Putin speaks at economic forum
State stewardship of a mixed economy with a dynamic private sector
The St. Petersburg Economic Forum is one of the biggest and most important business events in the world. It has met annually since 1997, and since 2005, it has been held under the auspices of the President of the Russian Federation. Participants in the Forum include its partners and shareholders, managers of major corporations, well-known analysts, and public officials. The Forum provides space for dialogue, for discussion of global economic trends and tendencies, and for the establishment of business ties and economic relations.
In the 2023 Forum, there were more than 17,000 participants from 130 countries. More than 900 business agreements totaling 3,860 billion Russian rubles, including 43 agreements with representatives of foreign companies, were signed. Preliminary projection for the 2024 Forum indicated the participation of at least 12,000 people from more than 100 countries.
Vladimir Putin, President of the Russian Federation, addressed the opening session of the 27th St. Petersburg Economic Forum on June 7, 2024. He maintained that in the world today, there is a fundamental conflict: many countries are trying to protect their political, economic, and cultural sovereignty; while at the same time, countries that until recently were the drivers of global development are striving to maintain their hegemony through any means necessary, including resorting to lies.
The global economy, Putin maintains, has entered a new era in which a multipolar world is taking shape, with new centers of growth and new investment and financial ties among states and companies. In this emerging multipolar world, China has the largest economy, India has the third largest, and Russia is in fourth position, by some measures. South Asian and African countries possess an increasingly prominent voice, and their rapid economic growth combined with high birth rates will enable them to shape the world-economy by the middle of the twenty-first century.
Furthermore, Putin notes, the world today is undergoing explosive technological growth, which is transforming management and productive processes. Those countries that are able to produce new solutions and rapidly implement them will be in the best position to take full advantage of technological progress and to effectively utilize their capabilities, maintaining and strengthening partnerships with other countries. Russia is “open to the broadest possible cooperation with all interested partners, including foreign companies, countries, and integration associations.”
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Putin explained at length Russia’s vigorous and purposeful marshalling of financial, human, and organizational resources at the federal, regional, and municipal levels in order to promote the economic development of the Russian Federation. In this process, structural changes are taking place in nine areas, guided by the Council for Strategic Development.
The first area of planned structural change is the restructuring of Russia’s imports and exports, which to some extent is provoked by the illegitimate sanctions imposed on Russia. Economic relations with the countries of Asia have grown 60% from 2020 to 2023, while commerce with the Middle East has increased 100%; with Africa, 59%; and with Latin America, 42%. Currently, countries that are friendly to Russia account for three-quarters of Russian trade.
The restructuring of imports and exports includes increasing the production of high-tech products that are high value-added goods. Russia is oriented toward the creation of full technological partnerships with other countries, in which Russia provides support for training of national staff and the development of local production. Cooperation of this kind, involving equal partnerships and technology/competency transfers, establishes stronger ties among countries.
Restructuring imports and exports requires the improvement and expansion of transportation links. Improvement of the quality and quantity of transportation is being developed in the Asia-Pacific region, the North-South international corridor, the Azov-Black Sea corridor, and the Northern Sea Route, connecting Russia to regional commerce.
In addition, international payment structures are being developed for both exporters and importers, because the reliability of Western payment systems has been undermined by the Western countries. The percentage of Russian export and import transactions in rubles is now approaching 40%. From 2021 to 2023, the share of ruble payments for Russian exports tripled. Russia is working with her foreign commercial partners to increase the use of national currencies in foreign trade payments and to improve the security and efficiency of said transactions. BRICS is working to establish an independent payment system that is not subject to interference through political pressure or external sanctions.
A second area of significant structural change is the development of an active supply-side economic policy, in which economic growth is driven by increasing the supply of goods and services. Russia has experienced GDP growth of 3.6% in 2023 and 5.4% in the first quarter of 2024, of which 45.5% was growth in manufacturing, construction, logistics (supply-side movement of materials and products from one facility to another), telecommunications, agriculture, and electricity. Some 61.1% of the growth was in industries like retail trade, hotels, restaurants, and financial services. Stress is given, Putin noted, to developing stronger financial, technological, and personnel sovereignty in order to build up productive capacity.
Russia’s stress on increasing the supply, Putin maintains, should result in the reduction of imports to 17% of GDP by 2030. In 1999, Russia’s imports as a share of GDP were 26%; but by 2023, they were reduced to 19%. Putin stresses that Russia is reducing imports not through government or administrative barriers, but through an increase in production. Domestic needs for the products of industry, agriculture, services, and information technology are increasingly being satisfied through national production. For example, Russia has become 100% self-sufficient in meat production. “Our country can and will produce more consumer goods, machine-tools, equipment, vehicles, medicines, and so on. To this end, we need to launch new projects, create modern jobs, and do it everywhere, in all regions of the country.”
In accordance with the stress on supply, Russia plans to increase investment in fixed capital by 60% in real terms, compared to the 2020 level. Russia has been doing well in this regard during the last two years, Putin notes. In 2021, Russia had planned for an investment growth of 4.5%, but it actually attained 8.6%. In 2022, 9.5% was planned, but 15.9% was attained. In 2023, the plan anticipated an investment growth of 15.1%, but 27.2% was attained.
Putin stresses that investments should be properly funded, not through state deficits or corporate external debt. For this reason, Russia is setting aside additional funds for its Industrial Development Fund. (The Russian State Duma established the Bank of Development in 2007, known as VEB for the initials in the Russian language of its predecessor, the Foreign Economic Affairs Bank, which functioned from 1988 to 2006.)
Investments in development are being forged as a public-private partnership, Putin notes. The State welcomes investments from the private sector, and private investors are now investing heavily in the Russian economy, alongside the state-sponsored Direct Investment Fund. The State Duma is currently considering public-private partnership in the space sector.
A policy of selective tax incentives is being applied, in which companies can reduce their income tax by investing in areas that have been targeted as strategic by the government. Beginning this year, projects of technological sovereignty and projects that contribute to the structural adaptation of the economy are being targeted as priority areas for the stimulation of investment. The tax restructuring will also be aimed at achieving greater social justice and reducing inequality.
The third structural change pertains to the labor market, and it already has been attained, in that youth unemployment and unemployment in regions and localities where it was historically high have been significantly reduced. Overall unemployment was at a record low of 2.6% in April. Putin observed that “fifteen to twenty years ago, the main question was how to find employment, whereas now it is where to find employees.”
The vocational educational system, Putin noted, must be reconfigured to meet current labor market demands, preparing qualified specialists for work in high value-added industries with higher wages. The government is undertaking a forecast of the staffing needs of the national economy, enabling an updating and upgrading of the course material in colleges and technical schools. By 2028, one million specialists in vocational professions will have to be trained for the aircraft, shipbuilding, pharmaceutical, electronics, and defense industries. In addition, in ten years, Russia will have forty university campuses with advanced conditions and opportunities for study, research, and work.
The fourth structural change is related to higher economic efficiency, on the basis of a qualitatively higher technological base with the broad use of automation. Production will be accelerated on the basis of the installation of more than 100,000 Russian produced robots, which will place Russia among the top-25 countries in robotic automation.
The fifth structural change is the digital platform revolution. Labor productivity is directly linked to digitalization and to the use of artificial intelligence technologies. Russia intends that 80% of Russian enterprises will switch to Russian-made software in the next six years. The application of digital solutions reduces the time and costs of the construction of housing, roads, bridges, factories, and plants.
The sixth structural change is the accelerated saturation of economic sectors with modern technologies and innovations. It is necessary to eliminate roadblocks and to prevent the shelving of inventions. It is necessary to develop a mechanism for the transferring of patents for specific research results to their creators as well as to small innovative enterprises and technology companies that know how to commercialize a product. At the same time, even while recognizing that someone who pays for an invention is its owner, it is necessary to create a soft market mechanism for using the inventions, so that the invention is not shelved.
The seventh structural change involves the strengthening of the role of small and medium-sized businesses in economic development. Today, there are in Russia approximately 6.5 million small and medium businesses. Russia has attained its goal, set six years ago, of increasing the number of persons employed in this entrepreneurial sector to twenty-five million. “Our entrepreneurs, including the younger generations, are steadily gaining momentum, occupying the market, and launching manufacture of products that often surpass foreign analogues in their characteristics.”
The eighth structural change involves the unlocking of the potential of Russia’s regions. Russia seeks to create “a new geography of development,” involving “the creation of new growth points in cities and towns across the country.” This will enable the creation of opportunities not only in capital cities but in small towns and villages, including work as professionals and in other well-paid jobs or owning businesses, enabling families to “raise their children in comfortable and modern conditions.” To support this goal, new projects in educational and health care systems, sports, and culture will be developed in the towns and villages. Master plans for the Far Eastern and Arctic regions have been developed, and the government has agreed to approve similar programs for another 200 cities and towns. Putin further proposes a home mortgage program of six percent interest in small towns and regions for families with two or more children, regardless of the age of the children.
The ninth structural shift involves reducing poverty and inequality and increasing family income. Salaries should grow at a rate that exceeds inflation; therefore, it is important that the minimum wage be tied to the overall growth of wages in the economy. The government will introduce a bill setting the minimum wage at 48% of the median wage. In addition, mechanisms like tax deductions for families with children, and a preferential home mortgage loan at six percent for all Russian families with children under six, should be implemented.
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Further considerations
The intellectuals and peoples of the world have before them four models with respect to the role of the state in modern economy and society, which have been forged in political practice by actors that had an interest in each. (1) A minimalist state, which carries out primarily security functions and seeks to minimize regulation of the economy or social programs to benefit particular sectors of the people. This is the model of nineteenth century laissez-faire capitalism, which played a positive role in facilitating the modernization of the capitalist world-economy; and of post-1980 neoliberal capitalism, which played a major role in promoting the current decadence of the Western powers.
(2) A welfare state, in which the state is much more active in regulating the corporations and in developing social programs designed to benefit targeted sectors of the people. This New Deal/Big Government model was the prevailing model from the 1930s through the 1970s. It was developed in the United States and in the West as a necessary and temporally successful response to the Great Depression, but it relied excessively on deficit state spending, and it did not address the global structural contradictions in the world-economy.
(3) State ownership of principal economic enterprises, adopted by the Soviet Union and eastern European states during the twentieth century as well as by some Third World states with anti-imperialist projects. It was highly effective in initial necessary transformations, but in the long term, it did not provide sufficient individual or corporate incentives for creative contributions to economic productivity, thus giving rise to long-term economic stagnation and an incapacity to deliver on the promise of the full protection of social and economic rights.
(4) State stewardship of a mixed economy that includes state-owned companies integrated with a vibrant private sector. It has been developed by China, Vietnam, Cuba, and other states constructing socialism since the 1980s, and it is the model being developed in Russia under the leadership of Putin. It was developed in response to the stagnation being experienced under the state ownership model. It is making great strides in the development of the productive forces. The countries that practice it are not only ascending; they also are reformulating the norms of the world-system, thus forging a transition from a neocolonial world-system to a more just and democratic world-system that respects the sovereignty of nations and is based in cooperation among states.
The minimalist state and welfare state models are tied to world imperialism. The emergence of the welfare state model did not change the essential structures of the neocolonial world-system. On the other hand, the state ownership and state stewardship models have been tied to socialist construction. The state stewardship model is integral to the current efforts of the global South and East to construct an alternative, pluripolar world-system.
Public debate in the West largely turns on the question of the minimalist state versus the welfare state. Although both models were functional in their particular historical moment, neither today adequately responds to the multidimensional crisis of the world-system, which has been provoked, first, by its having surpassed and overreached the geographical and ecological limits of the planet, and secondly, by a worldwide anti-imperialist movement that persistently demands a more just, democratic, and sustainable world order.
In contrast, the state stewardship model is effectively responding to the current multidimensional crisis of the world system. It is demonstrating itself to be the necessary road for humanity in the current historical moment.
The Western media and politicians, in seeking to discredit nations following the state stewardship model, are portraying such nations as authoritarian, manipulating and distorting historical and present-day facts in the process. They seek to hide from the people the most important dynamics of human progress in our times. They act, either unwittingly or with self-interest, in defense of the short-term interests of the power elites of the world. They perform a great disservice to humanity.
Intellectuals of the West today are assigned the duty of delegitimating Western politicians and their intellectual allies; showing to their peoples the insightful and committed political leadership emerging today in the nations of the East and South.
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