Putin champions post-crisis global economic liberalism in Davos

Characterizing Russia’s presence in Davos in 2009 and the impact it had on the conference deliberations, Dmitry Peskov, the spokesman for the Russian prime minister, noted that ‘this [year’s] Davos was conducted under the Russian flag.’ This description was very appropriate, at least, going by Putin’s speech and the reactions it generated at the forum and across the globe. 

Putin surprises the Davos audience 

Putin knew his turn-around views on economy would generate ripples across the global investment community, instigating scathing editorial opinions and other analytic publications in both Russian and foreign press, for months to come, but he did not seem to care. Honored to present the keynote address at the opening of this year’s forum, Putin readily used the Davos platform to attach an apt ‘clinical diagnosis’ to the current global economic crisis, calling it a ‘perfect storm,’ a situation that usually results when unleashed devastating forces of nature converge on one spot in an ocean, multiplying their combined destructive potential several times over. 

Putin, indeed, surprised the colorful Davos audience, both by the tone and content, of his dissertation on the global economic meltdown and comprehensiveness of the prescriptions for the cure, presenting himself not only as a pragmatic national leader at the frontline of the ongoing fight against the worsening global crisis at home, but also as an advocate for more liberal global markets and minimal interferences by governments in national economies. 

To the audience, comprising top foreign government leaders and titans of the global economy, Putin turned out to be a classical manifestation of a ‘born again’ economic thinker. Known for his near-absolute ‘governmentalization’ of the Russian economy during his presidency — a policy that drew caustic criticism at home and abroad, but which has now become very popular among foreign leaders and global CEOs as they battle the current crisis, albeit without much success — he warned the audience against seeing the policy of ‘excessive participation’ of governments in national economies as a panacea to the current global financial meltdown. “The ‘state’s excessive involvement’ in the running of a national economy would be extremely dangerous, just as ‘blind faith’ in government’s omnipotence’ in crisis situations.” 

Noting later at a meeting with members of International Press Council and CEOs of top global corporations that there were no controversies in his actions and speech, Putin noted that ‘government’s support for business’ and ‘state’s direct interference in the economy’ are two different policy issues. Drawing generously from his personal experience, he noted that the Russian government was forced in crisis conditions to offer a helping hand to local companies to enable them protect their assets used as collaterals in foreign banks from being sold at give-away prices. “The current strengthening of governments’ roles in economy is a natural reaction to the failure of free market mechanisms. Therefore, it will be totally wrong for the government to assume responsibility in all sectors.”

No tough Munich conference tone rhetoric

Putin also surprised the audience by the non-confrontational tone of his speech. Expected largely to follow the highly anti-western script of his epochal speech at the Munich Conference on Global Security Policy in 2007, when he lambasted the United States and other western countries for their selfish, diplomatically destructive actions and egoistic policies, Putin deviated from his direct, hard-talk signature rhetoric, presenting himself as a born-again advocate for the revival of the traditional economic liberalism in the post-crisis world. 

Indeed, the speech loaded with both old and fundamentally new liberal economic ideas in an era, being increasingly characterized by neo-Marxism, will now make Putin’s critics in the West — who are traditional supporters of liberalization of global trade and free-market principles that have now been forced by this crisis to adopt anti-free-market policies — look like orthodox Marxists by comparison. 

This is further illustrated by the increasing adoption of radically ‘anti-free-market policies’ as measures to combat the current crisis by western governments and corporations, namely, the unprecedented economic interventions, multibillion-dollar/euro bailouts of failed/comatose corporations, nationalization of private corporations in the banking and other problematic sectors, etc, which more than vividly underscore the ongoing deviation from classical free-market capitalism. 

However, the idea of Putin as the new champion of liberal global economy was really a complete revelation to most western political and business leaders in Davos. Thus, expressing the views of several other western delegates in Davos, ex-U.S. President Bill Clinton noted that Putin as an advocate for free market and liberal global economy is something totally new. “This is the first that Putin has come out for free enterprise.” 

Saying he would not use the podium to blame the United States for the crisis, Putin, however, strongly condemned the myopic vision of the Bush administration that generated and later compounded the global crisis and its titanic negative impacts, as it did not only fail to read the glaring signs on the walls heralding the global meltdown, but also blurred the global community’s sense of collective vigilance with its groundless confidence and misleading statements on the sound health of the U.S. economy. “Only a year ago we heard our U.S. friends talk on this very podium about the fundamental stability and cloudless future of the U.S. economy,” he noted. “But today, U.S. investment banks, the pride of Wall Street, have all virtually ceased to exist. In a matter of just one year, these banks had posted losses far exceeding their gross profits over the past 25 years. This example alone reflects the real state of affairs and speaks louder than any criticism [against the United States].”

Putin also blamed the structure of the global economic growth for the breakdown in the world economy, as it led to the creation of one center that practically and almost without control prints money and consumes material wealth, and another which produces cheap goods and hoards money emitted by other countries. “The generated wealth was very unevenly distributed, both within the same country, its different social strata, including even highly developed states. Besides, the global wealth was also unevenly distributed among different countries and regions of the world.” Also, the appetites of global corporations were blown out of proportions in relations to the demand for their goods and services. “The fight for boosting corporations’ market indices and capitalization became more dominating drives over the needs to boost their productivity and effectiveness,” Putin added. “All these ‘global financial pyramids’ were doomed to collapse one day, and this is what has practically happened today right before our eyes in the global economy.”

Offering solutions

The Russian prime minister offered several exit recipes from the current global economic malaise, as he called on all world political and business leaders to act maximally and decisively in their searches for urgent solutions to today’s problems. At the same time, he warned against adopting policies, even in these ‘force majeure circumstances,’ that could be regretted in the future. “It is common knowledge that there is a strong temptation during crises to seek simple and popular recipes. But treatment of only the symptoms of an illness often leads to more grave complications,” he said. “This is why I would like to start by stating what should not be done, at least, what we shall not do in Russia, as we tackle this crisis. We should not allow ourselves to be pushed into policies of isolationism and uncontrollable economic egoism.”

Calling for much freer international trade, Putin reminded the audience of the Summit-20 in Washington last November, where the leaders of the world’s Top-20 economies agreed to refrain from erecting artificial barriers against trade and capital movement. “Russia completely shares these views,” he said. “Though some elements of protectionism are inevitable in crisis conditions, one, however, needs to know the limits of such measures and sense of proportions.” 

A foundation for a new global economic order

Putin condemned the unipolar pattern of the world economy — a popular euphemism for the largely detested U.S. unilateral control of the pre-crisis global economy, which has now been killed by the current financial meltdown — and, called for a new global economic system based on cooperation among several large regional centers. “The excessive dependence on an essentially a single legal tender as a global reserve currency is dangerous for the world economy. Therefore, it is acutely necessary to encourage an objective process for the emergence of several strong regional currencies to act as global reserve currencies in the future,” he added. “But to avoid chaos and unpredictable behavior in a multipolar world, we need to bolster the network of global regulators – working in full compliance with international law and multilateral agreements. This is why we are calling for a re-think of the role of the existing international institutions.”

The United States in particular and the West in general also came under indirect attacks from China, another powerful BRIC state. Chinese Prime Minister Wen Jiabao, who also offered a high-profile speech at Davos, condemned what he called ‘the inappropriate macroeconomic policies’ of some [unnamed] countries and their ‘unsustainable models of development characterized by prolonged low savings and high consumption’ and also took the leading financial institutions in those countries to task for what he referred to as a ‘blind pursuit of profits’ and complete ‘lack of self-discipline and responsibility’ in the process. Though the Chinese premier diplomatically declined to fingerpoint the countries under his verbal attacks, it was, however, clear to all in the audience which countries were meant by the seasoned statesman.

It must, however, be noted that the full convergence of these two rising super-economic powers’ views on the current global crisis, its causes, those responsible and what should be done to revert the situation to normalcy as soon as possible is a clear sign of the emerging foundation of the new architecture of the post-crisis global economic order, and the roles, which both Moscow and Beijing plan to play in the new multipolar global economic system. “The decisions that we are making today must not only be seen as responses to the current economic situations, but also as a means of addressing the demands and challenges of a new, post-crisis world,” Putin noted. 

This particular statement from the second person in the Russian political hierarchy more than highlights Moscow’s far-reaching geopolitical and economic ambitions and the role it plans to play in the new, emerging post-crisis global economy.