Vladislav Inozemtsev, the director of the Research Center for Postindustrial Society and the publisher and editor-in-chief of Svobodnaya Mysl magazine, writing in Vedomosti and translated the Moscow Times:
Thursday marked the one-year anniversary since President Dmitry Medvedev took the oath of office. He came to power promoting the doctrine of “Four I’s” — that is, to develop the country’s institutions, infrastructure, innovation and investment. But Medvedev was hostage to a system that had been created over the preceding eight years by his mentor, former President Vladimir Putin. What has come of Medvedev’s Four I’s after a year in office?
1. Innovation. With the scientific potential of the Soviet era heavily weakened and the country’s educational system in a shambles, innovation has been on a steady decline for the last nine years. One simple way of measuring the scientific decline is by reading a few recent doctoral dissertations that are archived in the State Commission for Academic Degrees and Titles. You will quickly see that most of them are devoid of any academic merit at best and incoherent at worst. It should not surprise anyone that the Russian economy used 60 percent fewer domestically produced technologies in 2008 than it did in 2000. The share of foreign patents issued to Russians fell from 4.6 percent in the early 1990s to 2.6 percent today, and the combined circulation of all scientific journals published in this enormous country have fallen by about 95 percent and amount to about half of the total published in tiny Belgium.
2. Investment. In 2007, investment in Russia totaled 6.6 trillion rubles ($200 billion) from domestic sources and $120 billion from foreign investors. But in 2008, this flood of investment turned into a panicked flight of capital from all projects that carried the slightest degree of risk. Foreign investors pulled a record $129.9 billion out of the economy in 2008, while domestic basic capital investment dropped by more than 15 percent in the first quarter of 2009. Huge loans borrowed from foreign banks were spent on senseless mergers and acquisitions between Russian companies, and the enormous aggregate debt has become a crippling burden on the economy. Banks — the main sources of investment — ran to the state to be bailed out. The crisis has sharply reduced demand and driven up credit rates, making long-term investments unlikely.
3. Infrastructure. This remains one of the weakest elements of the country’s economy. Russia, with a population of 142 million and a land mass of 17 million square kilometers, has 62 percent fewer roads than Canada, with a population of just 32 million and a land mass of 9 million square kilometers. All of Russia’s air travel needs could be served by just one British economy airline, EasyJet. Moreover, half of Russia’s railroads were laid before 1916, and the aggregate depreciation of the country’s apartment buildings is more than 70 percent.
In any country with such problems, infrastructure improvement should be a top priority, but the bureaucrats during Putin’s presidency spent most of their time and energies on matters other than infrastructure. If this was the case during the oil-boom years, what can we expect during the crisis years? In 2009, when the government will run a budget deficit of at least 7 percent of gross domestic product, it is clear that we will see little improvement in the country’s infrastructure.
To make matters worse, 1 kilowatt hour of electricity costs 40 percent more in Russia than in Germany, and 1 square meter of Moscow retail or warehouse space costs about three times more than similar space in Paris and Rome. Laying 1 kilometer of asphalt on a four-lane highway costs four times more in Russia than the average price in the European Union. This is largely a result of the high degree of monopolization and corruption in the country.
4. Institutions. These are in critical condition. Putin’s power vertical is incapable of effectively distributing the funds allocated for fighting the crisis, policemen shoot people on city streets, and the percentage of funds lost to corrupt practices on state orders is growing rapidly. Painstaking work is needed in fighting corruption and reforming the civil service system.
Russia should draw lessons from what other countries have accomplished — starting with how France controls its traffic jams to how South Korea is able to control corruption. Only if Medvedev can adopt successful measures used by other nations will he be able to say in 2012 that his four years as president were not wasted.