Keynesdianism etc.

Re Keynesianism
You said:
"from a political angle armament spending is highly opportune because
investments in armaments have high political returns 
and
Basically - if you invest in schools or roads the political returns are
much lower and not likely to be concentrated in your constituency (and only
long term besides - and as Harold Wilson used to say a week is a long time
in politics). Politicians have this particular characteristic that they
have to worry about being elected (and even old style Soviet apparachniks
had to worry about their constituency)"

My answer:
You insist in linking Keynesianism with the production of armaments.
Whether or not such a linkage existed in the past is beside the point; at
present such policies would be incredibly inefficient, since
1. To-day's sophisticated armaments have a very small component of labor
and would not help to find work for unemployed factory workers or relieve
the poverty in developing countries, which are the goals of Keynesian
policies.
2. It is illogical to believe that producing armaments would bring more
votes for a government, than building housing, schools or hospitals or
hiring more teachers, nurses or doctors? It would only produce personal
benefits for CORRUPT politicians, expecting to get financial compensations.

Since unemployment is bound to rise to higher and higher levels because of
automation and technological progress, Keynesian policies shall become more
and more important in the near future. I therefore feel, that your vast
amount of economic expertise and your evident powers of persuasion could be
much better employed in advising decision makers on how to finance such
policies and how to plan them wisely for the greatest possible social and
economic benefits.

Re Magnetogorsk you said:
"`big is beautiful' was a result of an idea of the 1930's and Soviet
planners can hardly be blamed for doing what was then thought most 
efficient. 
I need only to point out that Boeing's aircraft factories during World War
II still dwarfed Magnitogorsk in their number of employees or output"

My answer:
The general fascination with economies of scale cannot justify
Magnitogorsk, because of the especially high incidence of freight rates in
this case.
As to compare Magnetogorsk with the Boeings plant, you forget that freight
rates are a completely insignificant cost factor in such a high tech
product, while they are decisive for the competitiveness of a steel plant. 

Re Special economic zones for Russia, you said:
"In 1991 the Russian state had a budget deficit of 21%. Under these
circumstances there was simply no way  they could have started with gradual
measures since these would only have led to an even bigger deficit.
Russia actually tried to build `special economic zones' (e.g. Nishni
Novgorod and Petersburg) on the Chinese recipe, which were not very
successful for the simple reason that Finland or Sweden are not a Taiwan
with very large available funds, looking for foreign investment. And
Germany even was reluctant to invest in the free economic zone of
Kaliningrad (its `own' former Koenigsberg). For why should you start
investing in a ramshackle naval base in the middle of another country if
you can invest in Poland"

My answer:
Why would special economic zones add to their deficit?
Creating the conditions for capitalism to succeed, such as clear property
rights and other necessary legislation, eliminate bureaucratic corruption
and inefficiency and provide manpower skilled in private banking etc. might
still be impossible to do in such a big country, but would be quite
feasible and NOT AT ALL COSTLY in such zones.
As to incentives for investment, Russia has a lot to offer: an immense
number of highly trained professionals, world famous centers of
investigation and almost limitless raw materials would certainly be
considered as big advantages by any investor. 
Regards         Paul Riesz