Academician Aganbegyan called the main problem of the Russian economy

Academician, former rector and current head of the Department of the Academy of national economy under the Government of the Russian Federation, Abel Aganbegyan recently celebrated its 85th anniversary. He was economic Advisor to Mikhail Gorbachev, his name is widely known in scientific circles, his lectures attended by the students in leading universities of the world, he was addressed the Nobel Committee with a request to recommend candidates for the award. His opinion was listened to heads of States, and few people know that it was during his participation in the early 1990s, the government came to the team of Yegor Gaidar, whose market reforms changed the Russian economy beyond recognition. In an interview with “MK” Abel, gasevic spoke about the myths surrounding his personality, about the market in Russia and how much money the country needs for economic growth.

photo: ru.wikipedia.org
Despite 85 years of age, academician Abel Aganbegyan actively involved in research and teaching.

— Are you satisfied with the condition of the Russian economy will be met by your anniversary? The crisis seemed to be over, according to the assurances of the authorities. Or is it not so?

— Let’s go back. The 2008-2009 crisis in Russia was the deepest of the countries “Big twenty”. We have decreased the most the volume of GDP, 4 times imploded the stock market and reduced revenues, industry, record unemployment has increased, significantly decreased investment. Then came recovery, and in 2010-2012, we have surpassed almost all pre-crisis levels. However, since 2013 began the stagnation, which lasted until 2014, and only then, after the introduction of sanctions and falling oil prices in 2015-2016 came the recession, that is the crisis and decline. Since the fourth quarter of 2016, she began to overcome and we can now say that the recession is passed and we went back to stagnation — stagnation, depression, and fluctuation around zero, which will be in 2017 and, apparently, 2018. Worst of all, during the recession has fallen sharply the standard of living indicators. This has not happened in our country: real incomes decreased by 13%, trade and final consumption of households — 14%, is 3 times more than the reduced volume of production in the country.

— To whom do we owe this crisis and the subsequent stagnation of the geopolitical situation, the collapse in oil prices?

— I must say that the stagnation in 2013, we created our own hands, receiving it as a result of the wrong economic policies: it’s been over half a year before the annexation of Crimea, sanctions, lower oil prices. The fact that we have preserved the old economic policy, and conditions have changed. While President Vladimir Putin has pointed out the problem at the first meeting of the Presidium of the Economic Council in 2014 when he said that the old sources of economic growth has exhausted itself — if we rely on them, we are waiting for zero growth. So far we have mobilized new sources, and being dependent on oil prices, received a major blow when the decrease in raw quotations initiated by Saudi Arabia and OPEC to confront the United States with their shale production. Suffering from measures not even for us, we managed to overcome the recession, but not because of the actions of the government, Ministry, or Central Bank, but also because of oil: it went after the “freezing” of its production in the OPEC countries and Russia from $39 to $57 per barrel of Urals grade, increasing by almost 30%, the volume of exports of the Russian Federation and ensuring GDP growth of 1.5% in the first half of 2017. A record decline in inflation from 15% in 2015 to 4% — today, too, cannot be considered a merit of the Central Bank, as many think. Inflation declined due to lower domestic demand, and not due to the actions of the regulator with its tight monetary policy, which I think is wrong. When 10-15% reduction in real income, trade, final consumption, it is quite natural that there is no demand, and consumer prices are not rising.

— Of all the problems of the Russian economy, whatever you call it, what I think are key?

— The main problem — the decline of investment, which began in 2013. We have the old fixed capital worn out financially-technical base of enterprises, which is updated only 0.7% annually, the remaining 99.3% of just get older from year to year. About a quarter of all of the equipment operates over the amortization period, and the average life of the machinery and equipment in Russia is 14 — fold more than in developed countries. In such circumstances, to produce quality, competitive products becomes increasingly difficult. Therefore, in Russia economic growth more than in any other country, is associated with the investment that you need to invest in production and human capital.

photo: From personal archive
Abel Aganbegyan (left): “It is a myth that I have played a crucial role
bringing a team of Yegor Gaidar (right) to govern the country, but I have created the organizational conditions for its operation”.

Market reform is underway in Russia for over 25 years — since the “Gaidar team”. About you, who served as Advisor to Gorbachev and in General had a great influence at the turn of 1980-1990-ies, referred to as the man who played a crucial role in bringing this team to the government. Is it true or a myth?

A myth is the right word. We sit in the office (shows the portrait of Yegor Gaidar. — I. D.), who chose Yegor, when at the end of 1989, I invited him to the Academy of the national economy. He wanted to create a Research Institute for economic policy, and I helped in the organization of this institution at the Academy. My personal interest was that I as the rector needed to renew the teaching staff. The average age of professors was more than 60 years, and we in the Academy need to start reading market courses — marketing, corporate Finance, international business and other, to make programs on the basis of foreign literature, and of all professors, only one knew English… I knew that we needed a youth, so I was looking for people around which it mobilized; one of them was Yegor Gaidar in Moscow, the other — Anatoly Chubais in Leningrad. In his Institute of the Academy Gaidar brought 66 people and has been developing ways of transition of our country to the market. It’s true.

But the fact that I played a role in bringing this team to govern the country — a clear exaggeration. As far as I know, Gaidar got acquainted with Boris Yeltsin, thanks to Gennady Burbulis, with whom communicated. Yegor liked Boris Nikolayevich, and could not help but like: he was a great genius, a distinguished economist, scholar, analyst, and theorist. He loved books and science, but had never been in the factories, farms, and not seen the real sector. This was his strong and weak side at the same time. He gathered the same team as he, a 30-year-old scientists, they traveled to the countries of the former Soviet bloc, for example Poland, which made a successful transition to a market economy, studied foreign experience. In scientific terms, Yegor Gaidar was above me, I had no influence on his scientific research, but have created the organizational conditions for its operation, funded by his Institute from the funds of the Academy, has placed his employees. Remember what I said to the executives and employees of the Academy: “If I asked you, and you do not do this, I will declare you a warning, but if Yegor asked, and you don’t, I will fire you”. Because the new can not occur if he does not contribute.

With hindsight how do you assess the head of government and the work of Yegor Gaidar, conducting reforms?

— Very highly. He did the most important thing — to preserve Russia, which was disintegrating before our eyes. The Gaidar government was called “kamikaze government” because of wanting to steer the country then was, it was a deadly lesson… But Yegor was a very brave man, for all its softness and intelligence. He made a lot of mistakes, as we understand in hindsight, but stayed in the government for only 11 months, so hang on him all the dogs and blame in what happened in the country over the next 25 years, is ridiculous. By the way, the biggest collapse of the economy did not happen in 1992, when Yegor Gaidar, who was removed from his post populists of the Supreme Council, and in 1993, when Viktor Chernomyrdin. Then Boris Yeltsin turned again to Gaidar, who again, all correct, but then again was not needed, as is often the case.

— Could you name the main achievements and failures of Russia during this 25-year-old market road?

— The main achievement is that the return to the old: we have private property, goods in the shops, we can travel abroad… But during these 25 years, it was possible to do immeasurably more. In the transition of Russia to market economy the country is facing a transformational crisis, the lowest point of which occurred in 1998-1999. If we compare with the crisis of 1989, the gross domestic product (GDP) then decreased in 1.8 times, industry — in 2.2 times, investments in fixed capital — almost 5 times the real income — by 1.9 times. A major problem was depopulation, and the death rate exceeded the birth rate in some years, for 950 thousand!

Then started climbing, but won from it not all the population, mainly the rich. In the end we got a huge difference between the lowest and highest segments of the population’s welfare. If in Soviet times 10% of the rich lived better than the poorest 10% is 3 times, now at 15.7 times. Meanwhile, in Western Europe this difference is 8-10 times that in the countries of the social-democratic orientation — 6-8 times, and in Japan — 5 times.

Such a dramatic income gap is a big failure. In fact, after the 1990-ies we were out of the reformation, and to the market, we have not moved. We have no funds capital and “long” money, the problems with the labour market, land, tax system. Russia today is a government of oligarchic transitional mixed economy, where 70% of the gross domestic product is made on the basis of state property.

— Let’s talk about the science. Quoted Russian economic thought in the world? Is there any chance in the foreseeable future, someone from the Russians win a Nobel prize in Economics — or the achievement of the Soviet era your teacher, Leonid Kantorovich, and remains the only precedent?

— In my opinion, our economic science in the world ranking is now below average. We have no outstanding organizations, such as the National Bureau of economic research in the United States. Although we’re neck and neck with world leaders in international economic research and forecasting. For example, the Institute of world economy and international relations (IMEMO) Russian Academy of Sciences, is one of three centers in the world, which makes global economic Outlook.

As for the Nobel prize, in addition to Kantorovich was three contenders from Russia, worthy of her, in my opinion, more than the winners of recent years. The first Valentine Novozhilov he has developed a problem of optimal solutions in the economy. His works are highly valued in the world. The second Yegor Gaidar: the development paths of transition from socialism to capitalism, that is, from the administrative-planned system to a market economy deserves a Nobel prize. The third might be awarded to Academy for their global Outlook. Now, however, the Nobel prize is often awarded to people that 90% of the major scientists were not heard, no one learns from their books, and new directions in science they will not open.

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