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Trajectories of Economic Transformations. Lessons from 2004 for 2024 and Beyond
Valery Kushlin
The first English-language edition of a landmark 2004 work by a prominent Russian economist, Professor Valery Kushlin, offers profound insights into the painful challenges and crossroads of Russia’s post-socialist transition, nesting them in the 21st century’s emerging global socioeconomic trends and contradictions. Twenty years after the book’s original publication, its key observations on the nature of economic transformations strongly resonate in the context of contemporary global challenges.
Trajectories of Economic Transformations
Lessons from 2004 for 2024 and Beyond
Valery Kushlin
To Oksana, my beloved wife and
trusted companion for life
Kushlin Valery
Trajectories of Economic Transformations: Lessons from 2004 for 2024 and Beyond / Valery Kushlin. – Ekaterinburg : Издательские решения, 2024. – 346 p.
ISBN 978-5-0064-6474-2
The first English-language edition of a landmark 2004 work by a prominent Russian economist, Professor Valery Kushlin, offers profound insights into the painful challenges and crossroads of Russia’s post-socialist transition, nesting them in the 21st century’s emerging global socioeconomic trends and contradictions. Twenty years after the book’s original publication, its key observations on the nature of economic transformations strongly resonate in the context of contemporary global challenges.
Translated and edited by Andrey V. Kushlin, 2024.
Cover design by Ivan A. Zherebtsov, 2024.
All rights reserved.
© Valery Kushlin, 2024
ISBN 978-5-0064-6474-2
Created with Ridero smart publishing system
Introduction
The modern world economy is a complex combination of transnational structures and national economic systems of different scales and levels. There is much to be said about the increased interdependence of economic systems in the world and the dynamism of economic and socio-political changes. But no matter how economic interactions in the world change, most people judge them by what happens in their home country. The peoples of Russia, as well as the peoples of several other countries. In the last decade of the 20th century, they were involved in transformations that were very sensitive to them, which primarily took over the economy and, through this, all areas of people’s lives. These transformations were initiated by the conscious actions of the most active representatives of the country’s elites and tacitly supported by the people. From the very beginning, they acquired the character of purposeful changes in the economic system, so it became appropriate to talk about the policy of economic transformations.
Although these transformation processes started a long time ago, and mountains of literature have already been written about them, the comprehension of what is happening not only does not seem complete, but with each step from the old to the other, it gives rise to more and more questions that do not receive explanations. Among such questions are both directly mundane, pragmatic, related to the lives of people today and tomorrow, and conceptual, worldview, related to the understanding of the driving forces and patterns of qualitative and quantitative changes in the economy and society.
The focus is rightly on changes in the economic system, which also determine other qualitative features of society. In studying them, it is important to agree on fundamental approaches related to the understanding of the general and the specifics. Since economic transformations have occurred many times in the history of countries and peoples, there is a natural desire to use the facts of history and their systematization in literature to derive the laws of economic transformations. applicable to today. Such an approach cannot be excluded, but neither can it become the main method of analysis. The transformations of the economic system that have unfolded today in Russia and other post-socialist countries cannot be adjusted in terms of content and consequences to analogues in the past. They are truly unique and need to be approached in all their complex concreteness. It is also necessary to consider the very complex relationship between the transformation processes in the countries of the post-socialist zone and the rest of the world economy. These external blocs are influencing post-socialist countries more strongly than in the past, and not necessarily positively. The increasingly contradictory development of events in the world economy, including in the system of economies of countries that have always seemed stable, gives rise to expectations of serious transformations in themselves along not entirely clear trajectories.
These considerations have predetermined our approach to the chosen topic of economic transformation. We will talk about the content and methods of transforming the Russian economy as a particularly complex phenomenon that does not fit into some known schemes, but at the same time as a process that is part of contradictory economic and socio-political transformations around the world.
When analyzing such complex transformational phenomena, the question inevitably arises about their causes and effects, about real (and hidden) goals, and about the trajectories of progress towards them.
The word “trajectories” in the title of this book is somewhat symbolic. It denotes the need for the economic systems of all countries to move towards new states in order to overcome global contradictions, and at the same time emphasizes the limitations of managerial influences on these advances. It is no coincidence that the concept of “trajectory” is taken here in the plural. I proceeded from the fact that there are a great many ways to transform the economy in each country. Moreover, the endpoints of each of the trajectories are also not unambiguous, but multivariate. The goals achieved by economic transformations are clarified and concretized only in the course of the practice of transformations. This means that the analysis of transformation trajectories should include a constant clarification of the content of transformations and their goals.
In fact, today, when assessing economic transformations in Russia, they are guided by their comparisons with the situation in the developed countries of the West. But to what extent this benchmark can serve as an objective criterion of socio-economic progress, no one has a confident answer today.
For some time now, it has become axiomatic that the most efficient economy is a market-type economy, i.e., one based on the principles of self-regulation, on the automatic laws of supply and demand, and on individual interest as the engine of development. The assertion of the axiomatic nature of this truth was facilitated by the long-term practice of the dynamic development of the economies of the countries of the capitalist West against the background of the rest of the world. At the same time, however, the question of the price of this “effectiveness” was left unanswered, as it is associated with the unique conditions for consuming the potential of the world’s resources within the “model” countries. Nevertheless, practically all deviations from the supremacy of the principles of the Anglo-Saxon market, be they patriarchal economies, command economies, collective or socialist economic systems, have remained in the historical past and are considered to have lost the competition with the market capitalist economy. Hence the choice of ways to transform the economic systems of the countries of the socialist camp made in the last decade of the second millennium.
It was the processes of radical transformations of economic systems in the countries of the post-Soviet and post-socialist zones that gave rise to a special elaboration in the literature of a special category – “economic transformation” or simply “transformation.”[1 - In 1990, the World Bank began to publish a special periodical bulletin “Transition” in several languages, designed to highlight the experience and problems of radical economic reforms in countries with economies in transition.] Over the past decade, several publications have been issued in which the topic of economic transformations is brought to the level of theoretical generalizations[2 - Lyubimtseva S. V. Transformation of Economic Systems. Moscow, Economist Publ., 2003; Minaker P. A. Systemic transformations in the economy. Vladivostok: Dalnauka, 2001; Monakhova L. I. Transformation of the Planned Economy into the Market Economy in the Context of Globalization. Moscow, Economist Publ., 2003; Olsevich Y. Transformation of economic systems. Moscow, Institute of Economics of the Russian Academy of Sciences, 1994.]. Attempts are made to identify certain laws of economic transformations common to the long history of mankind. But the desire for universalization in the description of the laws of development is fraught with the generation of errors. The probability of such outcomes is high if theorizing on the topic of economic transformations begins to follow the path of logical analysis concepts or juxtapositions of phenomena that are similar to each other in form, but in fact, perhaps not of the same order.
In this book, the reader focuses on the understanding of specific processes of transformation of economic systems at the turn of the second and third millennia, which started in the former socialist countries because of the conscious actions of the elite of society. Their objective reason is the need to establish economic institutions that ensure higher economic efficiency and the growth of the well-being of peoples. In practice, however, the proclaimed reform plans have largely failed to materialize. A few contradictions of the old economy, such as insensitivity to scientific and technological progress (STP), heavier structure, as well as social problems, have become even more acute. Moreover, after 10—15 years, the content and trajectories of the transformations that have begun in many countries today do not look quite predictable. The economic downturn has been inexplicably large and long-lasting. There is a great gap between the people who have benefited greatly from the reforms (the minority) and the people who have clearly lost (the majority).
In the context of the obvious divergence of interests of the existing social groups, it is difficult to count on the coincidence of assessments of the effectiveness of economic transformations among different segments of society. The number of people who are dissatisfied with the transformations is very high, and many are inclined to criticize these processes at the conceptual level. There are reasons for this, because the role models – the economies of highly developed countries – are in many ways more discredited than before. Under the influence of the aggravation of contradictions, the uncertainty about the future of the peoples of formerly prosperous countries is increasing. Local and international financial and economic crises have become more frequent. In the full sense of the word, some respectable concepts of transition to a market economy developed by international institutions on the basis of classical schemes for developing countries and countries with economies in transition have gone bankrupt. A striking example is the widespread negative effectiveness of the transformation programs formed on the basis of the so-called Washington Consensus.
With the rejection of the alternative economic structure to capitalism, it seems that all systemic obstacles to the establishment of homogeneity of economic space on the entire planet and to the harmonious socio-economic development of the world along the well-trodden track are being removed. Meanwhile, the latter is just an appearance. In fact, there are growing contradictions associated with the unevenness of economic development, the struggle for limited resources, and the new scale and quality of structural changes in the global world.
World-renowned philosopher and sociologist Alvin Toffler argues that “the recent shifts in Eastern Europe and the Soviet Union are only minor firefights compared to the global power struggle that lies ahead. And the competition between the United States, Europe and Japan has not yet reached its climax.”[3 - Toffler A. Metamorphoses of Power. Moscow, AST Publishing House, 2002. P. 16.]
The development of events in the world in the first years of the third millennium showed unexpected and very tough conflict situations that manifested themselves in the “prosperous” spaces of Europe and America, not to mention the Middle East and Africa.
But so far, in the literature, the theme of the struggle for power, touched upon by Toffler, reflects the side of the contradictions between the present and the future, which is limited to the interests and lifestyle of the most highly developed countries of the world. The rest of the world is present in the arguments only as a general background, as a condition for the implementation of the strategies of highly developed countries. Such an accentuation of research is a typical feature of the works of modern social scientists living in the West: apparently, it reflects stable priorities of thinking that exclude the manifestation of a deep interest in the needs of peoples who are not included in the “golden billion.” Meanwhile, future processes in the world are not reducible to relations between the United States, Europe and Japan (for all their significance). The most unexpected turns in world processes may occur, which will be determined by the nature of the development and resolution of contradictions between the North and the South, between the West and the East, between transnational corporations (TNCs) and the rest of the world, between religions, etc.
So far, there has been almost no scientific research on the content and trajectories of possible transformations of the economic systems that have developed in highly developed countries. Most researchers and politicians prefer to think that everything in these countries will continue to follow the well-trodden path. However, given the real trends, there is less and less hope for such scenarios.
In this context, materials on economic transformations in post-socialist countries, especially analytical and evaluative materials on such a large-scale and truly complex country as Russia, are becoming increasingly important. They are important both for finding the right decisions regarding the outcome of the experiments that have been initiated and the fate of hundreds of millions of people living in these territories, and for eliminating the mistakes of “arrogance” on the part of global strategists. It just so happened that the course of history created a unique test site in the space of the former USSR and the former Council for Mutual Economic Assistance (CMEA). This consideration was fundamental in shaping the idea of this book.
The book is based on materials on the economy in the former Soviet Union and, first of all, on materials from Russia. This emphasis is due, firstly, to the author’s personal interest as a citizen of his country, and secondly, to the author’s direct impressions of the behavior of high state structures both during the period of transformations and long before the collapse of the USSR. Thirdly, the author proceeds from the fact that it is the post-Soviet (especially Russian) transformations that today have a sufficiently representative factual base to make broader generalizations about hypotheses about the future of economic transformations in the world. Both the geopolitical position of the object of study (USSR, Russia) and the scale of the phenomena observed here during economic transformations provide grounds for global assessments.
An important circumstance that predetermines the choice of the vector of economic policy in specific countries and in the world is the correlation of forces of the functioning scientific and economic schools. Therefore, to the extent possible, when considering the main topics of economic transformations in Russia and in the world, the book traces the changes in the contours of economic thought that affect real life. Such an analysis is directed by the author to determine the scientific basis for the implementation of further economic transformations in Russia in the most effective way for the country.
Part I: Prerequisites and the Course of Transformations in Russia
Chapter 1. The Turn of the Millennium: A Time for New Directions
The transformation processes in Russia and other post-socialist countries began and unfolded at a time when the world of highly developed countries seemed to be rushing forward at full speed and ideally embodying the phenomenon of socio-economic progress. At the turn of the second and third millennia, however, the intellectuals of the world began to talk more and more often about the sense of a dead-end path based on the evolution of the age-old system of capitalist economy. The reason for this was the frequent economic and financial crises in various parts of the world economy, the aggravation of contradictions between competing centers of economic dynamics, including between traditional allies within the bloc of highly developed countries, the emergence of fundamentally new processes and forms in the global economy that cannot be explained within the framework of the usual scientific and economic concepts, the growing threats of energy (and resource shortages in general), and the lack of harmony between industrial development and the preservation of the human environment, the unevenness of scientific and technological progress (STP) and the ambiguity of its consequences for different countries and social strata.
The famous philosopher Jean Baudrillard, professor of sociology at the University of Paris, put it succinctly: “We are moving at an increasing speed, but we do not know where.”[4 - Ekspert. 2002. No. 17. P. 65.]
A Local Knot of Global Contradictions
In the last quarter of the 20th century, the aggravation of contradictions in socio-economic development manifested itself in all countries and regions of the world, but not simultaneously and with varying intensity. Despite the spurring effect of globalization, which has provided a significant head start to countries that have concentrated the potential of transnational capital on their territories, the world economy has not accelerated, but even slowed down. Average annual growth in gross domestic product (GDP) in the world fell from 3.1% in 1980—1990 to 2.0% in 1990—1995.
Let us name several more socially specific negative processes noted by international experts. First, there is a deepening inequality in the world. Average incomes in the richest 20 countries are now 37 times higher than in the poorest 20. That gap has doubled over the past 40 years, largely due to slow growth in the poorest countries. Similar phenomena of deepening inequality can be observed within many countries. An increasingly serious destructive factor is conflict situations have become more frequent. In the 1990s, more than half of the poorest countries were involved in conflicts, mostly civil conflicts. The result has been enormous losses, reversing the elements of progress and leaving a legacy of destruction and mistrust that undermines future opportunities. The relationship between nature and society has sharply deteriorated. Air pollution has reached critical proportions in many countries. Freshwater scarcity is increasing, with a third of the world’s population living in countries that already experience some or significant water scarcity. Since the early 1950s, nearly 2 million hectares of land (23% of the world’s arable and grazing land, forests, and wetlands) have been degraded. Deforestation of the land is proceeding at a significant rate (for example, since 1960, a fifth of all tropical forests have been destroyed). In many ways, there is a loss of biodiversity.[5 - World Development Report 2003: Sustainable Development in a Dynamic World – Transforming Institutions, Growth, and Quality of Life. Moscow, Ves Mir Publ., 2003. P. 2—3.]
Of course, these and many other problems did not come to the fore all at once. It is rather difficult to name the specific years of their crisis escalation, just as it is impossible to record the exact years when major corrective steps were initiated by governments or international organizations. It should be noted, however, that the period of heightened concern in the world about new problems coincided with the maturation and unfolding of fundamental transformations of economic systems in several developing countries and countries that have for some time been called countries with economies in transition. It can be argued that active actions on the part of the institutions of the international community to overcome the aggravated problems were asymmetrical, they acquired the character of correcting the situation mainly among those who did not get into the “mainstream,” who lagged the leaders in the field of technological progress and social development.
Russia and the other countries that made up the socialist system were among the first in the world to identify the most obvious economic contradictions. They manifested themselves in relief in the crisis of the extensive path of economic development, the inability to turn from which to a more adequate path of intensive type of expanded reproduction became a stumbling block for the countries of the Soviet bloc. And it is no coincidence that since the mid-1970s, in the USSR (and in Russia, which structured this union), in other socialist countries, there is talk of the dangers associated with a slowdown in economic growth. Table 1.1 shows that between 1980 and 1990, Russia’s already less impressive share of world GDP (compared, for example, with the United States or Japan) fell to 2.7%. The share of the other leading countries of the Eastern European bloc in world GDP fell to less than 1% in 1990.
Looking at the table, we notice while there was a slight decrease in the quota in the production of world GDP also in the United States and Japan. The shares of China and India also declined slightly during this period, but in the following years there was a steady increase in the economic weight of these countries.
The contradictory course of events in the economies of the socialist countries is very clearly illustrated by the parameters of exports and imports. Table 1.2 shows that in 1980—1990 the average annual growth rates of exports and imports in the transition economies[6 - The use of the concept of “countries with economies in transition” in relation to the periods before 1990 is very conditional and is permissible only in view of the subsequent transformation processes in the socialist countries. According to the IMF methodology, the transition economies usually include the republics of the former USSR and Yugoslavia, Bulgaria, Hungary, Poland, Slovakia, Romania, the Czech Republic, and Mongolia.] fell to symbolic values of 0.9 and 1.5%, respectively. At the same time, when considering three consecutive periods (1960—1970, 1970—1980, and 1980—1990), the nature of the dynamics of the average annual growth rate of exports and imports in transition economies is identical to those in developed and developing countries. However, the decline in the average annual growth rate of exports from 17.6% in the 1970s and 1980s to 0.9% in the 1980s and 1990s was egregious.
Table 1.3 shows how rapidly the share of transition economies, especially Eastern Europe, in world exports declined in the period after 1970.
In the context of the obvious aggravation of the problem of efficiency in the economies of the socialist countries, the decrease in their economic weight in the world economy and considering the increased desire among the elites of these countries to change the situation as quickly as possible, the active transformations of the economy that have begun here have become the center of the global search for new solutions. The conceptual dominant in transformation programs has been reduced to the formation and stimulation of market entrepreneurial forces on the model of the United States and other highly developed Western countries.
Transformations as systemic transformations in the economy and state structure unfolded differently in different countries and regions. In some places, for example, in Poland or the Soviet Baltic republics, political processes and demands came to the fore, followed only by radical economic reforms. In other cases, as in Hungary, for example, the process of economic reforms in the market direction was far advanced in the depths of the past, socialist system, and developed primarily in an evolutionary way. And in a completely evolutionary way, without the destruction of the political system, transformations developed in China. One way or another, the main content and motive of transformations and reforms was the formation of a market economy as a basis for familiarization with the values and lifestyle of highly developed countries of the West.
The totality of transformation processes in post-socialist countries appears to the observer, who undertakes to comprehend them, as a socio-political shift, which has no analogues in history. Nevertheless, the researcher must be able to rise above the abyss of events, otherwise the vector of objectivity will be lost.
Overcoming the euphoria inherent in the start of market reforms, it is impossible not to admit that the transformations that have unfolded in the post-socialist part of the world combine contradictory qualities: the uniqueness of the scope, on the one hand, and conceptual traditionalism, on the other. Indeed, the spatial scale of these transformations is impressive: they encompass at least a fifth of the Earth. They have begun to be implemented on the principle of almost instantaneous changes in the previous economic system, but, except for nuances, they are proceeding in different countries according to an almost uniform scenario in conceptual terms. In essence, transformations appear to be revolutionary only for the countries where they take place, and in a broader sense they are more than evolutionary, since they work by design, not to destroy, but to strengthen the prevailing traditional economic system.
Recognition of this conclusion has serious methodological significance for understanding the origins and driving forces of transformations in post-socialist countries. They are initiated and moved not only by the contradictions that have accumulated within the socialist system, but to no less extent by the approach of a deadlock in the evolution of the highly developed world along the traditional trajectory.
“The order formed in the post-war years, the ‘order of the 20th century,’ is being destroyed all over the planet, and not only in the former Soviet Union,” the outstanding thinker Nikita N. Moiseev remarked shortly before his death. “And our Russian conception of the future, and above all of the future of Russia, cannot be at all correct if we begin to regard the national internal crisis only as our own, outside of those general processes of global development that clearly testify to the general planetary ill-being.”[7 - Moiseyev N. N. How far until tomorrow… Free thoughts. 1917—1993. Moscow, MNEPU Publ., 1997. P. 251.]
This global malaise prompts the highly developed countries – the most active and powerful part of the world – to use all means to overcome the emerging contradictions based on their understanding of “progress.” And far from a secondary place among the actions taken is given to the use of the processes of purposeful adaptation of the space of the post-socialist countries – a space that was not previously part of their direct influence – to the tasks of such “progress.” Hence the activity of external consultants in Russia and other countries of the transformation zone. But the concepts and programs developed with their decisive role in today’s coordinates of the globalization of the world economy cannot, in principle, be impartial. In practice, they are built to a large extent on the interests of the developing party and only insofar as they are based on the interests of those countries that have undertaken to implement them on their territory.
Thus, in the concepts and composition of the driving forces of the processes of economic transformations in Russia and similar countries, a significant “specific weight” is occupied by the interests of the external order. Recognition of this fact prompts a more thorough assessment of the reasons for the ambiguous outcome of the activities recommended by the programs for reforming countries. In Russian practice, analysts of the official circle usually interpret the contradictions of the ongoing transformations because of deviations from the planned ideal course, as “inconsistency in the implementation of the reform program.” But what is to be done when this program only to some extent corresponds to the interests of the people of the country, and largely works either for the false benchmarks of “progress” or for the interests of competitors?
If the model models that were decided to be followed during the transformations are not completely good, then is it not logical to first make sure of the correctness of the goals and content of the reform programs, to assess the degree of their compliance with the interests of the people of your country? Only based on such continuous verification can the issues of the adequacy of implementation efforts to the proposed reform goals be properly resolved. Such a continuous feedback loop between the idea and the result is, among other things, a guarantee of maintaining confidence in reform actions and preventing possible irreversible disappointment in society regarding the very idea of systemic transformations. All this should further strengthen us in the opinion that a comprehensive study of the meaning of the overdue transformations in the economy and society, as well as the trajectories of their optimal implementation, will remain the central problem of social science for a long time.
Evolution of Strategies for Change
Economic reforms, filled with a market component, started in our country long before the collapse of the USSR and the socialist system. In 1955—1956, Nikita Khrushchev set the pace for the shake-up of the Soviet system. Although the reforms he initiated were essentially administrative and even voluntaristic, they to a certain extent paved the way for the inclusion of market mechanisms. A new quality of research (at least in the ideological sense) appeared with the start of market reforms in 1965 that were associated with the name of Alexey Kosygin, Soviet Prime Minister, as well as following a number of attempts at economic and political reforms in Czechoslovakia, Hungary, and Poland.
If we talk about the Soviet Union in the second third of the 20th century, the frequency of reform initiatives seems to be synchronous with the growth of difficulties in socio-economic development. Accordingly, in the 1990s, the start of market transformations was conditioned by the need to resolve a huge number of fundamental contradictions within the socialist economy. However, it is still impossible to understand the driving forces and factors of these transformations only on the basis of an analysis of intra-system contradictions. It is also necessary to address the contradictory course of processes in global space.
The middle of the 20th century was characterized by many positive changes in the world, which promised great hope. A special place is occupied by a complex of phenomena that at that time acquired the title of a complex scientific and technological revolution (STR). Philosophers, economists, sociologists, and systems engineers from all over the world enthusiastically joined the study of this scientific and technological revolution. Turning to the topics of scientific and technological development has greatly changed not only the economy, but also attitudes. Prospects for accelerating socio-economic development in the field of scientific and technological development. They were seen both in the developed capitalist countries and in the camp of the socialist countries led by the Soviet Union. The modernization direction of economic development was a logical response to the situation of that time. On this basis, the concept of “competition between two systems” has developed in a quite serious and long-term direction. For a while, this competition became quite constructive. Scientific conferences of an international nature began to be held on this problem, and quite serious works were published. The concept of convergence has emerged and has been powerfully developed capitalism and socialism.
It is noteworthy that the ideas of convergence originated on Western soil, and its developers included not only objectivist figures such as Pitirim Sorokin or John Galbraith, but also the likes of Zbigniew Brzezinski who were clearly ideologically biased against socialism and the USSR. This circumstance alone confirms the conclusion that the issue of competition between the two socio-economic systems at that time was by no means far-fetched, and its outcomes were a matter of serious concern for influential forces in the West.
In the USSR and other countries, hopes arose at that time for the objective presence in the depths of the socialist system of certain serious advantages in the sphere of the development of scientific and technological development. Studies have been launched on the problem of combining the achievements of scientific and technological development with the advantages of socialism (in which the author of these lines also joined with sincere intentions) and books and articles have been written. A set of “advantages” of this kind was multifaceted and characterized in these works. But it turned out to be hypothetical and did not manifest itself in practice. It can be argued that the unfulfilled hopes for the “advantages” of socialism in the sphere of scientific and technological development turned out to be a key factor in the rapid aggravation of many economic contradictions in the USSR and in the socialist system.
The long-term peaceful coexistence and competition of the two world systems meant that the USSR made strenuous efforts to maintain military parity with the United States (and NATO), for which the arms race and the unconditional priority of the defense and space complex in all economic policy were vital. This steadily maintained a relatively high level of science in the country, but, on the other hand, created the most complex structural distortions in the economy and society and prepared the way for the exhaustion of the economic system of the USSR. This exhaustion was largely the result of the extensive processes of expanded reproduction in the existing structure of industries and the inability of the Soviet system to respond to the challenges of innovative development.
At the same time, the long period of real rivalry between socialism (led by the USSR) and capitalism (led by the USA) and its inherent undoubted progress in the USSR in a number of areas – a breakthrough into space, the development of nuclear technology, the industry of modern weapons, the high class of the education and culture system, the general availability of many social services, etc. – had its impact on the world of capitalism. It was forced to respond to the increased cost of social components in the eyes of the masses of their peoples. These changes in public sentiment largely led to the emergence in the West of the concepts of the “social market economy,” the “consumer society,” the “welfare state” and so on.
These concepts influenced the practical policies of the governments of most developed countries, especially in the period immediately after the Second World War. They have also primarily served to intensify Western assistance to the underdeveloped countries. But the triumph of these ideas was short-lived, since the expansion of the number of people who wanted to live according to the laws of consumer society soon exposed the fundamental contradictions associated with the limited natural resources on Earth.
In response to the accelerated consumption of natural resources caused by the growth of production and mass welfare, social movements were formed to limit industrial development and economic growth. Especially famous was the activity within the framework of the Club of Rome, which formulated a firm socio-scientific position on the “limits to economic growth”.
A logical continuation of this line was also the advancement of the concept of post-industrial society, which put the factors of science, innovation, and human intellectual activity at the center of socio-economic development. In literature, the ideas of forming a “knowledge-based economy” began to be actively developed. This concept fits well into the emerging trend of globalization of the world economy, which is characterized by the displacement of many elements of the world economy. material production (especially dirty industries) from the territory of highly developed countries to the periphery of the world economy, to less developed countries. The displacement of the “factory pipe economy” (according to Alvin Toffler) opened space for a “knowledge-based economy” and for a post-industrial society, but only in certain parts of the world economy. Material production did not disappear because of this, but only moved to other spaces. Therefore, the thesis of a knowledge-based economy cannot be interpreted as an absolute global trend. From the very beginning, it has been prepared for borders that close to the economic interests of highly developed countries.
While in his book Future Shock Toffler fundamentally revealed the fundamentally new place of the factor of science and knowledge in the economy and society, at the same time he touched upon the new power functions of this factor. In The Metamorphoses of Power, he examined how the three main components – knowledge, violence, and wealth – are at different stages and the relationship between them determined the power in society. At the stage of post-industrial society, it is knowledge, according to his data, that becomes the determining factor of power. In this regard, Toffler cites Winston Churchill’s “prophetic” remark that “the empires of the future are the empires of the intellect.” Today, this has become true, writes Toffler[8 - Toffler A. Op. cit., pp. 30—38.].
As we can see, one of the strategists of the domination of the capitalist economy has long drawn attention to the potential of the imperial functions of an order based on intellect (knowledge). Consequently, the post-industrial conception of progress does not at all exclude but presupposes the scope for the intensification of exploitation by one part of the world community of other parts of it. Failure to understand this delicate circumstance obscures the objective boundaries inherent in the dissemination of the concept knowledge-based economy. In any case, it is impossible not to notice that at the present stage its establishment is accompanied by an increasingly rigid division of the world in the socio-economic sense into highly developed and underdeveloped parts. At the same time, the implementation of a policy of deriving unilateral advantages from the possession of knowledge potential is far from an absolute trend.
The informatization of the economy and society, which has engulfed the world for some time, creates both the prerequisites for the realization of the power of the strong over the weak, and the prerequisites for the alignment of countries and regions at the socio-economic level. Many technological processes in industry and communications, in trade and finance are changing radically. On the one hand, the network structures that complement the matrices of vertical and horizontal relations complicate the trajectories of managerial impulses, make the subjects of control implicit, and thus weaken the resistance to pressure on the part of the governed, and, on the other hand, make it possible to form and implement actions in the depths of the controlled mass that compensate for and prevent their subordination to the centers of power.
Thus, the trend of widespread informatization of society based on network technologies leads to the possibility of eliminating the foundations of the centuries-old problem-free division of the world into the elite and the plebeians. Controlling the illiterate and uninformed is one technology, but controlling the masses, who already have wide access to information, including information about who exploits them and how, is a qualitatively different type of problem. Under these conditions, “feedback” can turn into a powerful force that counteracts the ambitions of contenders for absolute leadership in the world.
Resource Scarcity at the Heart of Transformation
The turn between the second and third millennia was marked by a series of achievements and crises caused by uneven access to natural and, above all, energy resources. In the last quarter of the 20th century, the energy problem came to the fore among all the world’s problems. The developments of scientists and the analysis of specific practice show that the level and quality of life of the population, the scale of production of GDP per capita, consistently correlate with the level of energy consumption per capita in the respective countries. The relationship between these parameters is not simple, non-linear, and it largely depends on the structure of the country’s economy, its territory, and natural and climatic conditions. But one thing is certain: all highly developed countries are guided by high levels of per capita energy consumption. This is typical not only for countries with low winter temperatures, such as Norway, Canada, Finland, but also, of course, for the United States, as well as Australia, Belgium, Sweden, etc.
If we take the United States, a country with a far from cold climate and focused not on the predominant development of raw material industries, then they, nevertheless, in the aggregate, not only consume, but also produce more energy resources than Russia. The data for the year 2000 given by Aleksey E. Kontorovich in one of his public analytical reports are interesting. At that time, the U.S. produced 495 million tons of fuel equivalent, while Russia produced 459 million tons of fuel equivalent, while Russia consumed 1,256 million tons of fuel equivalent, while Russia consumed only 173 million tons of fuel equivalent. At the same time, gas consumption in the United States was 753 million tons of fuel equivalent, while in Russia it was only 434 million tons of fuel equivalent. Up to 1991, as follows from the materials of the above-mentioned author, Russia was steadily developing (by the nature of the relationship between the level of energy consumption and the dynamics of GDP) in line with global trends, but as a result of the collapse of the USSR and the economic crisis caused by it, In the words of A. E. Kontorovich, “described a peculiar loop of hysteresis.” And from the trajectory of development typical of developed countries, over the ten years of reforms, Russia “has decisively moved to the trajectory of the most backward countries, in which the growth of energy consumption does not affect GDP growth in any way.”
The increase in the energy supply of life in developed countries has caused such an increase in the production of energy resources that has come into conflict with the stability of the Earth’s ecosystem. And today it is already a characteristic sign of the limits of the evolution of the old (and especially Western) economic system. An extremely difficult situation has emerged, when developing and post-socialist countries are trying to catch up with the trajectories of the economies of developed countries, which is impossible without a significant increase in energy consumption. But this (and maybe even larger) “delta” of energy resources is no less claimed by highly developed countries, since maintaining the existing lifestyle requires it. The Earth, on the other hand, will not be able to sustain the simultaneous development of these aspirations.
Overcoming Inertia: Opportunities for Progress
The problem of the objective limitation of the natural potential and the insufficiency of energy resources for the extension of the lifestyle of highly developed countries to all the inhabitants of the Planet is constantly hidden behind other problems that periodically come to the surface, although it is precisely this problem that is a concentrated expression of the content of the dead-end path imposed on humanity by the inertia of the experience once formed in a group of countries that have hitherto had the opportunity to grind down the overwhelming majority in production and consumption. part of the world’s total resources.
For many years, the 80-to-20 ratio has characterized the distribution of total resources between the rich and the poor (between the highly developed countries and the rest of the world), while the proportion between them is the opposite and looks like 20 to 80% in terms of population. This correlation seems to be known to everyone, but it is not considered to be the fundamental cause of the impasse to which the world has come.
With the exhaustion of extensive growth opportunities within the socialist countries, the problems that aggravated the socio-political situation in them in the 1980s were perceived by the masses and interpreted by the advanced politicians exclusively in terms of the vices inherent in the economic and political system of socialism. These vices did exist and irritated society. They had to be overcome. But the big look at the situation turned out to be superficial. Under the influence of this circumstance, the beginning of the restructuring of the economic and political system followed a simplified, although seemingly logical path – the path of copying the order that had developed in the developed countries, and in fact it was reduced to an adaptation to the system of capitalism surrounding the socialist countries.
In Russia, the problems and contradictions of the external environment immediately overwhelmed domestic needs. In this context, it is no coincidence that Russia’s transformations resulted in the accelerated entry into the world market of only one sector of the Soviet economy, the oil and gas industry, which was further aggravated in post-reform Russia. In 2002, the share of export supplies in oil production in Russia reached 47% and gas – 31%, while in 1990 19% of oil and 13% of gas were exported from the USSR. The rapid inclusion of Russia’s energy resources in the balance of global deficits was a direct response to the key needs of the external environment. But this also contributed to the import of a heavy bouquet of deep contradictions of the world economy into the country. And they became an invisible companion of the motivations that guided the transformation processes.
Unbeknownst to many inside the country, these processes have become dominated by more powerful economic interests. Outwardly, these interests appeared to be equilibrium market interests, but in fact they reflected the hidden balance of power in the new configuration of the global world. There was an increase in the subordination of energy flows to the needs of highly developed countries. At the global level, this trend reveals a quite understandable motivation for the behavior of the key actors in highly developed countries, which is conditioned by hopes for continuation of the usual evolutionary development of the world (Western) economy through the implementation of transformations similar to a systemic revolution in a number of “insufficiently market” countries.
Considering the awareness of all these latent mechanisms within the transition countries, and in Russia in particular, there is a desire to single out in the adopted programs of systemic transformations those components that are not directly related to the service of national interests. Of course, before they are rejected, they must be analyzed from the standpoint of compliance with global interests, because Russia is a significant part of the world’s potential. But in the current conditions of Russia, when correcting programs, priority cannot but belong to the goals and objectives that correspond to national interests.
With all the innovations of globalization, international economic relations are still based on competition, including inter-country competition. And although the above-mentioned growing contradictions in the economic structure of the world objectively require new turns in the relations of all agents so that they are based more on constructive cooperation and even altruism, in reality, the success of countries in the field of economics can now be ensured only by a rigid attitude to their competitiveness and a consistent struggle for their national interests. Altruism in economic relations cannot be implemented in any one economic platform of the world, its development requires a difficult rethinking of worldview approaches in the entire world community.
At this stage, Russia’s contribution to the establishment of new economic relations in the world cannot but be based on a more aggressive national economic strategy. Therefore, Russia’s economic policy can no longer be passive and imitative. Objectively, it should include the motivations of our society to an increasing degree, determined by our own vision of the future of the country and the world.
First, it is necessary to strengthen the conceptual influence on the world’s ideas about the future, contributing to the assertion of the still veiled truth that it is not only the countries with “transition economies” and developing countries that will have to transform their economies and lifestyles, but also the current space of the “countries of the golden billion”. And to have such a conceptual impact, we need a groundwork of research based on creative practice.
Secondly, during the transformation of Russia’s own economy, it is extremely important to strengthen the component of real success that extends to the entire Russian society. In this regard, the policy outlined today by President Putin to accelerate the pace of economic growth can act as a powerful catalyst for moving forward. And here a very important point is the overdue transition to a new quality of economic growth based on scientific and innovative factors.
In fact, humanity has no other reliable resource than science and knowledge that can be counted on as a life-saving component in the policy of sustainable socio-economic development. Only the aggregate knowledge that summarizes the experience of all earthlings can ensure the finding of satisfactory answers to the aggravating problems of the universe, suggest acceptable ways to transform the economy of both individual countries and the world.
“Radical innovations are the main lever for the transformation of society,” say Boris N. Kuzyk and Yuri V. Yakovets in a recently published multifaceted book on the problems of Russia’s long-term strategy[9 - Kuzyk B. N., Yakovets Y. V. Russia—2050: Strategy of Innovative Breakthrough. Moscow, Ekonomika Publ., 2004. P. 45.].
All experience shows that our country developed most dynamically when integration tendencies were strong on its vast territory and creativity in human activity was encouraged. Therefore, science and scientists have traditionally been in a high place in our society. And today, despite the colossal losses in scientific and technical potential in Russia during the first years of reforms, there are still all the prerequisites for the development of the economy along a science-intensive path. For example, in terms of the number of scientists and engineers in the field of R&D per million inhabitants, Russia is on a par with the United States and is ahead of Germany, France and the United Kingdom, not to mention a huge gap with Poland, China, and India.
Development, based on the priority of innovative approaches, is the main way for Russia’s self-assertion in the world, which is necessary today. But it is also a way of correcting dead-end branches of development, into which, under the influence of the trends of the past, significant parts of human society are ready to stray.
Thus, much will depend on how the transformation processes initiated in the post-socialist countries develop further. This is important not only for the large number of people living in their territories. The experience of these transformations should also clarify the attitude towards the trajectories of changes in the economic systems of the global world. The events of 9/11 gave an impressive signal that history will not be able to follow the traditional milestones that are derived from the evolutionary prolongation of the economic paths of the 19th and 20th centuries.
Chapter 2. Internal and External Drivers of Transformations in Russia
The transformation processes that unfolded in the second half of the 1980s in the USSR and in the countries of the Soviet bloc are considered and comprehended in the literature in their various manifestations and in various contexts. Great interest was aroused by critical and at the same time constructive reviews of trends in the Soviet and post-Soviet economies in large monographs, which were prepared by prominent Russian economists whose authority was established in Soviet times and who continued to lead an active research life in the new conditions[10 - Abalkin L. I. Russia. Search for Self-Determination. Moscow, Nauka Publ., 2002; Bogomolov O. T. My Chronicle of the Transition Time. Moscow, Ekonomika Publ., 2000; Lukinov I. I. Evolution of Economic Systems. Moscow, Ekonomika Publ., 2002; Medvedev V. A. Facing the Challenges of Post-Industrialism: A Look at the Past and Future of the Russian Economy. Moscow, Alpina Publisher Publ., 2003; The Way to the XXI Century: Strategic Problems and Prospects of the Russian Economy. Author. Coll. D. S. Lvov. Moscow, Ekonomika Publ., 1999; Fedorenko N. P. Russia: Lessons of the Past and Faces of the Future. Moscow, Ekonomika Publ., 2000 and others.]. Valuable information is drawn from works containing a view of the transformation processes in Russia on the part of well-known and experienced foreign scientists[11 - Reforms through the Eyes of American and Russian Scientists. O.T. Bogomolov. Moscow, Nauka Publ., 1996; Stiglitz J. E. Globalization and Its Discontents / Transl. from English and note. G. G. Pirogov. Moscow, Mysl Publ., 2003.].
Does the existence of such authoritative sources mean that there is no need to stir up the past? Of course not. The longer the path traveled, the higher the price of appeals to various events that become the property of history, if they are covered by witnesses of time. The process of “cleansing” events of layers caused by political biases and limited information is very complicated. After all, the interpretation of the essence of events is always subjective and strongly depends on the needs of the moment of analysis. One of the most difficult issues in this case is the arrangement of representations made from diametrically different points of observation: representations based on comprehension of the internal logic of events, and representations containing the logic of the external contour of transformation processes.
Two Key Drivers of Economic Transformations
The transformations in Russia and other post-socialist countries have been caused, as already noted, for a variety of reasons. However, in my opinion, the analysis somewhat underestimates the division of the causes and factors of transformations into two large groups, related, on the one hand, to internal (intra-country) circumstances and contradictions, and, on the other hand, to the conditions and factors of an external order.
The internal reasons that necessitated the transformation of Russia’s economic system were determined by the accumulated contradictions in the country itself, contradictions that began to hinder the development of productive forces on an intensive basis and clearly limited the growth of the nation’s well-being in accordance with new conditions and socially justified criteria.
Here it is necessary to emphasize the socio-economic factors and contradictions that have developed in connection with the stable isolationism of the development of the country (Soviet Union) in relation to the world community. This state hindered the free exchange of ideas, seriously impoverished the motivation of citizens and business entities, excluding long-term entrepreneurial interest from it, and ideologized the criteria for economic development. The lack of competition, the tendency to stagnate, the costly nature of the economy, the dominance of extensive reference points of reproduction, the inhibition of incentives (motivations) for scientific and technological innovations, the substitution of real business in the economy with the imitation of results adjusted to the reporting and planned indicators, the cumbersomeness of the system of administrative and ideological management, and others – all this generated and strung together numerous contradictions that needed to be resolved radical changes in the system.
