How the revised Strategy-2020 could destroy the Russian economy
Strategy-2020 is an ill-fated document. It is based on German Gref’s ten-year strategy of early 2000, which was drafted on Vladimir Putin’s personal order and was largely implemented. At that time, Putin, who had just become president, required a strategic vision of the future. He eventually endorsed what amounted to yet another version of Yegor Gaidar’s reforms. Suffice it to say that in its basic version that strategy renounced the social state in favor of the subsidiary state. The provision of the Constitution proclaiming Russia a social state led only to the rejection of this thesis but not the measures that ensured its implementation.
Work on Strategy-2020 began at a time when stability was the main goal of the state machine and a vast part of society. Not only destructive liberal changes but any new ideas scared the nation, which had just started to enjoy the blessings of consumption after the nightmare of the 1990s.
This is why Strategy-2020 is riddled with half-measures. Suffice it to mention the goal of providing family homes for all homeless children in 12 years. It was speculative and lacked mechanisms for achieving the goals set. However, nobody noticed its shortcomings as it was adopted in October 2008, when the country was being swept by the first wave of the global crisis and ultimately had to be switched to manual control.
Having gained its breath after narrowly averting disaster, the ruling bureaucracy wanted to project confidence (including to itself) in the entirely new, post-crisis conditions.
The same specialists who largely shared Gaidar’s views and believed in the long obsolete Washington consensus, which encouraged the state to serve foreign global profiteers rather than its own people, were appointed to draft a new version of the strategy. This decision played a dirty trick on the concept of the strategy.
Strategy-2020 proved to be a liberal document that was designed to implement, in new conditions, the same policy that led to the disaster of the 1990s. The 2000s, during which the state and oligarchs lived on the fat of the land, were a lost decade for national development.
Some of the proposals in the strategy pose a direct threat not only to the domestic economy but also to national security.
Thus, the strategy calls for export duties on oil to be replaced with a higher mineral extraction tax in order to bring the prices of domestic oil and oil products to the global level. Ostensibly, this would give the Russian economy correct price guidelines and incentives for increasing energy efficiency. Compared with the past, the liberals made a big step forward by admitting that such a policy may impede economic growth and aggravate social problems, and, hence, should be applied gradually. However, the reason for deliberately depriving Russia of one of its competitive advantages remains vague. The authors have not proposed any realistic ways to upgrade infrastructure and overhaul our economic structure, without which higher energy prices are bound to destroy the economy.
The authors of the strategy insist on intensive injections of budget money into the reserve fund. They think that bringing it to 6% of the GDP will allow the country to make up for a decline in global oil prices to $80 per barrel in the course of three years. As in the previous decade, they don’t care what will happen to the country if during these three years oil prices fall below this arbitrary figure. It seems the Russian liberals are unable to understand that economic development, primarily infrastructure modernization, is the only protection against a crisis.
It did not even occur to them that a better solution would be reinvest petrodollars back in the industry – geological prospecting, modernization of mining technology and, most important, the development of oil refining, petro chemistry and gas processing. It is because of the lack of development in the industry that Russia, to use Mendeleyev’s metaphor, is not only burning banknotes but even selling its rivals the paper on which they print them.
Apparently, the authors of the strategy have decided to ignore this out of a conviction that global demand for Russian energy resources will decline. But this conviction lacks solid ground and stands in sharp contrast to the world’s unflagging interest (to put it mildly) in our natural resources.
Implementing this strategy would mean a new round of liberal reforms in Russia, causing the destruction of its social environment and the economy. However, this may come to pass because Russian liberals, the foot soldiers of global business, are influential and almost fully control socio-economic policy.
Mikhail Delyagin, Ph.D. in Economics, is Director of the Moscow-based Institute of Globalization Studies
Views expressed are of individual Members and Contributors, rather than the Club's, unless explicitly stated otherwise