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Can Russia Modernise? An economist’s perspective

By Blog Admin, on 20 March 2014

ICan Russia Modernise Thumbnailn her 2013 book Can Russia Modernise? Alena Ledeneva picked out key types of networks that make up Sistema:  Russia’s complex, ambiguous and sometimes surprisingly effective systems of informal governance. In the last contribution to a ‘mini-symposium’  Theocharis Grigoriadis assesses the book’s arguments from an economist’s perspective, suggesting that Ledeneva understands the durability of sistema as a series of trade-offs that reduce collective welfare. 

In her seminal book on informal politics and governance in post-Soviet Russia, Can Russia Modernise? Sistema, Power Networks, and Informal Governance , Alena Ledeneva puts forward a theory of networked governance that relativises the significance of formalised vertical structures and hierarchical decision-making for understanding Russian politics.

 Ledeneva’s theory makes a unique contribution to political science and sociology and deals with following themes in relation to Russian politics and society:

  1. Continuities of power networks under central planning and capitalism;
  2. Sistema as a form of networked governance in authoritarian regimes;
  3. The transformation of the St. Petersburg circle into the inner sistema of Russian politics;
  4. The prospects for societal modernisation under Putin.

 While blat networks in socialism facilitated the provision of consumer goods circumventing the formal absence of marketplaces, power networks in post-socialism involved the provision of public goods such as security, justice, and healthcare. The author suggests that market transitions in the former Soviet Union preserved more elements from the economic organization of central planning than we might want to admit, both in terms of people in power and economic practices.

 As Ledeneva argues, the analysis of informal networks matters, because it is essential to trace the effects of friendships and close relationships on ministerial appointments, judicial decisions and corporate deals. The identification of their existence per se has major theoretical significance, but does not explain current developments in Russian politics. Ledeneva suggests that while continuities in networked governance between socialism and post-socialism exist, what differentiates Putin’s Russia is the even wider spread of informal rules and even higher informational asymmetry between those insider and those outsider a power network. In this sense, Putin’s sistema is at least partially – if not fully – a reversion to the Soviet status quo ante.

 The Russian sistema is a set of public and private networks that manages public wealth and delivers public goods, thus determining the magnitude of its members’ rent-seeking strategies. While the sistema combines both public and private elements in its enforcement strategies, the hierarchical predominance of public over private interests and institutions is indisputable.

This is how, according to Ledeneva, Putin’s sistema has redefined the Russian public domain. (more…)

Why fair pay policies are needed to stop the East European brain drain

By Blog Admin, on 5 December 2013

Flags MakóA significant proportion of the EU budget is spent on research grants to encourage research and innovation across Europe. Although this funding is vital, there is Michael Galsworthy argues a substantial East-West divide which is encouraging a ‘brain drain’ from Eastern Europe.

Within the European Union there is an East-West gap, in health and innovation. The gap is widening because eastern European member states (such as Poland, Romania, Latvia, Hungary and Slovakia) are winning a tiny proportion of science grants from European central funding.

Scientist salaries and jobs have hit rock-bottom following austerity measures, not only in eastern Europe but also in many southern member states. Scientists are fleeing westward, fleeing out of the EU, or just out of science. Although the main funding body European Commission is now working to help, its current policies on salaries may be causing a brain drain.

As the EC prepares its research and innovation pot of €71bn to be awarded competitively under the “Horizon 2020” programme, it is also preparing additional programs to help struggling regions restructure to be more competitive for that money. However, the most powerful medicine for the recent cocktail of grim circumstances may be a simple principle: Equal pay for equal work.

Eastern Europe has huge scientific potential, but getting there from where we are now will require smart actions at the EC, national government and grassroots levels.

How bad is the situation? With regard to winning a share of central funds, the EC’s own impact assessment of health-related research found that the 12 newest member states participated on only about 6% of projects. Worse, they took home only 2.5% of the total funds collectively. Compare this with the original 15 member states with 78% participation and 85% of funds (the rest of the funds went to participants outside the EU). To put this in context; the original 15 member states had received 34 times more health research funding, a difference that cannot be explained by their 3.8 times larger population nor even their 12.8 times greater contribution to the EU budget. Other areas of science show similar patterns.

So what is in place to help poorer member states under Horizon 2020? Unfortunately, acknowledgement of a crisis and plans to tackle it are largely missing in the standard documentation. You have to call up the right people in the EC and connect the dots. (more…)

Skolkovo: Russia’s Silicon Valley or hollow real estate project?

By Blog Admin, on 20 February 2013

Many Western journalists see it as a Russian Silicon Valley, but to date the Skolkovo innovation city has been less silicon and more shiny new buildings and federal roubles. It still tells us a lot a about politics and economics in Russia today, argues Imogen Wade

Skolkovo Silicon Valley

Image: Applied Nomadology via Wikimedia Commons

Skolkovo, Russia’s newest and most Western-oriented centre of innovation, has received much media attention from Russia and abroad.

Some coverage, like that in the Irish Times and Wall Street Journal has been full of praise, boldly proclaiming that Skolkovo will be Russia’s ‘window on the world of technology’, as  St Petersburg – built on a swamp land by Peter the Great in the 18th century –  was once Russia’s ‘window on Europe’. Others  hint at troubles ahead for Skolkovo tied to Putin taking over as president again in 2012.

Many more are more dubious of Skolkovo’s chances of success. The leading Russian economics magazine  Kommersant Dyengi published a controversial article in September 2012 which argued that Skolkovo had become nothing more than a real estate project. A survey of educated Russians in 2011 found that people were largely sceptical that Skolkovo could be successful given Russia’s corruption, bureaucracy and unstable political and economic climate. 

What is Skolkovo?

Launched in 2010, Skolkovo is the most high-profile and newest manifestation of a policy shift in Russia towards economic diversification, innovation-based growth and modernisation that began around 2002. Situated about 20km from Moscow city on farmland once used for growing cucumbers, Skolkovo aims to be a physical and virtual ‘cluster’ of firms, researchers and graduate students promoting technological innovations and providing high quality infrastructure, human capital and a corporate environment that will encourage technological innovations. All activities relate to one of five pre-determined themes, which are also Russia’s strategic science priorities: IT, biomedical sciences, energy-efficiency, space, and nuclear technologies. (more…)