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Putin's Conservative State Capitalism

Published: December 17, 2013 (Issue # 1790)


The essence of President Vladimir Putins annual address to the Federal Assembly on Dec. 12 was that his enchantment with state capitalism and Soviet economics is continuing. Rather than promoting higher economic growth, he wanted to go after the remaining prominent private businessmen.

Russias most urgent economic concern is the disappearing economic growth, but only in the middle of his speech Putin arrived at the need for the renewal of sustainable economic growth. This time he did not blame the euro crisis, but he admitted that the main causes of the slowdown are not external but internal.

Liberal economists usually blame corruption, expanding state capitalism, red tape, decreasing competition and stalled international economic integration as the main causes of the declining growth. In a more positive language, Putin mentions four new factors of development namely high quality of professional education, a flexible labor market, good investment climate and modern technology.

All are correct but hardly key. Putin boasts about the minor improvements in the business climate that have occurred in the last two years and calls for further improvements, which are to be welcomed.

His talk of technological and professional development sounds like a Soviet throwback. It makes sense to revive Soviet-style vocational training, which corresponds to apprenticeships in Germany, Switzerland and Austria, but the unmentioned critical concern is that Putins policies are forcing good, modern managers to emigrate.

When Putin talks about technology, it gets worse. Characteristically, he does not use Prime Minister Dmitry Medvedevs favorite words innovation or modernization. The only thing he wants to modernize is the defense industry. In Putins Russia, everything has to be done by the state: We must form a domestic demand for high technology. He wants to do so by using the system of state procurement and investment programs of the state corporations.

Naturally, Putins state must establish technological standards, measure them and control them. He sounded completely Soviet: I propose to create a system of statistical evaluation of the level of technology in various branches of the economy to obtain an objective picture of our competitiveness. In the Soviet period such a system worked, Putin said. It was liquidated, and nothing else was created. It is necessary to recreate it.

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