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Brilliant Russian Economist Explains Future of Global Economy and Russia's Role in It

  • Khazin is one of Russia's best and brightest - he and Glazyev are at the top of the game. They are Russia's answer to Paul Krugman
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This article originally appeared at Nakanune.ru. It was translated by Kristina Rus at Fort Russ


The trend of centralization of the global economy will remain in the past. It will be replaced by regionalization. In today's economic instability, only systems with 0.5 to 1 billion people can be effective, - says the economist, member of the Izborsky Club, Mikhail Khazin. According to him, the formation of such systems will begin after the onset of the crisis, and the first prototypes have already appeared.

Khazin noted that the world economy has developed in the framework of expanding markets over the last 400 years. As a result, today it is in a very unstable state, since household spending is several times higher than income: by $3.3 trillion in the US and $2.5 trillion in the EU. The purchasing power of the average salary in the U.S. is at the level of 1958, all the rest - is induced demand due to the growth of private and public debt, said Khazin.

"The global economy harbors a potential recession, exceeding the scale of the Great Depression by 2.5 times," - said the economist.

Globalist tendencies are replaced by regionalization trends, smaller systems become more cost-effective.

"A norm is an economic system with 0.5 to 1 billion people. This means that the world economy should fall into 5-6 relatively independent units as a result of the crisis. An additional factor is that the dollar ceased to be the investment asset for the world economy. The value added generated by the economy today, is insufficient to ensure the normal investment process," - explains Khazin.

In this situation, the trend will be the creation of regional emission centers. This issue is raised in Russia: President Vladimir Putin at the regular meeting of the leaders of the Eurasian Economic Union talked about the necessity of creating a monetary union. The prototype of the regional economic zone is now the EEU.

"We see that, despite all the talk that it is nonsense, in spite of all the opposition to the IMF, the trends are there. Moreover, not only in the EEU. China is creating its own periphery, the EU has long been engaged in it, Brazil is active in Latin America and South Africa. Processes are caused by objective circumstances and they will continue", - said Khazin, adding that the EEU is only a "fetus", from a geo-economic point of view, it should be joined by Turkey, Vietnam, United Korea and Japan.

"They have nowhere else to go, because Vietnam, and Korea, and Japan, and Turkey - are export countries. If Turkey's main partner is the European Union, for the rest - its the US. Once the demand in these regions falls, and they begin to close their borders, these countries will be left "hanging". Neither Turkey nor Japan nor Korea are ready to return to the state of poverty in which they were at the dawn of the beginning of their economic expansion," said Mikhail Khazin.

 

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