Russian modernization is being reduced to a greasy blob

15.11.2011 — Analysis

Academics, politicians, and entrepreneurs got together to discuss the future of the Greater Urals. Experts searched for focal points for growth in the regional economy, but came to a sad conclusion. Russia in the near future will not only contract economically, but also geographically. This columnist for RusBusinessNews is now convinced that the root of this degradation lies in the fact that the country lacks an agent that is able to implement changes.

Valery Fadeyev, the general director of the media holding company Ekspert, opened a conference titled, Focal Points for Growth in the Economy of the Greater Urals: New Priorities for Regional Economic Policy, noting that a nation that has lost its industrial base cannot become a post-industrial country. In the last 20 years Russia has not paid sufficient attention to industry, naively assuming that it was more economically feasible to purchase inexpensive goods from abroad. As a result, manufacturing value added per capita in Russia adds up to only $1,400 per year. In developed countries MVA is in the $6,000-$10,000 range, which has preordained those nations' rapid transition to post-industrial societies.

Valery Fadeyev believes that universities are one of the most important ingredients in the creation of an innovative economy in Russia. He thinks that universities should not only prepare graduates for professional careers, but should also focus on applied science and engineering. But Russian colleges do not have new science departments they can point to with pride. Viktor Koksharov, the chancellor of the Ural Federal University, stated that his school had recently lost much of its funding for modern equipment, and that manufacturers have been slow to contract with the university for scientific research. The business community still clings to the idea that Russian academics have nothing to offer of interest to industry.

Nor do today's celebrity scientists who are brought to Russia with the help of government grants accomplish very much. In the first place, foreign instructors cost of lot of money, and second, it's not celebrities that are needed as much as mid-level scientists who are able to develop new scientific areas of focus. The Ural Federal University is unable to attract any of these scientists, because foreign instructors go to areas that can offer them a scientific environment. And creating a scientific environment requires a more significant investment and a different lifestyle - campuses or technology parks like Silicon Valley must be created. And Ekaterinburg does not have the prerequisites for building this type of environment. The city lacks the student cafes and inviting dormitories that are needed in order to produce a comfortable environment for scientists.

Natalya Zubarevich, the director of the regional program, the Independent Institute for Social Policy, believes that campuses cannot be created by fiat. Ekaterinburg must use its own resources, both intellectual and financial, to build a scientific environment. To date, all the Ural Federal University has done is hang a new sign on the walls of the two former schools - but there is little new inside them. Correspondingly, the quality of the human capital has also changed little, which is today the main requirement if one is to be competitive on a global level.

Although, to be fair, the same story can be found anywhere in Russia. The state has set the tone by decreasing investment in human capital in recent years. In the end, this approach had much to do with the decline in the birth rate in 2011. Natalya Zubarevich is convinced that today's short-sighted and fiscally over-stretched social policy to populate the vast Russian lands will fail. In fact, about a third of Russian villages will completely disappear from the map.

Vyacheslav Glazychev, the department chair of the administration of territorial development at the Russian Academy of National Economy and Government Service, suggests that the claim that one third of Russian villages will die is, in fact, overly optimistic. The country is experiencing a qualitative change that is destroying what is the very foundation of any civilization - human reproduction. The country will begin to feel the aftermath in a few years.

He is convinced that this sad fate of oblivion will befall two-thirds of Russian villages and one out of three small towns. Although it is true, it has not been fatally preordained which of them will die. Much will depend on the will of the regional authorities and of the residents of the depressed areas themselves. The time has come for the government to determine which ones will be supported and which not - the country's very survival is at stake. This expert believes that it is important to preserve the country's skeleton, which can be fleshed out later.

But the problem is that the country has no Ministry of Finance, only a Ministry of Budget. Consequently, there is no entity willing to implement investment programs. Even the public has the money. To take three rural regions in the Kaluga region as an example, experts claim that residents there hold 8.5 billion rubles in their bank accounts. It is entirely possible that they might allow that money to be used to organize some focal points for growth, but no one is investigating this.

Mikhail Maksimov, the first deputy chairman of the government of the Sverdlovsk region, explained to the conference attendees that the development of the area is being constrained because of the huge risks of investing in the Russian provinces. The business community feels that the local authorities are unpredictable and refuses to invest in even the traditional sector of the economy, much less its innovative components. The Russian political system is putting a strain on entrepreneurs.

But the official believes that although it will be 20 years before a new political system can be created, something needs to be done right now. Mikhail Maksimov is convinced that regional officials need to be held more responsible to the business community for their words and deeds. The Sverdlovsk region has begun to resolve this issue in true technocrat fashion - by creating an electronic document-management system that will allow the governor to monitor the work of his subordinates. But this system does not work well. Mikhail Maksimov claimed that the municipal officials don't go near the Internet for weeks and are even unaware of the directives being emailed to them by the governor's staff. In response, the conference attendees reminded the first deputy government chairman that he himself has made no response in the past year to the investment project to construct a medical center in Nizhny Tagil.

In any event, it seems clear to experts that Russia's main problem is not how to choose a path for development, but the fact that the country has no agent able to implement the ideas for the nation's transformation. Thus, our focal points for growth are turning into indistinct blobs.

Vladimir Terletsky