“Innovation City” nothing but another Potemkin Fraud

Vladimir Ryzhkov, writing in the Moscow Times:

Several high-ranking officials were quick to dismiss the proposals put forward in a much-discussed report by the Institute of Contemporary Development, the liberal Moscow-based think tank. The report suggests that Russia can modernize only if it develops a strategy for invigorating and strengthening state and social institutions. Proposals include the need for democratic control over state bureaucracy and siloviki agencies, an independent judiciary, political competition and direct elections for the Federation Council and governors.

Although Medvedev is the institute’s chairman of the board of trustees, he said he didn’t read the report, although he received it well in advance of its release Feb. 3. And, at an economics forum in Krasnoyarsk on Feb. 12 and 13, Deputy Prime Minister Igor Shuvalov quipped that the government already has enough qualified economic and political specialists on staff that it doesn’t need a lot of outside advice.

Almost simultaneously with the Institute of Contemporary Development report, the European Commission presented the Cabinet with its own proposal for a new “partnership for modernization.” This report also singled out Russia’s institutions as the main obstacle to instituting rule of law and a constitutional state, overcoming corruption, improving the investment climate and increasing the role of Russian nongovernmental organizations in civil society. It suggests that economic and technological progress is unattainable without first resolving these key problems.

Topping them all, however, was a Feb. 15 Vedomosti interview with first deputy chief of staff Vladislav Surkov, the Kremlin’s top ideologist and author of the sovereign democracy model. He is also the person Medvedev has charged with creating Russia’s Silicon Valley. Surkov promises to create an “Innovation City” of 30,000 to 40,000 of the world’s most innovative people from all corners of the world. They will live in ultramodern homes with all the Western comforts that they are used to. They will create cutting-edge technologies and products to sell in the global marketplace. In the first phase of Surkov’s modernization program, groundbreaking innovations will be hatched in Russian corporations and then carefully “transplanted” into a city of miraculous innovations. The resultant products are planned to generate from 100 billion rubles ($3.3 billion) to 200 billion rubles of income by 2015, and trillions of rubles down the road. This year the government has allocated an initial 4 billion rubles ($133 million) to support innovative startup projects.

In Surkov’s fantasy world, the influx of the world’s top innovative talent to Russia’s Innovation City will create a brain drain in Silicon Valley, Swedish technoparks will go vacant, and lines of innovators will swamp the passport control booths at Moscow’s airports.

Meanwhile, Surkov will continue to view democracy and an open, transparent society as needless extravagances — and even a dangerous threat to the country’s vertical power structure. He speaks openly of his firm belief in the virtues of “dirigisme” and the Kremlin’s strong “manual control.” Surkov, who has no objections to the term “authoritarian modernization” to describe Russia’s innovation model, admires the authoritarian and single-party governments in China and North Korea. In other words, his ideal is authoritarianism, maintaining the status quo and technological modernization with the current state apparatus driving and controlling the process, without a strong need to institute political or economic reforms.

In attempting to justify the Kremlin’s desire for uncontrolled power and “authoritarian modernization,” Surkov either does not know or purposely overlooks the fact that all of the successful modernization drives to which he refers were carried out in countries that had functioning government institutions, such as an independent judiciary, efficient and lean bureaucracy, high protection of ownership rights, ease of doing business and a highly favorable investment climate. These are all indispensable elements for modernization, whether the country is democratic, such as Japan or Sweden, or authoritarian, such as Singapore or China.

Russia doesn’t resemble any these successful modernization models. To the contrary, we see the country becoming even more closed and protectionist. It is crippled by a terrible investment climate, high monopolization of key industries, rampant corruption, the growing control of the state in key sectors of the economy, a lack of independent courts, widespread abuses by law enforcement agencies and a stifling bureaucracy that makes life for foreigners working in Russia a nightmare. Business activity in Russia is declining and dying out, and there is a flight of capital overseas and a continuing brain drain.

The real attraction of the Kremlin’s Innovation City lies not in what it will accomplish for innovation but in how it will line the pockets of Russia’s corrupt officials. Build it and they will come! With lots of money! The greedy bureaucrats are already salivating in anticipation of the hundreds of construction permits that will be required to develop a Silicon Valley from scratch. They are dreaming day and night about the seemingly unlimited number of bribes and kickbacks that they will be able to extort, how many registration papers and work permits for foreigners they will “sell,” the opportunities to earn money on protection schemes and official and unofficial customs duties. Think of the money to be made by the border police, intelligence services, fire inspectors, the Federal Tax Service and the Federal Service for Environmental, Technological and Atomic Inspection. Nobody has bothered to estimate what the latest Kremlin fantasy will cost, but the price tag will clearly be in the hundreds of billions of rubles.

Only those who have invested money here can really understand the true nightmare of doing business in Russia. Take IKEA for example, which recently fired two of its top managers for not standing firmly enough against Russian bribe giving, which, in reality, is the only way that elementary business can be conducted in the country. This is precisely what corrupt bureaucrats wanted — to force businesses to pay bribes and to decriminalize them so that they are considered by all parties as “normal operating expense.”

Take a trip to old Soviet technology and science towns such as Akademgorodok in Novosibirsk, Zelenograd, Dubna, Dolgoprudny, Sarov or Seversk. These dying towns with near-empty buildings and a few aging scientists are stark examples of the acute degradation in the country’s science and innovation sectors. This fate is exactly what awaits Surkov’s quixotic project if Russia cannot control corruption and if the Kremlin is unable to build an open, democratic society that guarantees private property protections and builds innovation from the bottom up.

One response to ““Innovation City” nothing but another Potemkin Fraud

  1. Crikey, talk about history repeating itself!

    Remember the western ‘believers’ who travelled to the USSR in the 20’s and 30’who were never heard from again?

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