Putin Calls for New Economic Architecture
by William Jones
It may not be the case that this year's St. Petersburg International Economic Forum, an annual gathering established by the Russian President at the beginning of his first term in office, was intended to upstage the recent G8 meeting at Heiligendamm, Germany on June 6-8, but the stark contrast between the two gatherings couldn't have been more striking. While the Heiligendamm G8 did provide a forum for Russian President Vladimir Putin's alternate proposal to the Bush attempt to place missile defense facilities in Poland and the Czech Republic, and a platform for the non- G8 members, invited for a widened economic discussion, to take some part in the economic discussions there, the G8 was a decidedly lackluster affair in comparison. More importantly, the St. Petersburg event provided the platform for President Putin, to call for the creation of a "new architecture of international economic relations." The Putin proposal is occuring in an atmosphere of growing concern over the fragility of the present "bubble economy," and in which the well known warnings of economist and statesman Lyndon LaRouche's about the need for a move to a a New Bretton Woods arrangement are gaining momentum.
In St. Petersburg were gathered almost 10,000 people from over 65 nations, including nine Presidents, four Premiers, 44 ministers, and 40 ambassadors, to discuss the economic future of the world. President Putin, just returned from the gathering at Heiligendamm, opened the Forum on June 10 by himself drawing this contrast. "The world is changing literally before our very eyes," Putin noted. "Countries that seemed hopelessly backward only yesterday are becoming the world's fastest growing economies today. Fifty years ago, the G7 countries accounted for 60 percent of the world's GDP, but today this situation has been reversed and 60 percent of the world's GDP is now produced outside the G7 countries. The developing countries are more and more active in establishing niches for themselves not just in the trade of goods but also of services. New players, including in the high-technology and science-intensive sectors, are bringing greater competition to the market," Putin said.
The forum also helped consolidate the moves the Russian President has been making to re-establish the economic strength of Russia after the many lost years of the disastrous "shock therapy" policy under recently deceased President Boris Yeltsin. More importantly, Putin has established close relations with the growing economy of China and with the Central Asia countries to re-establish Russia as a main conduit of trade between Europe and Asia, reviving the great economic development perspective of Count Sergei Witte and Dimitri Mendeleyev, the founders of industrial Russia.
This latest meeting was also timed to coincide with a number of other important meetings, including the heads-of-state summit of the Commonwealth of Independent States countries, and the board meeting of the Shanghai Cooperation Organization, which then dove-tailed into the forum itself..
New Financial Architecture
In his speech Putin called for the establishment of a new International Economic Architecture. "If we want to achieve sustainable development we need to create a new architecture of international economic relations based on trust and mutually beneficial integration,' Putin said. "We cannot ignore the importance of healthy competition, but at the same time, we need to move towards forming common and interdependent interests and ties... In an open economy, most countries depend on international trade and on how stable and sustainable are their exports and imports. Economic partners can feel a sense of security only when they have reliable and predictable relations and when buyers and sellers guarantee fulfilment of their respective commitments."
"The new architecture of economic relations implies a principally new approach to the work of international organizations," Putin continued.."It has become increasingly apparent of late that the existing organizations are not always up to the measure in regulating global international relations and the global market," he said, in a rather pointed understatement. "Organizations originally designed with only a small number of active players in mind sometimes look archaic, undemocratic and unwieldy in today's conditions. They are far from taking into consideration the balance of force that has emerged in the world today. This means that the old decision-making methods do not always work." Putin specifically pointed to the WTO and the Doha round of trade negotiations as those institutions desitined for the scrap heap of history.
Putin made several proposals for changes in international financial affairs. "The international financial organizations are also in need of serious restructuring and modernization," Putin said. "They were established at a time when the world looked very different. They were established at a time when the world looked very diffeent and are having difficulty adapting to the new situation of stable economic growth in the majority of developing countries and growing markets." A growing concern over the U.S. policy of allowing the value of the dollar, the key world reserve currency to slide has also raised much concern, as is seen in Putin's proposal for multiple reserve currencies. "Fluctuations of these currencies have a negative impact on the financial reserves of countries and on the development of different branches of the world economy in general. There is only one answer to this challenge: introduction of several world currencies and several financial centers. that is why it is today necessary to create prerequisites for the diversification of assets in the world's financial systems." He also suggests transforming the present fora for economic cooperation, like the SCO in Central Asia into "a regional Eurasian free trade instution"as a more workable alternative to the WTO regime.
While the Putin proposals reflect the keen sense of frustration felt over the failure of the world's governments to deal with the unfolding financial crisis, including the U.S. willingness to allow the dollar to plummet, it should serve as a useful spur to a more general debate over the shape of a new financial system, While they may not represent more than a somewhat futile attempt to plug a hole in a leaky dam that is about to burst, the problem broached by the Russian President's proposals merit serious consideration. The LaRouche proposal for a New Bretton Woods system, as he has outlined this on countless occasions, most recently on his visit to Moscow in May, broaches the needed universal, solution to the underlying problem — a solution that requires most immediately the collaboration of the four major economic players — the United States, Russia, China, and India — in devising the fundamentals of a new international system with fixed exchange rates and backed up by gold. With agreement between the four regarding the principles of such a system, the rest of the world can be easily brought in.
More importantly, the Putin government has gone a step further in the development of the Eurasian Landbridge perspective in its revival of a proposal to build a tunnel between Russia and Alaska under the Bering Straits. A high-level conference on the Bering Strait project on April 24, which LaRouche, although invited, was unable to attend, and instead submitted a paper, was a clear signal that Putin was determined to move forward on the development of the Eurasian Landbridge project in a big way. Putin also announced his intention to proceed with the building of a second canal between the Volga and the Don rivers, a major project that would significantly enhance the transport of goods through the heart of southern Russia.
The Russian President was followed at the forum by Kazakh President, Nursultan Nazarbayev, who introduced the audience to two other important megaprojects for the region: a direct canal from the Caspian to the Black Sea, and the long-discussed diversion of water from Siberian rivers to Central Asia. The river diversion would not only provide water to the arid region of Central Asia, but would also allow the replenishment of the dried-out Aral Sea. Nazarbayev had raised this issue already in talks with the leadership of Uzbekistan, which is also affected by the drying up of the Aral Sea.
The forum also gave the lie to the idle threat of the unseated British Prime Minister, Tony Blair, who had "warned" Putin that British industries would shun Russia if it didn't continue to "reform." With over 200 [Brit?-nbs] business leaders in attendance, there didn't seem to be any "cooling" on their part to participation in these Eurasian Great Projects.
And during the course of the conference, in between the speeches and the receptions, over $13.5 billion in investment agreements were locked in, with $7.5 billion worth of contracts between private companies, and an additional $6 billion private-and-state investments. During the conference Russia announced that it would purchase 22 airplanes from Boeing at a cost of $3.5 billion. France's PSA Peugeot- Citroen also signed a $334 million deal to build an auto plant in Russia and Sweden's AB Volvo will invest $334 million in a factory to produce 15,000 trucks a year.
China alone signed over $2 billion worth of agreements with Russia. There has been a continual increase in Russo-Chinese trade since the establishment of a strategic partnership between Russia and China launched by President Putin and former Chinese President Jiang Zemin. This is slated to continue with the launching this year of the Year of China in Russia, which will see another flurry of economic and cultural delegations from China to Russia during the course of the year.
The St. Petersburg Forum clearly indicates that the regional powers of Eurasia are intent in staking out their own path to development and are moving along it quite briskly. While the leaders at the St. Petersburg were discussing the possibility of Great Projects, our political leaders in Washington were bogged down in a useless debate about how to best limit immigration and fighting that old bugaboo, Al Gore's "global warming." While Big Al either did not accept the invitation extended to him to attend the St. Petersburg gathering or was discouraged from coming, it is unlikely that his Malthusian crusade would have gained much traction in the climate of progress being exhibited in St. Petersburg. But the proposals mooted by the Russian President in his speech to the forum deserve more serious consideration by those in Washington responsible for the economic well-being of the American people. As the world economy teeters on the brink of a major financial collapse, the proposals put forward by President Putin could serve as a stimuluss for beginning the moves toward a New Bretton Woods architecture as outlined by economist and statesman Lyndon LaRouche.