“The main trend” in Russia’s current economic development “is the absence of a trend.” Put simply, Russia’s past is an unreliable guide for its uncertain future. Yet, economic ‘solutions’ proposed by the federal government are the same ones, again. Will it be any different this time?
At the Sochi Investment Forum the prime minister announced a ‘new’ Economic Strategy 2030. To weary eyes it looks like previous grand diversification and modernisation strategies, going back to Sergei Witte and perhaps beyond.
Bright ideas are one thing, rigorous implementation another.
Announcing ambitious targets will convince few investors (whose ‘stimulation’ is the first priority of Strategy 2030) but will force regional governments - who have a key active role to play in facilitating investment at the local level - to scramble for compliance. It may be satisfying at the top level to mandate a policy for the entire country, but it’s misguided. As the Roman Stoic philosopher Seneca explained,
“The greatest loss of time is delay and expectation, which depend upon the future. We let go the present, which we have in our power, and look forward to that which depends upon chance, and so relinquish a certainty for an uncertainty.”
While Russia possess some of the greatest engineering talent in the world no-one is capable of engineering the future in a complex world. What is required are not grand outcomes - like import substitution, or an innovative economy - but realistic next steps. This means Russia should increase awareness of its present position, seek out higher ground nearby - then do more of the things that nudge it towards there and less of the things that move it away from there. It requires a very granular local focus, monitored but not directed from above.
Rather than taking months to create new strategy documents and years to ‘roll them out’ (by which time they become obsolete) Russia must start acting in the present to unlock a million ideas that will nudge the entire economy forwards, in any positive direction. Our own work with government agencies has been an early step in this process  - but it needs scaling up now.
As MGU economics associate professor Oleg Buklemishev has pointed out, whatever strategy you draw up it “falls apart if you do not pay attention to the real needs of people and reestablish a system of feedback between the government and the people.” In Russia these feedback loops must be free of delay and distortion so they help support local decision-making to impact meaningfully on lives in real-time.
‘In the absence of restoring some form of active feedback mechanisms, further economic momentum in Russia will be impossible.’Government’s economic role should be to get as many players as possible onto the field of play, referee disputes, and do the heavy lifting no-one else wants to (e.g. infrastructure investment, long-term education, pure scientific research). Its mission should be to stimulate a bottom up flowering of the economy, not impose a top down directive. Otherwise, the grand Strategy 2030 will go the same way as grand Strategy 2020.
This is part two of a series of posts looking at ‘what Russian businesses need to do next …’. Part one can be found here. For more information on the ideas and approaches included in this blog please contact firstname.lastname@example.org
September 1 - first bell - traditionally marks the business season kick off in Russia. But this fall the big question is, what will happen next? Will we see a further softening in the oil price, the Rouble and business confidence or will this be ‘it’, the beginning of the long road back to the good times?
The answer is that no-one knows, especially the experts. The future is an unknowable country, and there are no guide books. Reality changes quicker than people can write about it. Yet the economic fundamentals aren’t good - global demand is declining, currency wars are erupting, and political tensions in such climates tend to remain sharp.
So, in the current environment should organisations stick or twist?* Sticking - striving for ever-greater efficiency - risks cutting into bone, scuttling organisational resilience. But twisting - getting ahead of rivals by building capabilities to adapt better and faster to a volatile and uncertain world requires leaders to think and act anew.
The decision - what CEOs are paid the big bucks to get right - will determine the ‘vector’ (the direction and speed) of Russian business this year and next. For, while it's true that a few big macro-issues matter a lot, the hundreds of thousands of micro-decisions leaders make today can matter far more.
So, is this it?
*For those unfamiliar with this term it comes from the British version of Black Jack - pontoon - when if a player doesn’t want another card s/he 'sticks' and 'twists' if s/he takes another card (believing it to be a winning one)
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