Strategy 2020
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February 16, 2011
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On request of the government the Higher School of Economics and the Russian Presidential Academy of National Economy and Public Administration have initiated 21 working groups to consult the government with regard to the implementation of the Strategy 2020 document. The initial discussion will take place among experts: economist, sociologists and political scientists. In the fall of 2011 the results will be presented to the government. The rector of the Higher School of Economics, Yaroslav Kuz’minov, was recently interviewed by the newspaper Kommersant.

Strategy 2020 is the name for the plan for Russia’s development announced in February 2008 by the new premier Putin. The plan envisages a Russia which by 2020 after consecutive years of GDP growth between the 6 and 7% and a reduced inflation of about 3% will have entered the top 5 or 6 global markets. Early 2008, however, few people predicted the full impact of the global financial crisis. The world has changed and Russia has changed. Well, the world of course hasn’t changed, but our understanding of it has.

The creation of the working groups suggests that the government is soliciting expert advice on a new roadmap for Russia’s future of which some aspects will be used in the election campaigns, but will be presented in full detail by the new government (which may likely consist of many of the same people.)

The dialogue between state and society

Kuz’minov has an interesting perspective on the dialogue between the state and society. Russiawatchers often look at Russia as a country which needs to improve the interaction between the state and society. This is certainly true, but as Kuz’minov argues good government policy also requires the advice from experts and institutions. Not all decisions should be taken on the basis of sociological surveys.

Kuz’minov: ‘I seems to me, that nowadays economic policy is suffering from an overload of public attention, an orientation towards performance, towards the perception of large groups in society, and not towards those people, who really have enough information to draw conclusions. This overload of public attention sometimes distorts reforms, forcing the government to adapt to simplifications and often simply flawed reactions of the masses.

This happened foremost to social reforms, starting with the notorious monetization of natural subsidies [reforms initiated in 2004 that monetized a.o. subsidized travel and medicine for pensioners], with the pension reforms and periodically with education reforms.

This is the result of the attempts of the authorities to engage society in a direct dialogue. Because of the extreme consolidation of power in the years 2000 till 2005, which by the way was conducted within the legal and democratic framework, the authorities lost the means to interact with society in standard ways. For example by means of the interaction with a strong parliamentarian opposition, to whom the authorities in a normal situation would have show accountability and answer unpleasant questions.  Instead the authorities tried to find new [direct] channels of dialogue with society. Such a dialogue, however, is very easily replaced by PR campaigns. The success of PR technology comes to be conceived as public approval. To put it in simple words; when something has been shown on Channel 1, then by itself that already constitutes public approval.’

Looking back at the previous decade

Another interesting part of the interview concerns Kuz’minov’s view of Russia’s development of Russia in the years 2000-2010. Russiawatchers who have long ago come to the conclusion that the authorities are allergic to criticism may be surprised to see to what extent missed opportunities or even failures of the policy in the last decade have become a common admission among the political elite and the expert community. The current political elite may not plan to stand down, but it certainly realizes that Russia needs changes in its development strategy.

Kuz’minov: ‘We are witnessing the collapse of the current stereotype of economic policy. The policies of the past 10 years were build on the rejection of many harsh reforms or rather on ‘putting them aside’.  The growing disproportion was filled with budget funds, of which – thank God – there came more and more. This policy was continued into the period of crisis, although by then for different reasons [keeping the banking system and industries alive]. As a result we have a pile of unfinished business: a government apparatus, many sections of which are weak and corrupted, extremely ineffective budgeting, poorly developed competition, government regulation of not only markets, but even of private businesses and expensive credit, based on a low level of confidence in the economy.’

The priority is social policy

According to Kuz’minov the priority in determining Russia’s future path of development is social policy.  Without a modernization of the social sector, Russia will not have the means to modernize amongst others its industries. He does not mention it, but he must also be thinking about budgettary problems caused by an aging population.

Kuz’minov: ‘The larger part of Russia’s budget consists of continuous social obligations. This is what makes us different from other BRIC countries, with whom we often compare ourselves. China, India and Brazil (and many other smaller countries) provide for the funds to mobilize intellectual and technological modernization, by delaying as much as they can the construction of a ‘social state’, leaving the responsibility of the care for the elderly to their children. In the sense we cannot compare ourselves with them. We cannot follow the same path, not under any political regime, not under any government.

This however does not mean that our state should be Soviet, that our state should be as archaic as before. The modernization of the social state in Russia, is our first priority. All the other forms of modernization directly depend on its success or failure.

That is why the search for alternatives to our path of development is primarily not a technological, but a social problem.’

Education and migration

Replying to a question from the interviewer Kuz’minov provides two examples of what he sees as ‘forks in the road’ on Russia’s development path; choices which cannot be allowed to linger on and require immediate answers. The first example concerns education and migration.

Kuz’minov: ‘In our large cities almost all jobs with manual labor are occupied by migrants. Our current migration policy is in no way based on the long term structure of our economy. Educational policy should follow the choices that citizens make. 80% of the population wants their children to receive higher education. The gap between the graduates of our education system and the real demands on the labor market grows wider each year. Our current economic model is build on the import of migrants who in the long term should occupy 30% of the labor market. This model envisions the creation of large amounts of manufacturing centers, which will compete with the Chinese, but will also need the import of a Chinese labor force. This is a completely realistic model, but it will also require high expenses for the integration of these migrants.

On the other hand, it could be much more prospective for Russia to reject projects that require a large influx of migrants and concentrate on the development of technology, that does not need a large labor force of medium and low skilled workers. ‘

Summarizing his point, Kuz’minov says that: ‘Our industrial policy and the regulation of our labor market is not conform to the expectations of 500.000 graduates of higher education each year, two thirds of which do not have a chance at a professional career.’

Roads or social networks?

The second choice Russia is confronted with concerns the integration of the country in the sectors of transport and information.  Kuz’minov echoes ideas put forward by the president.  Medvedev’s focus on technology as a means of interaction and his overambitious attempt to decrease the temporal distance between Russia’s population centers by reducing the number of time zones show that the political elite is questioning whether the country should continue to try to connect the entire country by quality roads and become a transport corridor between Europe and Asia.  Climate and distances could make Russia unsuitable for such a strategy.

Kuz’minov: ‘The traditional model is very cost intensive. The construction of highways and railways requires enormous expenses. We could also depart from the traditional model for integration of the country by means of the transportation of goods to an economy in which the integration takes part through the global internet, an economy build on the interaction through services and not on the physical transport of objects.

This alternative becomes more and more realistic for our country in which the distance between cities can reach up to hundreds and sometimes thousands of kilometers. There even is a compromise; a focus on the development of transport networks around the larger cities and to increase the distance between living areas and industries from the current 20-30 km to 80-120 km.

Finally, until now I have not been able to discern political agenda’s in this project. The ego’s of individual experts may of course give ground to political intrigues during the process. It seems though that the request for the advice from the working groups has come from a consensus within a political elite, that has been awoken by the financial crisis. The direct request has come from the government, which means Putin. Social policy however is the prerogative of the premier, not the president. Modernization on the other hand is Medvedev’s slogan. The tandem is still intend to move the country forward hand in hand. They are however soliciting for options.

It will be interesting to follow the work of the 21 working groups. Kuz’minov has mentioned monthly reports available for the public and the press.