Trajectories of Economic Transformations. Lessons from 2004 for 2024 and Beyond. Valery Kushlin

in the process of renewal of the production apparatus followed19. The implementation of such approaches was focused on the mechanisms of optimal economic distribution of resources according to aggregate development goals within the framework of economic units specializing in meeting the basic needs of society. For this purpose, it was proposed to use detailed new methods of block-modular renewal of the production apparatus, which assumed an organic connection between investments in the economy and the implementation of the most effective scientific and technological innovations20.

      All these, as well as many other tempting offers, were not realized, for which there are many reasons. First, it is necessary to admit that in the development of the proposals, hopes were unjustifiably high for the possibility of understanding at the level of the central economic management bodies the key interrelations of the optimal development of the country’s economy, which is tuned to meet the needs of society. Here we must admit the truth of Friedrich von Hayek’s accusation against economists who believed (as we did then) in the possibility of a planned socialist economy, when he observed that “socialists, victims of arrogance, want to know more than is possible.”

      Secondly, the policy of our state at that time was fundamentally lacking purpose and energy. Collectivist-socialist driving forces were no longer brought into action by this state policy, as had been the case at certain stages earlier. And competitive entrepreneurial driving forces were not given the opportunity to emerge and express themselves. Ideological frameworks and regulatory frameworks severely limited and suppressed entrepreneurial initiatives.

      There was a great inertia of the approaches that assumed the eternal priority of the development of the “first subdivision” of social production (the branches producing the means of production) over the “second subdivision” (the production of consumer goods and services). Ideas about the expediency of building chains of expanded reproduction based on the structure and dynamics of people’s ultimate needs were rejected from the outset. Consequently, the technical level and the scientific equipment of the industries directly working to improve the well-being of the people fundamentally lagged behind the branches serving the production of means of production. For example, in 1987, the ratio of R&D expenditures to manufactured marketable products in the USSR Ministry of Light Industry was less than 0.09% compared to 2.9% on average in the country’s machine-building complex.

      In general, as of the end of the 1980s, the level of knowledge intensity in the main branches of material production in our country was noticeably lower than in the most developed countries of the world. According to available estimates, the average ratio of science intensity in the USSR and the USA was about 1 to 2 in civil engineering, 1 to 3 in chemical and metallurgical industries, and 1 to 5 in electric power industry. Although expenditures on science in the USSR and the United States were considered close as a share of national income (in 1987 they were 5.2 and 5.8 percent, respectively), the absolute amount of spending on science in the USSR was much less than in the United States. In 1987 they amounted to 32.8 billion rubles against $123.6 billion (1986) in the United States.

      The Soviet Union of the 1980s and 1990s was exhausted by competition (complex competition) with a much more powerful rival in the face of the United States (plus the countries of Western Europe, Japan, etc.). Maintaining military parity with the West required concentrating most intellectual and economic resources on the development of the defense complex. The volume of defense R&D in the USSR was estimated to be 3:221 on average. Moreover, the defense research sector was characterized by large overhead costs, which absorbed a considerable part of the appropriations for science and innovation. It turned out that the scientific support of that sphere of the country’s economy, which, under the normal structure of the economy, in fact, should be the main space of the economic process of expanded reproduction, was prohibitively low.

      Perestroika: Ideas vs. Realities

      The period of 1985—1990 was a very difficult and contradictory time for the country’s economy. In a political sense, it set the pace for the turbulent changes that were overdue. The beginning of perestroika was tinged with the euphoria of the emancipation of society, and therefore the strategy of “accelerating the socio-economic development of the country” looked like a completely natural direction for that time. The course taken for the rise of machine-building, the acceleration of scientific and technological development and structural shifts aimed at intensifying production was logical in concept and, moreover, relied on the historical confidence of the ruling party, which was accustomed to achieving its goals. But, faced with the very first difficulties and contradictions of the turn from an extensive to an intensive type of management, which presupposes a qualitatively different level of economic mechanism and management, the country’s leadership began to glide on the path of improvised gliding on the surface, moving away from solving real problems towards populist tasks that are in full view of the media.

      Inconsistency and superficiality in the formulation of the main goals of state policy had a particularly destructive effect. As early as 1986, almost immediately after the announced decisions to “accelerate scientific and technological progress” and the short-lived propaganda of this direction, another slogan appeared, focusing on “overcoming technocratic approaches” in socio-economic policy. Moreover, it was presented in such a way that it disavowed the value of the task of deploying technological progress and the transition to qualitatively new technologies. At the same time, the idea of a “social reorientation of the economy” and its subordination to the “human factor” began to be intensively promoted. This formulation, which was justified in principle and even belated in many respects, was then taken to a primitive extreme, which blurred the previously initiated actions to reorient investment policy in the direction of technological progress.

      An insidious role was played by the idea of regional self-financing, which gained special favor in the Soviet Baltic republics. It was used to show the supposedly significant driving forces of economic development that are revealed in the event of the separation of regions (republics) from the center that binds them into an independent circuit. To this end, the launched information about “injustices” in the macroeconomic exchange between the Russian Federation and the Baltic republics was actively circulated. The problem of “exploitation by the Russian Federation” was especially persistently raised in some circles in Estonia. None of the official statistics based on input-output balances, which testify to other (contrary to the emotional conclusions of local politicians) ratios of imports and exports between Russia and Estonia (other republics) were considered. Such sentiments have spread in a few other Union and autonomous republics. They contributed in no small measure to the collapse of the USSR as an integral state and as an economic complex.

      Significant and far-reaching damage was caused by the ill-conceived advancement of the tasks of a universal turn in politics to “universal values.” This turn, seemingly logical in its essence, was again brought to the point of absurdity and eventually turned our own fundamental goals into tasks secondary to certain global values inherent in an abstract “civilized” community.

      Many researchers, including the author of these lines, wrote about the mistakes and dangers of such a course at the time, but this was not perceived by the political elite. As an example, let us cite our statements on the situation and economic policy in the country, published in June 1991.

      Based on the analysis of the dynamics of the main socio-economic indicators, we then tried to identify the “stage” causes that led to the escalation of the crisis in the economy. One of these reasons is related to the structurally unadjusted investment boom of 1986, when there was a sharp increase in capital investment in the national economy as a whole and in industrial facilities, especially in mechanical engineering. This boom turned out to be purely extensive, even though a policy was proclaimed for the use of qualitative factors of growth and for the effective

19

Kushlin V. I. The Production Apparatus of the Future: (Problems of Efficiency). Moscow, Mysl Publ., 1981.

20

Kushlin V. I. Intensification of the Renewal of the Production Apparatus. Moscow, Mysl Publ., 1986. Pp. 72—107, 156—182.

21

The Path to the 21st Century: Strategic Problems and Prospects of the Russian Economy. Moscow, Ekonomika Publ., 1999. P. 348.