From Blind Faith in the Market to Market Planning

Abstract

The long-term dynamics of industrial output and the specifics of industrial growth in the Russian Federation are considered. Trends toward simplification of the production structure are identified, showing that the quality of economic dynamics, which the existing model ensures, does not correspond to the long-term goals of Russian economic development. The authors prove that the hope for the beneficial effect of market forces, artificially set against consciously formulated goals of economic development, has failed and led to attenuation of the investment process. Since production growth rates with a roughly four-year lag depend on the growth rates of capital investments, which critically depend on the current market situation, a sharp decrease in the growth rates of investments in recent years has set rigid limitations on economic development at least until 2020. The authors conclude that it is necessary to activate substantially investment progress, including state-run development programs, and analyze the financial potential of investment sources such as an increase in the rate of accumulation and repatriation of domestic capital. It is estimated that the current financial resources will be sufficient at least for the launch of this process if not for the full-fledged creation of an innovative economy in Russia.