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What the transition to a mobilization model of the economy means for Russia

© Форпост Северо-Запад

The growth of geopolitical tensions, caused by the unprecedented pressure of sanctions by the global power coalition, coupled with the flight from the country of many adherents of liberalism; have intensified the public debate about the optimal path for Russia's further socioeconomic development. Should we insist on the preservation of the former export-oriented system, which allows us to ensure a trade surplus, or should we aim for the transition to a mobilization model of the economy, and thus, a sharp increase in state regulation in the cornerstone sectors of the national economy?

The term "mobilization economy" is perceived rather negatively by society, because it is associated with the infringement of various rights and freedoms. It is believed that the achievement of the general goal, which is the preservation of the state, supposedly interferes with secondary entities, which are also important for progress, and thus this is harmful to many industries. This includes small and medium-sized businesses.

Another illusion, inspired by liberal managers who downplay the importance of state regulation, is that the mobilization of resources is possible only if they are placed under the full control of the state, which, as in Soviet times, begins to act as an employer. Of course, this is not the case. When it comes to the mineral sector, the function of an employer should a priori remain with the oil & gas, mining and geological prospecting companies. The government's mission should be to work out transparent and mutually favorable standards and requirements for all market participants - both the government and the business community - and to supervise their proper implementation, using only market regulation mechanisms without government involvement in production. This will make it possible to exploit the maximum efficiency of our raw material and intellectual resources to counter external threats.

It is no secret that nowadays the main group of states with a rich resource base monetizes no more than 20% of the real value of the minerals extracted in their subsoil. The rest goes to importers engaged in the processing and production of high-margin consumer goods. It is obvious that such a distribution of income runs counter to the interests of the population of those countries that supply mineral resources to global markets, including the interests of the inhabitants of our country. And the roots of this state of affairs go back to the era of colonialism, when the most developed powers at the time, possessing sophisticated fleets, got rich by expropriating values in Africa, Asia and America.

Modern world politics, no matter what individualist liberals say, is built on the same principles. Transnational management of mineral resources, sanctions on those states that do not want to play by the rules of the global leadership coalition, direct confiscation of private property… all this is a manifestation of the West's neocolonial strategy. Its goal is control over the world's wealth and free access to raw materials, which many post-industrial powers do not have, but which are at the heart of every production chain; no matter how "green" it may seem to the consumer. New forms of global colonial policy, based on access to mineral resources, have been implemented over the last 50 years, including by imposing various ephemeral problems on society (climate change, the need to abandon fossil resources and build a hydrogen economy, among others).

It is obvious that we can change the situation and monetize our natural capital for the maximum benefit of Russian citizens only if we implement the postulates of a mobilization economy and, in particular, strengthen government regulation. The government must set clear objectives for business, for example, concerning the volume of production and the share of minerals that should be involved in deep processing, followed by the production of high-margin products.

The state should certainly work out tools to create conditions for accelerated construction of specialized production facilities, to motivate business to develop oil and gas chemistry, and to increase resource consumption efficiency, because at the moment this indicator is at an extremely low level. We need to urgently increase the potential use of mineral resources, reduce losses in the transportation of hydrocarbons, and introduce modern technologies which optimize their use and save energy. The new economy should be based on an energy-saving strategy which would allow us to double or at least triple the GDP in the next 2-3 years.

At the IX International Conference on Energy, Resources, Environment and Sustainable Development recently held in Xuzhou, one of the central themes was the role of the state in managing mineral resources. My colleagues from around the world fully agreed that it is impossible to overestimate the role of national governments in transforming natural capital into physical, human and social capital.

Since the organizers of this forum were our partners from the Chinese University of Mining and Technology, I would like to cite China as an example. In 2006, the share of exports in its GDP was 36%, the country was a global factory of clothing and other direct consumption goods. Subsequently, however, Beijing decided to focus on the development of domestic demand, which has significantly increased the welfare of its citizens and led to a drop in the share of exports to 18%.

Much of this has been made possible by the establishment of credible and empowered government regulatory agencies. For example, last October, a mere statement by representatives of China's State Administration of Market Regulation about the intention to check for monopolistic manipulation was enough to turn down stock exchange prices, which turned out to be at multi-year highs. Coking coal and coke prices fell by 9% at once, aluminum and zinc by more than 6%, and other energy products and base metals also corrected significantly. Centralized state control is no less important for the smooth functioning of China's planned economy as a whole.

I am sure that our economy today needs to get rid of the remnants of liberal ideas, thanks to which Russia lived in a continuous crisis in the 90s. And it was after the "anti-liberal" decision of President Vladimir Putin, which only slightly increased the level of state regulation of the oil and gas and mining sectors, that Russia emerged from it.

It is the transition of the economy to mobilization rails using our unique raw materials potential in the production of goods offered to consumers that will allow us at last to engage professionally in the reproduction of the mineral resource base, cope with all the challenges of our time, preserve our statehood and civilization identity and lay the foundation for sustainable development for the next several generations.

Vladimir Litvinenko, Rector of St. Petersburg Mining University