“Working as usual, but buying less!” What a budget surplus threatens the country with

Recently, in the domestic media, they often write about the “surplus in the balance of payments of the Russian Federation”, as evidence of the “financial stability of the system, which allows more production than consumption...”

Economist Dmitry Prokofiyev in his channel does not agree with this opinion. And that's why:

“Yes, the surplus of the balance of payments of the Russian Federation, according to the Central Bank of the Russian Federation in January-March 2022, reached $58.2 billion, having strengthened by more than 2.5 times compared to the corresponding period of 2021.

But the “record surplus” in this case only means that the foreign exchange earnings that came to the accounts of Russian exporters in exchange for “natural resources” (primarily oil and gas) were NOT spent on the purchase of imported goods and services, i.e. to ensure the consumption of people employed in the economy of the Russian Federation. Actually, the leadership of the Central Bank honestly warned about this when it announced that “stocks of goods” could run out at the end of the 2nd quarter.

From a macroeconomic point of view, this may result in a reduction in the real consumption of people who work the same number of hours, but receive fewer goods (and services) at their disposal.

But won't the "surplus" foreign exchange earnings (after being converted into rubles) be spent on the purchase of Russian goods and services?

But that's not a fact at all!

What is so good that Russian exporters - the owners of this proceeds - will buy on the Russian market?

"Work"?

No, they have a full order with employment.

"Industrial equipment"?

Yes, it is possible, and in this case, the demand for labor in the relevant industries will increase. But in order for part of this foreign exchange earnings to reach the consumer market, manufacturers of such equipment will have to buy the necessary components, hire workers who will receive a salary ... and will come to the market, where they will face a shortage - there are “no more” imported goods (they were not bought ), and there are “not yet” domestic goods (they have not been produced).

What will happen next, don't the owners of resources and industrial capacities want to produce such goods?

Maybe they will, but only under a few conditions.

A. The production of these goods will bring industrialists the same profit as the production of equipment for exporters.

B. there will be “free resources” on the market, for which manufacturers of “equipment” and manufacturers of “consumer goods” will begin to compete

In order to compete (i.e. buy) manufacturers need free funds. Guess how they get them? By underestimating the share of wages in your costs - if you have a "deficit" in the consumer market - this is the same as understating real wages, expressed in "goods" and not in "currency".

So the "record surplus" of the balance of payments indicates an imbalance in supply and demand in the consumer market. This imbalance is corrected - by a decrease in real incomes - or by an increase in prices (which, by the way, the leadership of the Central Bank also warned about).

Therefore, if you are employed, keep in mind - the person explaining to you the benefits of the "surplus balance of payments of the Russian Federation" wittingly or unwittingly tries to convince you that working for a reduced salary is OK. If he himself is the beneficiary of a manufacturing business, this is rational behavior for the employer, although unpleasant for the employee. He just wants to pay you less, but masks this desire with stories about the "financial stability of the system."

Just clarify your own interests in this situation. And act on those interests.

Ask yourself - are you ready to work as much as you did, but buy less, so that exporters (and their owners) can continue to accumulate tens of billions of dollars in their accounts?