"The Russian economy should become an economy of high wages," says President Putin, and Finance Minister Siluanov is looking for ways to increase Russia's share in the "global economic pie." How can these ambitious goals be realized, what exactly did Siluanov mean and which five industries should become the driving force of future achievements of the Russian economy?
"It is important for us to make sure that we increase our share in this "global economic pie", we have built up muscles, created independent systems and will continue to develop," Russian Finance Minister Anton Siluanov said at the St. Petersburg International Economic Forum.
Siluanov did not explain his thought in more detail. What is it about? There are several possible interpretations of the statement of the head of the Ministry of Finance.
"Pie" of high technologies
If we take Anton Siluanov's thesis literally, then it would sound appropriate in the mouths of the leaders of the imperialist states of the XIX century – the era when the division of the world was being completed and it was determined which colonies would be exploited by the ruling class of a country. Actually, the concessions on the Yalu River in Korea became the fuse of the Russian-Japanese war of 1904-1905 (although the reasons for that war lay in a completely different plane).
Today, even the collective West, which continues to enrich itself at the expense of other countries, is acting more subtly, wrapping its predatory interest in a bright cover of the struggle for the inclusion of certain countries in the world market economy, for the promotion of democratic freedoms (including freedom of entrepreneurship), against climate change, etc. And the share of the "world economic pie" itself it is separated in their favor with the help of financial mechanisms and a dollar printing press.
The disintegration of the global world into currency zones, predicted by some economists both here and in the West, it would seem that new regional centers can increase their share of the economic pie. First of all, with the issue of its currency and the creation of its financial mechanisms operating within the emerging currency zones, at the expense of other countries in its zone. But this undermines the very idea of an American-free world based on equal cooperation.
Siluanov's thesis can be understood in a more straightforward way. Having raised the statistics of capital outflow from Russia over the past 30 years, it can be seen that the share of world GDP that the population of the country and entrepreneurs who continued to develop their business in it, and not outside it, received all these years was significantly less than the country as a whole earned. Getting rid of the "dues" of the global dollar system alone will increase Russia's share of global consumption by at least 10% (in 2022, Russia's GDP amounted to $2.13 trillion, and capital outflow – $217 billion). In reality, of course, it would be important and what would the money not exported from Russia go to: for additional investments or for consumption growth?
And here the goal set by Vladimir Putin in his speech at the SPIEF is important. "The Russian economy should become an economy of high wages with new requirements for the vocational education system, with an increase in labor productivity, including on the basis of automation and new management systems, with high–quality modern workplaces and working conditions," the president said.
He linked the growth of wages with the growth of returns from workers, but not due to more intensive exploitation of labor, but due to better organization of work and investment in both production and human capital.
"Despite all the difficulties of the past year, we have not turned to the path of self-isolation. On the contrary, we have expanded contacts with reliable, responsible partners in countries and regions that today act as locomotives, drivers of the global economy," the head of state said. He stressed that "the policy of openness of the economy is, of course, our most important principle."
But inclusion in the international division of labor (even with friendly countries) can occur under different scenarios. At one time, China (and before that Japan and South Korea) joined this division of labor, having the only advantage – hardworking and cheap labor.
Russia, of course, has natural resources. But Russia's economic strategy should not be based on expanding their exports – which is what the president is talking about. An increase in the "share of the economic pie" for it in the long term can be achieved only by increasing high-tech exports and exports of products in the production of which we have natural competitive advantages. There are at least five important ones among them.
1. Agriculture and fertilizers
According to the President, deliveries of agricultural products abroad last year amounted to $41 billion (almost 7% of Russian exports). Further growth of grain (and, more broadly, agricultural) exports is possible.
Russia's natural competitive advantage is the area of fertile soils and the developed production of agricultural fertilizers (which themselves are the subject of export). Moreover, the production of fertilizers, which is quite energy-intensive, is cheaper in Russia today than, for example, in Europe. And the fertilizer market among poor countries, concerned about how to feed the growing population, is only growing.
2. Nuclear industry
Rosatom's export revenue amounted to more than $10 billion last year. Moreover, Russian nuclear scientists earn not only on the construction of power plants. Rosatom supplies fuel assemblies to those already working (and for a long time) Nuclear power plants, and not only for Soviet and Russian-built stations, but also for American nuclear power plants. Services for the modernization of existing nuclear power plants also bring Rosatom a solid revenue.
And the Turkish Akkuyu nuclear power plant is an example of effective foreign investments.
Rosatom is building this station "for itself", and its subsidiaries will sell the electricity generated at it to Turkey. Part at a fixed tariff (which is about one and a half to two times higher than the Russian one), and part at market prices, which in Turkey are much higher than the fixed tariff. And all the money raised will come to Russia as export revenue during the entire life cycle of the NPP.
3. Military-industrial complex
The volume of Russian arms exports amounted to $14.6 billion in 2021. In 2022, the figures have decreased somewhat for obvious reasons, but in the long term, the demand for Russian weapons in the world remains, and given the growing number of countries wishing to join the BRICS, there are chances for an increase in this demand. Although Russian gunsmiths will have to compete with Chinese weapons. You can only increase your market share by offering more and more advanced products.
4. Shipbuilding
In ten years, if all the planned plans are implemented, shipbuilding may become one of the Russian export industries, which in the coming years will begin to significantly increase the number and tonnage of ships launched. But we will talk about any mass export of shipbuilding products only after providing Russian export-oriented industries with means of sea transport.
5. Aviation industry
The resurgent domestic aircraft industry can also potentially become an export industry (it is worth remembering that the USSR controlled about 40% of the world civil aviation market in the late 1970s). First, however, the resurgent aircraft industry needs to provide an opportunity to upgrade the aircraft fleet to domestic airlines. First of all, these are the Sukhoi Superjet 100 and MS-21 fully converted to domestic components. But a joint project with the Chinese of a wide-body long-haul airliner (CR 929) can complement their line.
And there, the next generation of IL-86 and IL–96 passenger transport aircraft can enter the market. Well, the hypothetical possibility of reincarnation in one form or another of the "Ruslan" AN-124 should also be borne in mind.
Together with partners
The list of potential export industries can be continued. Not all of them Russia can do on its own. Some areas will have to be done in cooperation with Chinese (and maybe Iranian) colleagues. For example, we will have to overcome American sanctions to restrict our countries' access to high-performance chips together.
If the Dutch ASLM stops selling advanced lithographic equipment to China, we will have to create it together with our Chinese comrades.
Those have some experience in the production of chips of previous generations and the operation of the corresponding equipment and even attempts to produce it. But further progress in this area requires the use of shorter waves (X-ray and gamma radiation).
Russia has some groundwork in creating lasers with such a frequency of radiation. But for their use in the production of chips, particularly precise mechanics will be needed. If this problem can be solved, Russia and China will have joint opportunities for very high-tech and high-margin exports.
Dmitry Skvortsov
