Central Planning: Bringing Forces to a Special Mode

6 September 2022

Central Planning: Bringing Forces to a Special Mode

Key conclusions

Historically, planning has proven to be effective

“Of course, some people say that the Soviet Union’s famous electrification plan was actually drawn up before the revolution, i.e., it was the fruit of Russian engineering, and the Bolsheviks simply arrived on time to lay things out and expedite the process. Regardless, however, a much-coveted strategic goal was achieved – a seven-fold increase in electric power generation,” Mikhail Kuznetsov, Director, Eastern State Planning Center (FANU Vostokgosplan).

A range of social problems can be solved automatically through economic growth

“The demographic situation improves across the board when the economy grows. That’s everything affecting the birth rate, reducing mortality, and migration. However, it’s not all as rosy as that. It’s not like we can say, ‘OK, let’s improve the economy, and the demographic situation will sort itself out’, and so on. There are also plenty of tricky questions, particularly when we start looking at demographic policy,” Irina Kalabikhina, Head of the Department of Population of the Faculty of Economics, Lomonosov Moscow State University.

“We focused on a residential mortgage programme; however, mortgages themselves are not a child‑friendly measure. If people are mired in debt, they won’t have children until it’s dealt with. So, we encourage people to start a family, while at the same time discouraging them from having children,” Dmitry Belousov, Head of Macroeconomic Analysis and Forecasting, Center for Macroeconomic Analysis and Short-Term Forecasting (CMASF).

Unification as a key part of planning

“Any strategic document needs to comply with the following: indicators set out in Decree 68, the integrated plan to achieve national goals, indicators set out in national projects, indicators set out in the Investment Climate Index – I could go on forever. And if there’s a divergence, the corresponding federal body will say, ‘Redo it’, and the process starts from the beginning again. And you know, I’m probably not divulging any secrets when I say that some regions have two strategies. The first strategy is the one that everyone has approved, and the second strategy is the one which they work on and which can be amended quickly,” Yuliya Morozova, Deputy Chairman of the Government of Kamchatka Territory.

“First of all, centralization should probably be divided into two areas. As I see it, these should be ‘unification’ and ‘centralization’. Routine processes, like figures or whatever you want, can be unified. And once these have been agreed upon, all complications are already eliminated. Everything already works, and is aligned and set on the correct path. There are no superfluous aspects which could otherwise cause setbacks. This is more like unification,” Anna Sharipova, Managing Director for National Projects, Russian Technologies State Corporation.

A state plan is nothing without supplies and logistics

“We often hear the term ‘state plan’ cropping up, although it’s fading. However, I’m sure that everyone is aware that there was also a supply and logistics committee. And a state plan without supply and logistics is little more than just a pipe dream. So, there needs to be a template for things to happen in any case. And it’s important to realize that planning and uniting around a specific aim is probably the most robust approach, whether we are talking about crisis or non-crisis scenarios,” Anna Sharipova, Managing Director for National Projects, Russian Technologies State Corporation.

“In terms of the geopolitical situation, the development of the Far East, and the priorities outlined by the President and government, we need to consider and plan things for the energy sector in the Far East. We also need to implement things at an accelerated rate, otherwise our love for the Far East may fade, and there will be no more development anywhere, no matter how much we want it. We will just see a rigid system marked by restrictions,” Sergey Kirov, Member of the Board, First Deputy Director General, RusHydro.

PROBLEMS

Federal programmes often fail to consider the interests of people on the ground

“People were rather put out by the fact that the federal centre would implement a number of construction projects which would have no direct bearing on individuals in Vladivostok, Khabarovsk, and so on. And sadly, this happens quite a lot around the world. <...> A focused effort is required to address this issue. We need <...> to localize these programmes, right up to demand for services and products from local companies. That way, people and businesses in the area understand where they stand in federal construction projects,” Dmitry Belousov, Head of Macroeconomic Analysis and Forecasting, Center for Macroeconomic Analysis and Short-Term Forecasting (CMASF).

“Problems include low living standards, the dominance of single industries, accumulated volumes, and a lack of consideration of local conditions. And let me emphasize this: it is impossible and wrong to implement projects across Russia’s vast territory according to ‘universal’ plans. That’s even more true when you consider the coastal nature of the Far East’s economy, and the region’s ties with the outside world,” Valery Kryukov, Director, Institute of Economics and Industrial Engineering of the Siberian Branch of the RAS.

Some national goals can potentially be in conflict with one another

“We say that we need to increase the birth rate, that the country needs children, that we need to tackle poverty. But these are completely contradictory objectives. If you think about it, having a child will always lead to a drop in living standards. There’s no government on earth which is ready to entirely compensate parents for the costs of having and bringing up children. And there’s no need for that either. But still, we are tackling two very acute issues in parallel,” Irina Kalabikhina, Head of the Department of Population of the Faculty of Economics, Lomonosov Moscow State University.

SOLUTIONS

The need for retraining must be taken into account in the pursuit of digitalization

“Digitalization is excellent, but it brings risks of its own. That’s because if we use powerful digital solutions to achieve normal levels of labour productivity, we will need to retrain around a quarter of the workforce. In principle, nothing is impossible here. About 1–1.5 million people per year will need to be retrained to specialize in new areas. <...> However, if we want to make a digital breakthrough, if we want to increase productivity and so on through employing these solutions, we need to draw up a programme which factors this in from the off,” Dmitry Belousov, Head of Macroeconomic Analysis and Forecasting, Center for Macroeconomic Analysis and Short-Term Forecasting (CMASF).

“We need the corresponding technology for organizational aspects. This is the kind of foresight which combines the demand of corporations – including state corporations – around solutions <...> which will enable them to focus on the demand that is actually there, and to identify solutions in this area,” Dmitry Belousov, Head of Macroeconomic Analysis and Forecasting, Center for Macroeconomic Analysis and Short-Term Forecasting (CMASF).

The risk of small businesses relocating to other markets must be factored in when providing support

“Any influx of grants or just support needs to specify where the company is able to grow. Otherwise, you’ll have small innovative companies traversing this path for a long time with our support, before leaving for external markets, and developing over there using their revenue. What was our support for, then? But if we do everything intelligently, the state will have solutions to draw upon,” Dmitry Belousov, Head of Macroeconomic Analysis and Forecasting, Center for Macroeconomic Analysis and Short-Term Forecasting (CMASF).

Federal programmes should be adapted in line with the needs of individual regions

“We need to localize things. This includes support and developing cooperation. And I believe in – and support – the idea that we need centralized planning, but of a different nature. Determining priorities and areas are related to the distribution of resources and price setting. They are also related to the system of regulatory measures focusing on specific aspects of projects,” Valery Kryukov, Director, Institute of Economics and Industrial Engineering of the Siberian Branch of the RAS.

“What do I think is important? Getting away from the unitary model of implementing resource projects, where you have one company for one project. And the regulatory approval system, which is predominantly geared towards the extractive industries and the fulfilment of tax obligations. We need to move to a civil law model. And we need to focus on the entire range of aspects related to integrating resource projects into the economy of the surrounding region,” Valery Kryukov, Director, Institute of Economics and Industrial Engineering of the Siberian Branch of the RAS.

“I would even suggest holding a separate session – perhaps next time – focusing on the imbalance of strategic benchmarks and targets set out in federal documents. This is particularly pertinent to national projects and the integrated plan, whereby the region of course falls into yet another trap whereby it fulfils one criterion at the expense of another,” Yuliya Morozova, Deputy Chairman of the Government of Kamchatka Territory.

There needs to be a discussion of new ways to address demographic issues

“When it comes to the Far East, I would place the emphasis on migration. As we have discussed today, we have two ways of increasing the population: we can address the birth to death ratio, and aim for a positive net migration rate. Addressing the birth to death ratio is a good thing to do, and births are essential – they indicate that everything is going well in the country. After all, by having children, we are helping to safeguard future prosperity. Currently we are bearing the costs of this situation, <...> but there is another aspect – migration. You get people who are already able to work, and who don’t require 20 years of investment,” Irina Kalabikhina, Head of the Department of Population of the Faculty of Economics, Lomonosov Moscow State University.

“Imagine that parents get a supplement to their pension – an amount linked to their salary or income, and to what their children do, which is provided by the state. Children and grandchildren. We would be looking at a somewhat different economic plan. <...> In this instance, reproductive labour – the term exists – would have its own economic value. Currently, being a liability, it sometimes pulls us back a little, and prevents us from tackling these problems,” Mikhail Kuznetsov, Director, Eastern State Planning Center (FANU Vostokgosplan).

Personnel decide everything

“When we speak about centralization, each stage has its own peculiarities. But one thing should be front and centre – personnel. After all – look at the centralization we have in terms of today’s sanctions agenda. We have all these European parliaments which are more or less acting in unison by a majority. That’s because they are centralized according to certain principles surrounding the global agenda. And the people who have voted in a centralized manner from a specific, very early period fall into a certain agenda in various ways,” Anna Sharipova, Managing Director for National Projects, Russian Technologies State Corporation.

Central Planning: Bringing Forces to a Special Mode

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