Critique of the Brookings Institution

Jurriaan Bendien bendien at tomaatnet.nl
Sun Nov 16 02:23:46 MST 2003


In his address to the State Duma in May this year, Russian President
Vladimir Putin said his goal was to double GDP in the next decade.
Responding to this, Fiona Hill and Clifford Gaddy, two senior fellows at the
Brookings Institution, commented in the Moscow Times recently that the
concern "is not whether Putin can double GDP, but how he will actually do
it. There is every reason to believe he can achieve his objective.
Unfortunately, he will likely do so by resorting to old Soviet methods of
cranking up production." Putin's ideas do not fit into the American
porno-imperialist theory about export-led development, obviously.

The standard dose of stale, moronic anti-communist rhetoric follows
(falsified statistics, growth boasts, forced labour etc. - as if Americans
didn't falsify statistics, didn't misrepresent economic growth and didn't
employ slave labour; it's the pot calling the kettle black) and then they
start talking about Siberia about which they had published a book, called
"The Siberian Curse: How Communist Planners Left Russia Out in the Cold -  a
catchy title which tries to blame the problems of modern Russian capitalism
on the Communists, rather than on American imperialist aggression and
plunder. They ought to write a book called "The imperialist Curse - how
American warmakers left the USA with massive debts, and inflicted mass
murder on the rest of the world."

The Brookings argument is, "In the Soviet Union, central planners indulged
in growth for growth's sake, promoting construction projects in Siberia that
defied nature and the market, and putting factories and people in some of
the most inhospitable places on the planet." This formula is interesting in
itself, because how could you "defy a market" if there was no market to
begin with, and no export of the output to the world market ? The Brookings
people do not know what they are talking about, with their rhetoric about
"the market", all they are talking about here is a theoretical market, a
hypothetical market, in which certain activities would have been uneconomic
if that market had existed. Putin is talking about creating the conditions
for real economic growth and regulating that growth so that it doesn't just
enrich a few Russians who then emigrate with their wealth.

The Brookings story is a bit like saying "if I had had a million dollars
then I would have made a lot of money with it", and anybody can say that,
this is banale ! Anyway, how could you mine minerals in Siberia and generate
electricity, without establishing factories and people there ? It is true,
there was forced labour, and there was environmental despoilation etc., but
what has this got to do with current Russian concerns about economic
improvement ? I might as well go and talk about slavery in the American
South and Government-sponsored pollution of the Great Lakes in the USA.

Anyway, the solution offered by the Brookings authorities is that "Russia
does not need more construction and more production for the sake of growth."
If boys and girls just play doctors and nurses, they think, consumer goods
will just
fall out of the sky and cars will appear out of nowhere on the drive. Thus,
"in referring to GDP as the ultimate indicator of the vitality of the
economy, size is not the issue - it is quality that counts." So now what we
need is a new cultured middle class in Russia, the very class which, in
America, is being ripped off by the US Government. It's funny how the
bourgeois always talk about creating a "middle class" somewhere overseas,
while they rob and plunder the middleclass in their own country !

The strategy the Brookings people propose is "to make industry outside the
energy and commodities sectors truly value-creating and let the market, not
the government, decide how factors of production - people and capital - will
ultimately be used". Putin's economic goal should, in other words, be to
free up the labour market, and help workers relocate to places and
professions of their own choosing, out of Siberia." Notice the reference to
"value creating" - but Brookings economics doesn't even know what economic
value means !!

The Brookings economic poetry sounds sexy, libertarian and humanitarian, but
it is nonsense, because the Russian labour market just doesn't work the same
way as in the USA, economic incentives don't work the same way, and the
Brookings people don't understand much anyway about how the Russian economy
works. Of course it is a good thing, if people can be free to live and work
where they want, but just praying and worshipping about the "magic powers of
the market" does not solve that problem in the CIS republics. That is just
Brookings occult economics, which abstracts from culture, politics and
society and lacks any theory which explains how they are related.

The reasoning behind the Brookings solution is, that we are talking about a
Russian economy where half of the enterprises operate at a loss, and a
handful of oil and gas companies account for two-thirds of the market
capitalization of the stockmarket, with the metals industry and primary
commodities as the other third. So what the Russian Government actually ends
up doing, is levy the raw materials sector and its exports, to obtain an
accumulation fund, in order to subsidise the development of other economic
sectors with the domestic economy. This conflicts with American export-led
development and globalist theories, which says that the USA should be able
to enrich itself, while other countries give up their independence, reduce
their personal income, get slaughtered in wars, and run up massive debts.

But the Brookings solution is a hoax anyway, because "letting the market,
not the government, decide how people and capital will ultimately be used"
is precisely why the Russian economy collapsed after 1989; vastly more
enterprises were wiped out, than newly created, and hearing this Putin would
laugh them out of his office, if not boot them out.  In the real world, "the
market" does nothing, people do, and in fact both Russian moguls and
foreigners plundered public assets in the CIS republics, caused the
rightwing ideologue Richard Pipes to pontificate in an article in the Times
Literary Supplement about how Russians "didn't have a developed idea of
property". Any day now, I expect Pipes to write an article about how Iraqis
"don't have a developed concept of property" either.

So anyway the Brookings people say just that, if people just follow price
signals on own initiative, then everything will get better. But this is
totally naive, because these Brookings people don't understand how the
market works in the CIS republics, what markets are, and what the real
conditions are for an effective operation of a market. They understand
nothing at all about primitive accumulation, they have only a bunch of words
and rhetoric. It is the same old banale Reaganite neo-liberal stuff,
equivalent to saying "you are walking your dog, and I think you should let
your dog off the leash" to which the reply is "if I let my dog off the
leash, then my dog will shit all over the place, and might get killed in the
oncoming traffic."

The Brookings people seem to have a concept of an economy inspired by the
USA experience, which involves mainly services, marketing and financial
dealing, whereas industrial production is something "dirty", it is more
something for 'niggers', 'redskins', "Russkies" and 'gooks' (sic.) in the
Third World, so that the USA can cheaply import the raw materials,
semi-finished goods and finished manufactured goods, as well as produce some
itself in huge mechanised plants within the USA (which however employ only a
very small dirty proportion of the workforce).

But the most interesting thing about the new Brookings ideas is that they
don't even know their economics, they are hired only for their ability for
rightwing garbage and sexual verbiage. Thus, Fiona Hill and Clifford Gaddy
state that "GDP by definition is supposed to measure the total market value
of all goods and services purchased for final use during a given year." This
is just false. GDP refers to the aggregate market value of goods and
services PRODUCED by residents of the domestic economy within an accounting
period, after deducting the cost of goods used up in the process of
production (Gross Output less intermediate consumption).

The parallel "expenditure measure" of GDP is admittedly obtained from data
about expenditure on goods and services bought by "final end users",
covering consumption, productive investment, and exports, but this does NOT
include IMPORTS, because those imports are not produced in the domestic
economy.  The "income measure" of GDP is derived from earnings data
(salaries and wages, gross profits, and indirect tax) but this does NOT
include income which is not "factor income", i.e. unrelated to production.

In other words, when the Brookings people define GDP as "the total market
value of all goods and services purchased for final use" they are just lying
through a hole in their heads, because the GDP measure refers only to the
sphere of PRODUCTION in the domestic economy, and does not include transfer
income, expenditure on final consumption unrelated to production, or
intermediate consumption. What the Brookings ideologists want to hide, is
Americans who get rich by producing nothing, and how the rich Americans
import their luxury goods from overseas, without this being accounted for.
But they completely misunderstand Putin's problem and his solution to it,
because the problem is precisely the conversion of money capital into
production capital, and keeping investment capital within Russia, to develop
the economy there cumulatively.

It's a funny thing when American dogtank consultants want to advised the
Russian government about how they are wrong about GDP growth, when they
DON''T EVEN KNOW WHAT GDP IS THEMSELVES. Putin would get better ideas from
reading N. Bukharin, E. Preobrazhenskii, N. Kondratieff, W. Leontief, E.
Varga, L. Trotskii, and A. Kollontai than from American garbage economics,
even if delivered by the Brookings Institution. Most of the Russians I
mention have been dead for half a century or more, but the new
fundamentalist economists in the USA operate with an 18th century ideology,
so, by comparison, the Russian economists of the 20th century are modern.

Jurriaan

Reference: http://www.themoscowtimes.com/stories/2003/11/12/009.html

Postscript:

The official US Commerce Department's Bureau of Economic Analysis definition
of GDP is: "The market value of goods and services produced by labor and
property in the United States, regardless of nationality; GDP replaced GNP
as the primary measure of U.S. production in 1991."





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