Vladimir Putin has so far failed to present a coherent economic program. What is clear, at least in broad strokes, is how the prime minister understands the global economic crisis.
Unlike Western leaders, Putin understands that since there’s no way to recover from the crisis using market mechanisms, solutions must be found outside the market. Nor can the United States solve Russia’s problems; we must address them on own. The problem is that Putin doesn’t do what he says.
Encouraging investment, creating new production facilities, introducing innovations on a mass scale, raising energy efficiency, boosting labor productivity and expanding advanced industries – of course, this is absolutely what’s needed. We’ve been hearing this since 1985. However, if you don’t deal with a problem, it won’t solve itself, it will simply get worse. It’s realistic for Russia to being rapidly pursuing these objectives. If Putin starts dealing with these issues in his first term back in the presidency, the issue of a second term won’t be so important. We don’t just need a new cat, we need a cat that’s good at catching mice. If a cat doesn’t catch mice, you need to get rid of it. If someone starts doing things that he’s supposed to do under his job description, things that everyone has been loudly talking about for so many years, then what difference does it make how long he stays in power? Franklin Roosevelt was in office for four straight terms, which resulted in a constitutional amendment limiting presidents to two terms. The country was at war. The man did his job well and was rewarded at the polls in fair elections.
In a country ruined by liberal reforms, even the most straightforward and simple actions to promote growth and development set off a firestorm. We are being told that trillions of dollars in investments are needed. However, these amounts include all the thievery and monopoly prices. Removing all the institutional limitations such as corruption and the arbitrary behavior of the monopolies will result in rapid cumulative growth. Yes, we do need to do certain unpleasant things to get there, such as introduce protectionism at a level of the European Union. But if all G20 members are stepping up their protectionist measures then Russia is well within its right to do the same. As for our WTO commitments, why exactly are we going to stick to these commitments? Why can we violate our commitments to Iran but not to the WTO?
Russia maintains a fairly high level of education despite the degradation of its educational system. If you start paying good salaries to specialists, they will stay in this country. Why do graduates of the Moscow Aviation Institute work for Boeing and programmers work for Microsoft in Russia?
At some point, the Governor of the Kaluga Region Anatoly Artamonov, a reasonable man, said: “Come to me and tell me what you need.” The negotiations were fast and lively. Even now you can tell where the border between Moscow and the Kaluga Region is: Once you start seeing large numbers of factories, it means that you are in the Kaluga Region. Indeed, these are assembly plants, and the region doesn’t make much money on them. However, the governor is not in a position to force multinational corporations to accept an agreement for annual increases in localization. The ruling party, which still enjoys a majority at the State Duma, can pass a law, like they did in Brazil, to increase localization level at assembly plants by five percentage points annually. It doesn’t matter whether they start from zero or from 90%. Failure to comply may result in sanctions and even nationalization. The investor has to comply, because access to demand in the global crisis is a premium.
There are many ways to promote growth. The problem is not a lack of options but a lack of motivation from the government to get it done. Where there’s a will there’s a way. This is a defining feature of Russian society: it can be mobilized to achieve great things.
Things are fine in Russia from the point of view of modernization. Of course, there is a monstrous problem as to what follows modernization, but we’ll face this problem in 20 years. There are still problems to deal with in the here and now.
Mr. Zyuganov relentlessly criticizes what he sees as Putin’s policy of “liquidating industry to the last enterprise, total and utter dependence on raw materials, transferring our key financial resources to Western banks and the final destruction of the socio-cultural sphere, which has effectively been sold out.” I agree with this criticism, because these were the exact policies that Yeltsin pursued as well. Putin came aboard as Yeltsin’s successor, and these policies were effectively continued on Putin’s watch. However, Russian history is full of examples where leaders drastically change course, both in terms of staff and politics.
The choice between modernization and industrialization is a classic fallacy. Modernization can be based exclusively on industrialization. Post-industrial technologies cannot exist without industrial ones. You can’t launch a satellite into orbit just like that. To do so, you need a booster rocket, i.e. an industrial technology, which ensures, first, mass employment and stability in a society, and, second, demand for education, which makes it possible to make education universal and train talented people in post-industrial technologies.
It was reassuring to read an article by Mr. Putin this summer where he mentioned the need to re-industrialize Russia. Before him, only one man had raised this issue, and that was Mikhail Khodorkovsky. If Putin is willing to quote Khodorkovsky, that tells me that he has no word for it other than the “re-industrialization.” This means that he understands the importance of the task. However, the question is what is he going to do with this understanding? Will he shelve it or start implementing it? Only time will tell.
Whether the voters have faith in the economic program of a presidential candidate is a question of advertising, not the credibility of the program. Television is the right tool for brainwashing. Certainly, we can’t talk about doubling the GDP at a time when capital is fleeing the country. However, the flight of capital is not as bad as growth without development. Capital is fleeing Russia because it can’t be put to good use here. If modernization becomes a reality, the capital will stay in Russia. Doubling GDP is a formal task. Imagine that the world comes to an end and we haven’t managed to double the GDP. That’s obvious: how can one double the GDP when the world is lying in ruins? Even stability under such circumstances will look like a great achievement. However, if price of oil goes up 40% in a year, as happened in 2011, and the economy grows from 4% to 4.2%, it will be a disgraceful failure. That’s more that the global average but terribly low if you think about missed historical opportunities.
