Modernisation challenges

The international financial crisis has exposed flaws in the Russian economy: its weak diversification and dependence on the export of raw materials as well as the absence among the elites of clear ideas about the choice of a correct algorithm to solve old and new problems. It has become extremely clear that Russia’s geopolitical aspirations are limited by the country’s socio-economic situation and by the lack of any “breakthrough” ideas about how to get out of this protracted stagnation. Russia’s political leadership realises the need for urgent, corrective actions to force the country’s modernisation: it evidently understands the connection between the “liberal reforms” conducted over the past two decades and society’s de-industrialisation, threats to Russia’s status as a “great power” and its stabilising role in the international system, the need for which has dramatically increased in what Newsweek’s Fareed Zakaria calls the “post-American world”.
Russian Prime Minister Vladimir Putin has already dissociated himself from the “liberal paradigm”. He is apparently behind the discussion that has begun in United Russia party on choosing the optimal strategy for Russia’s future. The first signs of this intellectual activity are already present. Moscow Mayor Yuri Luzhkov, an influential member of United Russia, has published two books with telltale titles: Capitalism and Russia: Dropping Out of the Future? and Transcapitalism and Russia. Both books merit attention.

In a society of “catch-up development” such as Russia’s, the state remains the leading agent of modernisation — both in the sense of creating conditions for a “normal” market economy and building a “new” scientific and technological structure of economics. The “classic” experience of the West, writes Luzhkov, shows that the “plan” and the “market” have a complicated relationship, while their juxtaposition changes depending on the tasks tackled in the process of modernisation.

Privatisation is an important factor, though not a determinant one in the strategy of development. The policy of privatisation is effective where and when it is subordinated to efforts to improve the economy’s effectiveness and competitiveness. From this point of view, the privatisation that took place in Russia in the 1990s did not answer efforts to modernise the country and as a consequence, promoted stagnation and the de-industrialisation of the national economy. A continuation of this line, begun under former President Boris Yeltsin, could lead to Russia’s “dropping out” of the cohort of future leaders of the world economy and threaten the country’s unity and territorial integrity.

The “stubborn” adherence to principles of monetarism in economic policy has made the country’s development chaotic and will require the introduction of elements of planning in the state’s overall course. At the same time, at issue here is not directive planning of the “command-administrative” type (“planning down to the last nail”), Luzhkov stresses, but indicative, strategic planning, the sort of planning that has been adopted not only in India, but also in developed countries in the East and West. (The author does not mention the Planning Commission of India, but it seems he is familiar with its work.)

Luzhkov has great hopes for BRIC, the virtual union of Brazil, Russia, India and China. A continuation of the current “liberal” policy could turn BRIC into BIC, warns Luzhkov. That is, Russia could “drop out of the future”. Luzhkov does not discuss such important aspects for Russia as “development”, “reform” and “modernisation” in the depth and detail they are discussed in Indian social sciences. The ice, however, has undoubtedly been broken and Russia can soon expect a national discussion on the subject of modernisation and a replacement, at long last, for the historically doomed “liberal paradigm”.

Dr Andrei Volodin is a professor of history with the Institute of World Economy and International Relations in Moscow.

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