SCIENTISTS AND GOVERNMENT DISCUSS HOW TO DIVERSIFY ECONOMY
Upon the initiative of VICTOR BIRYUKOV and with the support of the magazine “Our Power: Deeds and Persons” the 1st Roundtable in the series “Diversification of Russia’s economy” was held at the Moscow House of Economist on Tverskaya Street on December 9, 2009.
The keynote address was delivered by Academician VIСTOR IVANTER, director of the Institute of National Economic Forecasts at the Russian Academy of Sciences. In addition to expert participants, the meeting was attended by representatives of mass media, the Finance Ministry of the Russian Federation and the Eurasian Youth Union. The complete record of the discussion was published in Russian on VICTOR BIRYUKOV’s website.
Academician IVANTER noted that Russia’s innovation potential allows it to function normally in the framework of an economy model comparatively weakly dependent on exports of hydrocarbons. Opportunities are good in weapons exports, the shipbuilding industry as well as in metalworking and nuclear energy sectors. The aviation industry has a chance to be revitalized, although so far it is rather engaged in aircraft maintenance and repair. As of recently, agriculture has become an important sphere of innovations and investments. One of the critical weaknesses is sluggishness and clumsiness of the governance system.
YEVGENY FYODOROV, chairman of the State Duma Committee for economic policy and entrepreneurship, ruled out the applicability of mechanisms of all three Soviet modernizations to contemporary Russia. Emphasis should be placed on intellectual property: when sales of intellectual products reach 10%, economy can be called innovative, when they reach 20% economy can be called highly efficient, and if they are 30% the economy in question will be viewed as the best in the world. So far, Russia sells intellectual products 100,000 times less than the United States. A real obstacle on the way to modernization is the absence of an intellectual property market, which means that Russia even cannot import intellectual property. It is necessary to launch this market first. Furthermore, modernization demands a replacement of a part of the elite that is not interested in it. After that, “modernization from above” might develop evolutionarily, albeit at a revolutionary pace, and be completed in six or seven years.
Director of the Institute for Russian Studies IGOR CHUBAIS (PhD, Philosophy) believes that modernization is hampered by the predominantly monopolistic economy. As a result, gas and oil monopolists dictate their conditions to the whole country. It is necessary to legalize the notion “economic extremism” and apply it particularly to exports of non-processed raw materials. Consequently, the construction of new oil and gas export pipelines should be banned treated as manifestation of such extremism. However, the current political configuration apparently rules out any modernization because there is no mechanism of feedback between the authorities and the expert society.
Member of the Central Council of the Russian Agrarian Movement VICTOR BIRYUKOV is positive that the agro-industrial complex cold be a good alternative to the oil and gas industry. In agribusiness modernization is in progress and is already yielding considerable results. The farming sector alone showed growth during the crisis. Upon meeting the basic demands of the domestic market, Russia might become a major exporter of products of deep processing of grain and primarily of meat. Although the global population is constantly growing, the supply of farmland is not changing. While 50 years ago there were 24 hectares of fertile land per capita, today there are only 12 hectares. It should be also taken into account that today country life and country work are far from being the same thing. Workers of the advanced farms reside in comfortable conditions in regional centers. The agribusiness is not only agriculture but also processing enterprises, transport and logistics. In the United States only 3 million farmers are left but the national agro-industrial complex employs 17 million people.
President of the national Association of Privatized and Private Enterprises GRIGORY TOMCHIN believes that the economic strategy must presuppose the growing dependence of other countries on Russia. In this connection he pointed to the importance of cargo transit via Russia’s territory. Contrary to a widely spread opinion, it has been established that the cost of overland transportation does not exceed that of carriage by sea. However, today the road network in this country is not sufficient. This is a serious obstacle for economy’s diversification including for its agrarian scenario. Intensive road construction would provide impetus to internal growth and possibility to earn on transit transport flows between East and West.
NIKOLAI CHURKIN, first deputy chairman of the Federation Council Commission for natural resources and environment protection, elaborated on the theme of transit. He reminded that historically the geopolitical location of the country was instrumental in developing, in the first instance, commerce and only then various industries. Centuries of agency-and-trade activities resulted in a strong “merchant component” in the Russian mentality. This important psychological aspect should be taken into account during the discussion of various scenarios of economy diversification.
General Director of Agency PR-3000 STANISLAV RADKEVICH (PhD, Political sciences), also dwelt on the psychological aspects of the problem. First, the level of mutual respect and trust in the society is inadmissibly low. So, whatever diversification is done, it will not be successful without a considerable rise in the culture of human relations. Second, Russia’s economy is excessively technocratic and eventually undervalued due to understatement of the reputational capital. For example, the value of the Coca-Cola brand is more than 95 percent of all its corporate assets. In this country we normally see an inverse ratio. As a result, companies and entire sectors are undervalued. This situation is fraught with danger especially in the light of the oncoming second wave of privatization.
A leading expert with the sociology department at the Russian State Humanitarian University, SERGEI MAGARIL (Candidate of Sciences, Economics), especially criticized the many-year delay in starting modernization. The potential points of growth stagnated during the whole period of “prosperity” and during the crisis their situation only worsened. We are only talking about modernization but nothing yet has been done in reality. Apparently, this could be explained by the absence of a social theory fitting the challenges of our times, and hence, by the absence of a proper system of state governance. How could we speak about modernization in the satiation of the current relations between the state and the society?
IGOR OSTRETSOV (PhD, Technologies), member of the Commission for modernization and technological development of economy under the president of the Russian Federation, reminded that in the near future the world will run out of the exhaustible energy sources while the renewable energy sources (hydroelectric, wind and biofuel among others) could meet only an inconsiderable part of mankind’s demand. Therefore, the future belongs to nuclear energy, but so far we use just 1.5%-2% of its capacity. Another problem consists in the fact that by 2013 the global reserves of Uranium-235, used as fuel by nuclear power plants, will be exhausted. So, it is necessary to speed up the development of peaceful nuclear technologies using other radioactive elements. Research and development in this sphere will be a significant aspect of the economy diversification since Russia possesses fundamental nuclear-space technologies.
Deputy Director of the Institute of Economics of the Russian Academy of Sciences SERGEI SILVESTROV (PhD, Economics) noted that the scientific community does not have a clear enough understanding of the nation’s economic base. Therefore, it is necessary to carry out an inventory of industrial production as well as of scientific and technological potentialities. Only after that the time will come for forecasting and planning without a delay. Russia is overcoming the global crisis remaining itself in the marginal situation and facing its own individual crisis. Today Russia earns from exports of just 16 products. To tell the truth, in 1998 we had only three such products – oil, natural gas and pulp. However, living standards were far lower than today. Therefore, diversification is a matter of practical survival for Russia.
Summing up the results of the discussion, Academician IVANTER reminded that economic growth was his scientific specialization. Unfortunately, during almost a decade, from 1990 to 1998, he had to deal rather with economic decline. At that time today’s discussion was simply unimaginable, because there is nothing to diversify when oil prices are between $8 and $12 a barrel. But today, when the global recession is almost over, there is no doubt about the importance of the theme announced for this Roundtable.
The host of the Roundtable, ALEXANDER NOVIKOV, member of the board of the Free Economic Society of Russia and editor-in-chief of magazine “Our Power: Deeds and Persons,” proposed to continue the constructive discussion at the 2nd Roundtable “Diversification of Russia’s Economy” in February 2010.