The Transformation of Russia: Not Only Necessary, but Also Possible!

NEW – July 17, 2022

Russia faces a monstrously complex and multifaceted task of reviving Donbass, and with it, Ukraine being liberated from fascism.

But it is impossible to restore Donbass and the liberated Ukraine without transforming Russia, continuing to liberally destroy it in the interests of agonising global financial speculators.

Therefore, the task of reviving Donbass is the task of reviving Russia.

Nationalisation is the key to technological sovereignty

In a succinct speech on Victory Day, Commander-in-Chief Vladimir Putin pointed out that the Russian army and the Donbass militia are fighting for the future of our Motherland, its well-being and security. In the language of the modern economy, these goals mean comprehensive modernisation.

The path of human development is the progress of technology. To ensure it, we need to minimise prices for all types of raw materials and semi-finished products: otherwise, there will not be enough resources for the proper scale of transformation. The liberal mantra “only expensive energy stimulates progress” is a deliberate lie designed to crush a naive competitor, because (as shown at least by the reform of the electric power industry “according to Chubais, not according to the mind” and the current agony of the EU) there is simply no money left for such progress: everything will go to pay for housing and communal services.

The need for cheap raw materials is most clearly expressed by natural monopolies: since they determine the living conditions of the entire economy, each ruble (or dollar, or yuan) of their profit is 3-6 corresponding monetary units of losses for the economy as a whole. Therefore, their prices should be minimal (taking into account, of course, ensuring reliability and their own modernisation).

The same rule applies – and for the same reasons – to all raw materials and, more generally, to all production costs (including credit): their producers can only make a profit to support their development (or through exports).

This means that all production in these areas (including large banks) should be nationalised (and then restructured – in the interests of the overall efficiency of the economy, and not the profits of individual owners) – as in post-war England.

Of course, nationalisation should be soft: to preserve and encourage private initiative (and direct it to reduce costs, rather than increase prices), it is enough for the state to have 51% of the capital, preventing the consolidation of a blocking stake from any of the co-owners.

Its mechanism should also be soft: in addition to the compensation tax (following the example of post-Thatcher England – in the amount of the difference between the value of privatised property at the time of privatisation and the money received for it to the budget), levied on shares, it should also consist in repurchasing shares at the exchange rate (although this will decrease after the decision on nationalisation).

Of course, before the buyout, a full audit of enterprises will be required for the entire period of their stay in private hands, and funds that were unreasonably withdrawn or underinvested in them (based on the need to invest at least half of the profit) must be returned by the private owners who participated in the management.

Therefore, as a result of nationalisation, a significant part of privatisers and oligarchs will be indebted to society.

However, assets taken offshore, regardless of their industry or significance, should be transferred to the state for external management, and if their owners do not re-register them in Russia in a short time, they should be confiscated as ownerless property.

In addition to the sphere that provides for the costs of technological production, excise tax payers are subject to nationalisation (to ensure budget discipline): producers of alcohol and tobacco products, sugar and gasoline (perversions like the “excise tax on liquid steel” should be abolished together with their authors, who are no less dangerous to society).

Nationalisation will provide a huge increase in budget revenues due to both dividends and strengthening tax discipline, as well as a sharp increase in business activity due to lower costs and an overall increase in manageability.

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It will also increase the influence of the state, which, being the brain and hands of society, is objectively the organiser of technological progress. After all, without exception, all the “icons” of Western private business and “successful startups” have grown from garages to large corporations precisely with the support of the state, and often with its direct financing.

Customs revolution

It is time for us to return to the path tested by the most developed countries of the world, no matter how they disguise it.

All politics must be subordinated to social and technological progress in order to develop the productive forces.

This banality requires a radical transformation of the entire socio-economic policy of Russia, which is aimed by the liberals, on the contrary, at stimulating financial speculation, and therefore at destroying the productive forces (since their interests, alas, are opposite).

First of all, we need reasonable protectionism aimed at ensuring the fundamental task (formulated by the father of the “physical economy” F. List, and in Russia by the founder of the input-output balance D. I. Mendeleyev): to strive for the export of not raw materials, but finished products and the import of non-finished products, and raw materials.

When calculating the trade balance, it is correct to compare not the total amounts of exports and imports, but the exported and imported value added.

Ignoring this leads to ruin, as the reassuring gross performance of the commodity economy masks a catastrophic value-added imbalance.

To normalise economic policy and subordinate it to development, we need an escalation of duties strictly prohibited by the WTO (for this very reason): high export duties on raw materials, medium duties on semi-finished products, exemption from them of finished products (and vice versa with imports).

Raw materials that are needed by Russia and do not compete with those produced in Russia should be exempt from import duties. However, even coffee and bananas do not quite fall into this category, since coffee as a drink competes with tea, and bananas with pears. But there are such imports, and they include all critical imports, without which we cannot develop normally and which we cannot start producing right now.

But for all the imports that we can start producing in principle, we need a mechanism of tariff quotas (which Y. D. Maslyukov restored to poultry farming at the beginning of the noughties).

Under this low-duty mechanism, only the quota part of imports that is not covered by Russian production is imported to Russia, and it is steadily reduced in agreement with Russian producers as their production volumes increase. In addition to quotas, import duties are prohibitively high.

At the same time, when the market is fully covered by Russian producers, the share of imports, even in addition to quotas, should not exceed 10% (for example, Switzerland). After all, either goods or investments go to the country: if you want jobs, technologies, and an influx of specialists, ensure that they are protected from unfair (and usually directly subsidised) imports to capture markets.

In the context of the collapse of the single global markets into macro-regions, the average import duty rate for non-critical imports from ordinary countries should be 40%, and for products from hostile countries (including all NATO countries) – 80%.

Imports of luxury goods should be subject to a duty of 100%, and luxury goods available to no more than 5% of the population, like rice imports to Japan under the WTO, at a rate of 300%.

Of course, reasonable protectionism will increase the threat of smuggling and corruption; even in the development of English economic policy in the 18th century, its authors correctly referred to these phenomena as tools for breaking open foreign states and seizing foreign markets.

Therefore, corruption in the government should be equated with treason to the Motherland and punishable by 30 years of imprisonment.

Corruption: how to stop dancing to the english tune

Systemic corruption is an effective tool of our global competitors, the United States and, above all, England, who have been using it for centuries to secure power over the peoples they colonise. To paraphrase Averchenko: “Corruption is not a Russian folk dance, but the eternal dance of Anglo-Saxon political elites.”

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Therefore, liberals of all stripes, hysterically, like nuns in premarital sex, condemning corruption, do everything (including in Russia) to spread it and aggravate it.

But the mechanism of self-purification of power has long been known.

To liberate the state from the captivity of corruption and suspicion of it, two measures are enough, which have long proved their effectiveness in Italy and the United States.

Following the example of Italy, it should be established that a bribe-giver, when cooperating with the investigation (including speaking in court), is completely and automatically released from liability (and not like in our country). This also applies to captured criminals. By placing full responsibility on the organiser of corruption – an official, this step breaks the “mutual guarantee”, depriving victims of corruption of incentives to protect them. (Today, a corruption denouncer is often punished harder than a corrupt official.)

This measure literally swept the mafia out of the political life of the north and center of Italy, weakening its position in the south. However, at the same time, 6 governments have changed in 5.5 years.

The second necessary step is the complete confiscation (following the example of the United States) of even legalised assets (except for the minimum necessary for a modest life) of families of organised crime members who do not cooperate with the investigation. After all, corruption in power is always associated with the mafia (which destroys lone corrupt officials more effectively than justice – like competitors), and there are not enough “thieves’ cash registers” for everyone – they are not created for this purpose.

The effectiveness of this measure is due to the fact that, faced with a choice between the well-being of the family and the risk to life, a significant part of criminals risk for the sake of the family, knocking out the economic foundation from under the mafia and destroying the corrupt officials associated with it.

In addition, the state and the entire associated part of the economy should switch to an electronic decision-making system (which has long been implemented in international and many Russian companies). In addition to almost instant decision-making and dispute resolution, it allows for hidden control that is not noticeable to the person being checked. This, and not the destruction of the remnants of education by the “digital school” and “distance learning” to undermine our political stability and debilitate young people, should be the priority of the Ministry of Digital Development.

It is also time, following the example of Singapore, to introduce a presumption of guilt when official incomes and expenses do not match in the families of officials.

It is necessary to deprive criminals of at least one of the “gifts of Medvedev” – the opportunity to pay off uncovered bribes from unsolved ones.

Finally, a corrupt official should be deprived for life of the right to hold public and managerial positions, conduct any legal activity, teach social sciences, and be elected to elective positions at all levels.

To prevent corruption, it is necessary to prohibit dual citizenship for all citizens of the Russian Federation and accounts abroad for everyone except those living there, stop withdrawing currency from Russia (including cryptocurrencies) and prohibit cashing out in the amount of more than 50,000 rubles per day (with bank and tax verification of the purpose of cashing out if it is systematic).

The fight must be waged against corruption as a phenomenon – changing the rules that generate it and ensure its impunity.

Its traditional focus on corrupt officials is not only guaranteed to be fruitless and gives the impression of a competitive struggle of corrupt officials, but also generates the perception of corruption as an unshakable, almost constitutional basis of the state system.

Tax revolution

The reorientation of the state from plundering Russia to creating it, and the economy from financial speculation to developing technology, requires a new tax system.

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It is necessary to cancel the monstrous “tax manoeuvre” (introduced in the oil industry in 2018, and in metallurgy in 2021), which takes the oligarchs’ excess profits not from their pockets, but from the pockets of the people, and accelerates inflation. Its idea was to deprive Russia of added value by encouraging the export of raw materials while suppressing their processing. To do this, export duties were reset to zero, and the budget’s shortfall was shifted to the extraction of raw materials and their processing within the country (which made all refineries that are still subsidised by the budget unprofitable).

It is clear that the burden of fees should be shifted back from domestic processing of raw materials to their export.

The mineral extraction tax should be separated from world prices and differentiated according to mining and geological, climatic and transport conditions.

Excise taxes on alcohol, tobacco, gasoline and sugar should be set at 25-27% (which will not cause an increase in prices while reducing their overall scale by nationalising the basic industries that form the material costs of the economy).

It is time to fulfil the long-standing promise of abolishing the transport tax.

The VAT rate should be reduced to the cost of criminal evasion operations – up to 10%, with subsequent replacement with a more convenient and non-restrictive turnover tax.

Progressive taxation of income and property of citizens (including dividends and inheritance) should be supplemented by the abolition of the individual entrepreneur regime for those receiving income above 4 real subsistence minimums per month (so that millionaires and top managers do not evade taxes by registering as sole proprietors).

Instead of talking about a “luxury tax” for more than a decade, it’s worth applying a Swiss-style imputed income tax. Its mechanism is based on the fact that the cost of maintaining the property can not exceed a quarter of the income of its owner. Since property (with the ban on offshore companies) cannot be hidden, and the cost of servicing it is also transparent (and easily determined by state-established standards), imputed income allows you to effectively tax income that is not visible to the state.

To radically mitigate the housing problem, it is necessary, following the example of France, to introduce a tax on empty housing: in cities with a population of more than 50,000 people, it is not paid in the first year, in the second year it is paid at 12.5% of the estimated annual rent, and from the third year – at 25% of the estimated annual rent.

It is necessary to fully exempt production investments from income tax. The rate of the latter should be lower than the tax rate on high incomes of citizens, so that it is more profitable for the rich to direct funds to production, rather than to consumption.

It is high time to exempt non-speculative and super-profitable small businesses from all taxes for five years, and in the North, Eastern Siberia, Transbaikalia and the Far East – for 20 years.

And finally, the most important thing

To modernise the economy, a cheap loan is needed (if the profitability of the manufacturing industry by assets is on average 5%, an affordable loan is 2% per annum). So that it does not lead to a jump in prices and a collapse of the ruble, it is necessary to limit the arbitrariness of monopolies and financial speculation. The latter is best achieved by following the example of Japan: for every ruble directed to financial speculation, there should be at least 5 rubles directed to the real sector, to lending to the population or to the national debt.

These simple and self-evident measures will transform Russia in the first year – one just needs to want to. But it is clear that this requires a radical improvement of the state and its liberation from the pro-Western “systemic liberals”.

Mikhail Delyagin

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