Staunton, April 19 – Moscow’s economic policies rest on three fundamental misconceptions that are leading to the degradation of the country and the loss of a chance for the kind of development in all spheres that Russia needs, according to Nikolay Novichkov, an economist who sits in the State Duma as a member of the Just Russia Party.
First of all, he says, Russian leaders and intellectuals believe that urbanization is not only desirable but inevitable and that the central government should do what it can to promote that regardless of what happens to the rest of the country (mk.ru/economics/2022/04/21/koncentraciya-naseleniya-v-gorodakh-eto-nenormalno.html).
But that assumption fails to recognize that “the concentration of the population I the capitals and in port cities is a characteristic of ‘third world’ countries” where the small number of modernized and expanding urban centers develop brilliantly and the rest of the territory is degraded and depopulation, Novichkov continues.
Many think and act as if there is no alternative to this, but of course there is, the economist argues, suggesting that the country needs to promote the development of the many smaller urban centers and rural areas. Not only will that lead to more development but it will promote the kind of diversity on which development depends.
That is because by creating the opportunities for Russians to remain in smaller centers or even rural areas will block “the destruction of the way of life” people there have lived for a long time, “reduce the social primitivization of economic behavior, and much, much else besides,” Novichkov continues.
The second myth or better misunderstanding driving Russian policy making, he suggests, is the believe that the government should extract from the market as much profit as possible and put it in reserve funds to be used at some future point. That is doubly wrong and its pursuit is hurting Russia horribly.
On the one hand, it means that this money isn’t going into investments that could lift the country on a continuing basis. Instead, it is being squirreled away abroad in stocks and demand deposits. And on the other, precisely because this money is kept abroad, there is always the chance the other countries no friends of Russia will seize it or at least make it difficult to get at.
And the third fundamental misconception, Novichkov says, is that exports must be “the foundation of the economy.” Obviously, Russia should be engaged in trade, but its leaders must not think that “’exports are our all.’” Focusing on exports alone leads to the unrestrained growth of some industries and the decay of all the rest.
Moreover, because of the advantages and hostility of other countries, Russia is reduced to selling not manufactured goods but raw materials alone, with the country’s leaders thinking that they can use the money they earn to buy everything they need abroad while not spending on the development of Russia itself.
Once these myths are recognized and rejected, Novichkov concludes, it will be possible for Moscow to come up with far better economic policies than it has adopted up to now, policies that will based on the proposition that investing in people across the entire country and increasing their purchasing power will do far more than selling raw materials abroad.