Foreign recipes

A sick economy can be treated not only with money

Not only money. The distribution of money is the main remedy for the crisis, which is practiced by almost all governments. Are there any other recipes for saving the economy and how applicable they are in Russia - The New Times found out

According to Bloomberg, in the US alone, the administration and the Federal Reserve have spent $4.17 trillion on fighting it since the beginning of the crisis, and have already promised $12.8 trillion. The latter amount sounds absolutely fantastic, and a couple more aid packages could bring it up to the size of the GDP of the world's largest economy ($14.2 trillion in 2008). If the government and the Fed actually spend everything they promised, spending would reach $42,105 per American, including children.

Giving away enough However, in recent weeks, governments have begun to realize that they are spending too much. Last week, the Obama administration decided that the best option for General Motors and Chrysler was bankruptcy. Since December, the auto giants have received $17.4 billion from the administration to extend their torment, and if not for the decision to bankrupt them, they would have received another $21.6 billion in additional assistance in the near future.

The idea that it is time to be more careful with the distribution of money reached Russia in the process of preparing the government's cut budget-2009. There is no need to "replace macroeconomic stabilization proper, stabilization on international financial markets simply with the support of various structures," Dmitry Medvedev said last week. The government froze the program of Vnesheconombank's loans, which were supposed to help companies pay off their external debts, and is no longer trying to support share prices on the stock market at the expense of the National Welfare Fund.

Duties and taxes

However, if financial assistance is excluded, there is not much money at the disposal of governments. The most important of these are the increase in duties and the reduction of taxes. While leaders everywhere speak in unison about the evils of protectionism, their actual actions are driven by a desire to protect domestic firms from foreign competition. As a result, world trade is projected to fall by about four times as much as world GDP, according to World Bank and OECD forecasts (see graph). Similar expectations of a decline in world trade and the World Trade Organization (its forecast - 9%). At the same time, in January (later data is not yet available), world trade fell by 17% compared to last January, the WTO reports.

Both WTO members and those that are still outside it have resorted to a significant increase in both tariff (duties) and non-tariff barriers (sanitary and other restrictions) to imports. The most popular restrictions are in metal trade (the EU initiated several anti-dumping investigations against exports from China, and imposed prohibitive duties on a number of items), as well as in the clothing and footwear trade sector. Thus, the EU, Argentina, Brazil and Canada initiated anti-dumping investigations against Chinese products, the demand for which increased with the onset of the crisis.

Duties on clothing and footwear have already been raised in Russia, Kazakhstan, Ukraine, and Ecuador. India has introduced import licensing for steel products, and Malaysia has extended technical regulation to 57 steel products, the WTO calculated. The "Obama Plan" ($787 billion) contains a restriction on the use of budget money in the construction and repair of infrastructure: metals and manufactured goods purchased under the program must be American (if they are produced in the USA and available at reasonable prices).

India, on the contrary, has reduced import duties on fuel oil used in the energy sector. Several countries, including Kazakhstan, Indonesia, the Philippines, have reduced import duties on goods not produced in the country.

Tax incentives are less widespread. From the support of companies through taxes, the most effective measure is the reduction of export VAT (increasing the refund of this tax), as well as the reduction of export duties. China zeroed out duties on 102 types of products, reduced them by 23, and sharply increased VAT refunds for exporters. Russia has its own way here too - lowered income tax (this is almost indifferent to business: profits will fall sharply this year), but the Federal Tax Service proposes to introduce a 0.5 percent tax on banking products, which can drive many companies into the shadows.

Togliatti relapse And yet the most effective anti-crisis measure of the government continue to consider monetary assistance. And companies actively support this belief of officials. Prime Minister Vladimir Putin flew to Tolyatti last week. Prior to this, the situation at AvtoVAZ was repeatedly discussed at various government meetings, and officials said in unison that there would be no unconditional distribution of money. Both in the US and Europe, assistance to car factories (worldwide, according to Deloitte's calculations, about $50 billion has already been promised to be spent on it) is provided with the condition of restructuring - reducing costs, switching to more environmentally friendly cars ...

As a result, the Togliatti plant will receive 115 billion rubles (25 billion - from the budget, the rest - loans from state banks). Other Russian car factories, which in total produce more cars than AvtoVAZ, will receive a miserable 10 billion rubles, and even then not immediately. No conditions have been set for AvtoVAZ, which means that it will still come for money. The Russian government clearly confuses support for companies with anti-crisis support for people in order to avoid social discontent. “Unlike other enterprises, there were no mass layoffs at AvtoVAZ. And it’s worth a lot, ”Putin explained the allocation of money to the plant.

It is curious that the Togliatti giant earns not only on Russian, but also on German anti-crisis measures. From January 15 until the end of the year, anyone in Germany who changes a car older than 9 years for a new or slightly used one (condition - low fuel consumption) receives a subsidy of € 2,500 from the budget. For this, the German government has allocated €1.5 billion, expecting that there will be 600 thousand people who want it.

However, by the beginning of April, 900,000 Germans signed up to receive money, and sales of new cars, falling by 10-20% in Europe, grew by 21.5% in Germany. Probably the German government will extend the program. Most sales come from economical Volkswagen and Opel models, according to the German association of car manufacturers VDA. Auto lobbyists in Japan and the US are demanding similar action from their governments. However, the biggest increase in sales compared to last January-February was achieved not by German car factories, which officials wanted to help, but by Japanese Daihatsu (Japan, sales increased 3.3 times) and Hyundai (Korea, 3 times). And in third place is our Lada with an increase of 2.76 times. Until now, about 4,000 Togliatti works were bought in Germany a year. Car factories will get a large share of the aid allocated by Germany to the real sector. Many believe that this money was spent in vain: “This award is a big mistake that will not help the economy, but only increase the national debt,” says Joachim Scheide from the Institute for World Economics in Kiel.

SU-HSE, Opek.ru