Changes in the Pattern of Production are Feasible only with Expansion of Competition

The Ministry of Economic Development of the Russian Federation has prepared the Concept of Priority Social and Economic Measures in which a conclusion is made that factors behind stagnation of the Russian economy are of an internal nature, namely: growth in enterprises' costs, low labor efficiency and a lack of developed institutes for business and competitive environment.


Also, Ministry of Economic Development of the Russian Federation recognizes that former instruments of motivation, that is, extension of privileges to the small business as regards insurance contributions, lending to small and mid-sized businesses at the expense of resources of the National Welfare Fund and utilization of resources of the National Welfare Fund on infrastructure projects did not live up to expectations as regards efficiency.


To prevent the risks of a long-term stagnation, the Ministry of Economic Development of the Russian Federation suggests that the emphasis should be made on promotion of competitiveness of the non-oil and gas sector of the economy, investment activities and the human capital.


Slowdown of economic growth in the 2010-2013 post-crisis period and determination of the level of growth rates required for the sustained social and economic development justified the need to research the pattern and quality of economic growth and its ability to ensure modernization of the country.


The analysis of the dynamics of the main indices in the past 15 years shows that despite fairly high rates of business activities in the pre-crisis period the long-term domestic structural limitations continued to have an impact on the specifics of functioning of the economy. Actually, the analysis of transformation shifts in the Russian economy in the long-term prospect shows that changes in the pattern of production in general were determined by natural processes of redistribution of factors of production.


During the past few years, a relatively high level of foreign, external and domestic investments in Russia was maintained by high oil prices. Rapid growth in domestic revenues made up to a certain extent for institutional weakness of the economy, that is, the rates of expansion of the market and growth in profits absorbed risks related to backwardness of institutions.


However, as seen from experience the high rate of inertia in development of the Russian economy has resulted in the past few years in a slowdown of economic growth rates, drop in competitiveness of domestic products both on the domestic and international markets and strengthening of limitations due to the transport and energy infrastructure. That complex of problems predetermines the need for a change in the model of economic development in favor of factors of innovation growth, higher investment activities and activation of processes of effective utilization of labor and power.


Restructuring of industry and its diversification are based on a combination of effective entrepreneurial competition and state policy measures aimed at promotion of national competitiveness. The required changes in the pattern of production are feasible only with expansion of the freedom of competition and entrepreneurial innovation components in behavior of the business, as well as with formation of both solid small and mid-sized business and major Russian companies which play an important role on global markets and are a part of the global business elite.


The new Russian economic growth paradigm is based on high efficiency of the main factors of production and motivation of competitiveness. Determination of the principles of state regulation of priority types of activities in order to ensure the balance between the quality fulfillment by state institutions of their functions of the regulator and the objectives of development is the main condition of formation of opportunities required for economic growth and higher efficiency.


О.I. Izryadnova, Head of the Structural policy Department