Attempt to build in Russia a market economy on the Western model, by and large, failed. And to understand why, I propose to compare the conditions in which this economic model exists in Europe and in Russia.
From this comparison it will become clear whether it is feasible in Russia build a market economy on the Western model, at least in the long run.
So what are the differences between Europe and Russia:
1. Population (in Europe 5 times more).
2. Area of the territory (Russia has 1.7 times more).
3. Population density (in Europe at 8.5 times more).
4. Natural resources (Russia has many times more).
5. The amount of natural resources per capita (in Russia much more).
6. The climate (in Russia on average less than favorable).
7. External conditions (geo-Economics and geopolitics unfavorable for Russia).
8. The completion period of the market (in Europe more than 100 years in Russia, 25-30).
Surely someone will say that I forgot about the cultural differences and mentality. No, not forgotten. Just the mentality and culture values are not countable. Therefore, the stringency of comparison will first deal with the accounts values, and then return to the question of cultural identity and mentality.
For a moment assume that cultural differences between Russia and Europe, there is and evaluate whether or not to operate successfully in Russia the market economy of the Western model. If you want to – imagine all the people held a session of coding and was exactly the same as in Europe.
The market economy assumes free competition and liberal economic model requires minimal government intervention in business. However, Europe and the United States economy has moved away from the liberal model of state regulation and there is even there, but we will not delve into this topic.
In addition to free competition and laissez-faire business regulations and the WTO a set of rules called the Washington consensus. That, and the other assumes open markets and low protective duties.
What does it mean? For the successful functioning of a liberal market economy in Russia, it needs to produce goods and services that are comparable in terms of price/quality European. And in fact even superior. Otherwise, in the absence of protective duties open economy will be permanently reduced.
How to get the best rate price/quality?
The cost is known to be very dependent on the volume of output more than the output volume the lower the cost. And in order to achieve a lower cost per unit of output, it is necessary to release more than releasing a competitor (with comparable technology, cost of raw materials and other costs).
But the population in Russia is less than in Europe, and therefore the domestic market less. Therefore, to achieve the best ratio quality/price, you need to take part of the European market or much to save on raw materials, fuel, materials and labor.
But liberal Economics, the Washington consensus and WTO rules lead to the fact that the cost of raw materials and fuel lines, because grants, subsidies and export restrictions on raw materials are not welcome.
And commodity corporations too unprofitable to sell on the domestic market of raw materials and fuel prices much lower than the world. If these domestic prices much inferior world, there is smuggling, covered up by corrupt officials, and in the domestic market – the deficit. And equalized prices.
In short, no significant difference between domestic and world prices for raw materials in the liberal market model can not be. The difference can be 10-20% or a little more, but not 2-3 times.
However, the difference of the order of 10-20% in raw material prices is insufficient to create a competitive production, with a 5 times smaller domestic market.
And then you need to take into account that the European market was formed much earlier than the 91-th year, when Russia began to implement liberal economy. And when the Russian manufacturers are able to establish new market relations after the dissolution of the Soviet planning system, European manufacturers have long worked and they have all been established.
This means that while the Russian manufacturer is to produce and to market, this market is filled with imported goods. Then the task is dramatically complicated, and the ratio of the volume of production of European manufacturers is not even 1:5, as the proportions of the domestic market of Russia and Europe, and 1:20 or 1:100.
Let me remind you that protective tariffs and subsidies, the liberal model is not welcome, and without them even the Russian market, which is 5 times less than the European, the Russian manufacturer to take is not possible.
Now pay attention to the size of the territory and population density. Large area and low density entails higher transport costs. They arise for all products distributed in Russia, both its own and imported.
Add to this a harsh climate, which also increases the costs of storage and transportation of many goods in the winter. And short season when it is possible to perform construction works, equipment installation and so on.
What we get in the end? What the Russian manufacturer is in much more difficult conditions than the European, especially if he has long been present on the market.
And even if there is some new production, which opens in Russia and Europe at the same time, the European manufacturer still has the advantage. After all, he is within a radius of thousands of kilometers away from the plant much more consumers less transportation costs to capture domestic market, less climatic difficulties.
The advantage of 10-20% in the price of raw materials, which may have a Russian manufacturer, does not compensate for the fivefold difference in size of the market, the difference in the distances and climatic conditions.
And more cheap labor is also not save, because at the present level of automation, the share of wages in product cost is not too high. In addition, the difference in pay at the liberal economic model is also constantly decreasing, because qualified staff is committed to where they pay more, that is in Europe.
Also we should not forget about the geopolitics and geo-Economics. European producers will always have an extra advantage at the expense of political support and close economic ties with the United States. And due to the fact that in addition to the European market, they take part American and part middle Eastern.
If you add up all these factors, it is easy to understand that after the 91st of the year in Russia the chances of had only the production, which at the time of the dissolution of the Soviet Union was superior to European competitors on product quality.
These industries include the helicopter industry, nuclear power, aerospace, weapons manufacturing, and this, perhaps, everything. Others, who did not have a significant advantage and a safety margin, were in a dire situation and many of them are already bent.
Moreover, the new production will also be in an unfavorable situation compared with the European competitors with existing and new.
That is why Russia is not restored to production. The liberal economic model, it will not recover ever. On the contrary, will be permanently reduced.
Once in Europe, learn how to make helicopter, comparable in performance with the Mi – will be covered with the Russian helicopter industry. Learn how to build a nuclear power plant better than the Russian or will achieve success in nuclear fusion – will be covered with Rosatom. Of course, if Russia to refuse from the liberal economic model.
Everything depends on liberal economic model, which gives European manufacturers a lot of advantages due to the fact that they have a 5 times greater the domestic market, less distance, higher population density, better climate, and favorable geopolitics and geo-Economics.
Russia can support their producers with subsidies, subsidies and protective tariffs, but for this we need to abandon liberal economic model and to withdraw from the WTO. And to take action to avoid going back.
But actually this is not enough.
The capitalist model dictates the principle of maximum profit, the principle is flawed, because the modern economy should not be capital growth, employment, technological development, increase of standard of living.
While in Russia in the forefront is capital growth, its economy will remain raw. Because the only natural resources we have the advantage over Europe, in all other respects – climate, distances, population density is inferior.
Specifically I will explain about highest population density is in the modern economy is an advantage. That is why the greatest development reach cities and countries such as Japan and Singapore. High population density enables faster communication, more dynamic labour market, greater efficiency in the service sector.
To catch up with Europe on the quality of goods and services, it is necessary to compensate for unfavorable climate, large distances and low population density more affordable (cheaper) energy and raw materials. As well as introduce subsidies, protective tariffs, and to develop science and education to win again and highly qualified specialists.
And all this rests on the economic model and policy of the state.
The liberal capitalist model dictates the pursuit of profit and free competition, Russian producers will inevitably be in a worse position than the European. And there are no prospects for development in Russia and never will be.
And refer here to the cultural characteristics and mentality does not make sense. Even if the entire nation somehow replaced by Germans, French and Japanese, it will not change any territorial or climatic factor.
Moreover, the mentality is derived from the living conditions of the people, climate, territorial and other factors. So if somehow Russians and Germans are interchanged, then in a hundred years who had come to Germany Russian will be the Germans, who arrived in Russia the Germans become Russian. Actually it is not once tested in practice. The Germans, French and other Spaniards who went to Russia a hundred or more years ago, it became indistinguishable from the Russian. And not because of intermarriage, but because being determines consciousness – and nothing to do.
The conclusion from all this is. Liberal market economy in Russia failed not because the user is incompetent or the people are so worthless. This economy in Russia with its territory, population density and climate, in principle, can not be successful.
And the leadership we have in the last 30 years was not incompetent, and criminal. Because I could not understand, it will all end. I do not believe that Gaidar and Chubais did not know how to read and didn’t understand the above. They just would chhat Russia and its future, they solved their personal problems and successfully resolved them.
And Putin and Medvedev decide now your tasks – and also quite successful. They are engaged in the implementation of the project under the code name of greater Europe, in which Russia will be nothing more than a raw materials appendage – or, translated into their language, “energy power”. Because in a liberal market, nothing else we certainly do not Shine.
