The current situation is very specific due to the fact that the perspective of economic forecast is very limited. No long-term and even short-term forecast is justified and realistic.
One can forecast and plan for several months only. We are like a ship which is sailing in dark and fog. There can be clear waters or there can be an iceberg. In such situation the government has nothing to do but make small steps to the right direction. Such steps should be made in a manner to provide fast and immediate compensation. And actually it does. The forecast of economic development for 2009 and the heavy load of the crisis in 2009 is very pessimistic. If this economic growth equals to zero, it will not be so bad. On the account of what can the government resist the degradation of the economy?
The main sources of income for the economy development are foreign investments, export and consuming. It is clear that in this situation foreign investors will keep from investing in the Armenian economy. As for exporting, the foreign markets for export have been strictly limited and will stay closed for us during a long time. In addition, as the crisis comes to prove, much dependence from export is too risky. The American demand balance collapsed, which had an effect of domino for the economies of other countries as well. These countries have stopped exporting or are exporting with limited capacities. Only Japan and China are enjoying and benefiting from the current situation. Accordingly, the thesis that if the domestic market is small the best solution is to encourage export is true but not so much because our market is not small with its capacity but with the financial capacity, i.e. the purchase power is too small. For example, the market of Estonia, which has twice less population than Armenia, is more capable. In this situation the only and the best solution is encouraging the production, which would support inner demand and the necessary import to satisfy such demand. We should take care of the domestic market but not ignore it consistently. I believe that in our country we have not only an anti-crisis reserve, but economic development reserve. It is very important to encourage this demand for the domestic products and services but not the foreign ones, otherwise it may not become an anti-crisis policy. The fact that we almost don’t produce anything is a good opportunity to replace the import with domestic products very fast and effectively. It is a fact that our government failed to direct the inflow of foreign transfers in the golden age of “gastarbeiters” to revive the domestic production. Instead of that unfair import was encouraged, as a result of which instead of supporting our production we supported the products of other countries. And now we are paying a big price for this mistake. I think that the Central Bank should change the monetary policy as well. The policy of resisting inflation as a priority would be good for the old neoliberalism theory. Now this theory is being reformed. I think that in this situation the development of the economy in conditions of crisis is better than without it. Besides that, as we have small opportunities of inflation reserve, it is time to use it through enlarging the capacity of money in circulation. If not now then when? The government should fill the economy with money. It is worth mentioning that one year ago the American government threw a lot of money into the American market to enable the Americans to meet the consumer demand and thus provide economic growth. From this point of view our reserve is bigger because most of the population has very small income. The salaries and pensions are very low too. The government should increase the salaries and pensions and not wait until it is stipulated by the market itself. It is a pity that we don’t have anyone like Ford. When Ford established the car production factory he gave 5 dollar to people as their salaries in case when at that time the median salaries were about one dollar. In other words, he paid five times more than the market normal salary. He understood that he didn’t need hungry workers and his people had to feel well in order to produce well too. He wanted to have workers who would be able to buy his cars.
Now businessmen don’t understand a simple logical fact that Ford understood 100 years ago. Businesses don’t understand that they don’t need poor and hungry workers but they should have people who have high incomes. The salary fund is very small in companies and compared to their incomes. In many companies the overall staff expenses don’t exceed 10% of the companies’ overall circulation. Marx would say that such companies are exploiting their workers. Definitely the government should interfere and be more demanding to companies. The government should use both administrative and economic tools for the mentioned purpose. The government should encourage the sectors of the economy, which are creating the highest levels of salaries. The first sector in this regard is IT, which is one of the most progressive sectors of the Armenian economy. Every job in the sector of information technologies costs thousands of dollars, accordingly the state should take care of every such job. At least it is time to show that IT is really an important sector of the Armenian economy because it is a long time the government has been pledging that this sector is one of the most important ones but indeed no actual steps have been taken. Our economy needs to develop the IT sector not for collecting taxes from the sector for only the fact of having it developed. Because the IT sector is filling the most important gap in the relations between the state and society as it is creating the highest paid vacancies. Other sectors are not so progressive in opening so well paid vacancies.
In order to encourage the inner demand with sufficient purchase power the government should use budget resources and it has the necessary reserves too. This means that all facilities and products purchased on the account of the budget should be bought from Armenian producers if there are any. The procedure of budget purchase policy has been different so far but hence the government should change this policy and give preference to the products and services offered by local producers. Such state policy would ease the heavy load of the local producers.
Other mechanisms of supporting the domestic production can be found too, including mechanisms such as forming a list of domestic products, which are encouraged to buy even through privileged financial support and credits (hardly this list of products and services may be too long). In the situation of crisis all means and policies, which result in a positive change, are good and desirable. From this point of view the situation is very interesting now and any improvisation would be helpful. At the same time, we should not look back at anyone or any factor, especially at liberal dogmas.
Delovoy Express