The instinct of self-preservation in power is stronger than the fear of new stagnation

I agree with the decision of the Ministry of Economic Development to worsen the forecast for economic development until 2030. It is expected that in the coming decades the average growth rate will be no more than 2.5%, and not 4%, as previously expected. My forecast is even lower - 2%. The catch is that, in my opinion, it is impossible to solve the problem of accelerating growth through economic policy measures alone in Russia.

The country has a special political regime and a legal system peculiar to it, which presupposes the usual arbitrariness of the authorities in Russia. And citizens are not very inclined to comply with laws. Following political scientists, such a regime can be called “defective democracy.” This means that when choosing between maintaining political stability and creating conditions for high growth rates, the government will always choose stability that is beneficial for itself. Meanwhile, there are reserves for acceleration. Of course, oil prices are no longer rising every year, and the working-age population will decline. But it is realistic to bring growth to 3.5% of GDP and get 7-10 years of such accelerated development.

No investment megaprojects will help.

Left-wing populist policies will last for a maximum of a year, until rising inflation shows everyone that this is a dead end. Only market development will help to use reserves for growth. We need to remove the barriers that prevent us from moving forward. First of all, this is the low level of trust characteristic of society as a whole. Sociological surveys show that trust “horizontally” - between citizens - is much higher than “vertically” - in institutions such as parliament, police, and church. This is bad for the economy. We see a decline in business activity due to the fact that businesses are afraid to invest large amounts of money. There is an opinion in the business community that it is possible to talk with the authorities about specific tax benefits and procedures. Officials understand this language, but there is no dialogue on more general topics, for example about pressure from security forces.

It's clear how we got to this point.

Back in the 1990s, one could see a conflict between young and sometimes arrogant Russian business and the bureaucracy, which has always ruled in Russia and wanted to maintain its role. While the bureaucracy was represented by young reformers, it did not look very convincing, but under President Putin the situation has changed dramatically. The bureaucracy has won, business has lost confidence and now understands that force can always be applied to it. The situation is getting worse, as we can see from attempts to restore order in the tax sphere with the help of the Investigative Committee. Economic activity cannot be awakened in this way.

A similar situation occurred in other countries, such as Brazil. In the 1970–1980s, military juntas came to power one after another, and each time some kind of business group was associated with them. Seeing this, other players were not very keen on investing in the Brazilian economy. They accepted high inflation and preferred to invest for the short term. The only way to put an end to this system was to return to the rotation of power through elections.

The problem is that the further it goes, the more difficult it is to return to the policy of reforms. This is not 2001, when there was a much higher level of public trust and confidence that “these guys” would complete the reforms they had begun. Now, if you start changing the political and legal regime, you will get a decrease in controllability.

Such a restructuring would be a rather risky operation, which could lead to an even greater slowdown in growth and even an economic recession.

Therefore, I am against sudden movements and for a gradual change in the situation. Only pressure on the authorities from society and business will help. And these should be not only attempts to force changes, but also a demonstration of the ability to cooperate not based on one’s sympathies, but on a real assessment of the situation. A constructive response from the authorities to such pressure would be the best scenario, but I am not at all sure of its reality.

At the same time, the authorities do not have strong external incentives for change. Even worsening conditions and an economic downturn will not force people to take to the streets. They didn’t come out en masse in the 1990s, when social upheavals were truly widespread. So, we may be facing years of stability, but it will be bad stability, perpetuating the lag behind developed economies.

Poor stability: how Russia reached stagnation

Poor stability: how Russia reached stagnation