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Russia heatedly debates two approaches to future economic growth

January 14, 2014, 19:11 UTC+3 Zamyatina Tamara
© AP Photo/Misha Japaridze

MOSCOW, January 14 (Itar-Tass) - As Russia’s economic growth showed a steady slowdown last year, Russian economists and financial experts entered into heated debates on the possible ways to revive it. Russia's former prime minister, Yevgeny Primakov, blasted neoliberals, who stand for cuts in budget allocations for large-scale projects and the military industry. But at the same time, supporters of the late architect of Russia’s free market transition, Yegor Gaidar, who subjected the Russian economy to the so-called “shock therapy” in 1992, accuse the authorities of fluidity in the economic course and excessive pressures on business.

“Neoliberals stand for cuts in the budget expenditures on the military industry,” Yevgeny Primakov said on January 13 addressing a session of a business discussion club, Mercury Club.

“They [neoliberals] pay no attention to the natural interaction between defense and civilian industries. A considerable intellectual potential is amassed within the Russian defense industries. The development of the Russian military industrial complex must become one of the main sources for the economic growth,” Pryamakov said.

As a matter of fact, Russia’s society of neoliberals lobbies for the reduction of spending on the needs of military industrial complex in favor of higher financing in the spheres of science and education. In this regard, one of the Russian Interior Ministry’s generals said addressing an economic forum that former “Libyan leader Muammar Qaddafi managed an outstanding system of education, but had no air defense systems. Where is Qaddafi now?”

Primakov also suggested spending more money from the Russian National Wealth Fund and the Reserve Fund on the implementation of large-scale infrastructure projects, namely, on the reconstruction of the Trans-Siberian and Trans-Baikal railways, construction of the central ring-road in the Moscow Region and of the new railway link between Moscow and Kazan, as well as on other development projects in Russia’s Far East and Eastern Siberia.

But Russian former Finance Minister Alexei Kudrin believes that in cases of global economic recessions Russia should maintain and replenish the so-called “safety buffer” in the form of emergency stock. According to the ex-minister, it was such a “safety buffer,” that helped Russia negotiate the global economic crisis of 2008 with minimal losses and this fact was admitted by President Vladimir Putin.

Western business magazines Euromoney, The Banker and Emerging Markets three times named Kudrin as the world’s finance minister of the year during his service term in the Russian government between 2000 and 2011.

Kudrin believes that the growth of investments into the Russian economy stalled due to the lack of full trust in the country’s authorities. Speaking at a news conference at Itar-Tass on Tuesday, Kudrin said that “the growth of investment stalled,” adding that “investors talk about insufficient trust in the government’s policies.” According to the ex-finance minister, “government’s policies are inconsistent and unclear and this troubles investors.”

While Kudrin believes it is necessary for Russia to return to the implementation of a full-scale privatization program and reduce the role of the government in the country’s economy, Primakov, on the contrary, says the government should maintain the key role in it.

Kudrin’s news conference was held on the eve of the Gaidar Forum, slated to be held on January 15-18 in Moscow, where the neoliberals are expected to hold sharp debates with their opponents representing the old economic school.

It has been 22 years since Gaidar’s “shock therapy,” which involved the privatization of a considerable part of state enterprises and the country’s transition to the free market economy. Russians still display mixed attitude toward his reforms. Gaidar’s supporters argue his 1992 transformations averted mass hunger and a civil war in the country and laid the foundation for the future growth of economy. His opponents, however, blame Gaidar’s reforms for various negative consequences citing a slump in the living standards and even more, accusing him of intentionally ruining the economy.

Primakov suggests, in particular, “restoring industries, which were destroyed in Russia in the 1990s, primarily machinery manufacturing.” But neoliberals argue that Russia enters the post-industrial era and the country needs an economy of knowledge.

The current split of opinions over the future course of the Russian economy is also interesting concerning the Russian government’s final decision on which trend to side with.

Yevgeny Yasin, Russia’s former Economics Minister and the head of the Higher School of Economics research university, said in an interview with Itar-Tass that he sees two different camps in the government, “which stick to different economic policies.”

“As of today, I feel great influence in the Russian government coming from Finance Minister Anton Siluanov, Economics Minister Alexei Ulyukayev and Elvira Nabiullina, the governor of the Central Bank of Russia. They are all neoliberals and supporters of Alexei Kudrin. Prime Minister Dmitry Medvedev is also in the same boat,” Yasin said.

“On the other hand, there are officials in the government standing for the development of the military industrial complex and for putting more muscle into law enforcement bodies. They share Primakov’s stance,” he said.

“Eventually, we see two variants for economic policies. It is yet unclear, which approach will prevail. The president controls the clash of opinions and controls the current and perspective policies with his decrees,” the former economics minister said.

Having voiced his own opinion on the current standoff of the two approaches, Yasin said, “All talks concerning of the government’s key role in the economy is an attempt to return to the Soviet system.”

“Considering modern challenges, Russia will have to make a new complicated turn in the economic policies, with the aim to keep market reforms going and enhance the role of businessmen and the private sector. Otherwise, there will be no economic growth,” Yasin said.


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