Maria Kazakova: All the Economic Development Components are Correlated

The discussion was dedicated to the issues of economic development and dealt with various factors which had an effect on it: fr om the institutes traditional to the economic science, human capital and technological progress to political design and social modernization. Participants in the discussion outlined major problems of the economic development and touched in their reports upon such issues as economy, political science, social science and history.

The topics of the discussion were the following: the role of quality institutes such as property rights protection in facilitating the routine development of the economy; social modernization: its role and process; social and political conditions of the emergence and switchover of socialist-period transition economic institutes of Yugoslavia, Hungary and Poland; the Russians’ basic values in the European context; the role of the human capital in development of the economy and society and factors that limit the human capital’s influence on economic development; the role of sophisticated exports in economic development, some outputs of the research into Russian exporters’ innovative activities; the transition institutes’ advantages and risks and the prospects of utilization of the transition institute model for transformation of limited access regimes.

Participants in the discussion: Ilya Voskoboinikov, Senior Researcher of the Center for the Inflation Rate and Economic Growth Research, NRU Higher School of Economics; Mikhail Komin, Expert of the Center for Research of Institutes and Society, Center for Strategic Research; Ivan Lyubimov, Senior Researcher of the Center for Economic Growth Research, RANEPA ; Dmitri Travin, Professor of the School of Economics, Head of the Center for Modernization Research, St. Petersburg European University; Anna Fedyunina, Director of the Analytical Center, NRU HSE (St. Petersburg); Vladimir Magun, Head of the Center for Mass Consciousness Comparative Study, Expert Institute of NRU HSE; Maxim Rudnev, Leading Researcher of the Center for Mass Consciousness Comparative Study, Expert Institute of NRU HSE.

Opening the expert round table, Maria Kazakova, moderator of the meeting stressed that economic development was a complex process which was in the focus of researchers for decades. This process involves all the economic agents, including companies which make investments in equipment and technologies, workers who accumulate knowledge, authorities investing in the infrastructure and thus upgrading the quality of institutes and the society undergoing social modernization and gaining humanitarian views in course of time. All these economic development components are correlated. In particular, without modernization of the institutes it would be difficult to make the economy more complex, while without support the reforms fail to be implemented effectively. The latter may require transition decisions that secure the required support of the reforms.

The development process is complicated due to differences in limitations hindering development in different societies. Certainly, know-how or adequate protection of property rights are general components of the high standard of economic development, however, right now institutes and a lack of expertise may not necessarily be the main factors behind stagnation. As the economic development is a complex process, it requires a customized approach involving transition decisions.

M. Kazakova noted that the round table’s idea was to show the complexity of economic development and importance of economic, sociological, historical and political components of that process. The issues discussed at the meeting were as follows: the importance of making imports more complex, promotion of efficiency, accumulation of human capital and individuals’ worldview values as well as functioning of intermediary institutes for development.

Ilya Voskoboinikov opened the round table discussion with a report dealing with long-term growth factors prior to and after the 2008 financial crisis and potential causes of the global economy slowdown that could explain the Russian economic stagnation of the past few years. Ilya Voskoboinikov noted that factors by which countries differed from one another by the level of incomes and economic growth rates remained largely unclear. An important step towards the explanation of those differences was division of the contribution made by production factors (labor, physical, human and intangible capital and natural resources) and productivity factors. As seen from the research literature, the global stagnation of the past decade was driven by slowing down productivity growth rates. Their dynamics was largely governed by non-economic factors, in particular, a diffusion (exchange) of technologies, as well as distribution of workers by jobs wh ere they would be more efficient. The speaker pointed out that a drop of the total factor productivity which started in the world in the mid-2000s before the 2008 crisis was behind the stagnation of the Russian economy observed from 2008. Comparing Russia’s economic dynamics with that of the global economy and individual countries, Ilya Voskoboinikov said that the slowdown of the total factor productivity was registered almost in all the leading economies from the mid-2000s. It means that at least a portion of factors behind the stagnation of the Russian economy could be of a global nature.

Elaborating on factors contributing to productivity growth, Anna Fedyunina touched upon the importance of making exports more complex for development of the economy and cited as an illustration Russian exporters’ innovative activities. Speaking about the complexity of the economy as a factor of development, Anna Fedyunina stressed that in accordance with the approach developed by R.Hausmann and C. Hidalgo the complexity of the economy depended on the complexity of export goods; it is noteworthy that the economy would be more complex if it exported varied complex goods (with high added value) that only a few countries could export. The statistical data point to a positive correlation between economic complexity and the well-being level: the more complex the economy, the higher the well-being level.

However, Anna Fedyunina said it was very important to understand which economic sectors should become more complex and what factors were behind a company’s willingness to promote its efficiency and competitiveness. The research literature provides a lot of facts of a company’s productivity growth being influenced by that company’s innovative decisions and exporters being more likely to produce high-price and better quality goods than non-exporters. It is established that companies which engage both in exports and innovations are more effective. They are followed only by either innovators or exporters, while companies which take part in neither activity are the last in this list.

According to Anna Fedyunina, there are a number of channels through which exports may facilitate innovations. Firstly, export- related revenues permit to finance innovation activities, while the latter in their turn modify the pattern of exports and make it possible to quit the no-win strategy of price competition alone. Secondly, it is an adoption of new knowledge, technologies and business models through contacts with foreign customers; if necessary the type of innovation activities may change and a switchover to application of up-to-date technologies, including foreign ones may take place. Thirdly, competition-related effects stimulate innovations. In addition, exports to developed countries and exports to mid- and high-tech industries have a great effect on the build-up of a company’s innovative potential.

Speaking about the Russian economy, Anna Fedyunina said that according to the statistical data the extent of complexity of the Russian economy had been shrinking since 2009 and that could be explained by a number of factors, including downgrading of Russia’s position in the Doing Business rating as regards foreign economic conditions, low patent activities of Russian companies, low publication activities potential and weak partnership between universities and companies which was the evidence of Russia’s low competitive edge in the world.

Vladimir Magun, made a presentation of his paper written in co-authorship with Maxim Rudnev on core values of the Russians in term of the European context. Introducing his report, V. Magun stressed that unlike, for example, macroeconomic indicators such factors as values, culture and other could not be measured. Also, these factors were “traditional” and eternal, so, such notions as “cultural matrix”, “code”, “genotype”, “archetype”, “mentality” and other being the restraints of changes and development had indulgence for remaining unreformed. The speaker said that another widespread ideological belief was the supremacy of the Russians over people of the West: spirituality vs. “materialism” and collective values (“collegiality”) vs. individualism. However, these values constitute a full-scale subject for the research and may serve as an effective tool for comparative international research. It is noteworthy that Russia is an ordinary country which has very much in common with other countries having a similar level of economic and political development and being within the pan-European and global trend. Consequently, Russian values as those of other nations may undergo modification.

The analysis presented in the paper written by V. Magun and M. Rudnev was carried out in compliance with the S. Schwartz approach under which values were dealt with in terms of the following two lines: “Preservation – Openness to Changes” and “Self-Affirmation – Responsibility for People and Nature” vs. “Responsibility for People and Nature” category = Altruism. Vladimir Magun pointed out that in the past decade the Russian values had changed towards Openness to Changes and Self-Affirmation with Russia and other countries (including Western Europe, Scandinavia, Mediterranean countries and post-communist Eastern and Central Europe) retaining their relative position on the value-based map. It is to be noted that for the Russians the importance of the “Preservation and Responsibility for People and Nature” category was diminishing, while that of “Openness to Changes” was growing. In Russia, core values were changing, too. In particular, such notions as security, conformity, amiability and universalism were getting less important, while novelty risks and hedonism were gaining momentum. In the past few years, the importance of traditions increased, while that of self-dependence did not. Analyzing modification of values in Russia and other European countries in the past ten years, V. Magun noted that Russia had retained its relative position and deviated further from developed countries, such as the UK, Germany, France, Sweden and other.

According to V. Magun, an important factor behind the values modification was a generational change: in 2006–2016 the younger generations at the age below 25 years old moved towards Openness to Changes and Individualism (Self-Affirmation), while elder generations (over 60 years old), towards altruism (Responsibility for People and Nature) and Preservation.

Summing up the results, the speaker concluded that the Russians’ preferences shifted stronger than in other European countries towards Preservation (vs. Openness to Changes) and weaker towards Responsibility (vs. Self-Affirmation). The past decade saw a shift towards individualist values (in their two variations) to the detriment of socially oriented values. Vladimir Magun stressed that people’s (the society’s) values shift towards Openness to Changes was in discord with the statesman model imposed by the state, but it was at the same time, most probably, efficient for the economic development.

Dmitri Travin spoke about socialist period transition economic institutes in Yugoslavia, Hungary and Poland. From the experience of the above countries, Dmitri Travin concludes that their efforts to form transition institutes were related to a response to shocks, rather than an orderly restructuring. In particular, Yugoslavia experienced a foreign policy conflict and needed legitimization of the regime based on the anti-Stalinist principles; Hungary was under the occupation and took efforts to legitimize the new regime by means of a social pact, that is, goulash in exchange for freedom; and, finally, Poland was in the midst of domestic policy conflicts and sought to carry out economic reforms by means of round table discussions. Speaking about Russia, Dmitri Travin noted that it had not a single condition for modernization by means of transition institutes due to the following factors: the political regime was stable, legitimacy was ensured through manipulation of the masses, while external shocks (dynamics of global oil prices and sanctions) were not that important. Dmitri Travin believes that the main modernization factor in Russia in future may become a generational change in the government agencies to younger generations which are shifting towards openness as specified in Vladimir Magun’s report.

The expert discussion on transition institutes was completed by the report delivered by Mikhail Komin, Expert of the Center for Research of Institutes and the Society, Center for Strategic Research, in which he touched upon advantages and risks related to utilization of transition institutes for transformation of limited access regimes. Mikhail Komin believes that from the experience of political regime transformation during the latest wave of democratization one can see only a partial efficiency of standard transition institutes’ switchover to open access regimes. In some cases of successful transformation, the so-called second choice institutes representing an intermediary form of transition to a standard institute, but applicable for implementation with the socioeconomic, political and cultural limitations taken into account were used. The main risk related to introduction of such transition institutes consists in coalition of earlier winners who may block completion of the transformation of the intermediary stage into a full-fledged institute. However, formation of the second choice institutes with this and other political risks taken into account may create a potential modernization track. Mikhail Komin noted that the work on establishment of successful transition institutes should be carried out along the following lines: accounting of political, resource, social and cultural limitations, easing of limitations in the mid and long-term prospects; facilitation of the achievement of threshold conditions for a switch-over to the free access regime; generation of new economic rents with a “termed” nature of access provision and stimuli for promotion of profitability and competitiveness on foreign markets; creation of stimuli for domestic political competition between the elite groups , introduction of sanctions in case of seizure of control over the political process by one of the elite groups; and creation of venues for networking and dialogue between various social groups.

Presentations to the reports:

• I. Voskobojnikov. Dolgosrochnye istochniki rosta rossijskoj ehkonomiki do i posle krizisa 2008 g.
• M. Komin. Perspektivy i riski ispol'zovaniya modeli perekhodnyh institutov dlya obespecheniya transformacii poryadkov ogranichennogo dostupa
• V. Magun. Bazovye cennosti rossiyan v evropejskom kontekste
• D. Travin. Perekhodnye instituty v 1950-h – 1980-h gg.
• A. Fedyunina. V chem vazhnost' uslozhneniya ehksporta dlya rosta ehkonomiki?