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Surprisingly, this recognition comes too late. Globalization initiated the disintegration of the industry due to free trade that affected Latin American countries in the first wave in the late 1970s, and then in the second wave after the fall of the Berlin Wall in 1989, inflicting serious damage. to the former Soviet republics and, above all, to Russia and Ukraine. The third wave of poverty induced by globalization is now hitting the United States and the periphery of the European Union. If American economists had studied what globalization did during its first and second destructive waves, they would have seen that what has happened now in the American economy is in fact a historical story of an expected disaster.
Interestingly, the theory that protects manufacturing industries has similar roots in Russia and the United States. The German economist Friedrich List (1789-1846), who became an American citizen, contributed theories that were already there. The main work of the regulation “The National System of Political Economy” was translated into Russian by Sergey Witt, Minister of Finance of the last Tsar. So the economic competition in the Cold War between western capitalism and communism had the same theoretical basis. However, the huge differences between the economies blinded us to the fact that the economic strategy behind the two competing systems was exactly the same: Friedrich’s list of industrialization + reverence for infrastructure. In Russia, Sergey White promoted both.
The fall of the Berlin Wall brought many shocks to the Russian economy. The free trade shock and the privatization shock produced by a group of mainly American advisers who seemed to care more about the stock market and the foreign exchange market than about the real economy. With my Estonian colleague Rainer Kattel, we showed, in an article written for Expert, that from 1992 to 1998, industrial and agricultural production in Russia fell by more than 50%, while real wages, after having risen slightly at the beginning, fell later in a pronounced way. .
The surprising thing about the Russian economy during these years is that the value of the ruble has risen dramatically while the real economy collapses. Obviously, instead of making money by producing things in Russia, the money was made by transferring the ruble abroad at an artificially high exchange rate. It is clear that US economic advisers played a role in these destructive processes.
At the 2015 Gaidar Conference in Moscow, I was amazed that the economists most associated with the totally devastating trauma treatments of the 1990s, Professor Geoffrey Sachs and Professor Anders Aslund, were invited to be treated with the utmost respect and admiration. . It occurred to me that the Russian establishment did not seem to understand the links between destructive theories and the collapse of the Russian economy in the 1990s, from which the country was far from recovering. How was this possible? With all due respect, I must admit that the idea struck me the moment Russian elites succumbed to a version of the Stockholm Syndrome: when victims recognize and sympathize with those who have caused harm, when victims believe in the same values as the aggressor. Hopefully, now that the US economy is struggling (albeit more moderately) with the same kinds of bad advice, it will be more sympathetic to reviving a more realistic economic theory.
The United States began to believe in the propaganda created by its economists, and the elites did not realize the decline of industrialization and the stagnation or fall of real wages, and instead began to blame their neighbor Mexico more despite the lowest real wages there.
The United States began to believe in the propaganda created by its economists, and the elites were unaware of the decline in industrialization and the stagnation or decline in real wages that followed. Instead, the United States has begun to blame its neighbor Mexico, despite lower real wages than the United States. In fact, the Mexico-United States relationship shows a prototype of losing one country while another benefits from globalization. Mexico has lost much of its traditional industry and specializes in technological dead ends, products that cannot be automated. These products are manufactured in assembly plants (maquilas) located along the border where they are paid less than traditional industry in Mexico. While the United States specializes in agricultural products that can be harvested mechanically, such as wheat and corn, Mexico specializes in products that must be harvested by hand, such as strawberries and citrus fruits.
In 2014, the average life expectancy of a white man in the United States began to decline and decreased by four months for the next three years. This effect of neoliberal economics should not surprise us. Those who have followed the effects of declining industrialization in Russia knew that as a result of the shock therapy imposed by the West on Russia, the average life expectancy of Russian men has decreased by about 7 years. This was documented in a 2009 article in the prestigious medical journal The Lancet. As in Russia, the decline in life expectancy in the United States is largely due to social conditions. The richest 1% of American men today live 15 years longer than the average man.
Foreign Policy wonders whether free market economists in the United States have helped ignite protectionist demagogy in the White House. The answer to this question is clearly yes. But long before that, the ideological economists themselves had done massive damage to the Russian economy. The United States has become “light Russia.”
* (Eric S. Reinert. Professor, Tallinn University of Technology and Honorary Professor, Institute for Innovation and Public Purposes, University College, London).
This article was posted on networkideas.org
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