The New Russia by Mikhail Gorbachev

Author:Mikhail Gorbachev
Language: eng
Format: epub
ISBN: 9781509503919
Publisher: Wiley
Published: 2016-10-05T00:00:00+00:00

Ordeal by global crisis

Russia, and not only she, was soon to face another test of her resolve, a global financial crisis. When it broke, I was in the United States at the invitation of former President George Bush Sr. Literally on the day before I was to be awarded the 2008 Liberty Medal of the National Constitution Center, which he headed, news broke of the collapse of the Lehman Brothers financial services firm. It was not immediately clear that this was the beginning of a catastrophic collapse, but within two or three days the authorities and ordinary Americans realized that things were bad. It was perhaps the first time the Americans so openly shared their anxieties with us. Moreover, almost everyone pinned responsibility and their hopes on the state, or, as they say in America, the government. President George W. Bush had to cast aside neo-liberal dogma that ‘the market will regulate everything’ and agree with those insisting on emergency government intervention to prevent a collapse of the banking system.

We returned home in anxious mood. Ten years after the 1998 default, the Russian economy was facing a financial tsunami, which this time came not from Asia but from the very heart of the global financial system. It was certain to affect Russia.

When we got back, however, we found that the Russian authorities and many economists saw nothing all that alarming in what was happening. For several weeks after the start of the crisis, the predominant narrative was that Russia had little to fear and would even be something of an island of stability, a ‘safe haven’ during the storm. That was the view expressed by Prime Minister Putin at a meeting of the Valdai Club of foreign experts.

I wanted to gain a clearer understanding of the situation and how great a threat it posed. On 29 October, jointly with the National Investment Council, we convened a round table at the Moscow School of Economics. The discussants included influential economists, financial analysts, parliamentarians and journalists, all of whom were agreed that there was going to be no safe haven. Academician Alexander Nekipelov said the crisis had resulted from a huge market failure in assessing and managing risk. The authorities did recognize, if not immediately, that doing nothing was not an option and set to work to deal with the crisis. But how appropriate were their actions? Those at the round table proposed a variety of measures, from supporting the liquidity of the banking system and refinancing mortgages to assisting small and medium businesses and taking social security measures. The general mood can be summarized as a recognition that testing times were ahead.

Economic indicators for the last months of 2008 wholly confirmed that view. In mid-December, the Ministry of the Economy acknowledged that production in Russia was in a decline that would last for, at best, six months. That was, by definition, a recession. ‘I fear that two quarters will not see the end of it’, the deputy minister said in an interview.

Download

Copyright Disclaimer:
This site does not store any files on its server. We only index and link to content provided by other sites. Please contact the content providers to delete copyright contents if any and email us, we'll remove relevant links or contents immediately.