By Olga Tarasova

“The weak dollar is a myth”

Ruslan Grinberg is the director of the Economy Institute of the Russian Academy of Sciences. He has a PhD in Economic Sciences. Dr. Grinberg authored more than 150 academic works and invented the concept of transformational inflation. He is editor-in-chief of the World of Change magazine and the vice president of the international NGO Economists for Disarmament. He is one of the founders of the Russian-American Group for Economic Transformation.

– Mr. Grinberg, just recently in joint efforts with a team of economists you prepared a new program for the socio-economic development of Russia from 2008 to 2016. In that document you seriously criticized the government for its inability to take advantage of the good market conditions for natural resources in the world. You also noted that the work in infrastructure-upgrading and the agricultural sector has been weak. Have there been any repercussions?

– Some members of the government called to the Academy of Sciences and asked how dare Mr. Grinberg say things like that. That was the end of it. Soon afterwards, President Medvedev launched a new entity, the Institute of Modern Development, and I was invited as a board member.

The job of the scientists is to make the diagnosis. The actual procedure of treatment is a whole different story. Our program is a thorough analysis that has elicited great interest. Of course, the media completely distorted my statements. The scientists like to say “on the one hand this” and “on the other hand that,” but the mass media want to have everything clear. The politicians also would like to have it in this simple way. Ronald Reagan once jokingly said: “I am looking for a one-handed economist.”

Scientists may have differing viewpoints, but they base them on something. For an outsider person looking at a new topic, it is important to understand intuitively what viewpoint he should select. For politicians intuition is crucial. If two economists, who have studied all relevant issues for 30 years, go to consult a politician on price setting and tell him that he understands nothing, he will be very irritated. I had such an experience during the Soviet period. I was called to the Central Committee together with one woman. I was young and stupid at that time. The government official listened to us both and said: “Go to that room and reach a consensus with each other.” I became very angry and said to him: “If we could reach a consensus, then there would not be any need for you.” There was a big scandal. They called to our Institute and wanted to expel me from the Communist Party. I had an advantage anyway because I was not a member of the Communist Party.

– How were you able to have such a career in science and become the leader of the prestigious Economy Institute without any partisan affiliation?

– In my youth, I dreamed of being a soccer player or a marine. I played in the Torpedo youth soccer team. It was a great team. In general, I have good taste, but I lacked the ability to sit still. I graduated from Moscow State University, the Economics Department. I always believed that this science had more liberty in a society lacking freedom. I did my dissertation and worked at the Institute at the University. I specialized in price formation, studying foreign prices and the way to use them in domestic price-setting.

Later, I came to the Academy of Sciences, to the Institute of Economy of the World Socialist System. I was not member of the Party, but Academician Bogomolov made a decision to take me in at his own risk. I have been at the same place for twenty-five years. After 1990, the institute changed its name to the Institute of International Political and Economic Research. I finished my doctorate dissertation and later became the director of the Institute. We were studying all of the countries of the Commonwealth of Independent States and the countries of the former socialist bloc. At this time, some problems arose at the Institute of the Economy. They called me to help them out. That’s how it happened that I brought together three large research institutions. I have very many people working under me right now, around 500 people.

Because I had good relations with Mikhail Gorbachev since those times, I also work with his foundation. Unlike the Soviet people, I like him very much. He is a great man. He gave us freedom from his own hands. We did not deserve it.

– There is a sharp contrast between how well Gorbachev is received here in the U.S. and how bad the people in Russia think of him. Why is that the case?

– I will illustrate this situation with an analogy. We all were living in prison. Some people had a good cell; others lived in worse conditions; and the last category in complete misery. Then, suddenly, there appeared a new director of the prison, who had an intelligent wife that went to the library and read Tolstoy and Dostoyevsky. The director and his wife thought there was something wrong. Many people were sitting in jail for nothing. Why not let them go? So, they opened the prison gates. Everyone came out of the prison with great expectations. What was next? There was nothing outside. There, in the prison, people had breakfast, lunch, and dinner. There were artistic performances and even a library. Everyone started to curse the prison director: “What for did you let us out!”

Later, there started a war where everyone was against everyone else. Nobody had the habit of living in freedom. Only the stronger ones win amidst this chaos, only those who have taken for themselves all the prison’s property, all the riches of the country. Before, these resources were divided evenly. Now, they are all in the hands of twenty people. This lead to widespread and senseless poverty. Why should people like Gorbachev? Altogether, if democracy prevails in Russia, they will erect a monument in his honor. If not, he will be proclaimed the enemy of the people.

– Mr. Grinberg, let us return to discussions of the economy. Very frequently people ask us what is going on with the dollar in Russia. Why are the Russians so happy to see a declining dollar?

– Here is the situation. It would not hurt to have a psychologist here for a detailed explanation. We don’t like rich and healthy people. Why should we like them?.. America appears to us to be rich and healthy, and, as it seems to the Russian people, it tricked us. That is why the Russians like when the economy is down in the U.S. The Germans have a proverb that would be characteristic of our relations with America – “Malevolence is the purest form of happiness.” Some people even want to see America gone. When the dollar went down the people all of the sudden felt good. There formed a myth of a strong rouble and a weak dollar. I tell these people, how can you talk about a weak dollar? The U.S. has one of the lowest inflation rates in the world – around two percent a year. In Russia, it is around two percent a month. And that is the strong rouble?! It is strong because we are getting our oil dollars in all the time. When there is more supply of a given good, it goes down in price. This is the essence of the problem. It is an idiotic situation. The money inside the country looses 15 to 20 percent of its value, all the while the dollar becomes less expensive. It was 30 roubles to a dollar, and now 23. This undermines the efforts of domestic producers because it becomes easier to import.

I am a proponent of a new policy approach that the Russian Central Bank should adopt. It must intervene so that the dollar would not lose value. Money is the most complicated form of matter. As Karl Marx wrote, even love could not make fools of so many people as the mankind’s drive to understand the essence of money. There would be nothing bad if we’d buy more dollars and stop the decline of currency conversion rates. If we have inflation of ten percent a year, the value of the rouble must go down, not up by ten percent. This is a very difficult story, because we have less and less products that are manufactured domestically. Manufacturing is at a standstill, and that is a true defeat of the reforms.

– There is nothing that the U.S. itself should fear?

– There are different points of view. There are some people that don’t have a malevolent attitude towards the U.S. At the same time, they think that America’s debt, which stands at more than 9 trillion dollars, is very high. They think that it will all fall down. But we cannot make such assertion. I remember that my school teacher was telling me that the U.S. will soon cease to exist because it has a very large debt. Surprisingly, Americans are the most reliable partners.

– To what extent do Russian politicians listen to the advice of economists?

– Normal politicians listen to economists only when it is beneficial for them. One American appropriately noted that politicians treat economists just as a drunken man treats a light post. He uses it for support, not for lighting. There are three important tasks for an economist: to study, to discover, and to publish. That’s all.

– What about giving recommendations and advice?

– If you are asked, you must give advice. If not, don’t give advice. The key element here is that the people mak ing decisions must know how everybody thinks. The political system also plays a big role. President Bush has economists, but McCain and Obama also have economists. It is easier to correct a mistake in this arrangement. If you have a dictatorship, you can be so persistent that it can even lead to a great depression, as we had in Russia in 1998.

We need to know what we must be happy about. Should we be happy with our good analysis of market conditions? Someone is happy when his two words or a phrase gets into the speech of the president. I don’t see much importance in things like that, but many people want to be praised.

– Do you have to look over your shoulder and think how your ideas will be perceived by the government?

– A scientist must be free, of course. When a journalist begins to show everything in only one light, he stops being a journalist. One of my friends once noted that we have two types of mass media in Russia – the free and the influential. Those that are free are not influential, and those that are influential are not free. It is the same situation for the economists.

– How would it be better for Russia to use its oil dollars?

– It is important to manufacture products internally. In my opinion, we urgently need to spend money, to create a plan and buy equipment. We need airplanes, boats, energy equipment, machine-building tools, biotechnologies, and transportation vehicle-building lines. We need a comprehensive program for scientific and technological progress not on the basis of a brutal command-economy control, but within the framework of combined private and state management.

– In U.S.-Russia relations, political aspects have always been at the forefront, while economic questions have always taken the back seat. Will this continue?

– It is difficult to make predictions. The U.S. and Russia are not mutually dependent. Our energy resources are not for the U.S. We are not manufacturing any products that would be of interest to Americans. There may be something that develops on the energy side, but right now I can see only one good avenue of cooperation. The Americans can invest money in our economy and get really good returns.

– You believe that Russia is a good market for Americans?

– It is a very good market. First of all, I should mention the energy sector and the agricultural produce sector. The natural resources business would be very lucrative. We need to make our scientific and technical cooperation more active.

– Which one of the two presidential candidates in the U.S. would be better for Russia?

– They are both the same in that regard.

– The same in that they don’t like Russia?

– The topic of America’s relations with Russia is insignificant for them.

– Is that the right position?

– No, it is not right, but that’s why they use this anti-Putin rhetoric. This is done to affirm democratic ideals.

– Is Putin a benefit for Russia?

– He has been a benefit for eight years. I don’t know what happens now. How will democracy be preserved now? If this is infrastructure-building for the new president, that’s one thing. If it’s for preserving personal influence for eternity, then I don’t think that it’s good.

Opposition forces in society are also crucial.

– Is there opposition in Russia?

– This is a very hard question.