Thursday, October 30, 2014

Window on Eurasia: Lack of Balance between Responsibility and Control Retarding Russia’s Economic Growth, Moscow Scholar Says

Paul Goble

            Staunton, October 30 – Despite the convergence of the political systems of Russia and China, the Chinese economy is growing rapidly while Russia’s is lagging behind, the result, Andrey Yakovlev says, of Moscow’ failure compared to China to maintain a balance between responsibility and control.


            Yakovlev, a professor at Moscow’s Higher School of Economics, argues in a new paper that both countries have tried to ensure control as well as economic development but that China has found a successful balance while Russia has not largely because Moscow has not made the future of officials and businessmen dependent on results (


            Instead, he says, Russian officials responsible for controlling the economy are judged not by economic growth but by their participation in anti-corruption campaigns and the like, while Chinese officials are judged precisely on that basis and will be promoted, demoted or fired depending on the growth of economic indicators.


            If Russia is to succeed economically with the political system that it now has in place, Yakovlev continues, then Moscow almost certainly would find it advantageous to “try to introduce those mechanisms which work in China now and worked in the Soviet Union in the past.”


            Over the last decade, he argues, the political and economic systems of Russia and China have converged with the formation of state capitalism. Both have imposed restrictions on political competition, both have massive corruption, and both have weak legal and especially judicial systems.


            But there is “a paradox,” he continues.  The Chinese economy is growing rapidly while Russia’s is stagnating. Some have suggested that this reflects differences in center-periphery relations, but while those were relatively great in the 1990s, they are now minimal, with Moscow having reimposed tight control over the federal subjects.


            Others have argued that the two countries adopted different forms of economic planning on the basis of the past. The Chinese planned for the partial occupation of their country and thus set up key nodes, while the Russians focused on plans built around a single economic complex. That argument begs the question as to why the Soviets were successful but Russia is not.


            A better explanation for what has happened is to be found elsewhere, Yakovlev suggests. Chinese officials and not just businessmen are evaluated on the basis of economic success. If the businesses in their area grow, they are promoted; if that doesn’t happen, then they are demoted or even fired, an arrangement that is not true in Russia today.


            In addition, he says, “the Chinese Peoples Republic effectively has been able to use ‘the system of two keys’ imported from the USSR.” At each level, there is an administrator (a governor or a mayor) who is responsible for economic indicators and “a bureaucrat who represents the controlling vertical, in this case, the communist party.”


                That party functionary, Yakovlev notes, “not only possessed large control authority but along with the administrator is responsible for the results achieved.” If they are good, he like the administrator will be promoted; if not, not.  That leads “local officials to work more effectively for the achievement of that result.”


                Until the early 1980s, “that system worked in the USSR as well,” the scholar says, but with “a very important distinction:” the Soviet economy was closed off from the world and “oriented toward the fulfillment of the plan as such.” The Chinese economic system is based on results and on results measured in competition with foreign producers.


            In Russia today, he points out, there is also “’vertical control’ but this is not a party but the administration of the president and the force structures under the control of the president.”  These people are evaluated not on “the final result of economic growth” but rather on their work as measured by checking and so on.


            “As a result,” Yakovlev says, there is a growing lack of balance “between responsibility for economic results” which governors and the economic portions of the government bear and central control which is implemented by “the presidential administration and force structures” which are not evaluated in terms of economic performance.


            Unless that changes, the Moscow scholar says, Russia’s chances of matching China’s economic performance are small and even its ability to escape the current stagnation are not terribly great.

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