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23.08.2010

The MSE MSU‘s New Foreign Partners

According to MSE MSU’s programmer of international cooperation the MSE MSU’s delegation has visited some leading European Universities. Among them: The University of Geneva,(Switzeland), The University of Pavia, The University of Bologna and The University of Rome «Tor Vergata».Representatives of The Frankfurt School of Finance and Management (Germany) have visited MSE MSU.

With the leaders of these Universities were reached agreements on scientific and educational cooperation.
There were signed Memorandums of understanding with : the Pavia University, The University of Bologna , the University «Tor Vergata» and The Frankfurt School of Finance and Management.
The Memorandums will promote activities in the following areas:
- Exchange of students
- Exchange of faculty and academic staff
- Instructional and cultural programs, including publication activities of mutual interest ,exchange of bibliographic materials and shared access to information networks.

19.08.2010

Prof. James K. Galbraith has been elected to the Accademia Nazionale dei Lincei (Italy)

Dear Professor Galbraith,

We learned from Professor Robert Hutchings’letter about your election to the oldest scientific academy in the world - Accademia Nazionale dei Lincei.

On behalf of our colleagues and students of Moscow School of Economics we also congratulate you with this significant event.

We wish you every success and new achievements in your work and hope for your frequent visits to Moscow School of Economics.

Sincerely yours,

Director of MSE MSU RAS vise-President	A.Nekipelov
The First deputy Director of MSE MSU	S.Shakin

The Accademia Nazionale dei Lincei is the oldest scientific academy worldwide. Founded in 1603, the academy counts Galileo Galilei among its original members and has remained an elite organization, currently housing only 540 members, with only 180 from outside Italy.
Details at www.lincei.it

04.06.2010

Professor from the University of Texas James Kenneth Galbraith has visited Moscow School of Economics.

On the invitation of Dean of the MSE MSU, RAS vice-president A. Nekipelov from May 31 to June 3 professor from the University of Texas James Kenneth Galbraith visited Moscow School of Economics. The schedule of Prof. Galbraith’s being in Moscow included:

- Lectures for the MSE MSU students on subjects:
    «Inequality in the World Economy: An Empirical Investigation»
    «The economics profession and the financial crisis»

- Meeting in the Institute of Economics RAS with prof. R. Grinberg, Director Corresponding Member of RAS and members of the Scientific Council of the IE RAS

- Reception at the RAS Presidium (on the invitation of RAS vise-president A. Nekipelov)

- Meeting with the President of the Gorbachev Foundation M.Gorbachev .In this meeting the Dean of the MSE MSU prof. A.Nekipelov and the First Deputy of the Dean of the MSE MSU S. Shakin took part.

- Meeting with the prof. A. Shevyakov –Director of the Institute of Social and Economic Studies of Population RAS

12.05.2010

M.K. Alimuradov

«Financial Management: the Economic Essence, Financial Models and Tools»

The preface

Over the past 20 years, the Russian financial market has shown itself to be quite dynamic, with a high degree of instability. There is as well as a considerable dependence on non-economic factors within the country and influence of the world financial system. It demonstrates a necessity to evolve the Russian national financial strategy and, in relation, the strategy of the companies co-operating with the Russian financial market.

The Moscow School of Economics of M.V.Lomonosov Moscow State University, has recently created a Financial Strategy Department for the purpose of developing the theory and methodology necessary to solve these problems. It is the first such Department in the country. One of the major disciplines in which the Department prepares students is “Financial Management.”

Since the founding of the Financial Strategy Department Murad Kamilovich Alimuradov, the leading teacher and Deputy Head of the Department, has been engaged in the development of the coursework. Utilizing his exceptional education from the School of Management at Tel-Aviv University, M.K. Alimuradov has systematized this challenging course, which will have enormous practical value in the future professional work of the students.

The study guide, entitled “Financial Management: the Economic Essence, Financial Models and Tools,” is M.K.Alimuradov’s first publication in this field and is the first methodical material provided by teachers of the Department to bachelor degree students, trained in the 080100 Economics program. This study guide facilitates students’ understanding of the subject and systematizes their efforts in studying “Financial Management.”

I wish to congratulate both M.K.Alimuradov and the students who will use this study guide with my endorsement. I recommend it to everyone who studies financial management.

Professor. Vladimir L. Kvint,
Head of the
M.V.Lomonosov Moscow State University
Moscow School of Economics
Financial Strategy Department,
Foreign member of the Russian Academy of Sciences

19.04.2010

On April 29, 2010 Moscow School of Economics celebrates its 6th anniversary!

On April 29 Moscow School of Economics celebrates its sixth anniversary.
The new University faculty was spearheaded by Academician Viktor A.Sadovnichy, M.V. Lomonosov MSU Rector. And on April 29, 2004 with the support of Oleg V.Deripaska, Chairman of the Supervisory Board, Basic Element Company, as well as of profile research institutes of RAS the new faculty - Moscow School of Economics - was set up. RAS Vice-President, Academician Alexander D.Nekipelov was offered the office of MSE MSU Director.

Many good wishes were extended and encouraging words pronounced when this new educational project, which pooled the potentials of fundamental academic science, university education and real economy, came into being. “Our plan is to make this school leading not only in Russia but worldwide” - this is how MSU Rector, Academician Viktor A.Sadovnichy formulated the goal set to the new MSU faculty. “Moscow School of Economics is an elite educational institution, much needed by our science and the Moscow University,” Viktor Antonovich said congratulating MSE MSU on its fifth anniversary celebrated in 2009.

Much has been achieved over the year since MSE’s first 5th year jubilee:
- The Department of General Economic Theory headed by Doctor (Economics), Professor Svetlana P. Glinkina, Deputy Director, Institute of Economics RAS, started to work with maximum performance;
- The Department of Financial Strategy focused on training financial strategists will qualify the first Masters in Financial Economics;
- Professor Sergey A. Ayvazyan, Doctor (Physics and Mathematics), Head of the Department of Econometrics and Mathematical Methods in Economics, Deputy Director, Central Economics and Mathematics Institute RAS, in conjunction with Dean Fantazzini, Associate Professor of the same Department, are preparing the 2nd volume of their textbook on econometrics for publication. In autumn 2009 Dean Fantazzini published a series of his academic works;
- Professor Viktor B.Kuvaldin, Doctor (History), Head of the Department of Social Disciplines and Humanities, published his textbook entitled “The Global World: Economy, Politics, International Relations”;
- Our professors co-authored several collective monographs and authored several study guides;
- MSE MSU took active part in preparing and running the First Russian Economic Congress;
- A 100 hour professional refreshing course on Financial Strategy and Economic Efficiency Assessment of Economic Systems intended for top managers of big companies was successfully conducted in December by leading RAS scholars and MSE MSU professors for INTER RAO UES CEOs;
- MSE MSU students participated in several scientific conferences, some of them of international level;
- Cooperation agreements were already and are to be signed with several Italian and German universities.

In 2006 the first MSE Master’s Program graduates totaled only 25. Since the inception of the School, 124 persons graduated from MSE MSU, among them 67 earned a Master’s and 57 a Bachelor’s degree. This year another 82 persons are expected to graduate from MSE MSU.

On this day professors, students, graduates and numerous friends of our Faculty extend their congratulations to MSE MSU. Among those who cordially congratulated Moscow School of Economics was President of the Gorbachev Foundation Mikhail S.Gorbachev.
Happy birthday to you, MSE MSU!

19.04.2010
«Russia 2010: Russian Transformations in the Context of World Development»

On April 19 a Presentation of the collective monograph «Russia 2010: Russian Transformations in the Context of World Development» (published by «Logos») was held at Moscow School of Economics.

The book was implemented by the Gorbachev Foundation in partnership with the New Eurasia Foundation and the Moscow School of Economics, M.V. Lomonosov Moscow State University. This scientific publication was written by a group of well-known researchers from the Russian Academy of Sciences. Among them are professors of MSE MSU: A. Nekipelov - director of MSE MSU, RAS Vise-President, Prof. V. Kuvaldin –Head of MSE MSU Chair of Social Disciplines and Humanities and M. Golovnin - Associate Professor of MSE MSU Chair of General Economic Theory.

The Presentation was attended by the authors of the monograph, experts from the RAS’s Institutes, students of MSE MSU and mass media representatives.

05.04.2010
Jacques Sapir visit-professor of MSE MSU»

Professor Jacques Sapir from France has come to Moscow School of Economics to give a course of lectures on the topic: « Theoretical Dimension of the Current Financial Crisis » for MSE’s students this week. Moore:

Jacques Sapir- Professor in economics at the EHESS in Paris, and Director of Department of the Post-Graduate Studies on Economic Development Comparative research.Director of the CEMI Research Center at EHESS and Head of Russian and CIS studies at IRSES-MSH in charge of Russian regional economics program. Consultant for the French Ministry of Foreign Affairs, and the Ministry of Defense. Associate professor and member of the scientific council of Higher School of Economics (Moscow). Since 1999 scientific adviser to the TACIS-UEPLAC program in Ukraine.

29.03.2010
«Russia 2010: Russian Transformations in the Context of World Development»

The collective monograph «Russia 2010: Russian Transformations in the Context of World Development» (published by «Logos»)-implemented by the Gorbachev Foundation, in partnership with the New Eurasia Foundation and the Moscow School of Economics, M.V. Lomonosov Moscow State University. This scientific publication was written by a group of well-known researches from the Russian Academy of Sciences, among them are professors of MSE MSU: A. Nekipelov - director of MSE MSU, RAS Vise-President, Prof. V. Kuvaldin – Head of MSE MSU Chair of Social Disciplines and Humanities, M. Golovnin - Associate Professor of MSE MSU Chair of General Economic Theory, Translations of texts written by our professors:
In english see..
In russian see..

19.02.2010
February 8 is The Day of Science

On the Day of Science the Expert magazine (No 5 (691) features a discussion of the destiny of science in Russia and eventual ways of its development. According to the leading Russian scientists the Russian Academy of Sciences remains an efficient organization for creation of scientific knowledge in the present day world.

We Haven’t Got Another Academy
Let Us Look into the Myths
The Academy Responds

04.02.2010
The Resolution of the Presidium of Russian Academy of Sciences On the scientific expertise of the monograph by Academician A.D. Nekipelov

The present expert judgment is prepared in accordance with the RAS Presidium’s request to the Division for Social Sciences, dated January 19, 2010 to test the validity of charges of plagiarism, borrowings, non-creative vamping-together, lodged against Academician A.D.Nekipelov’s monograph ‘Stanovlenie i funktsionirovanie ekonomicheskikh institutov. Ot ‘robinzonady’ do rynochnoy ekonomiki, osnovannoy na individualnom proizvodstve’ (Moskva, Ekonomist, 2006 [‘Formation and Functioning of Economic Institutions. From the Crusoe Model to Market Economy Based on Individual Production’ (Moscow, Economist, 2006)]

Expert commission members:
RAS Academician A.A.Dynkin. Institute for World Economy and International Relations, Director)
RAS Academician V.V.Ivanter. Institute for Economic Forcasting, Director
RAS Corresponding Member A.G.Lisitsyn-Svetlanov. Institute for Studies of State and Law, Director
RAS Academician G.V.Osipov. Institute for Social and Political Studies, Director
RAS Academician V.M.Polterovich.Central Economic and Mathematics Institute, Head of Department; New Economic Association President
RAS Academician N.A.Simonia. Head of International Relations section of the Department for Social Sciences

For the full text of Presidium of RAS see…
For the full text of expert judgment see…

20.01.2010
In response to the initiators of defamation and lie campaign against Full Member of RAS Prof. A. Nekipelov we place on our website open letters by:

Full Member of RAS, Vice-President of RAS A. Nekipelov:
Open letter to M.V.Kashulinsky in Novaya Gazeta
Answer to the ‘Fighters against Scum and Rust’ in Science in Novaya Gazeta
Full Member of RAS, Doctor in Economics Viktor M. Polterovich
Editor-in-Chief (2003-2006), Economist Publishing House I.Bezumnova,
Lloyd M. Bensen Jr. Head of the Chair in Government-Business Relations and Professor of Government James K. Galbraith
Professor of Economics, Political Science, and Policy Studies, UCLA President of the Western Economic Association International Michael D. Intriligator
Professor in economics at the EHESS in Paris, and Director of Department of the Post-Graduate Studies on Economic Development Comparative research Jacques Sapir

12.04.2009
Robert D. Hormats Under Secretary Economic, Energy, and Agricultural Affairs at MSE MSU

Robert D. Hormats - Under Secretary Economic, Energy, and Agricultural Affairs visited Moscow School of Economics on December 2.

Mr. Hormats had a meeting with leading economists of the Russian Academy of Sciences who teach at MSE MSU. Mr. Hormats also held a lecture for the students of MSE MSU on the crucial issues of the world economy in the period of the global crisis. He also talked about the development of economic relations between the USA and Russia. For further information …

Article in Moskovsky Universitet newspaper

20.10.2009
Jan Aart Scholte-visit-professor of MSE-MSU

Professor Jan Aart Scholte from Great Britain has come to Moscow School of Economics to give a course of lectures on the topic: «Governing the World Economy» for 1-st year Magister Programme students this week.

More: Jan Aart Scholte is the Executive Director of the Centre for the Study of Globalization and Regionalization (CSGR) at the University of Warwick, Professor of the Department of Politics and International Studies in London. He has worked in the Universities of Sussex, Brighton and the Institute of Social Studies in The Hague. He has been working at Warwick University since 1999. He is also an editor of “Civil Society and Global Finance” journal, a co-publisher of the Encyclopedia of Globalization and the “Global Management” journal. He is a member of the Managing Committee of the Globalization studies Network.

15.10.2009
Presentation by Prof. M. Ellman (AmsterdamUniversity) at Moscow School of Economics MSU

On October 14-th distinguished economist Prof. M. Ellman made a presentation of the Amsterdam School of Business (AmsterdamUniversity) at MSE MSU.

Michael Ellman studied economics at Cambridge (B.A.1963), London School of Economics (M.Sc 1965) and Moscow State University (kafedra mathematical methods of economic analysis, 1965-67). He was a lecturer at Glasgow University (1967_69), a researcher at Cambridge University (1969-75) where he received his PhD (1972) and since 1975 has been a professor at Amsterdam University. He is currently chair of the department of business studies at the Faculty of Economics and Business of Amsterdam University. He is a fellow of the Tinbergen Institute, NAKE (Netherlands Network of Economics) and AIID (Amsterdam Institute for International Development). Awarded the 1998 Kondratieff prize. Visiting professor New Economic School/Russian Economic School (Moscow) 1997. Visting Fellow, Fitzwilliam College, Cambridge, 2005. Member of Workshop on the utilization of Soviet archives, Hoover Institution, Stanford University, 2007. Consultant to a variety of national and international agencies.

05.10.2009
The Global Emerging Market and its role in a time of crisis

On the 5th of October a Public lecture on the topic: “The Global Emerging Market and its role in a time of crisis” will be held by the Chairman of Financial Strategy Department (Moscow School of Economics, Moscow State University) Dr. V.Kvint at London School of Economics.

05.10.2009
New scientific publications of Dean Fantazzini, Associate Professor of the Econometrics and Mathematical Methods in Economics of MSE-MSU

A series of publications by Dean Fantazzini, Associate Professor of the Econometrics and Mathematical Methods in Economics of MSE-MSU appeared in September 2009 in the following books:

1.«EMERGING MARKETS: PERFORMANCE, ANALYSIS AND INNOVATION», in the series: Chapman & Hall / CRC Finance, издана Greg N. Gregoriou, State University of New-York (SUNY) , Plattsburgh, US.-2009, pp. 533-554;

You can find the Abstract at SSRN:
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1466697

You can find the book here at Chapman & Hall / CRC Finance:
http://www.crcpress.com/product/isbn/9781439804483

A long excerpt can be found at Google Books:
http://books.google.com/books?id=0GF7Mx3y5jEC&pg=PT573&dq=dean+fantazzini+emerging+markets&hl=it#v=onepage&q=dean%20fantazzini%20emerging%20markets&f=false

2. «The VAR Implementation Handbook: Financial Risk and Measurement, and Modeling», published by Greg N. Gregoriou /McGraw-Hill- 2009, pp. 253-282

You can find the Abstract at SSRN:
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1466692

You can find the book here at McGraw-Hill:
http://www.mcgraw-hill.co.uk/html/007161513X.html

A long excerpt can be found at Google Books :
http://books.google.com/books?id=OxGR5Z6oZIwC&pg=PT285&dq=dean+fantazzini&hl=it#v=onepage&q=dean%20fantazzini&f=false

3. «Stock Market Volatility» in the series: Chapman & Hall, издана:Greg N. Gregoriou, State University of New-York (SUNY) , Plattsburgh, US.-2009 ,p.527-548

You can find the Abstract at SSRN:
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1367512

You can find the book here at Chapman & Hall / CRC:
http://www.crcpress.com/product/isbn/9781420099546

A long excerpt can be found at Google Books:
http://books.google.com/books?id=hIvLUJJ4tAgC&pg=PA535&dq=dean+fantazzini&hl=it#v=onepage&q=dean%20fantazzini&f=false

4. "OPERATIONAL RISK TOWARD BASEL III: BEST PRACTICES AND ISSUES IN MODELING, MANAGEMENT, AND REGULATION", Wiley.-2009, pp197-216 You can find the Abstract at SSRN:
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1310642

You can find the book here at Wiley :
http://eu.wiley.com/WileyCDA/WileyTitle/productCd-047039014X,descCd-tableOfContents.html

A long excerpt can be found at Google Books:
http://books.google.com/books?id=slgX7ocrG2UC&pg=PT225&dq=dean+fantazzini&hl=it#v=onepage&q=dean%20fantazzini&f=false

28.08.2009
Recipes from Keynes

Russia
National weekly newspaper
www.russiannews.ru

No.32 (20.08.2009)

Alexander Nekipelov, Full Member of RAS, Vice-President of RAS, Director of Moscow School of Economics, M.V.Lomonosov Moscow State University, answers questions posed by Galina Polozhevets (weekly «Russia»)

- Alexander Dmitrievich, the crisis seems to spread over the whole world. Is it really so?

- Yes, it is the first global crisis experienced by world economy. I don’t tend to class it as cyclical though this opinion exists as well. The crisis started as a financial one, critical changes simultaneously took place beyond the economy: changes in environmental systems, changes of climate, depletion of natural resources, primarily energy resources. This has, naturally, given rise to numerous discussions about how to cope with them, how to overcome the global crisis. The thing is that many problems turned out to be similar in different countries, however, their sources, the dynamism of impact are not identical.

If we speak of the U.S. and Western Europe, their principal problem is crisis in the financial sector. During many years banks have been investing huge funds into US-backed derivative financial instruments. Meanwhile, a problem came to the surface described already by the prominent economic theorist John Keynes. By the way, he was a fortunate player on the stock market and, at the same time, showed extreme skepticism about it as an institution. So, when speaking about the stock market, Keynes compared two types of beauty contests. The first one is classical: every member of the jury expresses his own opinion. But we may think of a contest where it is not the most beautiful girl that wins but the person who can guess which of the girls will be chosen the first beauty by the other jury members. In other words, in this contest everybody’s vote is based not on his own perception of beauty but on the attempt to guess how other jury members would vote.

The same occurs on the stock market. Investors invest into securities not because they consider this or that company the best, but assuming other people think this way - that is why capitalization of the given company will grow. This produces a very serious distortion.

A similar problem emerged in case of financial derivative instruments. You see, no mortgage risk was thought to exist in the U.S. Why? Because credits granted are backed by mortgages. The real estate price has been rising for long. And it seemed this would last forever. You have granted a loan to a jobless, he doesn’t pay it back, so you take away his house and sell it at a higher price. No risk at all! Since prices on the housing market were growing all the time many people realized it couldn’t last long this way. As a result, a price avalanche started, then it turned out banks in the U.S. and Western Europe get mortgages but it is not clear what to do next.

The financial crisis began to spread: liquidity shrank drastically in the banking sector, then a credit crunch broke out, the banks started to grant substantially less credits. In the end, the crisis spilled over to real economy.

Within BRIC, another country grouping, the financial system has not been extensively involved in operations with derivatives. In China, India, Brazil, Russia, however, a steep downturn of demand for their respective export products took place. Of course, the financial lines of impact were also in place. Foreign investors, big banks and financial companies found themselves in a complicated situation with their obligations mostly in dollars. To meet them they began to hastily withdraw their assets from everywhere, which caused a breakdown of many stock markets in our country, too.

In Russia, the problem of the private sector’s external debt was added to these troubles. In earlier times, currency loans were profitable because, first, the interest rate abroad was lower than on the home market. Second, in recent years the exchange rate of the ruble grew; accordingly, to pay back the credit sum you needed less rubles. Thus, you could get a double profit. With the start of the crisis the ruble exchange rate began to fall because of increased outflow of money from the country, which brought about problems in the banking sector.

- Are there countries, after all, where anti-crisis measures have already improved the situation?

- The classical example is China. Although the country has also experienced a severe shock due to its heavy dependence on export of her products her growth rates remain at the level of 6 to 8% GDP - an indicator to be envied even in better times by not few countries. Many Chinese, however, lost their jobs and returned to live in villages. But in China they always behave pragmatically. In order to support domestic production they are not afraid to take absolutely unexpected measures. For example, China distributed among the citizens almost free of charge her electronic appliances, which have lost their sales markets.

In the U.S. where the anti-crisis program has been to a considerable degree oriented at the financial sector big investments are made into scientific researches, the same is true of European countries. By the way, this seriously jeopardizes Russia. If we go on acting as we do it now our scientific researches will not rank any more in the list of strategic development avenues, which may entail a new wave of outflow of researchers abroad.

The rebirth of the Keynesian idea about the need to stimulate domestic demand is, in fact, to be noted everywhere. Arguments about an inadmissibly big budget deficit are forgotten. Now the deficit volume, perceived in previous notions, is absolutely fantastic: for example, in the U.S. it amounts to 10%.

- Doesn’t it frighten people?

- The formulated principal goal is the revival of the financial sector and demand in the economy. Do you know how the crisis comes to be felt in the U.S.? Reduced real estate prices made the Americans poorer. Current wages and expenditures are the same but your house is two times cheaper, the value of your stock halved. This produced a serious psychological impact on the behavior of the Americans, they began to buy less. However, American economy has been traditionally oriented at spending, spending and once more spending! If you are short of money – please, you may get a credit, only go on spending. If you spend, the economy operates. That is why in this country the saving rate of households has always been very low, less than 1%. Now it has reached 7%, which is a catastrophe for the Americans. The customary economic development pattern is skidding. Up to now they haven’t succeeded in reversing the trend, although a tangible deceleration of unemployment growth rates is observed, and production downturn has slowed down. True, in the U.S. production has, actually, not decreased. It is our country where the rates of production slowdown are fantastic.

- Why have our anti-crisis measures resulted inefficient?

- We should give our government its due: from the very start of the crisis it began to act energetically and recognized very quickly that we shall have a budget deficit. It started to allocate rather big funds in the financial system and corporations with a huge external debt. If anything, one cannot charge the government with being idle. It’s another matter that there are several issues whose approach I do not share. First, in all countries the interest rate was lowered whereas we are raising it since last year. Only recently has it started to slowly drop.

- But the Central Bank explains the situation saying the interest rate cannot be lower than the inflation rate, which is too high.

- I take it for a false argument, which has nothing to do with real life. I am convinced the interest rate has been held high for another reason. When the debt problem of the financial sector and corporations became particularly acute they had to be supported.

But what happened? Upon receiving rubles the banking sector immediately converted them into currency. From the point of view of banks it was an absolutely rational behavior: they exchanged rubles into currency, after a while, in need of rubles, they sold it and profited thanks to exchange rate differences. Thus, despite financial injections, since September 2008 money supply was constantly shrinking. The effect reminds us of Baron Muenchhausen’s horse: from one side you pour money in and it immediately disappears from the other side.

How could the process be suspended? In two ways. The first one is connected with a return to currency restrictions. The second one chosen by the government consists in raising the interest rate, so that the flight from the ruble becomes less profitable. The interest rate was used as a mechanism which at least decelerates (if not blocks) the process of capital outflow from the country. But in this case credits became inaccessible for real economy. And those who, nevertheless, obtained credits, did not, obviously, intend to pay them back. That is why there are talks now about a second wave of crisis and growing non-payments.

Raising the interest rate is not an appropriate measure to be applied to stimulate aggregate demand. Other countries acted vice versa. In my view, with the start of the crisis we should have returned to currency restrictions. The government, however, took another decision and the country had to pay a high price for it. During half year only, from August 2008 to February 2009, $200 bln taken from gold and foreign exchange reserves had to be spent for such a fugacious thing as exchange rate regulation. This, to my mind, is a questionable line in governmental policy.

The second questionable line is the emphasis made on localized support of strategic enterprises. To build the entire line of coping with the crisis on the fundament of this policy is an error, pinpoint support does not solve the problem of demand. Strategic enterprises stand often in the middle of the reproduction chain: we give them money, they buy equipment, semi-products, raw materials, fabricate products, but demand is failing. And everything comes to a stop.

Keynes’ recipe consists in your influence on final demand. Then the effect spreads along the entire chain. But who is the demand carrier? First of all, it is the population. Meanwhile, we have set up a system in which the expenditures of our population, to a considerable degree, aim at buying import goods, to motivate production abroad. This is the reason why the efficiency of this channel of final demand for domestic production has radically fallen.

One more method, seemingly unexpected, exists. In our country the final demand carriers were importers of our products such as oil and metals. When their demand abroad dropped, domestic demand also decreased along the line. We cannot compel to buy our goods. But is it possible to somehow compensate things? I am deeply convinced, it is. Of course, it would be exotic to grant reserve money to oil companies. Nobody called to behave like that. But tax bonanzas for export branches might have been brought down to the level so that they have the same financial means at hand as before. The state has done something of the kind but insufficiently and very slowly. So, in November-December 2008 the oil companies’ profitability was, for the first time, negative.

If you reduce taxes a ‘hole’ in the budget emerges, and it has to be ‘patched’ by foreign exchange reserves. In the 4th quarter of last year our export fell by $40 bln compared to the successful 3rd quarter. Just imagine: you reduce exporters’ taxes by $40 bln and compensate the ‘hole’ in the budget by the same sum taken from reserves. If we hadn’t spent $200 for exchange rate regulation we would have had sufficient money for five quarters – the 4th quarter of 2008 and the four quarters of this year. This is the way to create demand.

Opportunities to stimulate aggregate demand on the account of state expenditures, including those of investment type, were obviously underutilized. Radical cuts of the federal investment program envisaged in the budget draft for 2010 are amazing.

And, at last, one more aspect. Yes, anti-crisis measures were adopted, on the one hand, but on the other many of them remained either not implemented or implemented with a big delay which negatively impacted economic dynamics.

- Forecasts appeared of late which argue the world would see light at the end of the tunnel this year already. What do you think about it?

-Yes, there are symptoms evidencing that by end-2009 the process of overcoming the crisis will start. These can be noticed in South-East Asia, the U.S. and Europe. They say recovery in our country will start by the end of the year, in 2010 GDP will grow 1%. May be. But we should mind that this year the downturn will be 10%. And 1% growth means 9% fall of GDP compared to 2008. In industry in the 1st half year only the decline reached 15%; apart from metallurgy, it was particularly serious in manufacturing branches. Everything testifies that, as a result of this crisis, our raw and fuel specialization will, unfortunately, become only stronger.

13.07.2009

The first graduation of Bachelors and the fourth graduation Masters of took place at MSE MSU

The graduation ceremony for Masters and Bachelors took place at MSE MSU on June 25, 2009. This ceremony was very special – it was the first issue of Bachelors at MSE. Among 57 Bachelors 18 persons graduated with honours, among 13 Masters - one person graduated with honours. President M. Gorbachev gave his book «To Understand Perestroika» with his autograph as a present to the best graduates.

Among MSE’s guests were graduates’ parents, friends, professors, sponsors and representatives of foreign Diplomatic Missions. The USA Ambassador Mr. J. Beyrle was unable to attend this ceremony because of the US President’s visit to Moscow, so he sent his congratulation to the graduates and Professors of MSE. The graduates were addressed with warm wishes by the Director of MSE MSU, vise-president of Russian Academy of Sciences Prof. A. Nekipelov, the First Deputy of the Director of MSE S. Shakin, Dean of Graduate School of Business Administration of MSU Prof. O. Vikhanskiy, the «Vnesheconom bank»’s First Deputy Chairman A. Smirnov, Moscow Interbank Currency Exchange Group’s Vice-President V.Gusakov and Deputy Director of the Institute of Economics RAS, Prof. S.Glinkina

30.05.2009

On May 29 students from Moscow School of Economics took part in international conference ”Roosevelt and Obama: Confronting the Economic Crisis” hosted by the Gorbachev Foundation

The conference was attended by Director of MSE MSU prof. Nekipelov, scholars, diplomats, public figures, students and post-graduate students from Moscow’s leading universities, who actively participated in the debate that followed the speeches.

It was opened with speeches by Mikhail Gorbachev and Eric S. Rubin, Deputy Chief of Mission at the US Embassy in Moscow.

Speakers at the conference included Michael Kazin, Professor in the Department of History at Georgetown University; Yury Rogulev, Director of the Franklin D. Roosevelt Foundation for United States Studies at Moscow State Unviersity; James R. Barth, Professor at Auburn University; and Vladimir Mau, Rector of the Academy of National Economy under the Government of the Russian Federation.

28.04.2009

We Are Five!

Yesterday the Moscow School of Economics of M.V.Lomonosov MSU solemnly celebrated its first 5-th anniversary. MSU Rectorate members, trustees, first MSE graduates, colleagues and friends came to congratulate the School on the event. Viktor A.Sadovnichy (M.V.Lomonosov MSU Rector), Mikhail S.Gorbachev, Victor V. Ivanter (Director, Institute of the Economic Forecasting, RAS), Ruslan S.Grinberg (Director, Institute of Economics, RAS), Alexander V.Zakharov (MSE MSU Board of Trustees member, Sberbank’s Deputy Chairman and Board member), Mikhail P.Kirpichnikov (President of the RF Higher Attestation Commission), Kirill A.Zorin (MSE MSU graduate, the first to defend recently his PhD dissertation) addressed sincere words and cordial wishes to MSE MSU.

MSU Rector, Full Member of RAS, Viktor A.Sadovnichy, Mikhail S.Gorbachev and MSE MSU Director, Full Member of RAS, Alexander D.Nekipelov granted honorable mention and merit certificates to the best MSE professors as well as Master and Bachelor Programs students.

After the solemn ceremony MSE MSU students and MOST theatre artists played pieces of music followed by a warm, informal and friendly reception.

28.04.2009

MSE MSU receives congratulations on the occasion of its 5-th anniversary

MSE MSU leadership and staff express cordial gratitude to all those who attended our party yesterday, sent and continues sending gifts, letters and telegrams of congratulation to us. Thank you, dear friends and colleagues!

Here are some of the gifts and congratulations we have received:

Gift from MSE MSU graduates

Gift from Viktor A.Sadovnichy

23.04.2009

On Revolution in Economic Theory, Economic Growth
and Economic Development
Director of the Moscow School of Economics
M.V.Lomonosov Moscow State University
Professor A.Nekipelov

Theses for the Conference “Concerted Strategies to Meet the Environmental and Economic Challenges of the 21st Century” (National Bank of Austria, Vienna, Thursday 16th and Friday 17th April, 2009)

1. Excellent Policy Notes distributed to the participants provide a sound basis for national and international anti-crises actions.

2. Global financial crisis is a big market failure in the sphere of risk assessment by financial institutions. In conditions of globalized economy it brings to the fore the necessity to introduce adequate regulation in financial sphere both on national and international levels. Moreover, it probably requires radical restructuring of this sector.

3. There is no doubt that liberal market produces incentives which can (and do) lead to the deterioration and sometimes even destruction of ecological systems. As far as global climate changes are concerned experts have different opinions whether they are the result of human activity or constitute just a chain in the development of long-term cyclical natural processes, anthropogenic factors playing but a minor role.

In any case such changes along with ecological disturbances, energy and development problems exert huge influence upon economic conditions of mankind and, therefore, require adequate economic responses. It is, therefore, absolutely logical to propose that measures taken to deal with financial and economic crises take into account other global crises we now face. At the same time it is obvious that these crises have different time horizon; overcoming financial and economic crisis is to occur first.

3.1 The idea that “revolution in economic thinking is needed” deserves complete recognition as well as the critique of Anglo-Saxon paradigm. But what kind of revolution is needed? Should we just throw away the heritage of the mainstream economic theory?

4. In accordance with classical tradition modern microeconomic theory is built on the assumption that human species strive for maximization of the level of satisfaction of their own needs, paying no attention to what happens around them. In other words, utility function of an “economic man” does not include anything but commodities and services he consumes.

This is a helpful assumption because on its basis it is possible to explain very important manifestations of human behavior. In fact, market mechanism is able to “take into account” only these, so to say, “egoistic” needs of people. “Economic man” assumption is, therefore, necessary and sufficient for understanding the way market operates. Mainstream microeconomics can thus pretend to be a theory adequately describing the interaction of market forces.

But there is no doubt that we all, to more or less degree, do care about what happens in the world around us. The very fact that people usually live together with other members of the family, with whom they share common interests, is sufficient to show that our individual utility functions are richer than that of an “economic man”. Moreover, there is quite a broad field where market fails and allocation of resources should be carried out with the aid of other, non-market institutions.

Conclusions from what was said above are:

• Economic processes go far beyond the processes which occur in the marketplace;
• Mainstream microeconomics should not be equated with economic theory; the latter is of much greater scope.

5. An extremely important and difficult problem is that of how to define the welfare of a group of people?

5.1. The answer from the welfare economics – a specific section of modern microeconomic theory – is that in the economy as a whole it occurs in conditions of general equilibrium when marginal costs equal marginal benefits in all spheres. This is an “ideal state” of the economy because under these conditions no members of society, if they respect the basic market rules of the game, are interested in any change. Two properties of this “optimal social state” are worth mentioning:

• It is not sensitive to the income distribution, which is determined by the initial allocation of resources between members of the society, all of whom possess the qualities of “economic men”;
• It is not sensitive to any circumstances, which, like global climate change, cannot be “taken into account” by the market;
• It is characterized by a particular allocation of resources, which can be adequately expressed in vector (not scalar) form.

5.2. The answer from the macroeconomic theory is different: it affirms that the welfare of the state depends on aggregate income (GDP) of the society. Correspondingly, dynamics of aggregate income is considered as an adequate measure of economic growth. One should take into account that this scalar representation of welfare contradicts one of the basic assumptions of microeconomics according to which interpersonal comparisons of welfare (and, as a result, summation of individual incomes) are forbidden. Macroeconomics gaining in simplicity sacrifices precision of its conclusions. Thus macroeconomics can be considered as a qualitatively different field of economic theory oriented rather on practical applicability than theoretical pureness.

Macroeconomic assessments of welfare and its dynamics ignore all factors but aggregate income. Endeavors to improve aggregate measure of welfare by applying weights to indicators, which characterize different sides of social life, may have only marginal effect: the result will still be nothing more than scalar approximation of a complex vector reality. Besides, it is hardly possible to find objective basis for selecting weights for different indicators.

5.3. It is enticing to apply to the problem of social welfare approach used by microeconomics in analysis of individual preferences. It would be great if we could know how group ranges all its possible states and, as a result, could construct group utility function. But this way has been blocked since K. Arrow proved famous “possibility theorem”, which says that in order to jump from individual preferences of the members of the group to the preferences of the group as a whole dictatorship is needed.

5.4. All this said only one way seems to exist. We have, probably, to look for the specific state of polity, characterized by all its innumerable dimensions, which would be a result of coordinating, under existing resource constraints, of individual interests of its members with the aid of given social choice rule. Individual preferences embrace here not only consumption goods, but attitudes of any person towards different states of society. Under “given social choice rule” one has to understand all decision-making mechanisms – market, political system and civil society institutions, which deal with resource allocation. In a sense, this is an extended welfare economics approach (see 5.1).

No doubt this logical construction possesses elements of tautology: in order to take decisions polity has first to take decision how decisions should be taken. But probably this is not so bad after all, because this “vicious circle” makes it easier to understand why social choice rule evolve with time. If given mechanisms of decision-making produce social results which are not acceptable to a significant part of its members pressure aimed at changing these institutions increases.

6. Of course, this is nothing more than a logical construction. But it seems to be useful one since it helps incorporate in the economic thinking factors, which are important for the society but ignored by market mechanisms. It is based on “vector approach” and is thus incompatible with the scalar economic growth paradigm. Instead it puts an emphasis on the necessity to seek economic development (progress), these notions being of multidimensional character.

7. This is not to say that classical macroeconomics and economic growth models should cease to exist. Not at all! They are very convenient for many practical purposes. It is important, though, to understand approximate and simplified character of conclusions driven on the basis of macroeconomic models and to be ready to supplement the macroeconomic analysis with examination of additional indicators which are beyond its sphere, but may still be very important.

23.04.2009

On April 23 the second student conference: “World financial crisis and its impact on Russian economy” devoted to the 5-th anniversary of MSE-MSU took place at our School.

Among participants were: professors and students of MSE MSU and our guests: Peter O` Brien –Vise- President of the Oil Company-«Rosneft», O. Zinovieva : Program Manager; Center on Russia and the United States; State University of New York.

The best reports authors were awarded with certificates of honor.

22.04.2009

Top Five Mark for the Five Years

http://www.poisknews.ru
April 17 (No.16)

Today it is clear: the MSU leadership has not made a mistake when it opened a new faculty, the Moscow School of Economics. With the crisis in full swing, the country feels particular demand for professionals able to objectively evaluate the economic condition and perspective. These days, MSE, the center to train the elite of economic analytical thought, celebrates its fifth anniversary.

The School was founded in 2004 on the initiative of MSU Rector, Viktor Sadovnichii. RAS Vice-President Alexander Nekipelov became MSE Director (see photo).

A small modern building near the MSU Faculty of Biology houses the School. The number of students is slightly higher than 300 (compare with about 450 first-year students at MSU Faculty of Physics). The Faculty has its own library (with most fresh publications), three well-equipped PC class-rooms, a small canteen. The students have access to special software packages during practical classes, seminars often take the form of round-table discussions, the students accompany their reports with visual presentations.

From the very start, the Faculty has favored the innovative model of training whose key feature is the trend to invite most prominent national and foreign researchers as lecturers. Renowned representatives of economic thought like James. K.Galbraith (USA), Michael D.Intriligator (USA), Grzegorz W.Kolodko (Poland), Jacques Sapir (France), Ruslan S.Grinberg, Sergey A. Ayvazjan, Natalja M.Rimashevskaya (Russia) have lectured at the School. The Faculty’s average professor-student ratio is 1 to 3.2.

MSE’s mission is to train high-class specialists whose fundamental knowledge in economics is coupled with practical skills. From the 1st year on, the students work on research papers to present them first at MSE economic conferences and then at conferences of higher level. The Faculty cooperates in various forms with foreign research and educational centers. For example, MSE students go to the Summer School, The State University of New York, where they can both rest and engage in research work.

A rating system is applied at MSE because it is a self-financing faculty, so students with the highest rating may count on grants. The list of grantees is revised every semester. The decision on extending a grant is made by the administration and the group of most active students at their joint meeting where – in accordance with various parameters - the best students are selected. Dynamic interaction between students and the Faculty’s administration might also be stressed as a typical MSE feature.

13.04.2009

We open a new column!

Attention! We open a new column of Topical Discussions on MSE MSU website where we’ll hold forums on various current problems.

These days, American expert Toby Gati, a good old friend of MSE MSU, gave an interview to the Interfax agency on likely development prospects of Russian-American relations. Mrs. Gati gave her kind consent to have the text of the interview posted in our new column.

Professor Viktor B. Kuvaldin, Head of the Department of Political and Social Sciences of MSE MSU, decided to share his opinion on the same issues of Russia – U.S. relations. The text was specially written by Professor Kuvaldin for our website.

All those wishing to express their views on problems in discussion are invited to send us their messages to:

Follow our new publications in Topical Discussions column!

02.04.2009

Crisis in Russia: The Logic of Development and Economic Policy Options
Alexander Nekipelov

Since August 2008, when the first unfavorable implications of the world financial crisis came to be felt, the Russian government has been working in an emergency regime. Numerous measures aimed at normalizing the financial, economic and social situation in the country are taken; just now an Anti-Crisis Program has been adopted. However, the condition goes on worsening. So the question emerges: Is it an inevitable result of the crisis itself, which has not yet “reached the bottom”, or evidence of insufficient effectiveness of decisions being made? To answer the question it is useful to seek diversion, for the time being, from immediate problems and concentrate on shaping an integral, systemic conception of ongoing processes.

The first stage: capital flight

The world crisis, as generally recognized, was triggered by the collapse of US financial markets. Tremendous miscalculations in evaluating risks of investing into complex financial instruments (so called “derivatives”) rooted in the US mortgage system produced yawning breaches in the balance sheets of major Western financial institutions. To “plug up” these breaches the latter started to get rid of a part of their assets, in the first place of the stock of companies from “countries with developing markets” (China and Russia stand in this category).

Capital flight had two direct implications for Russian economy: crashed quotations on the stock market and a considerably rise of currency demand fraught with steep ruble devaluation. The situation aggravated radically due to the fact that both processes made the foreign debt issue of the private sector critical. The thing is that the stock of Russian companies was often used as collateral to raise loans, and in case of its depreciation creditors could claim to have the collateral value compensated.

The Central Bank began to decelerate the fall of the ruble exchange rate by throwing out currency from reserve to the market which resulted in a smooth devaluation of the ruble. However, by purchasing rubles the Central Bank reduced their volume in circulation and aggravated the liquidity crisis of banks. Lending conditions to the real economy tightened drastically. Moreover, in view of the above foreign debt problem the banking system found itself menaced by a collapse.

Enormous monetary resources started to be pumped into the banking sector and this saved the banking system. But the money did not reach real economy: rooted expectations of permanent ruble depreciation were pushing the rubles out to the currency market and then further – abroad. That is why, despite huge financial injections, money supply instead of growing decreased since last autumn. This could be called “the effect of Baron von Munchausen’s horse”: whatever quantity of rubles you throw into Russian economy their amount doesn’t grow.

The authorities, in trying to counteract the changing out of rubles, adopted the policy of high interest rates. The measure met its direct target only to a very insignificant degree and with a long delay, but “instead” erected an insurmountable barrier for the flow of money to the production sector.

The second stage: fall of external demand

Meanwhile, the financial crisis in the West transformed itself into an economic crisis. As a result, prices of Russian export goods – ferrous and non-ferrous metals, oil, etc. – dropped steeply. In the 3rd quarter of 2008 our export volume was about $137 bln, in the 4th quarter it made slightly more than $98 bln. Our exporters started to turn down investment programs planned before, cut their cooperating partners’ orders. This quickly produced a deep production recession in the country.

The government did not disregard the real economy. Without negating the importance of taking measures to stimulate aggregate demand (it was also stated in the Anti-Crisis Program), the government, however, makes main emphasis on localized support of system-generating enterprises. But this “manual control” is far from always efficient. Imagine: you lend money to a very important enterprise operating in the middle of the reproduction chain. It purchases the necessary means of production and produces goods. Then it becomes clear demand for them is failing. In addition, Aleksey Kudrin, Head of the Finance Ministry, announced these days that a second wave of the banking crisis is expecting us. Why? It proves the banks have carried abroad not all the money (unfortunately, as it turns out) and granted a part of it in form of loans to enterprises. Now they’ll not get them paid back since there is no demand for these enterprises’ products.

The price of anti-crisis measures

It is not very usual to speak about the cost of anti-crisis measures taken in our country. But in the course of six months we have spent a third of our currency reserve. A major part of the sum was used to adjust the exchange rate, for the so called soft ruble depreciation, which means the state has not received any assets in exchange. Today, these $210 bln represent the value of about 800 bln tons of oil. To extract it our country needs more than a year and a half. These are the resources we have thrown into the furnace of the crisis during half a year only!

But maybe there are no other options to fight the crisis, or they are even more expensive?

Currency restrictions

For reasons I cannot grasp, the government refuses categorically even to discuss the issue of introducing restrictions for capital movement into and out of the country. Meanwhile, limitations imposed on capital export, a relapse to the practice of exporters selling 100 per cent of their currency revenues, the banks’ fixed open currency position as it was done in 1998 by the then head of the Central Bank, Viktor Gerashenko, would have obviously long ago stabilized the situation in the monetary sphere, with minimal reduction of the currency reserve. In this case, we wouldn’t have needed to pursue a policy of high interest rates. The measures wouldn’t have in any way touched the population, citizens could have retained the chance to buy and sell foreign currency freely. The interests of foreign companies engaged in direct investment into Russia wouldn’t have been hit either. Only participants of speculative operations with the capital would have been affected.

Stimulating domestic demand

Of course, one cannot exclude the option that localized measures are adopted, but one has to stake on waves of demand kick-started along the entire reproduction chain. Their organizer should be, logically, the state.

Let us be reasoning in the following way. The downfall of external demand in the 4th quarter of the last year made slightly less than $40 bln as seen from the data given above on export fall. Could the state have compensated the fall? Yes, it could in case it would have reduced the funds withdrawn from exporting sectors and, thus, saved their opportunity to fully realize their production and investment programs, and financed the budgetary breach by the currency it had at its disposal. Ideally, the economy simply “wouldn’t have noticed” the declined external demand. There would have been no production downturn, non-payments wouldn’t have been accumulating, taxes would have been transferred to the budget, no need to spend huge sums for unemployment benefits. Mind that $200 bln spent to adjust the ruble exchange rate would have been enough – other conditions being equal - for five quarters, that is till the end of the current year.

This is, naturally, only a general scheme. True, its literal realization would have promoted conservation of the established economic structure. But this is a useful scheme since it shows what steps should be taken not to provoke huge failures in the reproduction process. It fully allows adjustments introduced to intensify the innovation process in the economy - a goal truly considered a priority by the government.

31.03.2009

World Policy Journal
Vladimir Kvint: It’s Time for a G-25

The leaders of major countries are in agreement on the need to respond quickly and cohesively to the current global economic crisis. But while developed nations are experiencing tremendous slowdowns, emerging market countries are still expected to achieve gross domestic product (GDP) growth rates of 2.5 percent to 3 percent, on average.

In this global downturn, can emerging market economies can be the locomotives of the world’s marketplace?

Perhaps. But only if the global community substantially changes the current organizational structure of the global economic order to allow these new and dynamic economies to assume greater responsibilities commensurate with their greater roles.

Today, there are only three major multilateral Bretton Woods institutions still in existence: the World Bank, the International Monetary Fund (IMF), and the World Trade Organization (WTO). This is not enough.

In 1944, these organizations were created as multilateral bodies, bringing together the biggest economies of the time. But, with the birth of emerging markets, the economy is now global. New rules and practices are needed. The global marketplace needs new global ratings agencies, global crisis monitors, and monetary and financial instruments for global regulators.

Political and business leaders have attempted to determine which individuals and authorities should be held accountable for not ringing the alarms at the first hint of the current financial crisis. Some point to the IMF—but it is only a fund, not a ratings group, and certainly not a crisis monitoring agency.

Indeed, the fragmentation of existing institutions underscores the need for a new architecture in the global economic order. The functions of future agencies must be based on an understanding of how crucial cooperation is to the stability of the global marketplace—enhanced cooperation between companies, national governments and multilateral institutions is increasingly essential in our interconnected world.

The era of romantic capitalism is over. The role of government is increasing to fill the void in regulation, monitoring, and crisis prevention. This need was apparent during the Asian crisis of 1997. Because governments weren’t involved in regulation, monitoring, or prevention, regional fiscal crises blossomed into the very first global economic disaster. The crisis spread through Eastern Europe and Russia, finally ending in 2001 in Brazil and Argentina. Governments, then in the grip of an idealized view of free-market self-regulation, were afraid to intervene.

In our current mess, governments tried to prevent the spread of the market crisis by intervening to provide liquidity and enforce restrictive measures. Nonetheless, despite the urgent need for new global agencies, the last G-20 meeting was notable for a lack of concrete proposals from global leaders.

Two new multilateral agencies are essential.

First, the global marketplace needs a rating agency that can handle rating and classifying both national markets and the most influential private companies. For example, the IMF and the United Nations use the terms “developing,” “emerging,” and “under-developed” almost as synonyms—but each term actually reflects a different market, with widely varied levels of economic maturity. And countries within each of these categories are surely not homogeneous; they require greater specificity in classification.

Second, the world needs a multilateral watchdog agency to perform one critical function: to recognize the earliest signals of an upcoming crisis and warn businesses and governments. When everyone is responsible for this task, it falls to no one in particular.

Existing multilateral institutions, first and foremost the IMF, are desperately outdated given the scope and complexity of the new global economy. Indeed, the IMF rarely works with the private sector, and its record of giving loans to governments that perform poorly has been a disaster. Bureaucrats have often stolen substantial portions of the loans, leaving generations of citizens in those countries to repay their graft. Worse, as deficits accrue, the IMF refuses to accept responsibility for the poor oversight and questionable loans that were initially granted.

The World Bank, for its part, does work with the private sector but—like all of the existing multilateral institutions—not particularly well. It has not learned from past global crises or taken steps to correct the current disaster.

In the triangle of private business, national governments, and multilaterals, there must be a clear division of responsibility. In the paradoxically fragmented and interconnected global marketplace, this doesn’t currently exist.

It is essential that a new architecture for major institutions of the global marketplace is considered at the upcoming G-20 meeting in London. Indeed, the G-8 nations cannot handle this alone, or take regulatory steps within a bubble: the increasing role and responsibility of the emerging market countries are required.

The last G-20 meeting included leaders from both developed and the emerging markets such as China, India, Brazil, Russia, Indonesia, Turkey, Argentina, Mexico, Korea, and South Africa. But perhaps they should have invited the leaders of Egypt, Pakistan, Nigeria, Kazakhstan, and Ukraine.

30.10.2008

Bloomberg
Emerging Markets: Crisis`s Influence
Vladimir Kvint

Dr. Vladimir Kvint - Head of Financial Strategy Department of the Moscow School of Economics Moscow State University, member of the Bretton Woods Committee (Washington, DC) and of the Russian Academy of Sciences (Lifetime Foreign Member) has given an interview to the Bloomberg. TV Company. See the record of the interview here.

27.11.2007

Forbes
Commentary
Inflation Rising
Vladimir Kvint 11.28.07, 6:00 AM ET

Ten years after the Asian Crisis, the ensuing ruble default of 1998 and the Argentinean Financial Crisis of 2001, the situation in emerging markets has became more stable. Still during the last couple of months, in some emerging markets--especially Russia--inflation has become a very popular and ominous word.

I recently visited Russia a couple of times, and the empty shelves in grocery and department stores that were so prevalent in the early 1990s are now a distant memory. This is the case not only in Moscow and St. Petersburg; stores in the Siberian city of Novosibirsk, and the Caspian city of Astrakhan, are as well stocked as those of Sao Paulo or suburban America.

But prices are starting to increase at quite a rapid pace, and this has very important implications for production costs of enterprises funded by foreign direct investment. Inflation severely reduces the purchasing power of domestic currency, so domestic workers demand more. Foreign entrepreneurs and strategists need to understand and be able to react to rising production costs, and the shrinking purchasing power of locals.

The Russian government, like many other emerging market countries, wrongly blamed their domestic financial problems on increasing consumption in China and India, despite the fact that the rate of inflation for these two rarely exceeded 4% and 7.5% respectively. From 2000-06, the Russian consumer price index increased by 119%, while that of the World, U.S. and E.U. increased by 21%, 17% and 15%, respectively.



. In the global marketplace, most governments experience similar financial trends. What differs substantially is the sophistication of the strategies that they use to deal with these trends, which is reflected in the above numbers.

Very often, certain price increases can trigger global inflationary pressures. For example, in 2007, the increasing purchasing power of consumers in the Global Emerging Market (GEM) led to rising prices for food. In China, the average price of eggs increased by 20%, vegetables by 23% and all other food products by 18.5%. This caused increases in food prices in Japan, India and even in countries as far away as Chile. However, unlike Russia, the governments of these countries found mechanisms to keep general inflation under control. It is important for investors to understand the financial strategies (or lack thereof) of national and regional governments.

Russia was unable to control inflation due largely to its reliance on imported food. Some 35% of the Russian daily diet is imported despite the fact that 27% of its labor force is employed in the agricultural sector. By comparison, less than 2% of the work power of the U.S. and about 4% in the E.U. are employed in the agricultural sector. Inefficiencies in Russia’s agricultural sector are the result of several factors. Private initiative and economic interests still suffer from the legacy of command management systems, which never offered normal economic incentives.

Another factor is a lack of western technology and know-how. As a result, many farmers and entrepreneurs from the U.S. and Western Europe are beginning to take advantage of lucrative opportunities for foreign direct investment in agriculture in the global emerging market. Many regional and national governments in these nations have set up incentives to reinvigorate rural areas, which can provide financial support for entrepreneurs and investors from developed countries. It is not uncommon for farmers from emerging markets to import cows or sheep from Australia, Holland, or the U.S. to improve the productivity of their herds.

Moreover, a lack of suitable transport and telecom infrastructure further inhibits productivity in emerging markets. This makes it very difficult for local farmers to deliver their goods to major urban markets. A lack of fuel for trucks and cars exacerbates the lack of infrastructure. This issue can be resolved by the production of ethanol and other biofuels from agricultural waste. Unfortunately, the taxation systems of many emerging markets essentially prevent the development of these industries. In Russia, the tax on ethanol fuel is almost 200% of its production cost, and is higher than the taxes on alcoholic beverages. At least in Russia, fuel ethanol production is not a cause of rising food prices, as it is practically nonexistent.

Most emerging market governments do not have a strategy to replace imported food with domestic agricultural production and have not been able to motivate domestic producers. Nonetheless, the role of agriculture of emerging markets in the world is increasing. In some cases, food crises are caused by excessive exports to developed countries. This was the case with vegetable oil and fish products. In Russia during the last six years, vegetable oil production has doubled, but because of an increase in exports, the price of vegetable oil jumped by 13.5% in the first eight months of 2007.

Sometimes, a local food crisis can be the result of improvements in standards of living. As people become more prosperous, they tend to be more health conscious. Many consumers in emerging markets have become aware of the health risks of trans- and saturated fats and have begun to replace them with vegetable oils. Some governments in Eastern Europe and Latin America have enacted restrictions on transfat. As a result, exports of vegetable oils and high-quality butter have decreased from these countries due to rising domestic consumption, causing shortages elsewhere.

Despite many indications of inflation expectations, and the real growth of inflation, and increasing prices of first necessity consumer goods, governments of emerging markets often, for political reasons, print more currency. This is the case in countries like Venezuela and Russia.

In Russia, upcoming parliamentary and presidential elections have caused the government to increase the amount of rubles in circulation by 27.8%. This trend will unfortunately continue, putting more empty rubles in the pockets of Russians. In 2003, which was also an election year, the money supply increased by 50.5%. In 2007, consumer demand increased by at least 15%, twice the rate of growth of the Russian gross domestic product. All of these issues are causes of the current creeping inflation, which is in danger of reaching a gallop.

Usually, emerging market inflation harms the middle class and the poor the most in these nations. The prices of goods of first necessity and food tend to rise at a faster rate than the prices of luxury and high-quality goods. If these prices increase by more than 1% per month over a sustained period, the likelihood of galloping inflation is very high. Investors pay very close attention to these prices in order to prevent them from skyrocketing and to be prepared to produce goods that are suddenly in higher demand.

The dynamics of prices in developed countries are very different. During times of financial instability, the larger and much wealthier middle and upper classes immediately invest in gold and luxury goods. As a result, the prices for these products rise faster than those of goods of first necessity. Regardless, in all types of economies, the government has the important responsibility of preventing inflation, which is the most sensitive nerve of an economy.

Dr. Vladimir Kvint is the president of the International Academy of Emerging Markets and is a U.S. Fulbright Scholar.

07.28.2004
Entrance examinations for first-batch applicants of the Moscow School of Economics are over. Not all of them were successful in completing the written examination and standing an interview in English. Only 14 out of the 21 who submitted applications in the first batch, convinced the Admission Commission that their knowledge of mathematics, economics, and English is sufficient to understand lectures of famous foreign researchers. The game was worth the candle. First-batch students will be provided with non-repayable grants covering first-year tuition fee of the two-year program. As a reminder: it was the decision of a number of batiobal public foundations and business structures which supported the initiative of V. A. Sadovnichii, Rector of Lomonosov Moscow State University and Academy Member, to set up MSU Moscow School of Economics, a Russian provider of high-qualified economists who are in great demand with federal and regional government bodiesw, research, higher education, and Russian companies. The second- batch admission will be announced later. Follow the information posted on the School website. The list of future happy MSU Masters can be found here.

07.13.2004
At MSU Moscow School of Economics regional applicants’ request the application deadline for Master program #521611 Economic Theory and Problems of Contemporary Russia is extended to July 19. The entrance exam will be held on July 21, 2004 and the interview on July 26, 2004 respectively.

07.08.2004
A new page has been added to the Moscow School of Economics website. From now on all visitors can ask the School Director, Academy Member, Alexander Nekipelov questions directly or make further enquiries with the Admission Commission. Suggestions on how to improve the School web resources can be sent directly from the website. It is only natural that visitors are granted an opportunity to familiarize themselves with the list of frequently asked questions. All website visitors can also share their opinions about the new School by filling in a special form in the Opinions section. See.

07.02.2004
A. D. Nekipelov: “Successes of the last five years are not a reason for self-complacency, but a precondition for serious thoughts about Russia’s future. The long-term problems we are facing are too global: demographic situation, poverty, drastic income differentiation, unemployment, obvious degradation in the fields of health care, education, culture, etc. There are no simple solutions to these problems. Strategic choice becomes especially important in these situations.”

There is an article by A. D. Nekipelov, MSU Moscow School of Economics Director, Academy Member, (“Rodnaya Gazeta”, #25, July, 2004). The article objectively analyzes the stepscurrently taken by Russia’s authorities with regard to formulating Russia’s vital strategic goals. The author is concerned about the situation in Russia’s fundamental science, health care, education, industrial policy, insufficient efforts and lack of attention regarding these basic constituents and crucial conditions for the prosperity of any developed country. See.

06.23.2004
V. V. Ivanter on the goals of MSE MSU: “We would like our students, who are not mere students, but future Masters, to have direct contact with first-rate researchers.”

The complete shorthand report of Academy Members A. D. Nekipelov and V. V. Ivanter’s press-conference (July 18, 2004) has been published. See.

06.22.2004
MSE MSU entrance exam dates have been set. The exam in General Economic Theory is on July 14, 2004, the interview on July 21, 2004.

06.18.2004
On July 18 a pressconference was held in RIA Novosti presscenter. The subject under discussion was the opening of the new top educational institution, Lomonosov Moscow State University Moscow School of Economics (MSE MSU). Alexander Nekipelov, MSU Moscow School of Economics Director, Academy Member, and Victor Ivanter, Professor of Moscow School of Economics, Academy Member, spoke about MSE MSU specificity, advantages, educational prospects. The journalists were provided with exhaustive information on the School’s strategic goals and objectives, admission requirements, teaching forms and methods, faculty as well as the subjects to be taught.

06.17.2004
On July 18, 2004 a new educational institution, Lomonosov Moscow State University Moscow School of Economics (MSE MSU) will be presented at RIA Novosti prss center.

V. A. Sadovnichii, MSU Rector and Academy Member, and A.D. Nekipelov, MSU Moscow School of Economics Director, Academy Member, Vice-President of the Russian Academy of Sciences, will speak about the new School.

Journalists, HR department representatives of major Russian companies, experts have been invited.

Presentation starts at 2 pm in RIA Novosti presscenter located at 4 Zubovskiy Boulevard (“Park Kul’tury” Metro station), floor 6, RIA Novosti presscenter. Accreditation and registration: (+7 095) 730-14-09, 201-50-19, 981-64-72.

06.11.2004
The starting date for admissions to MSE MSU has been set. On July 21 MSE MSU Admission Commission starts accepting applications in MSU main building, sector B, room 266. Application can be submitted daily from 10 am to 7 pm.

05.28.2004
A new top educational institution has been opened. On April 29, 2004, V. A. Sadovnichii, MSU Rector and Academy Member, signed a resolution on establishing Lomonosov Moscow State University Moscow School of Economics (MSE MSU). A. D. Nekipelov, MSU Moscow School of Economics Director, Academy Member, was appointed MSE MSU Director.

MSE MSU contracts leading Russian and foreign researchers as lecturers. Internship opportunities with research and development centers of major economic schools of the Russian Academy of Sciences, banks, investment companies and economic departments of regional level will be provided.

At the initial stage a Master program in Economics #521600 will be introduced.

Admission to MSE MSU will be conducted in accordance with MSU general requirements based on exam grades and an interview. A Master degree is awarded upon completion of the program, and a MSU diploma issued.

To be a successful MSE MSU applicant, you need to have at least a Bacchelor degree and a sound knowledge of English and mathematics. If you have questions about admissions to MSE MSU, you can call 939-50-81.

Information is from Lomonosov Moscow State University information website http://www.msu.ru/news/?2004-05-25_13-08.59

05.26.2004
President Putin: “We need to introduce modern and effective education standards”. Today President Vladimir Putin gave his annual Message to the Federal Assembly. He outlined his stance on the major issues of domestic and foreign policy for the current year and provided information on the important decisions made by the President in accordance with his constitutional powers.

President Putin said with regard to problems and prospects of education in Russia: “The conditions of global competitive environment demands of us that we strengthen the practical component of our higher education system. This means, above all, placing higher demands on professional education, professional in the broad sense of the word…

We need to introduce education standards that meet today’s demands. Furthermore, the content of our education should measure up to the highest world standards. At the same time we must not forget about the areas in which we have built up our own achievements and we should ensure maximum development of these areas in which Russian education meets or even surpasses world requirements,. and we do have such areas. We must also go further in integrating education and research activities. Advancing research in universities and major academic centres should be a priority objective”.

From the President’s Annual Message to the Federal Assembly (May 26, 2004). The complete version of this message can be found at the official website of the Russian president president.kremlin.ru

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