''It is in Yemen there is despair, but a large part of our population is living better than 30 years ago''

Interview with Andrey Movchan, the director of the program Economic Policy at the Carnegie Moscow Center. Part 2

''It is in Yemen there is despair, but a large part of our population is living better than 30 years ago'' Photo: facebook.com

Realnoe Vremya published the first part of the interview with Andrey Movchan, a financier, the director of the economic program at the Carnegie Moscow Center. In the second part, the economist argues with the critics of the ''defense budget'', tells about the disappearance of the class interested in changes, and about the end of the ''era of the countries.''

''Generally speaking, our army does not have pots of money''

Can the authority change the situation today, for example, with falling incomes, or it has gone out of control like what you have said about?

We're not in a mystic space, but in real, after all. We have budget, we know how much it is. No matter how much they give, you still receive about the same. They say a lot, especially the liberals, that we have a huge defense budget, bloated power budget, let's distribute it to people. But, first, even if we do, it makes little difference. People will consume it, it will raise prices and everything will be absorbed by inflation. Second, the problem is that we have a military budget the same as in Saudi Arabia, in Germany. But our borders are far broader, we have greater population and more problems with border security. At the same time, the population itself demands that Russia played an 'important geopolitical role', and for this we need certain types of weapons and a certain size of the army.

Generally speaking, our army does not have pots of money. If you are Russian president, not the opposition who criticize for the sake of criticism, then go try to reduce the military budget, which, by the way, a half is military pensions, benefits and allowances. The space to maneuver is very little. The normal state creates welfare for its citizens by providing those citizens opportunities to build their wealth. With this we have problembs. We have archaic laws, and corruption is very severe, security and tax authorities do total and absolutely terrible things, and demography fails, as well as the society is unaccustomed to independence.

As I have said, it is very difficult to deal with this because things have gone out of control. It is impossible to give the tax authority the instruction to stop going to the entrepreneurs and take away business, take fines for nothing — it doesn't work. We have kind of consolidated the power in the Kremlin, and all the governors are accountable to, specific persons are accountable — but the system has gone out of control. It can live for many years, it is not a sign of disaster and extinction. There is a resource economy, where everything is fine. But the welfare of the citizens in this situation is not expected.

''Generally speaking, our army does not have pots of money. If you are Russian president, not the opposition who criticize for the sake of criticism, then go try to reduce the military budget, which, by the way, half is military pensions, benefits and allowances.'' Photo: Ruslan Davletshin

''Businessmen are leaving or selling a business, or becoming officials. Well, or going to jail''

Let's say tomorrow the state would have the political will to begin real reforms to try to end corruption, reduce its share in the economy. If such takes place, will we be capable to conduct these reforms?

I don't quite understand these words. What do you mean by saying ''the state would have the will''? The state – it is what?

The Kremlin.

I have already said that the will of the Kremlin has little relevance to the situation in the country. It can determine to a certain extent the list of beneficiaries of the first level. But the will of the Kremlin absolutely cannot change the fabric of the environment. What can you do? They are already hysterically urging from their towers to end corruption. It doesn't work.

It should the will of a completely different stratum — a wide will of the social strata. They must be born to exist. How was it happening in Europe? The beginnings of such will was the cities. First, they were dependent and controlled by the feudal lords, but there already were arising new types of relations. When instruments of labour, produced in the cities, became important, the cities received the Magdeburg rights, freedom, the possibility to run a business how they wanted. And then these cities grew so much that began to dictate their will. Here it is the formation of the class of players who can press for changes.

We have the reverse process: the remnants of the class who was interested in changes are just disappearing. Businessmen are leaving, or selling their businesses and becoming inner emigrants, or becoming officials. Well, or going to jail. So, we just have nobody to rely on; we do not have the power to stop all of this. This class could have appeared — even after 2008, after 2012. But the authorities saw the risks to themselves and accepted (perhaps even unconsciously) the decision to destroy this class at the root. So we do not have it, that is why we have nothing to expect.

''But we still have 9,000 dollars per person, and on the streets there are no starving people, and quite a large part of the population is living better than 30 years ago. It's not like in the late eighties, when the Communists brought the country to the condition that the shelves were empty.'' Photo: Maksim Platonov

See, we are again coming to despair.

It is in Yemen there is despair. But we still have 9,000 dollars per person, and on the streets there are no starving people, and quite a large part of the population is living better than 30 years ago. It's not like in the late eighties, when the Communists brought the country to the condition that the shelves were empty, and sweatpants were sold by coupons for veterans of war. There is no such situation, isn't it?

''There is no sense to deliberately produce worse and more expensive''

Import substitution — is it a real project or populism?

It is not a project or populism, it is the slogan quite meaningless and pseudoscientific enough, under which someone got the money and got rid of competitors, started selling more expensive products of lower quality. And someone hired more employees in their bureaucratic office. There is no method of development of the country such as import substitution. The only way of development in the modern world is the diversification of exports. It is even boring to talk about. It's like a question whether the earth is spherical or flat.

Efficient economy is one that produces what we can produce better and cheaper. There is no sense to deliberately produce worse and more expensive and force ourselves to consume it. It is easier to buy, it will be cheaper. Imagine that you start in your family to produce a refrigerator — you will have such import substitution. Instead of working and buying a refrigerator for money, you will make it by yourself out of found on the garbage details. At the same time, losing money because you don't have a job.

''Those countries will benefit that are maximally open to the world''

Recently you have stated the following: ''The age of countries has gone.'' Could you elaborate on this?

There can be many explanations. But if you look at the share of international trade in world GDP, it reaches 40 percent. And it's the assessment from the bottom. Plus, if you compare ethnicities of the owners of large companies with the places where these companies are registered, you will find an amazing mix. And if you look at where the companies are registered and where they manufacture the product, it's another mix. A Hindu can own a US corporation that manufactures products in Indonesia.

From the point of view of culture, the countries are also dying. Where is the center of Russian culture? In what museums are the main Russian wealth? Where do people live, writing in Russian, who are the creators of new meanings? Certainly not in the Izborsk club and not in Valdai. They're in New York, in London — anywhere.

''From the point of view of culture, the countries are also dying. Where is the center of Russian culture? In what museums are the main Russian wealth? Where do people live, writing in Russian, who are the creators of new meanings?'' Photo: Oleg Tikhonov

This is happening not only in Russia. The culture of diaspora, which was previously characteristic only of the Jewish and Armenian people, is becoming more or less natural to all nations. It is not only good manners but a necessity in most peripheral countries to have a foreign education. Of course, the world has become integrated completely.

In the end, even technology today is so fast and easy proliferating in different countries, that it is becoming unimportant where it was invented – it is used by everyone anyway. Those countries will benefit that will be maximally open to the world. Those isolating themselves will further be driven to the sidelines.

By Artyom Malyutin