Home / Economy / 25 years of market reforms in Russia: what next

25 years of market reforms in Russia: what next

It’s time to abandon the selfless faith in the power of the invisible hand of the market

25 лет рыночных реформ в России: что дальше

photo: Gennady Cherkasov

In 2016 will mark 25 years since the beginning of the Gaidar reforms that still affect Russian economic policy.

We destroyed the Soviet system, but to create another successful economic model we have failed. Today, the country that provided all the necessary resources, huge market and beautiful areas, where educated citizens, lags behind in rate of development from many other countries. Many people live in poverty and can’t buy enough food to at least not die from hunger, not to mention to feel like a full-fledged middle class. They sit without work, while no one is tilling the field, without things cost thousands of tractors manufactured in Russia, — no one buys. But poverty exists in our country is not due to the fact that in any year the weather was bad or other objective problems, but because in our country built an incorrect economic policy, which originates in the ideology underlying the 91-m to year.

Liberal economic doctrine, which dominated in Russia for a quarter of a century, denies the need for planning. The invisible hand of the market will do everything for us — this principle, and are governed by liberals, denying that this doctrine had led the country to degradation, to reduce the population, lagging behind other partners.

Now is the time to renounce wholehearted belief in the good power of the invisible hand of the free market. We need to build active government economic policies that stimulate production in agriculture, in industry, which provides the economy with cheap resources, low taxes, supports exporting, seeking access to foreign markets and thereby gives people jobs and a chance to realize their talents. Without state interference in the economy can not do — even now it sets the taxes, fees and interest rate of the Central Bank. In this case, the state is not guided by the interests of production, as abstract objective 25 years ago to abandon Imperial ambitions and to integrate the country into the world economy as a raw materials supplier. This policy has led us to reduce the population, to poverty, unemployment, the degradation and the economic, cultural, and educational.

From January to October 2015 the number of unemployed in Russia grew by 200 thousand people. It would seem, a little, but if we take not only the officially registered unemployed citizens, but also all who are looking for work, in total unemployed will be more than four million people, or 5.5% of the economically active population. To this figure we must add one and a half million guards that stand outside each door and do not produce anything valuable, and one and a half million accountants who are doing largely unnecessary work, because in Russia the accounting and financial reporting is arranged is unreasonably more difficult than in many developed countries.

An additional three million people are unemployed — is a healthy men, smart women, good, conscientious workers, which can be used in the manufacturing sector. Nedootsenennost human potential is very high. And of course, we need to fight it through the creation of quality jobs primarily in agriculture, because the village the number of unemployed is traditionally far ahead of the city.

In the 25 years since the beginning of the Gaidar reforms, food production has doubled in all regions of the world: in North and South America, in Africa, in China. We dropped by 40%, but not because of the disaster and not because we can’t buy powerful tractors. Healthy men who sit today in the village or go to nearby town to work as security guards, have created unfavorable conditions to grow grain, pigs and cows. All this can be remedied by taking the necessary economic policy measures in tax and other spheres.

I’m often asked about the substitution and the fight against import. I, working in the field of agricultural engineering, do not feel any economic isolation of our country. We are cooperating with Canada, Germany and other countries, except, perhaps, Ukraine — with her connection torn by political methods — and Iran, with which we are not allow to trade sanctions. With the West and China Russia has no economic problems, because cooperation works economic feasibility. I think the insulation was not at the start of Yeltsin’s reforms — all of our problems are more internal.

In foreign policy I would recommend to our government less to quarrel with partners and to moderate ambitions at this stage, although some decisions sometimes are positive for our production. For example, the limitation on the importation of cheeses from Switzerland led to the creation of many dairies in Russia. Another thing is that situational responses to “grievances” in the form of retaliatory sanctions do not lead to long-term economic growth. Therefore, the basis of our policy should be no reaction to external stimuli, and the analysis and creation of equal competitive conditions for Russian producers.

In Switzerland, for example, subsidies to farmers amount to 900 Euro per hectare cultivated area, and we have 5 Euro, which are also distributed opaque and get not all. Accordingly, if we want to create equal conditions of competition for Russian agriculture, we must either increase subsidies or to protect our peasant duties or quotas, or provide him with a much cheaper resource than a Swiss farmer. The European Union actively uses restrictive measures, large sets of duties and quotas on the import of grain. Because of this we cannot sell to the EU single ton of grain. Therefore restrictive measures there is nothing wrong, the main thing — correctly to apply them. Not to build walls when it is necessary to create equal conditions of competition.

We all talk about politics, about the economy, about the increase in production. The main direction I propose to do precisely the latter — the development of agriculture and industry. Under conditions of proper economy will be the main value is not a ton of yield, oil deposits, number of accounts or dollars on abstract indicators such as ratio of debt to GDP, and the working man. People will feel themselves worthy, they will care the state will increase the level of medicine and education will increase the quality of life because a society which thinks of moving forward, will be fully configured on the working man — the Creator of the future.

The core of an active economic policy aimed at the creation and independent development of the country, must be a production, industrial and agricultural development. This will allow several times to increase the volumes of domestic products and give millions of people more opportunities to realize their talents, to work and earn money. It is clear that we need to care about culture, and about education, and about science and about medicine. But without the development of production, if not demanded by the people, will become unnecessary education and science. Even if we will invest oil revenues in infrastructure, our country without the real sector does not justify its existence.

I want to remind that the potential of our country is huge. Production, persevered with inadequate economic policies, his persistence proved it. Agricultural machinery, agriculture, furniture, airplanes and other industry surviving in the long term superconcentration. The right economic strategy, reasonable taxes and a rate of the Central Bank, with the support of exports we can measure the growth in industry and in agriculture are not the fractions of a cent and two-digit numbers.

For example, this year the growth of Russian agricultural machinery industry reached 25%. This happened, firstly, due to the devaluation of the ruble, which the government sees as the tragedy at the background of the fight against inflation. Secondly, the real effect was given by the program of subsidizing farmers at 25% of the cost of agricultural machinery. Grant not spent so much money, but the result was impressive. The problem is that with this program too many in the government are struggling, reducing its share in the budget. I hope that the crisis and political situation will help officials to assess the needs of the industry in the complex and the government recognises that it is necessary to plan and conduct an active industrial policy, increasing the profitability of the real sector.

Konstantin BABKIN, the co-chair of the Moscow economic forum

Check Also

Will America manage a soft landing in 2024?

Policymakers rarely bring down inflation without a recession. This time they might Could 2024 be …