Russian economic policy presently has three main pillars. One is the overriding desire to maintain financial and economic stability and independence. The second most important is a group of National Projects to develop the Russian economy and social conditions in the period to 2014. The third is the assumption held by many influential policy makers that Russia’s “pivot to Asia” – particularly China – means that there is less need for structural and institutional reform inside Russia.
By Jeff Schubert, Professor of International Business, Baikal School of BRICS, Irkutsk National Research Technical University, Russia.
This article will begin by giving an overview of Russia’s present economic situation, and will then examine Russia’s domestic economic and relevant foreign policy issues using a framework mainly based on the above three pillars. However, other issues that do not neatly fit into one of these three categories will also be considered if they are important. For example, import replacement largely relates to a desire for economic independence but also has an influence on implementation of aspects of the National Projects, and would also seem to run counter to the notion that the “pivot to Asia” is a major plus for Russia.
In administering such policies, Russian policy makers as a whole find it difficult to finally shake-off their own history of centralized planning. This is partly due to the fact that the economic reforms of the 1990s were badly handled with a great drop in economic output and government provided services, surging poverty, rigged privatizations and very significant criminality. Some of this was inevitable given the highly centralized structure of the Soviet system, but much was also due to the intellectual shortcomings and incompetence of influential reformers and their foreign advisers. Too little thought was given to putting in place an effective institutional and administrative framework – legal, accounting, banking etc – that would allow a sensible “capitalist” economic system to effectively function.
Russia’s present-day economic policy makers now appreciate that lack of thought and take a more balanced approach, but cannot resist attempting to exert centralized control with comprehensive numerical targets and now fashionable Key Performance Indicators (KPIs) for almost every activity. The resulting constraint on thoughtful innovative thinking and decision making by mid and lower level officials will be a drag on Russia’s economic performance.
When combined with thoughts of past Soviet technological achievements and the desire to escape the so-called “resources curse”, the result of this planning tradition has been a series of government directed projects to almost magically develop the Russian economy. The first was Skolkovo which was announced by President Dmitry Medvedev in 2009. Later, President Vladimir Putin was to push the National Technology Initiative (NTI) project aimed making Russia a leader in Fourth Industrial Revolution sectors. These projects still exist with their KPIs but have now been joined by the National Projects.