Protectionism Is a Good Thing

It is not clear why many colleagues often say that protectionism is bad. Protectionism is the support of a local producer with all the encouraging consequences: increase of gross income, number of jobs. So it is wonderful and does not lead to stagnation and retardation at all. On the contrary, openness often leads to catastrophe.

I want to tell why I started farming, changing the career of an IT specialist with an office in the center of Moscow for a farm and a cheese factory. In my youth, I often traveled to the Tver region as a volunteer on a search expeditions. We were engaged in the burial of Soviet and German soldiers who fell on the fields of the Second World War. But my strongest youth impression were not the remains of the soldiers, but the terrible sight of dying Russian villages. In the regional center, near which we worked, the milk factory was closed, which caused the closure of 10 farms. Now I understand why this happened. We lost the Cold War, opened the market, and the “winners” did everything they wanted. Economic strikes were performed against our villages:

1) Using the open market, for several years we were given free milk powder as the so-called humanitarian aid. Nobody needed our milk, the enterprises were closed, and even elite herds were going under the knife.

2) Those who did not close themselves, were bought by European corporations. Only with one goal - to close immediately the dairy and cheese factories.

As a result, we have lost not only the agricultural production, but also tens of thousands of villages in our country. About 40 million hectares were abandoned - this is the entire territory of Germany with its autobahns, forests, cities, the Rhine and the Alps.

I dreamed to change all this and even entered an agricultural university to study as a zoologist-engineer. But I quit soon, because I didn’t see prospects - everything fell downwards and it seemed to me that there would never be light at the end of the tunnel. As a result, for 10 years I worked as a programmer, but the dream of a farm and a cheese factory did not go away. I could not decide, because I did not see economic expediency - we simply could not stand the competition with European farmers because of their well-established system of subsidies, loans and market protection.

Everything changed on August 7, 2014, when Russia retaliated against the Western sanctions. For their introduction, I personally really want to thank Mrs. Merkel, Mr. Obama and former French president Hollande. On that day, we got protectionism in the form of the import ban on the European and American food in general, and cheese in particular. It became obvious that our state was truly in the same boat and will now support its farmers with all means.

I realized that my dream of a farm and a cheese factory can come true. And the state helped. I was given 46 hectares of land (there is a lot of land in Russia), for which I pay only 100 euros per year. Then I believed in import substitution and sold everything that I had: apartment, car, business. I moved to the field to live and began to build my own cheese factory and farm. The state paid me half the cost of the farm: every second cow was bought at a budget expense, every second brick, every second tractor was bought at the expense of the state. By the way, it is often said that in Russia there are problems with corruption - if there is a lie detector here, I am ready to go through it: for everything I didn’t give a bribe, nobody even asked me for it. Our President promised that the first three years of work we will not have any audits, and it happened.

Of course, there were problems. The main one is with credits. In the first two years, our banks offered me a loan for building a barn under 23%! When I showed this figure to my friend, a German farmer, he did not believe it and said that the bankers simply forgot to put a comma between two and three.

But the state corrected this error. Now, thanks to government subsidization of the rate, I received a loan in rubles for 2 million dollars at 3% and we have already started building a new line of cheese factory. Our company grows by 200-300% every year. But even with these indicators, we do not keep up with the high demand for our products.

Now we are building a new cheese factory, which is more than the legendary Swiss Gruyere, and prepare to export our products: a weak ruble is a great help for us in this business! In Russia there is a proverb: if necessary, we will repeat it! And we will repeat, we will rush into Europe, but this time not on tanks, but on domestic wagons with Russian cheeses. It seems ridiculous to many, but I remember very well how many made fun of me and thousands of people who came from cities to agriculture, and said that we would fail. Now, these critics, looking at the result of our work, are bashfully silent. Yes, thanks to the import substitution program, you can now earn money in the agriculture.

I received more than one subsidy, which I mentioned above. More than 4,000 grants for small dairy farms have been issued, and more than 100 huge milk production complexes are being built. Somehow I visited the web site of the Ministry of Agriculture of Germany and read that 2,000 dairy farms were closed in Germany over the years. It happens in economics that if somewhere there is profit, somewhere is decrease. The budget for agriculture in Russia is not reduced, it only grows. At this rate in 5 years we will have an overproduction of milk, exactly the same as it already happened in grain, chicken and pork. Many say that foreign investors will not go to Russia because of sanctions, but it is not. The biggest investors in the dairy farming of our country are the Germans. We often communicate with them and I can say that in Germany, for example, agriculture is even more regulated than in Russia. There really is some kind of planned economy in action.

Thanks to protectionism in the form of food counter-sanctions, cheap ruble and agricultural subsidies, we got a real breakthrough. The agriculture growth was 20% in 4 years. In the domestic agricultural machinery industry - an increase of almost 300%! Special support programs of the Ministry of Industry and Trade of Russia helped. Many people are surprised to see that the Agrosalon exhibition occupies larger areas than the Moscow Motor Show. For cheese equipment a special program was also adopted and, as a result, domestic manufacturers appeared, which began to make such equipment. Today the vast majority of small cheese-makers work on Russian equipment.

We can say that the industry of high-quality cheeses in small dairies was revived simply from scratch. If before the introduction of counter-sanctions we had only 6 enterprises at this level, now there are already more than 400. The result is obvious - the stalls of farmers' markets in Moscow today are not different from those of Berlin, Vienna or Munich. The cool thing is that the attitude of our compatriots has changed. If earlier they tried to buy imported goods, now they are proud that they buy domestic goods, they support us. 200 cheese farms come to the cheese festivals. At our cheese festival, called "Import Substitution", where we celebrate annually the anniversary of the sanctions, this year more than 45 thousand visitors came, who bought 35 tons of excellent cheese in three days.

All this would not exist without the government support. And no matter what the critics say about the “free hand of the market”, the role of state and state regulation in agriculture and industry is fundamental. And it is only gaining momentum. Therefore, I believe that we will plow all our abandoned fields, revive our villages, feed not only Russia, but the whole world. The main thing is that the sanctions should be preserved (at least for another 6-7 years), state support measures should work and there should be a cheap ruble.

Views expressed are of individual Members and Contributors, rather than the Club's, unless explicitly stated otherwise.