Russia’s political changes seem to be geared in the opposite direction
Dmitry Medvedev has repeatedly stated that freedom is better than its alternative and that a modern economy should be based on the free individual. The government should retreat from the market, courts should protect contracts, law enforcement should enforce the Russian legislation, and officials should be executing their duties rather than dividing resources and taking bribes.
Valdaiclub.com interview with Sergei Aleksashenko, Director of Macroeconomic Research at the Higher School of Economics
In his recent article, Russian Finance Minister Alexei Kudrin stated that economic modernization in Russia is impossible without political changes. Russian President Dmitry Medvedev has repeatedly made a similar point. What steps have been taken in this direction and what remains to be done in order for Russia to rise to a new innovative level in its development?
I believe that this proposition is somewhat illogical because all of Russia’s political changes seem to be geared in the opposite direction – that is, toward tightening the screws. Dmitry Medvedev has repeatedly stated that freedom is better than its alternative and that a modern economy should be based on the free individual. That a business should strive to make money is natural and absolutely normal. For example, the Soviet Union’s innovative development model was based on slave labor, largely of prisoners, and on the fact that most of the country’s vast resources were directed at major industrial projects in space exploration, nuclear technology, defense, and so on. Nowadays, this model is hardly plausible because the government is not ready to undertake it and the people will not accept it. This means that businesses’ willingness to be more competitive and efficient and to offer new goods and services needs to become the engine for innovation rather than the government. Competition is necessary to make that happen, which means that the government should retreat from the market, courts should protect contracts, law enforcement should enforce the Russian legislation, and officials should be executing their duties rather than dividing resources and taking bribes.
I believe that innovation is the product of struggle between businesses in a competitive environment. People who want to engage in efficient non-resource related business need effective protection of their economic interests and political rights. Arguing about what should come first – political change or competition – is similar to the chicken-or-the-egg dilemma. I believe that these processes are equally important. That is, competition is necessary to both politics and the economy. And the political system needs to be changed with a view to true and fair competition rather democratic window-dressing.
What role do you think the gaining momentum of the Customs Union will play, particularly if member economies join the WTO? What benefits does this move promise for Russia?
I believe that the Common Customs Union expands economic boundaries for Russian businesses – that is, it expands the boundaries of the space in which Russian companies will be able to do business on the same terms as at home. And if the Customs Union develops along its declared lines – that is, toward more EU-like rules of the game – Russian businesses will see brighter prospects for development. As for the collective accession of Russia, Belarus and Kazakhstan to the WTO within the Common Customs Union, I don’t believe that it’s possible. I would imagine that at this point, everyone has put this idea to rest and simply refuses to admit that it was somewhat bold to begin with and that joining the WTO as individual nations will be much easier. However, if these countries have a common customs space and coordinated regulations, they will be entering the WTO from similar starting points. The difference will be in the speed of the accession. For example, Russia has issues with Georgia that Kazakhstan and Belarus do not have. And if Russia and Georgia do not come to terms on these issues, we may well see Belarus and Kazakhstan joining the WTO earlier than Russia.
What prospects do you think the Skolkovo innovation center has? What significance does it have for Russia as a whole?
It is difficult to predict the future of the Skolkovo project. On the one hand, it is significant because the government’s support for fundamental and applied research is both good and necessary if Russia is to make progress in this area one way or another. On the other hand, I wouldn’t expect too much from it. Ultimately, the Skolkovo center will occupy an area of 400 hectares; Russia’s total area is 1.7 billion hectares. Even if the “Skolkovo effect” is 100 or 1,000 times stronger than the national average, we need to understand that these figures are incomparable.
But Skolkovo’s model, if it is successful, could be applied elsewhere in Russia…
I believe that the legal regulations set individually for Skolkovo are reasonable, and I fully agree with them. And these regulations and financing options also need to be applied to similar projects without any exception whatsoever.