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Friday, May 12, 2006

Time In!

As if to refute the wild-eyed Time magazine statements pointed out by La Russophobe below, writing in the Moscow Times Robert Skidelsky and Pavel Erochkine, arguing that the Kremlin should stop hoarding Russia's oil revenues as previously described in La Russophobe, remind us that:

While the oil economy has been overheating, much of the rest, based on Soviet-era heavy industry and agriculture, has been seriously underheating. A 12 percent inflation rate coexists with 10 percent unemployment, and much higher under-employment. In technical terms, there is a large and growing "output gap," The growth rate of the economy is much lower than it could be. In this situation, to concentrate on fighting inflation is like trying to cool down an already freezing room.
So not only is the Russian economy grossly underperforming, as Illiarionov, but it is posting double-digit inflation AND unemployment. If 6% growth in the Russian economy is somehow impressive because it would be if it occurred in a Western economy, then why doesn't Time find these inflation and unemployment stats, which would be the harbinger of depression if they occured in the U.S., just as significant?

In any normal economy, high inflaction and unemployment are supposed to be tradeoffs; you suffer one to reduce the other. The fact that both are occurring in Russia simulatenously and despite the good fortune of oil prices shows conclusively how utterly wretched the economy's basic fundamentals truly are. However, as RIA Novosti reports, it's rather clear that Russia doesn't want to be normal. First Deputy Dimitri Medvedev ruled out using any of the fund for any purpose other than hoarding.

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