Foreign Exchange Rates Plunge Again

18 Comments

1. hang on, is CB increases the foreign currency reserve rates for banks, doesn’t that naturally mean that the banks would be required to buy more dollars???
   Following the pannic that has been building up in oil futures markets in recent week, Saudi Arabia anounced that is it is considering to start trading oil in its own currency (before Saudi currency was pegged to dollar). And this announcement alone has been enough to cause less confidence in the dollar that had already been dwindling down due to the Iraq war. Now continuous threats directed at Iran are not helping here at all…
   In other similar news, some say that Poland’s announcement (late on Friday) that they are going to withdraw from Iraq in 2008 could contribute to the general panic that is already in currency markets.
   Most analysts that I’ve read agree that USA has borrowed so much that dollar’s real value is next to nothing — it really is on the verge of collapse.
   The effects are already felt in Europe. Yanks are trying to cheer themselves up that this is good for their economy because that will increase the international demand for their exports, but the inflation and destabilisation effect are already being felt by people in america – interests rates and mortgage markets are up in avoc. Others are saying that is just a cyclical phenomenon, and that it’s just that the amplitude is now of a higher band because of the changing nature of oil market.
   Because Armenian economy structurally depends on transfere, having no robust industrial base of it’s own, these are nearly catastrophic news. I don’t quite know what exactly Observer means my increasing the money supply while there is no proper industrial base, but a simple money printing policy would simply be catastrophic — it would send Dram dwindling after Dollar’s path. The CB should have acted 2-3 weeks ago when the above news strated comming in. They should have (A) temporarily pegged Dram to Euro or Sterling or Rouble and (B) lowered the interest rates as low as they could.

2. They would have been, but apparently they must have chose to call in loans than buying depreciating dollars. Banks have for some time been very reluctant to lend dollars in the first place.
   Second, with all of this said, the dollar is actually not the only currency depreciating. Actually, what I believe happens in Armenia, is any such news hits the dollar first, since that is the most common foreign currency and I believe a huge amount of all foreign currency in Am are dollars. All the others then follow suit, as a result of pressure from international trading. This was quite visible these days, when the dollar first plunged, only then the euro depreciated (it did so by 20 drams in 460, I believe it’ll still go on falling).
   Also, interestingly, there has been a lot of trading going on after hours, the exchange rate has been fluctuating saturday and sunday, although the Central Bank is closed. We’ll ave to wait till tomorrow to see what this really ends up with (I believe the numbers might turn up quite different from what you see now).
   What I meant by boosting the supply is a more long term question. Armenia has seen rapid growth for quite some time now and the pressure on the dram has been there all the time. The CB should have thought about keeping the exchange rate steady for at least sound currencies like the euro.

3. “The central bank continuously keeps explaining the strengthening of the local currency”
   “Despite the asserted strengthening of the dram”
   “Central Bank is deliberately allowing the currency to strengthen unhindered.”
   Observer, just a small note that you are using the term “strengthening” in wrongly. In economics, stregth of a particular currency is measured by its resistance to fluctuations (up OR down), and not by its value in relation to other currencies. For instance, the Japanese Yen is regarded as a much stronger currency, even though it goes for circa 108 Yen per $1. The Stability of a given currency is insured either by that economy’s industrial strength, foreign trade balance, self-sufficiency of basic necessity production, or the gold standard (depending on what is the regime of any given economy).
   ————————–
   Appart from that, I want to emphacise that the recent plunge of dollar is mainly attributed to the announcement that Saudi Arabia is considering to re-evaluate it’s currency, to stop pegging it’s currency to the dollar, and to start trading oil in its own currency. This is a huge blow to American economy, and Euro and other currencies are feeling the impact to. But the full impact is going to come when Saudi Arabia is going to decide to go ahead with its decision, and the Armenian CB is not doing anything about it (at least nothing that I can read in the news). Sometimes I just wonder if there are any employees in there who have a proper degree in economics?
   Other important reasons that have cause this are
   1) the American misfortunes in Iraq,
   2) the Speculators (large corporations and banks who have increased the oil futures trading volume),
   3) the booming economies of China and India
   4) The Oil Peak phenomenon!!! This is the most important factor and I’ll soon post an article about this on http://azat.wordpress.com
   ————————————-
   As for increasing the money supply this is not something that the CB does directly. This is done mainly by the banks, but the CB can influence this by setting certain quotas and by setting the minimum reserve rates, as well as by lowering the base interest rate.
   Increasing the money supply just because the major foreign currency is plummeting is not the right way to go. That is something that needs to be done only when the industrial output of the economy has increased. In conditions when the prices are rising and rising, increasing money supply (especially in the times of per-election campaign and WINTER) would drive the prices so much higher that it would cause not just a panic, but a Riot in the streets!!!
   Armenian economy is very fragile. It depends on trasphers not only from the relatives abroad, but also from many institutions abroad. When the Soviet Union collapsed, there was no question about what form of economic structure we should adopt — it was as if Capitalism (and it’s neo-liberalist formula) are the *natural* and the only way to go forward, and that there is no other way. Back then we all were brainwashed that Capitalism is cool and sexy — now it becomes obvious that it is nothing of the kind. The industrial base of Armenia was dismantled in 1990s when it was confronted with forces of global capital and when money was just floating out of the coutry like water… and Kocharian continued that process. This dismantling of the industrial base was suplemented by mushrooming of NGOs and other institutions and small offices which all depend on foreign donations and grants.
   Furthermore, starting from 1940s, USSR had built a very coherent structure of localised system of production and distribution of basic necessities such as food production. As Stalin once remarked “The best food is the one that travels least”. This was done not only due to USSR’s ideology, but also as a security measure in case of invasion, blockade or any other such crisis. By 1980s Armenia was one of the few coutries in the world that was fully self-sufficient in terms of food production. A rapid shift to market economy and privalisation had broken down those highly localised systems of production and distribution of basic necessities, with no clear alternative of what to built in it’s place.
   Key industries that guarantee people’s security in times of crises and famine, were all privatised. Energy, public trasport, food etc… If these were COLLECTIVISED (ie given to cooperatives and trade unions, instead of imposing most ridiculous laws agaist those formations) then the governemnt could still have some kind of degree of control, influence or mediation over price levels and it’s own currency stability today. But alas….
   Furthermore, those good old Dashnaks when running away from Bolsheviks, like cowards leaving the entire population “na proizvol sud’bi” didn’t forget to empty Armenia’s gold reserves on their way out. If there was some serious gold in CB today then these fluctuations could be less hard felt.
   So, I’m afraid that apart from playing with base interest rates and influencing the banks’ reserve rates, there isn’t much that poor Armenia’s Central Bank can do to protect it’s population from the fluctuations of the Global Capital when those big fat-cat oil speculators are making billions and trillions of profits on international oil futures markets.
   In addition to the plumetting of the dollar, there is a lot of currency that has been flowing into Armenia with no real investment impact — all that money has been entering through one door, circulating for a while creating the illusion of an inflated economy (thus the high prices), and then leaving through another door.
   What we see here is Stagnation (inflation combined with relatively slow real growth) with elements of Dutch Disease. It’s a trend with economies that are rich in oil (though don’t have their own industrial base) or countries that depend heavily on foreign grants.
   My answer to all this is to foster a decisive restructuation of Armenia’s economy, whereby key industries like energy and communication would be re-nationalised (but not monopolised) and others would be collectivized into cooperatives, hamaynqs and syndicates. Of course, banks and private enterprises (like companies and corporations) should also be allowed, but socialistic mode of production – (i.e a mode of prodction that has the benefit of the community in mind, rather than egotistical profiteering), should have better conditions from the governemnt.

4. This is just the start. This crises is not temporary. It is global, it is deep and it is not only economic. The reasons are U.S.- China geo-economic competition and U.S.-Russia geo-political competition. China, Russia, Iran and some other countries are redrawing the worlds economic and political map. And the U.S. is trying to prevent that.
   Both world wars have started with a financial crises. I am not saying that there is going to be another world war but it is going to be tough.
   If Kosovo gets independence that will mean the end of World Order that was established after the World War II. Make your conclusions…

5. //just a small note that you are using the term “strengthening” in wrongly.//
   Thanks, unfortunately that is the predominant term used by the Armenian Central Bank
   My point is a bit different. I am aware of the dollar’s international depreciation, however the question here is mainly focused around the *general* depreciation of all foreign currency alike in Armenia, and the correlation between this depreciation and local events.
   This is an ongoing process which began well before the dollar began facing tough times. Overall, the dollar has depreciated more than 50% over the past several years.
   //As for increasing the money supply this is not something that the CB does directly. This is done mainly by the banks, but the CB can influence this by setting certain quotas and by setting the minimum reserve rates, as well as by lowering the base interest rate.//
   Obviously I didn’t mean ramping up the printing press. 🙂
   The CB has actually done the opposite thing by increasing the reserve rate, even if that is for foreign currencies only.
   //Increasing the money supply just because the major foreign currency is plummeting is not the right way to go. That is something that needs to be done only when the industrial output of the economy has increased. In conditions when the prices are rising and rising, increasing money supply (especially in the times of per-election campaign and WINTER) would drive the prices so much higher that it would cause not just a panic, but a Riot in the streets!!!//
   Once again, I am talking about increasing the money supply *relative to the growth of the economy* i.e. the same numbers that the CB’s bosses in the government draw every year. The main argument made by the CB throughout the drams appreciation so far has been the economic growth. If that is the case, then I suggest the money supply be raised.
   There has been economic growth some way or another. Actually the financial system doesn’t really care whether the growth is due to real estate or to real production and export, so long as there is economic activity and pressure on money.
   Again , this is a process, I do not suggest pumping up the money supply, especially now, when the economic growth seems to be least healthy. This is a process and all of this needed to be done long ago.
   Another point, as I said, there has been significant after hour trading, which can in no way be a result of international turmoil.
   I’m no fan of socialist policies, but I agree that cooperatives would be the best means of transition from the soviet system to capitalism. Otherwise, the only way i see this country getting up on it’s feet, rather different from your idea, is by hitting hard on corruption, creating a business friendly environment, getting particular individual’s interests out of the financial system for good and encouraging investment.
   And btw. You probably didn’t realize, you’re not talking to Artur, I am actually crossposting in his blog here 🙂

6. Armen – very valuable point about the connection of Financial Crises with World Wars. In an increasingly globalized world we are sinking towards the biggest ever financial crises, does it imply the biggest ever World War?
   Coming back to our petty-little Armenian economy, let us differentiate strictly between the objective and subjective factors influencing AMD exchange rate against foreign currencies.
   Hence, while Kronstadt is speaking about objective factors, Tesaket has been questioning the subjective ones, that is to say the factors, that are well under the Armenian CB’s control. What Tesaket has been questioning – is whether the volume of Armenian Dram in circulation corresponds to the demand for it, and states, that while the economy has reportedly been growing at double digits, the AMD supply in the meanwhile has deliberately been kept lowеr then needed, so as to artificially boost the trading value of AMD against foreign currencies and thus help major importers in Armenia, who are in most cases major monopolies headed by government connected oligarchs and relatives of the incumbent President and Prime Minister.
   Please also keep in mind, that if there is any single institution in Armenia, where there are serious professionals-technocrats working, it is the Central Bank of Armenia. And if the Armenian Dram’s exchange rate has plunged by 10% against the USD within 2-3 days, that can only be the result of a carefully planned financial operation specifically designed by the CB technocrats. And let me tell you one thing – these guys are good, the way they play their games with this tiny little economy, with several major monopolies and very predictable market!

7. Tesaket – by the way, according to this table on the CBA website, the currency supply in circulation has increased by 18% since December 2006, unless I’ve misinterpreted the data? That, in my opinion compares more or less with the reported economic growth rates in Armenia. What do you think about that?

8. There is a valuable discussion at Armenian Economist’s blog about the money supply in Armenia: http://armenianeconomist.blogspot.com/2007/04/growing-cash-circulation.html
   I would recommend reading other posts there that are about the appreciation of dram. A lot of people have been/are/are going to be screwed because of this situation with dram. The CB’s stance sounds normal to me – the root cause of the problem is the over-reliance of the Armenian economy on foreign transfers of immigrant citizens. The dollars keep coming in without anything of value going out.

9. Holy cow.

10. There is too much focus on the decline of the $US versus the dram. What is the trend between the dram and other currencies – in particular the ruble and the euro?

11. R, dram has appreciated against all the currencies. Otherwise there would be a great opportunity for arbitrage (sell Euros for Drams, buy Dollars with those Drams, sell the Dollarsfor Euros, repeat).

12. Why the dollar matters is that there is so much reparations of $$$ from the US to Armenia… now those dollars sent back doesn’t help so much.

13. —–
    kronstadt Says:
    November 25, 2007 at 5:22 pm
    hang on, is CB increases the foreign currency reserve rates for banks, doesn’t that naturally mean that the banks would be required to buy more dollars???
    —–
    The moneys in the reserve do not have high return. Any sane person would avoid putting so much more money aside. So the logical action to take is to get rid of your dollars and convert them into the local currency so that you can use that extra 4% (create money).
    But be certain that when the CB decided to increase the reserve amount, they intended to take that extra 4% off of the market. But they did not have enough competence to see what might happen. They should have asked a banker before doing it.
    There have been a number of instances when I have questioned the CB competence. A few years back, as gold started appreciating in value and dollar losing its value, CB sold all their gold reserves and converted them into dollars. Gold has since almost doubled in value and dollar has lost a third of its value.
    Go figure!

14. Dear kronstadt:
    You have your economics backward – and making rudimentary errors in your analysis. I won’t go into much of it but just quickly:
    When one of the biggest challenges Armenia’s economy is facing is lack of competitiveness, the answer to this is not re-nationalization of key industries – it is opening up even more and enforcing the laws on the books.
    Your observations are full of Marxist crap – “syndicates, re-nationalization, co-operatives” and other things that this nation has seen in the past. If someone were to listen to you, we’d be reverting most of the economic gains (in terms of restructuring) we’ve had since 1991, and that, my dear friend, is the last thing we ought to do.
    You talk about agriculture – the data is clearly against what you’re saying. If you read any IMF or WorldBank papers that were published in mid to late ’90s, you’ll see that by 1994-5 Armenia’s agricultural output was equal to that of 1990, so after privatization of the land, it took about 4 years to get to previous levels, and now Armenia’s agricultural output is higher than anytime in the past.
    Also, your love for “industry” should be restrained by the fact that it is only about 1/3 of total GDP of Armenia. Service sector has a greater share than industry.
    Finally, you keep talking about the CB – you forget the 1 objective of the central bank isn’t to make sure that the exchange rate between AMD and USD fluctuates within bounds, but it is to assure that inflation is kept under control. As hard of a job as this is, all else being equal, I think our CB has been managing the inflation satisfactorily (again, given the circumstances: close to 13% growth, more than 25% of increase of wages etc…)
    Levon

15. Dear Nazarian,
    Yes… that’s precisely my whole point… it’s just simply paradoxical and absurd. (btw, it should be “if”, not “is”. a typo 🙂
    Dear Levon,
    As a good old liberalist you repeat the trick of presenting the neo-classical claims as being “natural” and neutral of ideology. Yet let me remind you that Capitalism too is an ideology, one that brought us where we are now.
    What you call “Marxist crap”, many would see as the institutional arrangements that once had helped build much of what you see in Armenia today in a relatively short period of time. Much of central Yerevan was built by this “Marxist crap” in just 11 years! It you compare 15 years of “Marxist crap” (1922-1937) with 15 years of “Liberalist gold” (1992-2007) you might notice that while former managed to effective mobilise and motivate the productive forces into a coherent and sustainable economical project that lifted the country out of despair, disease, ignorance, illiteracy, hopelessness, Povery and the brink of extiction, the latter has dismantled those achievements to build palaces and lifestyles of bouirgeois decadence for 5% of the population while the rest of the population is confidently descending into hopelessness, ignorance and barbarity. Yes, the Liberalist formula works, but it works for those who invented it, and they will spare no effort or resource to convince the rest of the world that it would work for them as well in building democracy and relative equality. And thus the IMF White Paper and the WB report that thou mentioned.
    In the last 15 years I see little more than destruction, while you see and celebrate construction (of Northern Avenue?) But once again, you are entitled to your point of view just as I’m entitled to mine, but let us not forget that the liberalist formulas that you subscribe to are precisely the sources of destruction that I keep on observing. If someone would really read Marx, understand and critically engage with him, and criticise his works thus, as I do, he/she would have my respect. But since you’re slagging it off as “Marxist crap”, I find it difficult to believe that you know what you;re talking about — for any person who actually reads Marxist texts and even disagrees with his claims, would call it many things but “crap”.
    And BTW, syndicates and cooperatives were not Maxist ideas, there were actually put forward by the Anarchists, which Lenin incorporated in NEP. And it was through the cooperatives that people in Armenia built many houses (efficiently and a relatively low cost), collective farms and other enterprises. Until Stalin formalised all that into State-planned construction industry, and Sovkhoz structures in agriculture, while only keeping the name of “collkhoz” on paper. But please tell me, in your rozy-colored picture of current Armenian economic circumstance, how do you account for the most absurd anti-cooperative, anti-credit-union and anti-trade-unionist laws that clearly favour the local kulaks (businessmen/oligarkhs)? People want to form collective farms and cooperatives in order to cope with their hardship, but instead of encouragement and support they are faced with beureaucracy or Kafkaesque laws that make it impossible for them to officially engage in cooperative enterpreneurship.
    I have seen many instances whereby cooperative modes of production and collective farming have proven to be much more efficient, easy to organise and, above all, competitive than capitalist alternatives. How else are we to make sense of these economical obstacles in Armenia other than the liberalist necessity to form a class-based society with a well articulated bourgeois class?
    Now lets turn to agriculture: If you read carefully, my concern was not the overall *volume* of agricultural output, but the diversity of it’s composition. The whole point was that Soviet Armenia was once a fully self-sufficient economy in terms of it’s food production, processing and distribution. This is a matter of security and even EU realised this when they initiated CAP. Nowadays, however, Armenia imports most of those commodities that are the basic items in consumer basket (wheat, potatos, vegetable oil etc). And if dollar depreciates against AMD, who do you think the rising wheat prices are going to affect most? It will inevitably be the class that is politically and economically the most powerless one.
    And of course there is economic growth — it would be absurd not to see any economic growth in the last 15 years at all. But when you compare that growth with the extent to which the original Soviets (many of whom were mensheviks who just put down their arms) managed to mobilise and decentralise the economic growth, I’d say the comparrisson is futile. Just as the comparrisson of welth and gains distribution.
    Now let’s go to the question of Industries and Tertiary sector. Yes, indeed, the service sector in Armenia is booming, but only when compared against the industry sector that is ever declining. And let’s look at what these service sectors mostly are: the little cafe here and there to entertain the Diaspora in summer, the little beaureau de’change, the hairdressers, the human trafficers, the retail, the NGOs that produce nothing or real value and depend of foreign grants, the marshrutka, the Proshian street etc. While loosing it’s industrial capacity Armenian economy has turned itself into Labour Economy, rather than a capital intesive economy — it is now an economy that gambles itself on a basis of wage-slavery (of Malaysian model), while not realy being competitive enough at that to attract significant foreign investors.
    Do Armenian Banks present a serious competition on international market? No.
    How muc do Armenian Banks invest back into the productive forces of the country? A lot less then would be expected of a country that projects such beautiful picture of itself.
    Service sectors can really sustain the entire economy only when they become competitors on the international markets. Since this is not the case with Armenia’s tertiary sectore, it becomes obvious that much of this hyped-up service sector depends entirely on the trasfers from immigrant workers, Diaspora’s tourism and tiny foreign grants for the NGOs. If you think that you can construct a confident economy out of these (one that would not be susseptiple to foreign currency fluctuations), then sorry, but that would be a case of self-comforting delusion.
    One has to wonder, why is it that Chinese economy is booming at such an incredible rate? And the answer is not the centralised planned economy. Neither it is the capitalist mode of production. But Dan Xiaoping’s economical reforms that were wery close to what Gorbachev called “Xozraschet”! In terms of policy making Xozraschyot was about returning to the original ideas of Lenin and Khruschev. If Gorbachev was to call it by it’s real name (collectivised enterpreneurship and cooperatives) the Brezhnevite and Stallinist politburo of the day would oust him immediately just as they did with Khruschev, so he had to give it a different name. And yet, if any of you remember that period in 1980s, there was a lot of excitement and popularity about this “Kozraschyot” – people were being given the right to form collective enterprises and cooperatives — many of the housing construction projects in 1980s in Armenia were precisely formed on the initiatives of these people’s cooperatives. And for a brief period of time just before it’s collapse (due to it’s disprespect for the demands of various ethnic groups for self-determination and national liberty, and due to the irresponsible actions of GKChP) the Soviet economy was actually booming. It is totally misleading and out of historical context to assume that the collapse of USSR had a purely economic underlying cause, and many scholars now agree,
    Looking in retrospect, I see a lot of possibilities in that Khozraschyot project for it could gradually democratise the economy and politics of Soviet Union. What I find to be a wrong path that we took in early 1990s is that claims for national independence in Armenia went hand-in-hand with full embraicing of Capitalism. If people had a say over the political question of national independence, then at least there should have been a popular debate about the configuation of that independence (republic, monarchy, parliamentary democracy, direct democracy etc) and about the economic question regarding the mode of production. But instead we were given single option of a Capitalist Republic. and that’s it…
    In effect Armenia went back, while it should have gone forward. People of Armenia should have looked back at the history of Soviet Armenia, assessed not only ints mistakes and drawbacks, but also it’s achievements, and thus have formulated a new direction that would learn it’s lessons from USSR and move forward, rather than back!!!
    Believe me… I once was a staunch believer in neo-classical economics and if I was confronted with such “Marxist crap” I was able to formulate a much more coherent response in defense of Capitalism. But one has to move beyond the simplistic and ideologically-loaded teadings and preachings of the Economics course at AUA or any other such institution. When one reads Marx, one can’t help but dissagree with him, but in such disagreement one is able to recognise the fundamental points and realities and explanations that Marx presents. And the whole point of Marxism is so that intelligent people can read it today, see how Bolsheviks hijacked the Revolution, dissagree with it, learn from it and be able to formulate a new project for socialism, radically democratic society, participatory politics and progressivism.
    In some of the best business and economics schools in the west that prepare the future big players of world economy, the students are actually required to read and understand fully Marx and the subsequent Marxist scholarship as the best fundament of understanding world economy. I wonder if those professors think that it all just “Marxist crap”. But who know, maybe you know something that they don’t? After we all dwell on the notion that Armenia is full of surprises, right? 😉

16. You could not have been more apologetic – I mean that literally, that is, you could not have used more words and sentences to apologize for a system of governance that has proved itself inefficient, destructive, and above all regressive 🙂 I hope your response to this would be much shorter.
    I will not spend time arguing with you about neo-classic economics vs. Marxist economics. I will just point out that if you care at all about indicators that attempt to describe the state of economies and general welfare of the people of the world (GDP per capita, literacy rates, mortality rates, and in fact, what you really ought to appreciate ,GINI coefficients etc.) Capitalist states fare better, almost universally, than Communist states [I should note here that states that have allowed markets to function, but have a much more wider social nets (welfare schemes) are not doing too bad either, which goes to say that the key here is unhindered markets]. Now, you may say – “Oh sure, the people that produce these reports, have a stake in system, thus they’ll find ways of justifying it…” I can’t respond to this in anyway better, than, perhaps, asking you to read some of the development stories of Chinese and Vietnamese villagers, who for generations didn’t even own donkey, but within the last 20 years have come to own a car.
    BTW, I have read my Marx, Lenin, and the others – I have also read my Locke, Mill, Friedman, Hayek and others. And these are not really “preachings” – but are sound theories that have been validated over and over again, and will continue to be revalidated because these enlightened thinkers got something fundamentally correct: Let humans free to pursue what they deem good for them individually, and you’ll get something that’s good for both the individual and, in the process, the group will be better off as well.
    My apologizes for not addressing the many points you raised: how in a generation Yerevan was built (who cares at what cost right? Human, environmental – whatever… What matters is the truth that Mr Lenin and Mr Stalin have prescribed – forget about the millions (how does 20 million sound?) that will be wasted along the way to create the this Perfect Utopia, where everyone will be equally poor…)
    Levon

17. Levon,
    I’m glad you read your share of classical Marxist as well as classical Libertarian thinkers — something that I myself am very much fond of. What I meant by “preachings” is the way that the neo-liberalist formulars are being advanced in modern institutions in newly independent states, and of course tere are vested interests of the imperialists in all this.
    Ever since Capitalism has been imposed on Armenia, I can’t help but get this feeling that we are in a constant *transition* in a constant instability. We are repeatedly being told “Just wait a little bit longer and we will show you real results and real proof that Capitalism can work in Armenia and resolve all the contradictions”. And quite frankly I’m quite tired of this *transition* that yields very few (if any) convincing results. Capitalism creates more contradictions than it purports to resolve. What’s more is that the logic of capital accumulation inclines toward accumulation and monopoly of power — it’s an invitation to fascism and ignorance, and every little bit of Armenia’s recent history is a living proof of just how destructive Capitalism is.
    But don’t make the mistake of reading me as yet another Bolshevick lunatic or an apologetic defender of Big Brother State-planned economy — I’m not! This dichotomous thinking is yet another problem that needs to be overcome: just because one criticises Capitalist mode of production and capitalist social relations, does not automatically imply that s/he is a Communist. There is always the third way and forth and fifth. There are two types of socialism: State-Socialism (as we’ve seen) and Free-Socialism (which I subscribe to). just as there are two Libertarianism: Neo-Liberalism (or Libertarian-Capitalism) on one hand and Libertarian Socialism (which I subscribe to) on the other.
    I’m a staunch believer in individual liberty and the autonomy of groups. I believe in Radical Democracy and Participatory Politics. If you think I’m going to defend actions of Kim Il Sung or Stalin, you wrong. And yet I see that when looked at global, historical and broad perspectives, Capitalism is really an impossible position whichever way you twist it. It is only recently that popular sensibility starts to realise that Capitalism does not yield any long term answers to the problems of environment and rapid resourse depletion (which, in part has caused today’s financial cul-de-sac in Armenia).
    I am not here to argue that Socialism is more economically progressive than Capitalism, when looked at the overall picture. Even though there were historical cases that will prove the opposite, I see the beauty of Socialist economic alternative not so much in terms of it’s ability to compete with with Capitalist growth and expansion, but in the simple fact that it offers growth that is moderate, balanced and sustainable. What’s more is that through cooperatives and credit-unions people could really lift themselves out of poverty if not for the obstacles that the government puts in their face. Cooperatives and credit-unions are usually very easy to set up, efficient, easily manageable and the workers are motivated by the knowledge that they are working for themselves.
    Socialism or Barbarism — looked at human history in long perspectives and its direction, I come to realise that human options are really boiling down to these two options.
    Capitalism is destructive, undemocratic, inballanced and ultimately, a culturally debiliating system. The Bolshevik models of pseudo-socialism, which landed on the rocks as they failed to adress human demands for liberty, self-determination and minimal statehood, are not the only alternatives to the Capitalist system. This is why at this point in Armenian (as well as human) history I see the necessity to explore and formulate a new Socialist project that would be much more democratic and much more participatory (intellectually, politically, economically, etc). I see this primarily as a matter of survival in 21 century.

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