SERGEY DROBYSHEVSKY: INEQUALITY IS A VERY CHALLENGING ISSUE IN MODERN WORLD
Sergey Drobyshevsky, Scientific Director of the Gaidar Institute for Economic Policy, granted interview to “Profile” magazine.
Consequences of current world crisis and threat of a new one, resetting of relations between authorities, business and society, these are the topics to be discussed at the Gaidar Forum -2020, which will be held on January 15-16 in Moscow. Sergey Drobyshevsky, Scientific Director of the Gaidar Institute for Economic Policy, Head of IPEI RANEPA Macroeconomic Studies Department, told “Profile” journl about trends and challenges of a new decade.
-The very name of the Forum "Russia and the World: Challenges of a New Decade" already indicates that 2020-s may become problematic for economy. What will we have to face in the coming years? - I would not say that issues and challenges represent identical concepts. Although issues exist in global and domestic economy. In our case, these are the issues related to progress towards higher and more stable growth rates. However, within the framework of the Forum, we will talk more about challenges, that is, about tasks, limitations and goals that the government of the country, business, and all of us will have to solve in order to make the Russian economy more developed, modern and ready to counter existing issues.
- What are these challenges?
- There are plenty of them. The first one is relevant not only for us but for the whole world: this is the definition of a new nature of economic policy, new algorithm for interaction between business, state and society following the crisis of 2008-2009. Ten years have already passed but consequences of that crisis have not been completely eliminated; in many countries, primarily in Europe, extremely low growth rates remain. There are many works, studies, forecasts telling us that a new crisis is about to start because we have failed, inter alia, to solve problems that generated the previous crisis. The challenge is to make economic policy adequate to modern stage of development, so that it could resist possible crisis-like phenomena.
The second challenge concerns this country and refers to the fact that the President set rather ambitious goals on the national development up to 2024. To reach these goals in the complicated environment, i.e. external constraints, adverse conjuncture, is also a challenge for the state and society.
The third and the major challenge is also global and it means that inequality issue is very relevant in the modern world, ratio of standard of living, consumption, distribution of social benefits among different segments and categories of the population. We will discuss how to resist inequality and not only achieve certain development indicators but also make population feel them as growth of their well-being.
- There has been long and verbose talk about a new economic architecture, new format for interaction of key economic actors. However, what do you mean by the concept of “new formats of interaction between government and business”?
- Relations between government and business have changed several times in the recent decades. There was a period of partnership in 1950-1980 when Western states actively supported business and at the same time implemented measures aimed at protection of employees and population. Then, there was a period of liberal policy in 1990-2000 годов when it was thought that business should work for the sake of own profit, however, like it or not, it will contribute to implementation of social programs, improve environment in the country and society taking into account its pragmatic interests, because profit depends specifically on well-being of employees and consumers.
At present, paradigm is changing again after the crisis of 2008-2009: on one hand, we may see that liberal approach is not working while, on the other hand, new tasks emerge related to sustainable development, resistance to climatic and ecological changes. It is obvious that in these conditions state should become again an active player and be a partner of society to a major extent, restricting freedom for business and inviting or forcing business to partnership and distribution of responsibility for economic and ecologic issues, if required. It happens already now that companies are forced to think about consequences of their activity for environment when they develop products, technologies and chose business partners.
- In other words, is “green economy” a serious trend already? Is it beneficial to Russia taking into consideration the structure of our export? – Conclusively, this is a global trend. As we may observe what is happening in Russia, the activities of many Russian major corporations, it is a trend for us as well. I do not think that this is a threat. “Green economy” in the short- term period is typical for the most developed countries while we diversify our supplies of carbon hydrates and can embrace markets of developing countries. In addition, as we may observe in developed countries, “green energy” is covering growth of energy consumption that takes place there. In other words, part of “green technologies” in the total amount of energy consumption is growing but the amount of consumption of classical energy resources is not declining. Moreover, when oil and gas prices significantly dropped in 2015-2016, the USA started to develop slate projects and increase use of traditional energy resources.
- And how does domestic format of interaction between business and the state correspond to international trends? - Transition to market economy took place in the 1990-s in this country and we built market economy in a liberal paradigm having missed the partnership stage. Now, together with the whole world, we are trying to make business more responsible and ready for partnership. At the same time, there are some specificities related to the fact that Russian business is largely controlled by the state. State is the owner of major companies.
- Is it good or bad?
- It is good and bad. It is good because state has more leverage and it is bad because state being the owner can entrust business with many other tasks besides the mentioned ones. As a result, these tasks may contradict each other followed by an issue as to which element of control input is more important.
In private business, it would be the management responsibility to look for compromise. As practice shows, such a compromise can be usually found and it becomes the most effective solution for both parties. In this sense, we may face certain issues but the general trend for sustainable development is recognized at the highest level, therefore, we will move forward with the world.
- Well, are there any other specific Russian challenges?
- State approved a list of national projects related to industries demanding the highest attention. Development of our economy will be determined by progression of national projects.
Another challenge is associated with the mode of interaction between the state, business, population, public organizations as far as technical solutions are concerned. That is to say, this is an interface issue between state and society. Partially, this is a follow up of a fast transition from planned economy to the market one with many norms still in operation, even if they are obsolete.
- It was at the Gaidar Forum a year ago when Prime Minister Medvedev announced launch of regulatory guillotine ...
- Yes, Dmitry Medvedev announced launch of the regulatory guillotine at the previous Forum. That is not to say that all nodes that should have been cut off by this guillotine were identified and cut off over the past year.
- However, is there any progress? - There is progress, it is just a very large-scale task, it cannot be solved without thinking. When one barrier is removed, it turns out that there is a dozen of associated ones. We need to work to identify not only undesirable legislative norms but also all related by-laws, instructions, provisions, etc. Then, we can really get rid of chains imposed on our economy.
- Is this a long process?
- I presume, major part of work has been already fulfilled, at least, identification of problematic areas. Further decision making is already a technical matter and may turn out to be quite fast. I think that this work will be finalized within six months.
-The very name of the Forum "Russia and the World: Challenges of a New Decade" already indicates that 2020-s may become problematic for economy. What will we have to face in the coming years? - I would not say that issues and challenges represent identical concepts. Although issues exist in global and domestic economy. In our case, these are the issues related to progress towards higher and more stable growth rates. However, within the framework of the Forum, we will talk more about challenges, that is, about tasks, limitations and goals that the government of the country, business, and all of us will have to solve in order to make the Russian economy more developed, modern and ready to counter existing issues.
- What are these challenges?
- There are plenty of them. The first one is relevant not only for us but for the whole world: this is the definition of a new nature of economic policy, new algorithm for interaction between business, state and society following the crisis of 2008-2009. Ten years have already passed but consequences of that crisis have not been completely eliminated; in many countries, primarily in Europe, extremely low growth rates remain. There are many works, studies, forecasts telling us that a new crisis is about to start because we have failed, inter alia, to solve problems that generated the previous crisis. The challenge is to make economic policy adequate to modern stage of development, so that it could resist possible crisis-like phenomena.
The second challenge concerns this country and refers to the fact that the President set rather ambitious goals on the national development up to 2024. To reach these goals in the complicated environment, i.e. external constraints, adverse conjuncture, is also a challenge for the state and society.
The third and the major challenge is also global and it means that inequality issue is very relevant in the modern world, ratio of standard of living, consumption, distribution of social benefits among different segments and categories of the population. We will discuss how to resist inequality and not only achieve certain development indicators but also make population feel them as growth of their well-being.
- There has been long and verbose talk about a new economic architecture, new format for interaction of key economic actors. However, what do you mean by the concept of “new formats of interaction between government and business”?
- Relations between government and business have changed several times in the recent decades. There was a period of partnership in 1950-1980 when Western states actively supported business and at the same time implemented measures aimed at protection of employees and population. Then, there was a period of liberal policy in 1990-2000 годов when it was thought that business should work for the sake of own profit, however, like it or not, it will contribute to implementation of social programs, improve environment in the country and society taking into account its pragmatic interests, because profit depends specifically on well-being of employees and consumers.
At present, paradigm is changing again after the crisis of 2008-2009: on one hand, we may see that liberal approach is not working while, on the other hand, new tasks emerge related to sustainable development, resistance to climatic and ecological changes. It is obvious that in these conditions state should become again an active player and be a partner of society to a major extent, restricting freedom for business and inviting or forcing business to partnership and distribution of responsibility for economic and ecologic issues, if required. It happens already now that companies are forced to think about consequences of their activity for environment when they develop products, technologies and chose business partners.
- In other words, is “green economy” a serious trend already? Is it beneficial to Russia taking into consideration the structure of our export? – Conclusively, this is a global trend. As we may observe what is happening in Russia, the activities of many Russian major corporations, it is a trend for us as well. I do not think that this is a threat. “Green economy” in the short- term period is typical for the most developed countries while we diversify our supplies of carbon hydrates and can embrace markets of developing countries. In addition, as we may observe in developed countries, “green energy” is covering growth of energy consumption that takes place there. In other words, part of “green technologies” in the total amount of energy consumption is growing but the amount of consumption of classical energy resources is not declining. Moreover, when oil and gas prices significantly dropped in 2015-2016, the USA started to develop slate projects and increase use of traditional energy resources.
- And how does domestic format of interaction between business and the state correspond to international trends? - Transition to market economy took place in the 1990-s in this country and we built market economy in a liberal paradigm having missed the partnership stage. Now, together with the whole world, we are trying to make business more responsible and ready for partnership. At the same time, there are some specificities related to the fact that Russian business is largely controlled by the state. State is the owner of major companies.
- Is it good or bad?
- It is good and bad. It is good because state has more leverage and it is bad because state being the owner can entrust business with many other tasks besides the mentioned ones. As a result, these tasks may contradict each other followed by an issue as to which element of control input is more important.
In private business, it would be the management responsibility to look for compromise. As practice shows, such a compromise can be usually found and it becomes the most effective solution for both parties. In this sense, we may face certain issues but the general trend for sustainable development is recognized at the highest level, therefore, we will move forward with the world.
- Well, are there any other specific Russian challenges?
- State approved a list of national projects related to industries demanding the highest attention. Development of our economy will be determined by progression of national projects.
Another challenge is associated with the mode of interaction between the state, business, population, public organizations as far as technical solutions are concerned. That is to say, this is an interface issue between state and society. Partially, this is a follow up of a fast transition from planned economy to the market one with many norms still in operation, even if they are obsolete.
- It was at the Gaidar Forum a year ago when Prime Minister Medvedev announced launch of regulatory guillotine ...
- Yes, Dmitry Medvedev announced launch of the regulatory guillotine at the previous Forum. That is not to say that all nodes that should have been cut off by this guillotine were identified and cut off over the past year.
- However, is there any progress? - There is progress, it is just a very large-scale task, it cannot be solved without thinking. When one barrier is removed, it turns out that there is a dozen of associated ones. We need to work to identify not only undesirable legislative norms but also all related by-laws, instructions, provisions, etc. Then, we can really get rid of chains imposed on our economy.
- Is this a long process?
- I presume, major part of work has been already fulfilled, at least, identification of problematic areas. Further decision making is already a technical matter and may turn out to be quite fast. I think that this work will be finalized within six months.