly more working capital than in 1857 .”
The people of Russia perfectly understood that the economic mess, poverty, the ruin of farms, the low competitiveness of the local commodity producer in the world market arose from the lack of money, which suppressed labor energy and the desire to work. The most literate representatives of the people tried to get to the “tops” to explain to the capital authorities that it was necessary to include an additional amount of money in circulation.
For example, the Rostov merchant G. Parshin sent a letter in 1885 to the then Minister of Finance Bunge. Noting the plight of industry and trade caused by the reduction of money in circulation (deflation), Parshin offers a way out of this situation: “… the only way … it is necessary, for example, to issue, for example, 200 million credit notes and use for starting state work in various parts of Russia at the expense of the treasury …
And that our ruble will be cheap in the foreign market, because a lot will be issued, but in our homeland it will go for a full coin, and this will achieve a smaller export of our goods abroad, and we will buy everything in our homeland … and if our ruble in the said opinion, everything necessary for our buildings and everyday life will be worked in our factories and our people will earn …. This will achieve full competition between Russia and abroad ” (quoted by: Vlasenko V.E. Parichnyna reform in Russia 1895-1898 – Kiev, 1949, pp. 134-135).
Unfortunately, the Russian authorities ignored such appeals of the Russian people.
The people did their best to resist the deflationary experiments of the financial authorities. Credit cooperatives and mutual loan societies were established. Merchants and entrepreneurs, where they could, replaced money with bills of exchange or barter. Some of the most energetic entrepreneurs created their own money.
The most striking example is the money of S.I. Maltsev. Maltsev (correct – Maltsov ) Sergey Ivanovich (1810-1893) – Russian industrialist, Cavalry Guardsman, retired major general, honorary member of the Society for the Promotion of Russian Trade and Industry. An exceptional representative of the noble and industrial Maltsov family. It creates and uses its own money in its fairly autonomous economy, which spans several provinces and includes several dozen factories, plants, and other businesses. This local money was called “cash notes” of the Maltsovsky factory district and was distributed in this area together with legal banknotes (see: Paramonov O.V. “Banknotes of the Maltsovsky factory district in the 19th century. “Notes” of His Excellency S.I . Maltsov “). Moscow: 2001).
Sharapov admires S.I.’s energy and entrepreneurial talent. Maltsov, testifying to the entrepreneurial spirit of the Russian people in general: ” And that we can work, that we know how to do business, only gentlemen who are not familiar with business in Russia can ask for proof of this. We are so used to worshiping everything foreign and spitting on everything “domestic” (the word itself is an irony) that we do not notice at all the many excellently staged affairs in our country, not only they are not inferior to “Europe”, but also surpass this is especially important, when those difficulties which surround the Russian industrialist.
Take, for example, the late S.I. Maltsev. By the volume of what he did, by the spirit of the work and by the great initiative that unfolded here, I will not name another such work either in Europe or America.’ (Sharapov S. Foreign capital and our financial policy).
However, the famous Maltsevi factory district with dozens of enterprises and tens of thousands of workers began to gradually decline at the end of the 19th century. And it is not about the mistakes of S.I. Maltsev or the diseases that began to defeat him. The fact is that the authorities could not allow any money that did not “fit” into the financial theory to circulate on a huge territory (and even in conditions when the Ministry of Finance was preparing to “please everyone” with the “golden ruble”) .
Sharapov bitterly states: “Why did this thing die? The only reason is that Maltsev was suddenly forbidden to print his own money (money that always flowed and knew no abuse), and he did not receive state money in the form of the necessary credit. The blood was separated from a living organism, but the organism was born so powerful that it still breathes, but – alas! – he is already disabled and can hardly cope.
The lack of money, notes Sharapov, suppresses and devalues labor: “Political economy defines capital as concentrated past labor that is an instrument for new labor. The absence of bank-notes, raising the rent-payment of capital, separates it, cuts it off from the labor of the future, devalues, paralyzes that labor, enslaves it, and places the idle elements in a position which prevails in the country, the laboring elements in their slavery.
How relevant is this provision for understanding the current policy of the monetary authorities of the Russian Federation, “fighting inflation” by compressing the money supply! Creating a money deficit is only profitable for those who trade in money, that is, the moneylenders.
Sharapov directly says that under the current financial system in Russia only the forms of serfdom were replaced, and the new form of serfdom turned out to be even more difficult: ” Trying these considerations in life, it is easy to understand that this is not for America, but for Mother Russia, where only thanks to the Western financial doctrine, which has diverted the eyes of the Russian financial department for the past quarter of a century, instead of the old good-natured legal serfdom , a new one appeared, a thousand times more difficult, was created – economic serfdom.
Gentlemen: stockbrokers, discounters, speculators, rentiers, clerks.
Slaves: landowners, farmers, industrialists, workers.
Here are the direct consequences of the lack of banknotes and at the same time its exact signs.
It is curious that among Sharapov’s “gentlemen” are financiers (exchangers, discounters, speculators), but also officials and employees. Today we see this “marriage of convenience” between bankers and officials – both in Russia and around the world.
In Russia, the lack of money in circulation contributed to the fact that legal serfdom was replaced by economic serfdom. How much exactly! The current system should not be called “market economy” or even “capitalism”, but, as S.F. Sharapov describes, “economic serfdom”!
Translation: ES
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