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Generals from the Last War
// They have no less economic freedom in Russia than in Macedonia, Nigeria and Papua New Guinea
The government is continuing its search for the sources of accelerated growth in well-developed forms of “enlightened state management.” Paths to accelerated growth were discussed recently at a session of the government's council on competitiveness. Yesterday, the government approved the foundation of a fund for nano-industry. It was decided at an earlier meeting to set up a state venture fund to support the IT industry and development of energy technology has been declared an integral part of the strategy of the “energy superpower.” It is thought that, as a result of the “enlightened state management” measures, Russia will eventually begin to export the products of state-nurtured industries such as high technology.
Concentration on industrial export in economic development is undoubtedly correct. Russian exports of vehicles, means of transportation and transportation equipment has been unstable recently. In 2001, it amounted to $10.5 billion. In 2002, it fell to $10.1 billion. But in 2004, it rose to $14.2 billion and last year it fell again to $13.5 billion. “Government statistics on the first half of 2006 indicate that export in the given field has risen 24.7 percent,” Igor Belyakov, an expert in the Economic Expert Group, told Kommersant. Therefore, it is hard to make any predictions, he says. The problem is the strengthening of the ruble and the positive tendency is the result of increased state support for exporters. In the first half of 2006, $1 billion was allotted for state guarantees to exporters. On the whole, the growth of industrial exports in the first half year was from large international contracts concluded with the cooperation of the authorities, Belyakov holds.
The total growth of industrial exports reflects the successes of the economy. But to assedss the quality of that growth it is important not to look at its absolute size but at the volume of export per person. That indicator shows export effectiveness. And it gives a different impression. According to Deutsche Bank, China increased its exports in dollars by about seven times between 1990 and 2003 to reach $600 billion per year. In the same period, Ireland increased its exports by five times, to reach $130 billion. But if the export of industrial goods per person in a year is calculated, Ireland is in third place in the world with an indicator of almost $12,000. China is doing somewhat worse, in 71st place with $136 per person. With $88 per person, Russia is in 80th place. It turns out that the average Irishman exports good worth 86 times more than the average Chinese.
What makes Ireland so effective? The key to its success is following the principles of economic freedom and reducing state intervention and regulation, according to the authors of the report “Economic Freedom in the World,” published yesterday by the Cato Institute and the Frasier Institute. Ireland scored 8.1 out of 10 points for economic freedom and came in sixth in the world, after Hong Kong, Singapore, New Zealand, Switzerland and the United States. China received 5.7 points for 95th place and Russia came in 102nd with 5.6 points, along with Mali, Nigeria, Papua New Guinea, Sierra Leone and Macedonia.
In the modern postindustrial world, the success of a good on the market cannot be planned, predicted or calculated in advance. Success can only be guessed at and, to do that, business must make many attempts to produce that perfect good. It is much harder to do that in a regulated economy. Moreover, the free economy is spontaneously concentrated on the export of more competitive products in successful countries. In a regulated economy, the main exports are assigned and do not do so well on the world market. For example, the three most profitable goods of industrial export bring in $15 billion per year. In Burundi, the three leading good bring the country $151,000 per year. That country has the lowest per person industrial export ($0.02 per person per year) and ranks 123rd for economic freedom with 4.7 points. For comparison, in the latest accessible statistic of the Federal Customs Service, the two leading products in Russia, trucks and cars, brought in $534.1 million in the first half of this year.
“In the modern world, which is distinguished by heightened dynamism of production and consumption, it is simply impossible for the state to set industrial or other sectoral priorities,” write experts from the Institute of the Economy of the Transitional Period in their report “The Russian Economy in 2005.” The best the state can do, they say, to choose an “intensive” export path is to invest in the development of human capital.
All the Article in Russian as of Sep. 08, 2006
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Photo: photoxpress
