Western politicians have a simplistic view of the economy, thinking that capitalism is a magic wand that will automatically solve all of Russia’s problems. Furthermore, they are trying to bring Russia into the twenty-first century in one giant leap. It did not happen this way in the West.
The theme of this article is that Russia should follow, not only the economic principles of capitalism, but also the history of Western economies, producing many goods with mid twentieth century technology, and with a mid twentieth century tariff protection concept. (Japan, which used to tell Australia not to protect its industries, had itself protected its industries until they were strong enough to compete.)
Internal competition, rather than external competition should be more used to lower prices, as this resulted in full employment in the West in the 1960’s. Large corporations, where one company has a monopoly on producing a certain type of goods, should be subdivided by law. Usually at least three competitors are necessary to ensure true competition.
Japan’s economy was built with capital after the war. If Russia does not have this capital, there is perhaps another solution: an investment of labour. Unemployed could work building a factory, receiving, instead of wages, non-transferable shares in that company. Factory workers employed before the factory turns a profit could also receive non-transferable shares in the company instead of wages. They would not manage the factory, but would receive a share of the profits. This model of ownership is ideal, as the workers would be interested in the success of the factory.
The other problem with rebuilding an economy is skills. Perhaps skills from Russian tank building could be transferred in the form of hardware and personnel, to the manufacture of consumer products. (No one is going to invade Russia, and its tank superiority was used by the West to justify a first-strike nuclear option.)
Mid twentieth century factories were more labour intensive and less capital intensive than twenty-first century factories. They are therefore better suited for employment, and for lower investment and skills supply to build them. What I say does not apply to many products. For example, the oil crisis may make high-technology cars necessary soon.
There is a place for high taxes upon the wealthy, and a luxury tax in Russia, as many of Russia’s wealthy do not deserve their wealth, especially those who secured Russia’s assets at well below market value.
To a more practical matter, rotation of those handling financial matters such as tariffs should reduce corruption.
I hope that Russia’s experiment with capitalism succeeds, so that it does not drift back to communism.