The questions of seats arrangement in the new cabinet of Vladimir Putin or distribution of powers between Prime Minister’s apparatus and President’s Administration, and even the question of which posts Dmitry Medvedev will be able to fill with “his” people – all that does not seem to be most important in the current Russian political agenda. It appears that a theoretical and looking abstract discussion by experts and officials about whether Russian economy is overheated, this discussion may have more significant influence on our future, including the future of ordinary people.     

Half a year ago any speaking about “overheating” was considered to be alarmism and malevolence, at the background of the brilliant showing by our economy. However, 12% inflation last year and the threat of 15% for this year have changed position of the scale.   

Apologetic point of view, antagonistic to alarmist one, is reduced to that our progress of the last year (investments growth of 21%, GDP growth of 8.1%) was a reflection of rapid processes of development by Russian economy under conditions of political stability and rational economic course. And the huge inflow of capital from abroad is related to the fact that this is a natural rational choice to place the money into rapidly developing countries, considering uncertain situation in the world markets. The country with a strong potential for development must consume a lot of money and the money must wish to come there. 

The opposite point of view says that unbelievable inflow of capital to Russia last year was related not so to needs and potential of our economy, as to state of the world markets. The excess of money makes the investors place it in the speculative assets like oil, or to put it into the developing markets where the rate of profit is higher. Especially benevolent is investing in the markets where rapid growth of profits leads to growth of consuming, while national currency is getting stronger towards the weakening dollar. And Russia is exactly such a country.    

In other words, significant inflow of money into Russia is related not to her real possibilities but to external factors. As a result, the country gets over-credited. At first the cheapness and availability of money promote considerable growth rates. But later, however, the excess of money transforms into price growth.  

At the time being, at the background of the world financial markets crisis the conditions for external loans are getting worse for Russian companies. This may lead to lessening of economic growth. Apologetic opinion supporters affirm that the growing economy must not be affected with financial difficulties in the West. They say its potential must be supported with the money gained out of high prices for oil. That means they suggest providing continued cheapness of money through the use of inner resources, which in their opinion would help promoting economic growth. 

The overheating theory advocates believe that the problems are rooted not outside but inside of the domestic economy and the cheap money would only aggravate the situation through boosting the inflation. They say economy must be cooled. Besides, some believe the problem is in the model itself of the economic growth that has been working in Russia late years. Constant anticipating growth of income of the population promoted the domestic demand, which supported the growth of GDP. At the same time, the Russian economy was getting less competitive, which was manifested, in particular, in steady rise of the share of imported goods in the domestic market.  

However, such formulating of the problem would be direct negation of the outcomes of the second term by Vladimir Putin. This is just impossible at the moment when a large-scale exchange of seats is going on at the top of our authority and when ordinary people and even officials have not learnt yet what the difference is between the elect and the acting president. Moreover, it’s exactly the above mentioned model that was one of the keystones in the unnatural political construction built by Vladimir Putin in the late years, the construction where even losing one’s rights day by day, the lower and upper strata can and wish to live the old way.   

This is why those saying there is no overheating in the Russian economy have more chance to be heard. Besides, the newly created state corporations are to become a good support for the apologists’ camp. The final outcome of most state corporations being obvious – that’s selling out property to settle the debts to the private investors – they are to show some not bad results in the interim stage, and that would only be possible under conditions of access to the super-cheap money.     

So, as we can see, the outcome of a harmless academic discussion about whether there is overheating in the Russian economy may have significant consequences. The trick is that there is nothing terrible in the overheating itself for the common citizens and the economy on the whole. But what matters much is the correct diagnosis. It’s like appendicitis, which is no fatal, though very painful disease. And of course applying a hot-water bottle is absolutely inadmissible with it.