Modernization Is as Simple as Making Cheesecake

Independent development is very important, but borrowing is more effective. The question is what Russia wants to achieve. If it wants to catch up with someone by a given deadline, independent development will be counterproductive, because we would kill ourselves trying to reinvent the wheel when there is technology that we can use for free.

Valdaiclub.com interview with Vladislav Inozemtsev, Federal Political Council member of the Right Cause party, Director of the Centre for Post-Industrial Studies, publisher and editor of the Svobodnaya Mysl monthly.

Is the Russian economy capable of introducing new ideas?

No, because ideas are not introduced but grasped in a flash and implemented. There are no regions in Russia where this is done. However, when there is competition and opportunity, private companies readily use the latest methods to conquer the market. For example, there is no system for sending text messages via your service provider’s website in the West, whereas Russia’s top three mobile operators, including Beeline, offer this service.

Some don’t see the need for this. For example, Gazprom does not offer customers the option of signing up online to connect their country homes to the gas grid. It wants to keep its monopoly so as to force people to pay bribes. This is how the system works. The need to bribe bureaucrats is a tiny part of the problem, because kickbacks are common at all large companies, including private ones.

Is it more important to borrow ideas or to create them?

Independent development is very important, but borrowing is more effective. The question is what Russia wants to achieve. If it wants to catch up with someone by a given deadline, independent development will be counterproductive, because we would kill ourselves trying to reinvent the wheel when there is technology that we can use for free.

Flying geese countries like Vietnam and Laos understand that technology is theirs for the taking. There is a large number of innovative products which one can use without paying anything. Why reinvent PDF software when you can download it from the producer’s site?

The problem with Russia’s state funding of innovative programs is that we are spending money on reinventing things. I see no sense in that. I believe that we should introduce and use available and affordable technology, so that people who implement and use it can focus on improving it. Many Russian software experts will propose new ways to use existing technology, thus accelerating our development.

What is the role of new institutional structures, such as business incubators, technology parks and innovation estates, in promoting innovation?

All of these structures are rooted in Boston’s Route 128, which was a cheap site for offices and agent labs for companies that spun off from the Massachusetts Institute of Technology and Harvard, becoming a complement to Silicon Valley. Actually, it was a place with cheap office space and a solid infrastructure located at a convenient distance from large universities and research centers. This is where those companies were established.

In principle, it was not a business incubator with tax incentives and the like. But the idea was later taken up in Europe, leading to the establishment of the Sophia Antipolis technology park in France and other such structures. I believe that their importance is exaggerated. There are two options: you either create something new or offer favorable conditions for all the science-based industries. If you choose the second option, you only need to remove their tax liability. If you don’t want to introduce this new regime across the country, you should establish a special zone similar to China’s technology and economic development zones.

Russia can definitely establish such a zone in Kaliningrad. If that exclave adopts European laws in terms of rules on technological procedures while respecting Russian laws in terms of low taxes, it will become a business heaven without any additional efforts. Make travel there visa-free, allow both Russians and Europeans to register companies there, lift some taxes but keep the VAT and a very low profit tax, and people from Poland, Sweden and other countries will be eager to set up businesses there. They will register companies and commercialize their projects there, paying a very low dividend tax, 9% compared to 30% across Europe, and a 13% personal income tax, which can be as high as 40% in Europe. This will be sufficient ground for further development.

We should also create a zone there with tax-free industrial production for the first 15 years. Industry parks will be built to accommodate these businesses. There is no need to invent anything; we only need to give freedom of action to a large area, because Skolkovo will not resolve the issue of innovations in Russia. Skolkovo may reduce the brain drain, but it will not secure breakthrough technological development or the creation of new pilot projects.

When Dmitry Medvedev started talking about modernization, I was perplexed. On the one hand, he was right to set a course for modernization and pledge support for it. But on the other hand, Western science stopped talking about modernization and its possible avenues after the Asian crisis. The issue ran out of steam by 2001.

Everything has become as clear and easy to implement as making a cheesecake. Google “how to make a cheesecake” and you will find lots of recipes that are not that different from each other. The same goes for modernization: feed in basic data and, depending on the variant (Brazilian or Malaysian, for example), you will get a set of solutions and measures for achieving the desired result. It’s very simple: you either do it or you don’t. As for the things we are trying to invent now, frankly, I can’t make heads or tails of them.

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