The following isn’t Russia related, at least not directly. I’m reading David Harvey’s A Companion to Marx’s Capital, which anyone interested in getting through Marx’s opus should pick up. Harvey has transformed his lectures on Capital into book form. Anyway, I’m going through the chapter on money and a question popped into my head regarding its dual nature as a measurement between things and its existence as a commodity. Harvey writes:
We would obviously prefer the quantitative representation of value to be a stable standard of measurement. Gold is a specific commodity, though; its value is given by the socially necessary labor-time embodied in it, and this is not, as we have seen, constant. Fluctuations in the concrete conditions of production affect the value of gold (or any other money commodity). Since, however, such changes affect “all commodities simultaneously,” then “other things being equal . . . the mutual relations between their values [are] unaltered, although those values are now all expressed in higher or lower gold-prices than before” (57)
Gold no longer plays the role as the universal equivalent between commodities. The power of money as a universal equivalent is based as much on faith as it is on the control of its quantity in circulation. However, money, either as paper or coin, is still a physical commodity produced somewhere out of something by someone. The material it’s made of, the machines that shape it, the ink used to imprint the faces of dead presidents, and the transportation systems that send it into its virginal circulation are part and parcel to any commodity. Human labor is behind all these processes used to create the money commodity.
Hence my question: If money is a commodity, does the cost of producing it factor into its value? Or, to put it in another way, what is the cost of money?
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By Sean — 11 years ago
“Bastards! (сволочи!)” For the last week a women who sits in front of me in the reading room has been cursing documents as she thumbed through files of Komsomol protocols and resolutions from the late 1980s. I finally found out what she is working on the other day.
“They are all thieves,” she told me yesterday during tea. “They stole from me and Russia. During Komsomol meetings they were diving up the property of cooperatives, allocating money for projects and themselves.” The “they” are Russia’s oligarchs, many of which have fled the country as exiles. “Khodorkovsky’s name is everywhere,” she told me pointing to a document from 1991 that details funds going to one of the oil cooperatives and banks he “owned.” The protocol in the document allocated to him over a million dollars.
“You know,” I told her “many in the United States consider people like Khodorkovsky are considered heroes of democracy.” “Well, here they are all thieves.” And it was no wonder, she added, because Khodorkovsky was tied to American banks in the early 1990s.
This woman is working on an article she hopes to publish in Der Spiegel. The story of how leading cadres in the Komsomol allocated property to themselves is a fascinating story. It is a perfect picture of what might call primitive capitalist accumulation with all the theft, swindle and blood that goes with it. Everybody knows how elites the Communist Party, like Gazprom’s Viktor Chernomyrdin became instant billionaires. What is less known is how Communist Youth League cooperatives were used in the 1980s as a means to marketize the Soviet economy.
Gorbachev’s idea was good natured but na?ve. By rehabilitating the ideas of Nikolai Bukharin, Gorbachev hoped to revitalize the executed Bolshevik’s slogan “Enrich Yourselves!” and his ideas about socialist competition. Like in the 1920s, Komsomol cooperatives of the 1980s were subjected to market principles to foster competition with state enterprises. The competition, it was believed, would increase productivity and production quality. It is now called Komsomol capitalism.
Komsomol cooperatives were based in two industries: construction and technology. But archival documents might reveal a much wider breath of entrepreneurship. From the few documents, I was shown, the Komsomol was allocating funds to oil, banking, and publishing, all of which were run and later owned by key Komsomol cadres. This of course wasn’t Gorbachev’s idea. His idea was that using the Komsomol to experiment with market reforms was politically safe. The Party pumped funds into the organization for it to set up cooperatives. In the case of technology, it was hard currency since Komsomol members would buy old computer equipment from the West and refurbish it for big profits.
By the time the Soviet system collapsed, the now redundant Komsomol was awash with cash. The players in the organization quickly appropriated it and set up the first banks, and therefore were the first ones that had the ability to give credit. The Komsomol oligarchs also made out big in the privatization scandals of the 1990s where they took privatization shares for loans. The result was that many, like Khodorkovsky, became the owners of recently privatized state enterprises.
“I’ll take these documents to court if I have to,” the woman told me with hopes that an article based on archival documents will bring some justice. In fact, some of the documents she’s looking at were used in Khodorkovsky’s conviction. “The strange thing is that he didn’t believe he was guilty. This is why he didn’t flee to Israel or America like the others. But how could he think he was innocent!? His name is all over these documents. And there were laws on cooperatives that prevented their privatization. And the Komsomol was after all a social organization and therefore not theirs to take.”Post Views: 135
By Sean — 2 years ago
I wrote an article for OpenDemocracy on microloans and debt collector violence. I’ve been mulling the article since January when I read a gruesome story about a debt collector throwing a Molotov cocktail through the debtor’s window severely burning his two year old grandson. A Google news search revealed that though this incident was one of the most tragic, it was hardly exceptional. But the idea sat and so did the saved links.
Then two things happened.
First, was all of the reporting on Putin’s alleged connections to $2 billion in the Panama Papers. Many Western reporters were bemoaning the fact that the Russian federal media wasn’t covering the story and how the details in the Papers revealed the nature of corruption and power in Russia. As usual, Mark Galeotti provided one of the more cogent comments. But besides Mark’s intervention, most commentary read as recycled verbiage salted and peppered with new flashy metaphors.
Second, on April 5, another story sprang up in the Russian press. In the town of Iskitim in Novosibirsk oblast, four masked debt collectors broke into the home of Natalia Gorbunova, beat her husband and 17-year-old son, and then raped her in front of them. Gorbunova had taken a 5,000 ruble microloan in 2014 and now the collectors were demanding 240,000.
It was the contrast between the global media outcry and analytical mummery about Putin’s alleged billions and the complete silence about what ordinary Russians like Gorbunova have to deal with. But this is always the case. Stories about the Gorbunova’s of the Russia are few and far between. It’s easier to obsess over Putin than to illuminate the complexities of Russian daily life.
I hope that my OpenDemocracy article is a modest contribution to the latter.
Here’s an excerpt:
Media reports of harassment and violence against debtors have become all too common. Most debtors and their relatives are subject to constant harassment —in Stavropol, debt collectors shut down a hospital’s phone system with their constant harassment of a hospital worker over the telephone. Similar incidents have happened in other towns as well.
Threats and outright violence are increasingly frequent. In January, debt collectors in Ulyanovsk threw a Molotov cocktail through the window of a 56-year-old grandfather, severely burning his two-year-old grandson. The grandfather took a 4,000 rouble ($60) loan to buy medicine; the collectors demanded he pay them 40,000 ($598).
In Krasnodar, a debt collector broke a woman’s finger over a 300 rouble ($4.50) debt payment. In Penza, a 54-year-old woman took a microloan for 30,000 rubles ($448) to, once again, buy medicine. She put her home down as collateral. The collectors now say she owes 470,000 rubles ($7,022), and as a result, they’re to seize her home. In Rostov-on-Don a collector was sentenced to ten months in prison for threatening to blow up a kindergarten if an employee didn’t repay his loan.
In Yekaterinburg, collectors “cut the telephone wires and filled the locks with glue” as they locked a debtor’s child in an apartment. Aleksei Selivanov, a Yekaterinburg lawyer who defends debtors against predatory lenders, was threatened by a group of collectors led by Maksim Patrakov, a former Donbas volunteer fighter. According to the jurist, Patrakov threatened to throw him in a car trunk and murder him out in the forest. The media is filled with these stories.Post Views: 273
By Sean — 5 years ago
The financial crisis in Cyprus has put Putin in a bind. On the one hand, sitting silent and allowing Russian depositors take up to a 10 percent haircut on its $31 billion in Cypriot banks jeopardizes Putin’s standing with the Russian elite. On the other, if Putin is serious about anti-corruption and de-offshorization, the crisis gives him opportunity to make some modest headway. Either way, the Russian government’s hesitance in striking a deal with Cyprus reflects the schizophrenia between Putin the populist patriot and Putin the guarantor of the class interests of the Russian bourgeoisie.
The European Commission, European Central Bank, and International Monetary Fund have inadvertently accomplished a remarkable feat: prompting the normally disharmonious Russian bourgeoisie to suddenly sing in tune. Note some of the reactions from Russia’s bourgeois quarters. Putin furiously denounced the Troika’s plan as “unfair, unprofessional and dangerous.” Medvedev took the defense of the Russian bourgeoisie even further by red-baiting the EU with comparisons to Bolshevik expropriations. Oligarch and faux-oppositionist Mikhail Prokhorov warned the tax on Cypriot depositors could open “Pandora’s box.” Similar to Medvedev, neoliberal champion and effervescent Putin hater, Yulia Latynina blasted the EU’s “confiscation” as indicative of socialism. The crisis even has the Moscow Times running uncharacteristic op-eds imploring Putin to stand up for Russian capital against EU “bullying.” Even Andreas Aslund, who is ever dour on Putin’s Russia, believes that in this instance Putin “is undoubtedly getting strong advice to act from wealthy, smart, and daring Russian businessmen.”
The great irony in all this is that we find the Russian elite, which normally has no problem cannibalizing each other’s assets at home, defending in Cyprus what they are unwilling or unable to institute in Russia: a working legal system that protects capital from predation. With Cyprus the Russian elite gets its cake and eats it too: capital extraction at home and a safe harbor for its storage in its safe Cypriot colony.
How did Cyprus become so important to Russian capital? As Business Insider explains, all roads lead back to the Cypriot-Russian 1998 Double Tax Treaty:
Additionally, according to Bloomberg Russia billionaire reporter Rich Lesser, there is no penalty for moving money out of Cyprus, so if you want to move your money to another tax shelter, say, The British Virgin Islands, you’re free to do that.
So some oligarchs do.
How does this work? According to the Christian Science Monitor‘s Fred Weir:
“For quite a long time, Cyprus has been the major offshore zone where Russian corporate earnings are banked, and then re-invested in Russia,” says Grigory Birg, co-director of research at the independent Investcafe equity research provider in Moscow.
It works like this: Russian companies and wealthy oligarchs set up shell companies in Cyprus, which then invest in Russian operations and “repatriate” their profits to Cyprus, where they pay a flat corporate tax of 10 percent compared to more than 20 percent in Russia. Since Cyprus adopted EU banking rules in 2004, experts say, the scrutiny has become a little tougher, but not enough to discourage most rich Russians.
According to Russian central bank figures, little Cyprus invested almost $14-billion in Russia in 2011, compared with barely $2.3-billion invested by Russia’s biggest European trading partner, Germany.
“Cyprus is really convenient place for Russians, because it’s in the EU, has a low tax rate, and has adapted itself to Russian customers. It offers infrastructure, proximity, and Russian-speaking staff. It’s about capital protection … but now, no matter what happens with this tax plan, that’s bound to change,” says Mr. Birg.
Basically, Cyprus is for Russians as Caribbean tax shelters are for American oligarchs: a means to squirrel money away from the prying eyes of government auditors and tax collectors.
At the same time, Putin’s allegiance to the Russian elite puts him at odds with his de-offshorization efforts. Again Weir:
“Russian authorities have long pursued a campaign of “de-offshorization,” declaring that this practice of cycling money through other countries is bad for Russia,” says Alexei Makarkin, deputy director of the independent Center for Political Technologies in Moscow.
“In practice, it has usually meant that money just gets shunted from one offshore destination to another…
The crisis certainly presents Putin with an opportunity to fight corruption, as Stefan Wagstyl of the Financial Times notes. Indeed, Russia’s first intervention into the crisis suggests that anti-corruption and de-offshorization is on Putin’s mind. Ten days ago, Kommersant reported that the Ministry of Finance considered giving Cyprus aid in exchange of the names of its Russian depositors. The hope is that even modestly depriving Cyprus as a Russian tax haven will stave off the capital outflow from Russia. Capital flight from Russia is already around $14 to $16 billion so far this year, exceeding Central Bank estimates of $10 billion for the entire year. Medvedev even floated the idea of creating an offshore zone in the Far East. The money would still be under a tax haven but in Russia where the government would know who’s depositing, how much, and ostensibly where the money came from. This would undoubtedly give Putin some leverage in keeping the increasingly fractured elite in line. However, given that a main reason Russians park their money abroad is to avoid government raiderstvo, I seriously doubt a Sakhalin tax haven will be much of a draw.
The Cyprus crisis has pitted Putin against himself. It opposes Putin the patriot against Putin the guarantor of Russian elite; Russian national interests versus Russian class interests. I can only speculate how this internal struggle has played in the recent ebbing of Russian-Cypriot negotiations.Post Views: 77