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Sovetnik Pravitelstva CWA, Tovarichestvo Palmsa, Inc.
Investment Bankers. Washington, United States of America.
On Wed, 17 Apr 1996, Douglas Keene wrote:
> Dear List Members:
> This short article in OMRI caught my attention today, and presents some
> opportunities for some questions, comments, and discussion.
> "LACK OF CAPITAL THREATENS RUSSIA'S SECURITY. A report for the Security
> Council prepared by the government's Financial Academy concludes that
> the shortage of capital in Russia is a threat to national security,
> Izvestiya reported on 16 April.
There are numerous poor countries in the developing world with an extremely
low standard of living which have never had their borders threatened. Cuba
is perhaps the best example of a lack of threat to national security under
such conditions of poverty. Whenever I hear Russia equate investment needs
with national security, the word "tribute" comes to mind. Actually
the only things threatened in Russia are lack of property rights and rule
of law and a just economic system, which are all threatened by the $150
billion that is more than willing to invest in the economic reconstruction
of Russia, providing Russia abandons its "Russia for the Russian Nomenklatura"
policies. The power structure considers the surrender of their perks too
high a price to pay for a prosperous population.
A financial crash would provide a pretext for continued exploitation
of 95% of the population and indeed result in a continued lagging economy
of third world class. It wouldn't restore the command economy, as that
would require the nomenklatura to return their newly acquired "private"
riches to a community property State. But Russia knows that "national
security" and "command economy" are trigger words that generate
"donations". Its an effective protection racket.
Presently Russia is a sieve with capital inflow converting to flight
capital outflow before it is ever applied to industrial reconstruction.
So donating money would produce the same result as "investing"
money, - Zero. Most of the proceeds of exports never return to Russia.
Russia's view of exports is the same as its view of capital repatriations.
Neither are recognized, although the latter receives lip-service. Russia's
economic goal is satisfaction of national "need" through inflow
of" donations", rather than the exchange of GDP in the global
economy. By "Russia", I mean the power structure not the population
which is quite distinct from "Russia". Russia's nomenklatura
also distinguishes between exports owned by Russians and exports owned
by "foreign" investors
Russia's capital needs could well be met through exports which at $50
billion or more annually, have the potential to be increased dramatically.
For that matter twice the required investment capital in the form of "flight
capital" already sits in Western banks under Russian control. But
Russians are no fools and that capital will not return until conditions
in Russia make investment safe. Meanwhile Russia remains a revolving door
for building western bank accounts rather than the Russian economy. When
that it understood the seemingly self destructive policies of Russia do
finally make sense. Their objective isn't really what it purports to be.
Once that is understood, their military activities are also less surprising.
The reversal of all this depends on the Russian electorate. If permitted
to function economically logically the population could indeed attain its
economic objective. First they have to identify the source of their problems
and come to desire a representative government so they can reverse their
own individual dis-enfranchisement.
The rest of the world seems to understand this as evidenced by the massive
"grass roots" education program being conducted by the Peace
Corps, Corps of Retired Executives, former U.S. public and civil servants,
and hundreds of other NPO and NGO organizations operating in Russia today.
I estimate a half million Western individuals are living in Russia today
performing that volunteer work. Meanwhile political and military considerations
of Western nations place economic agenda on the back burner. Placating
the power structure while evolution, with a helping hand from volunteers,
brings about change, appears to be the strategy. Viewed in the context
of American foreign policy of the past 40 years, it appears consistent.
Dr. Peter Johannes van de Waal-Palms
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Date last Revised: September 10, 1997