Thursday, September 4, 2014

Does the WEF actually approve of import substitution?

Those who believe (like me) that people who design and build things are much more interesting—and prosperous—than those drones who merely shop, must be a little startled to discover that such a neoliberal free-trade organization as the WEF agrees with us.

The Liesure Classes might define reality in real and meaningful ways with their depressions and wars, but at the end of the day, serious countries are defined by their Producer Class accomplishments.  If you can build the very difficult, very well, folks tend to notice.  The Soviet Union might have built some really crappy cars, but they were seriously world-class in aerospace, sub manufacture, etc.  Not only were the citizens of the SU proud of their accomplishments, it was something that impressed outsiders.

Then the neoliberals showed up during the Yeltsin years and de-industrialized Russia—turning it into a Leisure Class paradise where conspicuous consumption paid for by oil exports replaced pride in accomplishment.  My guess is that not a few Russians miss the feeling of being world-class.  And probably more are furious that some cheap thugs in the world's banking centers are actually able to threaten them because they have forgotten how to make the necessities of life.

Institutional analysis would suggest that the Producer perspective is being heard these days in the halls of the Kremlin.  The sanctions from USA / EU have highlighted just what Russia should do to insulate themselves from the bullying of Leisure Class thugs.  And the first act is to go backing to making the basics—to stop importing things that can easily be made in Volgograd.

What is absolutely certain is that if Russia does embark on a serious program of import substitution, they will have a very different economy in a few years.  Could they become South Korea with an oil industry?  That's a tall order but in theory, it could be possible.

Russia to go up in WEF rating if taps opportunities offered by Ukrainian crisis

Economy September 03, 2014

Strategy Partners Group's Alexei Prazdnichnykh says one of the opportunities is greater emphasis on import substitution, which would favorably affect the development of businesses locally

MOSCOW, September 03. /ITAR-TASS/. The Ukrainian crisis opens vast opportunities for business development that might propel Russia to a far higher position in the World Economic Forum’s Global Competitiveness Report, Strategy Partners Group Alexei Prazdnichnykh told ITAR-TASS.

Prazdnichnykh, a coordinator of the World Economic Forum’s international program in Russia for assessing countries’ competitiveness, said that the effects of this year’s Ukrainian crisis on Russia’s rankings in the coming years would depend on its ability to make use of the opportunities and neutralize risks.

One of the opportunities, he said, is greater emphasis on import substitution, which would favorably affect the development of businesses locally. The key risks include the possibility of still greater restrictions on competition with the exodus of a number of key foreign players from the Russian market, as well as ineffectiveness of state investment, which will inevitably sore, as Russian businesses will face restrictions in accessing capital markets.

“Ideally, if the opportunities are used to a greater extent than the risks manifest themselves, positive trends will be in sight in two or three years from now. But if the opportunities are wasted, Russia will lose its positions in the next report,” Prazdnichnykh speculated.

The World Economic Forum earlier on Wednesday published its Global Competitiveness Report, in which Russia climbed eleven lines up from last year’s 64th place to 53rd.

Prazdnichnykh attributed such an impressive result to a combination of formal and substantive factors.

“From the formal standpoint, progress on some positions was achieved not only in absolute, but also in relative terms. Some of our competitors showed negative dynamics,” the analyst said. He mentioned such aspects as access to local providers, the effectiveness of marketing, the situation on the labor market and a number of infrastructural parameters.

“In substantive terms, one can say that Russia is a big economy, the country is growing richer and businesses are becoming more sophisticated,” Prazdnichnykh said.

Main challenges

Prazdnichnykh pointed to some fundamental problems that hinder Russia’s further progress, such as underdeveloped institutions and low effectiveness of state governance.

“If these aspects were made top priorities of the president and the government, this would improve Russia’s positions in the rating fundamentally, because other parameters of the rating would go up as well. Russia would surge up as a rocket over a period of five years," Prazdnichnykh concluded. more

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