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Dmitry Medvedev Discusses the New Challenges of Socio-Economic Policy with HSE Experts

On April 2, 2014, Dmitry Medvedev, Prime Minister of the Russian Federation, participated in the roundtable discussion ‘Innovation and Social Policy in the New Context’ as part of the XV April International Academic Conference on Economic and Social Development

Dmitry Medvedev
Dmitry Medvedev
On April 2, 2014, Dmitry Medvedev, Prime Minister of the Russian Federation, participated in the roundtable discussion ‘Innovation and Social Policy in the New Context’ as part of the XV April International Academic Conference on Economic and Social Development.

The Prime Minister emphasized that he was glad to speak at this anniversary conference at the HSE. ‘Probably, as it is traditional in our country, it will be concluded by April Theses, although they played a somewhat fatal role in the history of our country, and that’s why I hope that you’ll prepare not Lenin’s theses, but more constructive ones’, Dmitry Medvedev said.

Macroeconomic problems

First, the Prime Minister gave an evaluation of the macroeconomic situation. ‘We have long been seeking to become part of the global economy, and now we are. That’s why we are experiencing all the problems and difficulties related to global economic trends. But it is also obvious that trends in the global economy are multidirectional, and they are characterized differently: from moderate optimism to predictions of ongoing recession’, Dmitry Medvedev noticed.

‘But most analysts are radiating moderate optimism (I don’t know what position the people present here today take), and believe that we have reached the bottom of the crisis and have some fragile possibility of recovering from it. Only time will show what is true and what is not. That’s why the general slowdown of economic growth in Russia can be more or less explained. It is also obvious that it has external, as well as internal, reasons. Which of them add to the slowdown is also a subject for discussion. Last year the economy demonstrated, as you know, a moderate growth – about 1.3%, which is, on one hand, is not terrible, but of course doesn’t make any of us happy. On the other hand, the macroeconomic and social indicators which we align ourselves with, are generally stable for our country, not bad, although, of course, we expected somewhat different figures’, the Prime Minister continued.

Strategy 2020

Dmitry Medvedev praised the Strategy 2020 programme, which was prepared with participation of experts from the Higher School of Economics, and declared that the Russian Government follows it in current activities. But, he said, recently some concerns have appeared, as to whether it will be possible ‘to complete the planned tasks, whether there will be sufficient growth to support all points of Programme 2020’.

The PM said that he would like to hear the HSE experts’ opinions on ‘what the government should do today, what it should focus on, how to provide the necessary inflow of technology in the industry in order to make the industry more competitive’.

Eurasian integration project…

‘We should certainly re-evaluate our participation in the global economy. We are developing the Eurasian integration project, and it is generally following the schedule we negotiated several years ago, when I signed the documents with Kazakhstan and Belorussia as the highest state official. It is obvious that this project has its difficulties, but nevertheless we believe that the prospects and potential of this project are rather good’, Dmitry Medvedev claimed.

…and other regions of the planet

On the other hand, according to the head of the government,  Russia is planning to develop ‘full-grown relationships with all other countries, with all our other economic partners in Europe, America, and other parts of the world’.

‘Clearly, all of this should be based on transparent principles, the prospects of developing free competition and the unacceptability of artificial barriers. Frankly speaking, taking into account the current situation, it’s obvious that economic interests shouldn’t be sacrificed for political ambitions, prejudices, and political positions as a whole, even if our approaches to certain international problems differ. All of us – and I mean both the Russian Federation, and our partners in all countries – should act, primarily, pragmatically. I believe that this should be absolutely obvious for all participants in international economic relations and the international system of division of labour’, Dmitry Medvedev said.

‘A subject of state attention’

In concluding his speech, Dmitry Medvedev made it clear that he is well aware of the multiple difficulties the university is facing in its development.

‘I won’t pay long compliments to the Higher School of Economics, but I will say something. It is known that the School has a high reputation not only as a university, but as a research centre. It was one of the first to start attracting young specialists who had received PhD degrees from leading international universities to teaching. After a serious selection procedure, they received the opportunity to work in our country, in the university. It seems to me that this is a good example of how university instructors should be staffed’, the Prime Minister noticed.

Dmitry Medvedev particularly emphasized that the lack of a united campus in many leading universities, including the HSE, ‘should be a subject of state attention’.

’35 buildings, where educational and research processes take place, in such a megalopolis as Moscow, is, of course, a very complicated situation. At the same time, it’s problematic to form a united campus. Although, I believe that some decisions will have to be made sooner or later nevertheless’, the head of the government concluded.

The development plan needs to be clarified

HSE Rector Yaroslav Kuzminov continued the Prime Minister’s idea and said that the April Conference ‘has always been a platform of interaction for those who make economically significant decisions and those who analyze them’. And the roundtable discussion with Prime Minister brought together experts in two close fields – social and innovation policy.

‘The things you’ve been speaking about, Dmitry Anatolievich, such as decreasing rates of economic growth and the difficulties we are facing, call for clarification of the development plan up to 2020. And while monetary and industrial policies depend on the evolving necessity of reacting to external risks, the policy in entrepreneurship should stay unchanged, and here we should move at an even higher pace’, Yaroslav Kuzminov said.

Budget maneouver

According to the HSE Rector, social and innovation policies today are the sphere of strategic choice for Russia.

‘Social policy is the focus of presidential and governmental programmes. Considerable success has been achieved here, and it would seem that all we need to do is to preserve the current situation and prevent even a temporary reduction in resource support. Yesterday [Vice Prime Minister] Olga Golodets spoke at our conference and said that the government would provide recources for completing the key tasks of social policy, whatever happens. I believe this is absolutely right. But this is not enough. I believe that the success of the last few years has been achieved thanks to assigning additional resources to the spheres of education, medicine, popular sport, and culture. This is the budget maneouver, which we spoke about in 2011, when we presented Strategy 2020. At the same time, we have to pay attention on how to increase efficiency and mobilize internal reserves, including the ones in regions, as well as how to restructure the budgetary network and to support competition’, Yaroslav Kuzminov noticed.

The key risk is giving up modernization

With all the government’s effort, the key areas – education and health care – still have less resources than needed. According to the HSE Rector, there still a deficit in the pension system. And the main risk of social policy implementation is giving up modernization. ‘This means preserving unchanged the whole mass of existing tools under the pretext of preserving some kind of social stability to support wide parts of the population. In the context of limited budget resources, giving up modernization will lead to a gradual devaluation of state investment and a decreasing quality in the social sphere. We should pay more attention to the modernization of the social sphere and its structure’, the HSE Rector emphasized.

According to Yaroslav Kuzminov, a comparative long-term advantage of the Russian economy is related mainly to accumulating human capital. It is the quality of human capital that defines economic growth, not vice versa. Social costs should be evaluated taking into account their input into the economy.

In accordance with this criterion, the HSE rector outlined three groups of social sphere industries.

1. ‘Areas of development, which form the innovative part of the human capital. They are directly related to economic modernization and include all types of professional education, not only higher ones. The core of this group is the network of research universities and the Russian Academy of Sciences. This group should be given priority funding, and at the same time a tough independent evaluation of the quality of their work, as well as any necessary restructuring, should be carried out. It is vital for Russia to stay globally competitive in this sphere’.

2. ‘The sphere of human capital reproduction, which aims at increasing the length of a working life. This includes general education, health care, popular sport, culture, support of families with children. The key task here is to define internal priorities and target the expenditures’.

3. ‘Social support and pension system themselves. The main effect here is macroeconomic. It means creating national long-term money.

We believe that the simplest option of adjusting social policy to the renewed macroeconomic forecast is highly dangerous. And especially since this means an automatic decrease of the social commitments already made. It’s obvious that to refuse the solutions which have been part of presidential orders and are implemented by the government is unreasonable, not only in terms of preserving reputation, but also because it would mean giving up the key ground for long-term economic growth. We have to look for options on how to balance social commitments together with balancing the budget. And here we should aim for measures that don’t imply increasing costs and that are implemented by stimulating efficiency, structural changes, and leaving behind inefficient practices’.

Risks in innovation policy

The main danger for Russia would be to drop out of the international research and technological division of labour, the HSE Rector believes. In order to avoid this, we need priority investments in those sectors where Russia remains competitive.

‘We have to form a system linking research with education. And, first of all, not to forget about funding fundamental and exploratory research. We have assigned a lot of resources for the system of venture investment, but we should remember that all applied projects are based on fundamental studies. You can’t have an apple tree without roots. Today the funding of fundamental studies in the Russian Academy of Sciences is about 70 billion roubles. And the funding of all research universities is about 70-80 billion roubles. This roughly the same as just the budget of Harvard University. And in order to develop, we have to increase funding of the RAS and research in universities’, Yaroslav Kuzminov said.

Global competitiveness

Another situation which requires an immediate solution is the falling number of research universities whose development programmes are supported by state funds.

‘In 2006 we started with a programme to support innovative universities – 62 institutions. Then 2009 there was a programme of national research universities – 29 institutions. And last year 15 universities were supported as part of the ‘5-100’ programme. And I’m saying that 15-20 universities are not enough for a country such as Russia. We can’t abandon the universities that have already been supported by the state. We should continue our support. Our young colleagues, who are present here today and have been hired as part of international recruitment, prove that Russian universities can develop in the global system. Out of 2000 HSE instructors, 120 researchers have been hired from the international academic market. This is not a few, but we need to make this figure up to one third’, Yaroslav Kuzminov declared.

Dmitry Medvedev gave a firm, unambiguous response to statistics about academic activity among university lecturers. According to HSE research, only 16-19% of academic staff in Russian universities say that they are involved in research. The Prime Minister said that all members of university staff should be involved in research.