I’ve translated Kusch’s work already here and here, and critiqued his point of view here. Right now, there is plenty of anger among patriotic society in Ukraine over the government’s inability to compete with Russia’s skyrocketing drone industry, which is having severe effects on the front. I recently discussed an interview with a Ukrainian soldier that, like any soldier, described Russian drone superiority as one of the main dangers they face, one which is growing each day.
What I found particularly interesting in this article was Kusch’s open admission that he wishes Ukraine would follow Russia’s ‘military Keynesianism’, as Volodymyr Ishchenko has called it, and that Ukraine is currently a ‘pygmy’ society standing on the head of the [Soviet] ‘giants’.
Published originally here on August 19, 2023, 09:30
Alexey Kushch - financial analyst, economic expert. Lives in Kyiv, works at the United Ukraine think tank. Author of analytical publications, actively blogs on his Facebook page. Former advisor to the President of the Association of Ukrainian Banks.
Even an attack by a hundred Shaheds, if repeated almost every day, is a huge problem for all of us.
Drone Attack.
Russian media reports that Russian industry will produce up to 6,000 attack drones in the next year or two.
This would allow the Russians to conduct one-off attacks on Ukraine using up to 300 Geranium/Shahed drones.
And also to use Lancets and other types of kamikaze drones in a "swarm" format, where strikes are made in a massive "fist" and clearly coordinated with each other to overstretch our air defenses.
This is already, one might say, the germ of network-centric warfare, based on the widespread use of information technology and targeted coordination across the breadth of the front.
For example, when a bomber flies accompanied by a "swarm" of attack drones that destroy air defenses in front of it.
Let's say the Russians bragged as usual, plus propaganda.
But even an attack by a hundred Shaheds, if repeated almost every day, is a huge problem for all of us.
Why were the Russians were able to launch such a sophisticated program in the face of sanctions.
The first explanation is obvious, as it lies on the surface: technological sanctions against Russia are working extremely poorly.
Recall how I wrote that a special interstate commission should be created to track parallel imports into Russia, as well as supplies of high-tech goods and services.
A commission with the participation of Ukraine and our allies.
With authority similar to the current arms export control authority.
So far, nothing has been created in this direction.
But the most important explanation is not that at all, but our lack of understanding of how economic models of growth work in today's world.
Remember the joy of our experts about the broad budget deficit in the Russian Federation at the beginning of the year by 2.5 trillion rubles.
They said that "the Russian economy is dying out", that Russia had chosen the entire annual plan for the federal budget deficit and they would soon be finished.
To me, such statements have become a key factor in our intellectual myopia.
For years I have been writing articles about the fact that the budgeting mechanism in the world has changed and no one is afraid to apply wide budget deficits in times of crises or wars anymore.
That when the question is about the survival of the economy and, more broadly, of the country, the issue of inflation and the dollar exchange rate recede into the background.
And the priorities become employment of the population, launching amortization programs in the economy, support for business and socially vulnerable social groups.
For example, during the pandemic, Indonesia financed economic stabilization programs through its central bank and ignored IMF protests.
By the way, when everyone was rejoicing at the RF budget deficit, I immediately warned that these were advance payments for the launch of large-scale military-industrial complex programs and very soon the size of the deficit would stabilize, which happened in spring and summer.
I also said that in half a year everything that was appropriated by the Russian Ministry of Finance in January-February of this year would start falling on our heads in the form of missiles and bombs.
And it's now coming down in the form of missiles made in May and dozens of Shaheds.
Now a question for the studio - what did our Ministry of Finance fund at the beginning of the year?
Drones smashing windows in Moscow City?
For many years I have been writing about models for Ukraine's exit from the crisis:
Monetary-budgetary-investment-consumer growth incentives in the form of affordable loans, proper infrastructure spending by the government, stimulation of cluster business growth points, consumer spending by the population as a key driver of economic development, primarily in the segment of small and medium-sized businesses.
And why did I have to write these articles in Ukraine to watch all these mechanisms being successfully applied in Russia to create a new industrial core and military-industrial complex?
After all, Russia applied exactly the above-mentioned stimulus package, with the help of which it amortized the impact of sanctions in 2022-2023 (slowing GDP decline from the projected 10% to 2%; transition to the growth phase in 2023).
Monetary stimulus - the Central Bank rate at 7.5%, i.e. below inflation. Sharp growth in lending to households (primarily mortgages) and businesses.
What was the NBU discount rate? 25%, now it's 22%! Any questions? (eventsinukraine: check out my translation of Kushch’s article from 2022 critiquing Ukraine’s harsh, counterproductive wartime monetary policies. Check out my article in Jacobin for a longer meditation on Ukraine’s wartime military policies)
The budgetary incentive is the enormous infrastructural costs of launching the MIC, creating alternative cargo transshipment, and new transportation communications.
How much money have we spent on the same projects? Didn’t we beg for foreign aid and the grain corridor?
Investment incentive - creation of growth clusters at the points of import substitution and MIC.
Consumer stimulus - social payments to the population as a driver of growth of solvent demand.
Where are the actions of our government, the National Bank, the Ministry of Finance in these directions?
Let’s live without, unlike the Russians, import substitution programs on such a scale and programs of technological sovereignty.
But where are our affordable loan rates.
Where is our infrastructure spending? And not on stadiums and paving stones [eventsinukraine – there have been many scandals over the past year of the Zelensky government spending budget money on stadiums and other corrupt schemes instead of military needs], but on alternative maritime logistics.
Where are our growth clusters for business, at least in the agro-processing sector?
Where are the guarantees of asset preservation for business and guarantees of orders in risky business territories?
Where are our social programs?
Restoration of housing, payments to internally displaced people (and not just 3 thousand hryvnias, $81 a month), assistance to socially unprotected strata of the population, allowing us to launch the model of a "circular economy".
Where are the state's job security programs, including funding for employment at volunteer centres.
Now for the drones and the calls to "value engineers".
I'm going to say unpopular things.
With THESE monetary policies from the National Bank, THESE economic policies from the Ministry of Economy, THESE tax and customs policies, THESE regulatory policies and THESE economically stagnant models from the government, we will NEVER have successful programs in the military-industrial complex, including drones.
We must realize that any economic system is a complex, multifactorial organism, like the structures of coordinated neural ensembles of human brain cells.
Different segments of the overall economic model develop as a result of stimulating economic linkages with each other.
The influence of external events (endogenous influence) should be reflected in the hierarchical structure of internal economic "neural ensembles" - endogenous structural adjustment of the economy.
If part of the brain is frozen and part is damaged, it is naive to believe that genius ideas will arise in the pituitary gland and drones in a particular sector of the economy.
And one other very important point.
Good, bright people with open faces are now writing about "engineers", "creating industries".
What engineers, what are you talking about?
Look at the people coming out of the entrance halls of our factories in the evening, primarily in the military-industrial complex.
People of retirement age, 60+, the last of the Mohicans, the splinters of a great generation of builders and big projects.
The current pygmies are saved only by standing on the shoulders of these giants.
But when the gray giants are gone, the pygmies will sink to the sinful earth and immediately drop in stature to their natural level.
What engineers are there...