Thoughts during the plague № 3. Closed national economy and its priorities
Hello, you are watching the new series of the program "Thoughts during the plague." Today I wanted to talk about those changes that have already begun from the first coronavirus pandemic spread stages, about what is actually happenning to global economy. In fact, those processes which already take place, not only those trends that are outlined in the near future and the middle future - all are so fundamental that in comparison with the previous era, which also had its crises: dot-com bubble, real estate crisis and the housing bubble in 2008, which seriously affected the global economy: all this, compared with what is happening today are just kid stuff, because today the overall world's economic model is already collapsed. And of course, it’s very difficult to adjust one's consciousness, to this wave. Everyone thinks when correction of markets will begin, when will oil price reach some acceptable for all levels and when the global economy will recover. Now it’s clear that countries are only closing, and the movement goes fundamentally down, but there is a hope that says, "Well, some day this should end, and gradually, albeit with huge losses, but the world economy will return approximately to that status quo, whence it collapsed.
This is more than doubtful, and in order to understand, in what world are we already in, I suggest that we perform the following experiment: let's imagine that in the state of emergency in which the economies of all countries of the world are today: Russia, China, Europe, USA, BRICS countries, third world countries - in general, all the economies. Let’s imagine that they will be in this mode for an indefinitely long period. Well, for experiment, let's say that they will always be in it. Now let's imagine. You will say, "No, no, no, no, never, in no case, no, this is absurd, stop saying it, shut up immediately, switch the channel, we wanna listen to anything but we have to see the light at the end of the tunnel, and by this light everybody means one thing: a return to pre-crisis state. Let this return be long, but give us this precrisis conditions at least as a dream. I suggest (no one, of course, knows how everything will be developing), but I suggest that we conduct a mental experiment. Let's not give this light at the end of the tunnel, and let's get used to looking at those things that surround us, without this so called "light" in order to finally turn off in this economic maze round the corner, and there is no light neither in the beginning nor at the end. What do we have? Today we have closed economies that represent a kind of islands formerly associated in a single archipelago with bridges, transitions, tunnels, but today these bridges are destroyed and we are dealing with an island group, that is, just every economy of each country represents a certain independent, self-sufficient phenomenon. This is already hard to comprehend. Even the Iranians, for example, who damn the West so much, and for whom the West is "the great shaitan", and America must collapse, and this Dajjal kingdom - and still when the situation with closed borders reached Iran, and the Iranians themselves closed their borders, and the West closed its borders, and the US closed the borders - all of a sudden the Iranians: these proud, independent, religious believers that the great Satan is in the West, suddenly implored, saying, “Remove sanctions from us.” And Russia, too, behaves the same way: saying that sanctions don't befit during coronavirus. Fit very well!
Neither of the epidemics in history mitigated hostilities, neither in the XXth century, when the Spanish flu took the world by storm during World War I, nor in the Thirty Years War epochs, nor during Medieval wars. And the epidemic was just a kind of attendant circumstances of military operations. As the history proves, no one makes a discount in none of political systems because of an epidemic, and everyone continues amidst open or closed society to move towards their own goals. Now we we live in a closed society, we are forced into this order, and my suggestion is to consider this not as a temporary state, but as a new world landscape. It is a mental experiment, I recall once more. So, in this case, if we recognize it, if we agree with it, even as a hypothesis, I emphasize - a mental hypothesis, then the first thing to do is: "All the hope abandon, ye who enter here." Give up hope for lifting sanctions, give up hope to go along with Chinese BRI, for continuation of Chinese globalization, American globalization, European globalization. Give up hope for the WTO give up hope of lifting or the imposition of new sanctions, abandon hope for international global economy. For the fact that Wallerstein called "world system". This world just don't exist any more. Give up hope on this, and let's try to see how they will be acting the countries from the economic point of view in these conditions. If you get rid of this hope, because when people enter the hell, of course they don’t want to, they want to say that it's random, but at some point some kind of figure appears that says, "No, when you read here the phrase "abandon every hope, all you who enter", (it was written above Dante’s hell), that's exactly what was meant." That is: leave it, one can't go out of here. And if we accept it, then the first thing we will forget about and refuse is to ask for mercy, to hope that everything will be restored, to grab resources for a limited quantity in these force majeure circumstances in order to return again to the situation which we moved beyond. So, not to wait out.
If we give up hope and we believe that the economic model which has formed now will last indefinitely long (well, conditionally forever in terms of human cycles, not in terms of real history). Well, for ever. Just as the Soviet Union existed for evermore - like liberalism existed for aye, like Modernity existed endlessly. In other words, it’s always very relative to human history. So, imagine that this situation will always be. So, we find ourselves in the situation of closed commercial states, that’s not Popper, not an "open society", not globalization, not liberalism in international relations, not Adam Smith, but a Fichte's closed commercial state. Now we live in conditions of closed commercial state. What are closed commercial state priorities? Primarily - providing food autarky. This is the first. Why? Because if people in closed commercial states will not have a sufficient amount of food they will just rise to rebellion, riots will begin, and they depose that government, which rules over them - and that’s all. If this power will not provide them a living wage to keep body and soul together. But this living wage suggests a very important thing: all products should be produced (namely critically important ones for this living wage) on the territory of this state. This applies to Russia, this applies to the United States, this applies to any country - big or small.
It means that abandoned in the era globalization primary agricultural sector must be of strategic priority for the state. In closed commercial state agriculture must be developed exactly to the extent which is necessary to ensure satisfaction of primary food demand of the population and not depend on external supplies. Something right opposite to globalization with priority to cutting costs and optimizing the economic model and, accordingly, food products were produced not where it was needed, but where they were cheaper because they could always be delivered. But this open global supply chain collapsed and, consequently, the products must be national. Import substitution in the food sector must be absolute. We can buy and consume only your own products, which we cultivate ourselves, and consume ourselves. Besides, a state in conditions of closedness cannot allow this area to develop everyhow. Because if the agricultural sector becomes completely hostage to market prices then accordingly following from orientation to profit maximization and appearance of speculators, purely market approach will lead to a possible lack of food products, and accordingly to riots and uprisings. Respectively, it is required first before (this is the most most important, sine qua non of closed commercial state) to establish control over agriculture, and, of course, experience shows that here there must be some freedom of production because coercive collective farms and full planning in this sphere does not give positive results, but the converse is also not true: leaving this area to unfettered market forces can also lead to negative consequences.
Accordingly, the state must maximize freedom of agriculture, but at the same time to prevent the appearance of speculators in this area that would create unreasonably high prices for agricultural products. Here is the first task of any closed commercial state. And instantly a feature comes up: first, this do not require at all neither contacts with foreign countries, nor friendship or enmity with anyone - it is just up to us and must be essential, first and foremost aspect. Of course, if we establish economic cooperation with some other countries, we can buy or sell, and distribute on our territory foreign products but, strictly to the extent that keeps us independent. Because today it can be a friend, tomorrow it will be an enemy, so we cannot depend on any supplies of grocery products. This is sine qua non. The next aspect is the question of industry. If we talk about the need to provide in the primary sector complete food independence, autarchy, the same is to be done in the field of industry. And here again we face exactly the same issues as in agriculture, those trends that in the era of globalism led to delocalization of industry. It concerned not only Russia, which in the 90s and the 00s lost ninety percent of its industrial potential, or even about 99%, but this applies to both Europe and the USA, which moved their production to Asia and to the Far East since it was more efficient, cheaper, and thus in the situation of forced closedness, they lost the most part of their industry because this industry doesn't exist any more. By the way, Trump came to power precisely under the slogan of that he would reform this situation, and his opposition to globalization even theoretically was based exactly on that.
So, delocalization leads to deindustrialization of states, it is beneficial from today's point of view and justified by the logic of global open society, but it's completely incomparable, incompatible with the reality of closed commercial states. The second feature is development of national industry. In our country there were talks abour it, but since everything was easy to buy, Russia was integrating into the global economy, in a clumsy and bad way in the 90s, and a little more rational under Putin. But actually there was the main task to integrate into these processes and take advantage of the conditions that globalization created. That was an absolutely, fundamentally different policy.
And after all Putin’s talks about the need for national production, all the officials nodded, but since there wasn’t urgent need, everybody simply gave up on it, and finally, after listening did nothing. The only area which Putin controlled by direct micromanagement, the defense industry, was developing, but again we we don’t know how exactly it was, because it is evident that there is no industry in Russia, It was destroyed in the 90s, sold and not restored in the 00s But since we believe our president that we have better weapons, it means that in defense industry, something was developing independently. Naturally, in this area there is no place for open society. We believe in it, it’s ours almost religious patriotic mentality. How it is in reality - we don’t really know, but the point that we have no industry, and that we need it is the second imperative of the current epidemic.
And the third feature: maybe you would like me to have started with it - it is sovereign independent financial politics because in the modern and postmodern world, and especially in current global system everything is totally connected with financial institutions and financial mechanisms, and agriculture and industry are considered as optional things because the one who owns money, can afford to buy both industrial and agricultural goods in sufficient quantity providing it for population and national needs, but as soon as we find ourselves in a closed commercial state, the whole hierarchy is changing. In the first place is food safety and the need for autarky, in the second - independent industry and in the third, only in the third - the creation of a sovereign national financial system. Here I would draw attention to the great american poet Ezra Pound, who dedicated his magnificent work "Cantos" - the book of life - mostly not only to the description of beauty, but also to the description of the ugliness of finances, ugliness of banks, satanic nature of capital as such.
And this is very important, because Pound in his "Cantos" describes the whole debates between economists: Silvio Gesel, Keynes, liberals just as a huge field of aesthetic struggle in economics, because from Pound's point of view, the system based on loan capital, it's a certain satanic element destroying human personality, human beauty truth, goodness, justice and the human as such. In other words, either banks, interest, loan capital or a human - Ezra Pound says; and when he extends this ethical, metaphysical problem, this religious hatred to capitalism, loan capital, banks and financial system that destroy like usury, penetrating into the art works, into the matter, into people's lives, transforming everything into commodity, alienating one from another, any person, destroying societies, destroying families, destroying nations, subjugating them to the dark power of the estranged, demonic, satanic beginning, when he applies it to a positive scenario. Here Pound gives surprisingly excellent recommendations. First: the state can issue as much money as it wants, and it cannot be poor, the state cannot be bankrupt, the state cannot default.
Why? Only in case it is truly sovereign and if this national currency is backed by sufficient quantity of agricultural and industrial products within the state. Then the national currency issue leads neither to inflation nor to defaulted state simply because this national currency is sovereign, it is not tied to any other currency, it does not depend on any international fluctuations simply because the state has everything inside itself essential for the support of all types of activities. And then the issue of national currency is completely independent from any kind of currency board, from any external factor, then the state becomes truly rich and with the help of financial policy keeps the economic growth at the level it needs. This is the third element: independent sovereign financial system. This is salvation for any country in Fichte's closed commercial state situation. It's clear for Russia, but also for any other country - now I speak in general. Another crucial element is the complete state foreign trade monopoly. It's a certain antithesis of liberalism in international relations and if the state is the only monopolist in foreign trade activity, then it monitors that the penetration of import goods from abroad do not weaken national autarky neither in the field of food products nor in industry, financial system, and at the same time control that the export of goods, services, technologies and materials do not strengthen competitors in the international field. This is a direct anti-liberal approach, which is defended, by the way by many economists who are against Adam Smith, this is not unusual it's just mercantilism in international relations proposing state foreign trade monopoly.
This state can have internal market relations in combination with special management, for example, where there is the need to regulate some processes in the national interest or, for example, reduce the opportunity of profits to speculators, especially in sensitive areas, but at the same time for everything concerning foreign trade it is necessary to impose a tariff policy, policy of special wages and national interests. That is what we are coming to. These are the principles of a closed commercial state that go into effect today. Just recently, Russia completely closed its borders, we were not the initiators, we were one of the last to do this, it doesn’t even matter how we found ourselves in this situation, but today we are already living in a closed commercial state. And here only one question arises. By the way, the same can be said about Italy, which, having found itself as a closed commercial state and at the same time completely dependent on the European Union, simply defaulted in the first few days, and was actually bought up at the exchange. The same can be said about France, which introduced a state of emergency, and about the United States. That is, all countries today are closed commercial states. Not Russia began to close its borders, we were one of the last to close, but we are already there. And now we are faced with a choice: whether to accept this as a long-term project and build a closed commercial state. It will not necessarily be a dictatorship, but it will also not be a democracy at all, it may be with greater and lesser conservation of market relations in certain areas.
The state should certainly strengthen its position, but what kind of strengthening of these positions will be, to what extent and in what form it will take place - every nation and each closed state will decide itself, based on its own considerations. There are simply no dogmas here, but those principles that I have outlined are dogmas in the situation in which we are. And completing this, I can say that we must decide if we accept it as a long-term project, well then goodbye globalization. We live in a post-global world, we are building a post-global economy, and a completely different subject – the sovereign economy – dominates in this global economic system. This main subject is the national closed commercial state - this is the main player on the world stage. Here, sovereignty or realism becomes absolute. And, accordingly, either we believe that this is a temporary measure and, as it were, make a stand and bet that everything will return to the era of globalization. Now our governments will answer this question.
And here there is a risk: our government has become accustomed, frankly, in these recent times, not to be responsible for anything. That is, no matter what is happening, it tries to say that it's an advantage, everything is as planned, it was a tricky plan. In fact, here - stop.
Now it is necessary to give an answer, both direct and unequivocal: either a closed commercial state, because it is movement along one path, or it is an expectation of a return to the restoration of the global economy. This movement is in a completely different way. These two strategies are incompatible, you cannot make both of them at the same time, you cannot prepare for one and the other at the same time: a choice is made here, and depending on what the history will show next, how it will develop, it will be clear whether this decision was right or wrong. For one or another, the state, the government and the current political regime will have to pay. Will it make one choice or another. This is the risk of power. Why do people endure power and allow to be maltreated by it for centuries? Only for one reason: when such a critical moment of choice comes, the people can calmly observe how the authorities solve this complex problem. And here the power begins to take risks, because if it makes the wrong choice, it will simply fall, it will pay for it. And the people will just choose the next power, another. This is where is the risk. Therefore, accordingly, from my point of view, the government should determine which way it will go when entering a pandemic situation, and how it perceives this forced closure. Does it perceive it as a model of the future economic world order and prepare for it for a long time and seriously, or expects when everything will return back, and then, according to the result of this choice, it will be responsible for this choice. So, the situation is extremely serious. What I say, in general, thinking more about Russia, is absolutely applicable to Italy, France, England and the USA, Mexico, Iran, China, Turkey and so on.
We ended the era of peremptory existence in an open global world, we were forced to find ourselves in a closed commercial state, and I propose to seriously think over this perspective. We can return, I do not exclude this possibility that we can return to globalization, it will be, however, a different globalization, we will not return there soon, but there are very great reasons that we will never return to this globalization, and will exist for a very long time in a closed commercial state. In order to prepare for this second scenario, which we are already doomed to, and we don’t know how much time it will last: the coming months, maybe years, maybe even longer. That is why I propose to make this mental experiment and, in fact, to make a choice. Without this choice, we cannot move on. The situation is very serious, and Russia will have to make this choice, but all other countries will also have to make this choice. So, either we temporarily take a step back from globalization, to which we will return after the end of the coronavirus, as Bill Gates, Gordon Brown (speaking about world government) and George Soros say (in fact, he keep silence now, because now to advocate for globalism is like to make a coming-out, that is, if you say “I'm a liberal,” you can be hospitalized for this, so only people with a bunker or some kind of reliable shelter such as Bill Gates or Gordon Brown can afford it. In principle, today, of course, everyone understands that only closeness is saving, but nonetheless, voices even from these dungeons, from secret shelters are heard that propose however to make a world government. But, of course, today no one is listening.
But gradually their voice may sound louder and louder. So, some people are squeaking from the dungeons that let's still have a world government, let's go back to the global project, but realists or practitioners begin to close their borders and are preparing for a complex, difficult existence, an unexpected, abrupt existence within a closed commercial state. As for me, I like the project of a closed commercial state from the philosophical point of view, and from the metaphysical and poetic point of view, just like Ezra Pound, and I prefer this, but it is my personal opinion. Let's digress from our sympathies and face up the reality. This choice must be made now, and everyone must make this choice. Every responsible politician, every responsible economist, every responsible citizen in whatever country it is. All the best, we will return to the “Thoughts during the plague” soon.