Three reasons for stagnation

By Vestnik Kavkaza

In summing up results of the economic year in Russia, all experts say that the country has stepped into a period of stagnation. Clear and unclear reasons for the current situation are listed by Ruslan Grinberg, the director of the Institute of Economy of the RAS.

The first reason. The slowdown is connected with the end of mega-projects – the Olympics, Russky Island, the Universiade, everything is constructed. When the projects were in the process of implementation, the economy grew, and now this has come to an end.

The second reason. There is a psychological aspect of the problem. “Our government awaits a breakthrough from the private sector. 20 years tell us that the investment climate should be improved, inflation should be reduced, and long-term money will appear… In fact we have a different situation. We observe a phenomenon of turning the quantity into the quality. I mean the total bureaucratic oppression of business in Russia. Those who are 40-45 today used to be first private traders. I mean not oligarchic business, but the normal generation of first Russian businessmen. They earned their money, they understand what business is, they want the rule of law and order. People always want the rule of law and order when they become wealthy. They are tired. People don’t want to plan business for the long term because the state interferes with their assets too much. There is a joke: “You business is so successful that it begins to match our interests.” The world indicator of the investment climate is Doing Business, and I say that Doing Business is when bureaucrats keep charging business [Russian “do it’” means “keep charging”],” Grinberg says.

The third reason. Nobody knows what to do, where private business should invest. “There are very serious achievements in the economic development of the country for 25 years. But a consumer orientation was chosen. I mean very powerful imports in all spheres. If people have money in the RF, after utilities and buying food, they usually use imported goods and services. This is a serious problem, because if a business knows that its chairs are in demand, it will settle the problem of taxes, administrative limitations, firefighters, the Health Inspection Service, and so on. But when it sees that there is no space for it, serious problems occur,” Grinberg thinks. At the same time, he says that one index is growing rapidly – direct foreign investments: “About 60% this year. It seems to me we are returning to the Soviet Union where foreign investors had very favorable conditions, if there was an agreement with Kosygin or the secretary of a regional committee, everything was fine. But compatriots suffered.”