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28 I Cover story bne August 2020
Debt has been the bane of emerging markets. Africa in the 70s fell into debt traps as the cost of servicing debt ate up governments' revenue, forcing them to borrow more.
Putin embraced the idea of low debt almost as soon as he took over in 2000. The IMF borrowing was quickly paid
off and then the London and Paris clubs of debt were paid down. Since then the Russian government has run deficit- free budgets for almost two decades and maintained public debt in the low teens, while concurrently building up hard currency reserves. This is just what the Washington Consensus calls for, yet Russia is now criticised for having too little debt.
“Putin continues to hoard international currency reserves, giving his view of 'sovereignty' priority over the standard of living of the Russian people,” tweeted Anders Aslund, a senior fellow at the Atlantic Council, after the Central Bank of Russia (CBR) announced reserves were up to $587bn at the start of August.
Low debt is a core part of the Moscow
Consensus as the “financial fortress” makes a country impervious to sanctions. Both Russia and China have followed this model, made possible by their export of raw materials and cheap labour, respectively.
Free trade & protectionism
Free trade is a core value in the Washington Consensus, but some economists argue that throwing
Trade Organisation (WTO), only to be blocked by the US. It was finally admitted in August 2012.
However, only two years later Russia abandoned the WTO as the tit-for-tat sanctions over the annexation of the Crimea effectively introduced austere protection regimes. Now Russia is pursuing a policy of autarky for national security reasons. China has always kept
“Russia actually embraced the idea of free trade and campaigned for over a decade to be allowed into the World Trade Organisation (WTO)”
open markets at the early stage of transformation in emerging markets
is actually a bad idea. The inefficient and low-quality domestic industries
are simply crushed by the international competition who produce better for less.
Russia actually embraced the idea of free trade and campaigned for over a decade to be allowed into the World
its market very closed and that has led to trade wars with America as US president Donald Trump’s natural inclination is also for protectionism.
Free trade under both the Washington and Moscow Consensuses has been increasingly distorted by commercial goals. Another key element of the Moscow Consensus has been to
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