The root of all problems is still within the country, and only changes within can restore economic growth

The speech of the head of the Central Bank Elvira Nabiullina at the International Financial Congress in St. Petersburg became one of the most notable economic events of the last few weeks. Representatives of state bodies have taught us that in speeches concerning economic development issues, they either refer us to the latest May addresses of the president, or try to find those to blame for the stagnation among colleagues or foreign ill-wishers. We have become quite unaccustomed to truly programmatic speeches that would give at least a somewhat holistic view of the country's economic development strategy.

Nabiullina's speech attracted so much attention largely because, even if it did not formulate such a strategy, it at least quite clearly outlined a position on the causes of the country's economic problems and possible sources of growth. At the same time, in what concerned the economic situation in the country, although the speech did not say anything truly new, it very clearly placed accents and said out loud all those things that many respected people prefer to talk about behind the scenes or - at most - at the Sberbank business breakfast at the SPIEF .

The most important thesis is that the key to the country's economic problems should be sought within the country, and not attributed to external factors. Both trade wars (which really depend little on us) and sanctions (which are more a part of Russia's foreign policy than an external influence) certainly make life much more difficult. But the root of all problems is still within the country, and only changes within can restore growth. Without them, even an improvement in the external climate will only add money to the trough of resource companies, but is unlikely to have a significant impact on the well-being of citizens.

An equally important statement by the head of the Central Bank was the recognition that growth is created by business, not the state. At a time when issues of economic development of the country are discussed exclusively from the point of view of the implementation of national projects, this already blinding statement actually does not sound so obvious. All the rhetoric around national projects as a potential engine of economic growth has been reduced only to the effectiveness of their implementation. Moreover, by effectiveness we mean, first of all, the minimization of stolen money, and not how much certain projects help the work of private business. With such an approach, it is hardly worth hoping that national projects will really be the magic wand that will restart the economy.

If we proceed from the fact that economic growth is created by business, then in order to solve the problem of stagnation we must look at the problems that private entrepreneurs face. They, in turn, very clearly make their attitude to what is happening clear, continuing to demonstrate a very low level of investment in the country's economy. And it is quite obvious that without increasing the volume of private investment, it will be impossible to achieve economic growth. But in order to understand how to solve this problem, it is necessary to clearly understand the reasons for such a low level of investment.

To put it simply, the low level of investment in the country can be explained by both a lack of desire to invest and a lack of opportunities to do so. In the first case, even entrepreneurs who have money that they could invest in a business prefer not to do so, since they do not see sufficiently attractive opportunities in terms of the ratio of profitability and risk. In the second case, entrepreneurs would be happy to invest money in a business, but they are stopped by a lack of funds.

One explanation, of course, does not exclude the other, but in order to understand how to treat a disease whose symptoms are low investment, it is necessary to have an idea of which of them is more important. If the problem is the unwillingness to invest, then the investment climate issues become the primary ones. If the problem is the ability to invest, then the key issues are the development of financial markets and accessible lending. At the same time, if the diagnosis is wrong, the consequences can be extremely unpleasant. Thus, if the problem is the lack of desire to invest, then increasing the availability of loans will lead to this money flowing abroad in every possible way, and if it is invested domestically, then rather in speculative assets (remember the GKOs on the eve of the 1998 crisis).

To understand which of the problems is most pressing in Russia now, we can look at the behavior of companies for which the problem of access to financial resources is practically not an issue due to large volumes of their own funds. And here we also see a rather bleak picture - these companies are also in no hurry to invest money. This was the reason for the appearance of the infamous and, fortunately, already forgotten Belousov list, the purpose of which was ultimately to force large companies with large volumes of their own funds to increase investments against their will. This indicates that the key problem now is not the lack of opportunity, but the lack of desire to invest among private entrepreneurs. And this is treated not by increasing the availability of loans, but by improving the notorious investment climate that Nabiullina spoke about. And this is the key to resuming economic growth.

Another issue is that there is no agreement on what needs to be done to improve this investment climate. But if we believe Adam Smith, then all that is needed is peace, low taxes and a tolerable administration of justice. And if everything is fine with peace, at least in Russia, then there are obvious problems with low taxes and a tolerable administration of justice. And they need to be treated.

The author is the rector of the Russian School of Economics

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