Russian industrial policy in the context of global production system transformation and severe constraints

Abstract

Russian industrial policy as an instrument of progressive structural changes has been attracting the attention of politicians and experts for three decades. In the last decade, the attitude of developed countries toward industrial policy in the context of increased global competition, countries’ repositioninig in world trade and transformation of global value chains has become more pragmatic and positive. Simultaneously, the approaches to industrial policy in the world have changed significantly due to shifts in the organization of global production. This defines a new demand for Russian industrial policy, especially in the context of tightening financial and time constraints. We identify key structural constraints of the Russian economy that must be taken into account to define industrial policy, including: fragmented participation of Russia in global trade, low commodity diversity of exports, geographic concentration of export and import flows, underdeveloped backward linkages, weak role of small and medium sized enterprises in value chains. We support the importance of maintaining integration of the Russian economy in the world economic system to ensure its competitiveness and discuss possible trajectories of re-positioning in global economic relations. Under new conditions several principles of implementation of Russian industrial policy are singled out, including flexibility, variability of solutions and encouragement of grass-roots initiative, specialization that takes into account specific features of production organization of various sectors of the Russian economy, building a system of decision-making aimed at the future and overcoming inefficient local equilibria in the economy.