The Russian transition to a market system

Ministry of Education of the Russian Federation

ST.PETERSBURG STATE ENGINEERING-ECONOMIC UNIVERSITY

Department of Economic Theory and National Economy

COURSEWORK

on the subject «Economic theory»

on the theme: «The Russian transition to a market system»

Performed Student Andreyanova Alexandra

Leader: Ph.D. German L. A.

St. Petersburg 2011

Contents

• Introduction
• 1. The Russian transition to a market system
• 1.1 Concept and program of transitive economy
• 1.2 Foreign experience of transition
• 2. Strategic reference points of long-term economic development
• 2.1 Strategic reference points of long-term economic development
• 2.2 Challenges of the upcoming long term
• 2.3 Targets
• 2.4 Direction of the transition to an innovative community-oriented type of development
• Conclusion
• Bibliography
• Introduction
• The system of market relations is the most universal management model that creates the conditions for achieving the maximum economic benefit at both the macro and micro levels.
• The market economy in modern conditions — is a system of economic organization across the country, based on commodity-money relations, diversity of ownership, Economic freedom and competitiveness of citizens (as owners of its workforce) and business entities in the production and sale of goods and services.
• Basis of market relations between producers and consumers, buyers and sellers make everyone’s freedom in choosing a business partner, free movement of goods and services, financial capital and labor within the Common Economic Space. Regardless of market relations are organizations and institutions to non-production sphere, which function at the expense of budget allocations, even though they have (may have) additional income from providing services on a commercial basis.
• Reforming Russia’s economy from the beginning was focused on the transition to liberal market model. The first practical steps in this direction were expressed in the liberalization of economic activity and prices (starting from 1992. prices by 90% Goods and Services have been fully exempted from state interference), the lifting of restrictions in pay, the accelerated privatization of state enterprises. It was understood that it is self-regulating mechanism of the emerging market system will put everything and everyone in their «niches» and create a new structure of the economy, a new division of labor in the Russian economy.

Chapter 1. The Russian Transition to a Market System

1.1 Concept and Program of Transitive Economy

Transitive economy — a special condition in economy evolution when it functions in transition from one economic system to another. Here there are changes not in the settled system, and transition from one system of the organization of an economy to another.

Features of transitive economy are shown first of all in globality occurring changes. All is subject to changes: property relations, a way of distribution of resources, motivation, the purposes and means of economic development, valuable orientations the population, economic and social institutes. The economic structure of the transition economy is characterized by mutual interlacing and mutual influence of different segments. In one dominated by elements of the original level — planned system, in the other — endstage — market system, in the third-a symbiosis of elements of the two systems. Economic processes are changing in the direction of strengthening market and weakening of the administrative-command system elements. Therefore, a typical feature of the transition period, in the first place, is the volatility and instability. They are so violate the stability of the system, weakening it, that in the end, it gives way to the other economic system.

Secondly, for the economy in transition characterized by the appearance of special economic transition forms, in particular, multistructure. Along with the state in the transition period are the development of the small commodity and private capitalist structures. An example of imperfection of the transition of economic forms in this period can serve as jointstock form of ownership. At first she only looks like a jointstock company into market-developed systems. Prevailing here closed jointstock companies, are in fact a kind of nomenclature-corporate ownership.

With the increasing degree of development of the economies transitional forms are gradually beginning to increasingly meet the economy of market type.

Thirdly, the transition economy is characterized by the distinctive character of contradictions. There are contradictions of the old and new elements of the emerging and moribund economy, various layers of the society. The resolution of these contradictions in the end, leads to the change of the economic system.

Finally, the fourth — the historicity of economic transition, that is its transitory nature, which is followed by a period of mature development of the economic system. The duration of the transition depends on the conditions of economic transition and on the characteristics of a region or a country.¹

A number of changes in transition for all countries is the inevitable character and acts as patterns. Call the major ones.

The liberalization of economic relations — is abolishing the state monopoly on economic activity, the transition to competitive market conditions, pricing substantially in accordance with supply and demand, the formation of factor markets, the emancipation of business, to create equal opportunities for business activity of economic subjects.

Institutional transformation — adoption of an adequate market conditions of economic legislation, altering property relations through privatization and formal and informal business environment, the emergence of new business entities (commercial banks, Commodity and stock exchanges, investment funds, etc.).

Structural reforms — is eliminating disparities in the sectorial structure of the economy, the development of products that are in demand in domestic and foreign markets.

Macroeconomic stabilization — control of inflation, maintaining a high level of employment, continued high growth rates (at least 5−7% per year), guaranteeing equitable distribution of income and property, creation of necessary infrastructure, the formation of a balanced balance of payments if they normal balance of current payments, balancing the state budget, etc. ²

The formation of appropriate market economy of social security of the population — the transition from equal distribution to targeted social assistance to needy members of society, while simultaneously relieving companies of the implementation of broad social functions.

Common for transition economies the laws differently manifested in different conditions. Keep this in mind when designing programs to reform the economic system in transition. For example, the liberalization of economic relations can get rid of deficits, and inefficient nationalization of the economy. However, the establishment of liberal market institutions is the only means for the adoption of new mechanisms of appropriation and distribution.

Ultimately, a transition must be created such economic relations and mechanisms that are targeted to all economic actors do not so much on increasing the volume of production, how to improve the quality of life.

Since the beginning of the reform, the 90 century, and our economic system actually had a market attributes and in this sense is no longer in transition. The overwhelming majority of the gross domestic product is produced in the private sector. Russia received official status as a market economy. We should recognize the irreversibility of fundamental economic and political changes and the inability to return to the socialist past, at least in its old form.

However, it must be noted that the functioning of market institutions in the Russian economy still does not meet modern requirements for the organization of the national economy. Institutionally imperfect market economies require further reform. Crisis of 1998 has completed the period of formation of the classical «wild market» by putting the most pressing problem the problem of translation of market relations in a civilized fashion.

As the most common form of this process is aimed: A) to achieve economic growth, High competitiveness on the basis of creating a competitive environment and economic restructuring, and b) to establish an effective legal system (primarily in the sphere of economic freedom and the protection of business), and c) the formation of an open economy.³

Creating a competitive environment requires a prerequisite. Among them, we distinguish: Dispersion of market power; variety of business entities, government support for entrepreneurship, effective information provision and access to technology; training and retraining, changes in their motivational orientation toward the psychology of the market type.

The competitive environment enhances competitiveness. Competitiveness — a relatively new concept to the Russian reality, meaning the ability of businesses to confront their rivals in the market better and cheaper goods and services within the national economy and beyond. In the ranking of competitiveness of 59 countries while Russia occupies 55th place. Among the Russian companies 34% consider themselves to be competitive in the domestic market and only 7% - on the international market.⁴

Establishing an effective market economy presupposes its restructuring. It represents a set of measures aimed at redistribution of the resource potential for the development and qualitative renewal of economic growth. Transformative process is designed to work simultaneously on several levels of the economy: industry, regional, technological, organizational, managerial, and social. The ultimate goal of restructuring the economy — is to achieve the optimal structure corresponding to social needs.

World experience of successful structural changes in the economy shows that a key aspect of restructuring is to support those areas of the national economy, which may be carriers of economic growth in the global market. The leading countries of the world change the structure of production and world trade, increasing its share of more technology-intensive and knowledge-intensive products. Hence the need not just a restructuring under the influence of market processes, and structural adaptation to the world economy and work out effective measures to improve the competitiveness of domestic enterprises.

Structural adjustment is particularly necessary in Russia. So far in the country is dominated by raw materials, the extractive industries. In the near term growth opportunities would be limited because, above all, an out-dated logistics industry and the low level of investment. No accident that in Russia currently the industry average aggregate performance of 25% compared with Western companies, energy intensity of production is 4 times higher. Life of the equipment in 2, 5 times exceeds standards, more than two thirds of assets out of date.⁵

Structural changes in the modern economy of Russia require a legal framework, focused on the efficiency of businesses. In the Russian legislation, there are numerous gaps in the normative regulation. The lack of a legally set of laws, so they often contradict each other. Among the main directions of improving the legal security of business entities at the present stage should be made: Providing a unified legal field, the development of a system of legal norms, the creation of reliable mechanisms for the implementation of laws.

The formation of an open economy, its occurrence in the world economy requires both the rejection of extreme protectionism and effective support to domestic industries and enterprises at all levels of management. Openness should always be commensurate with the interests of domestic producers.

This is one of the most important functions of the modern Russian state.

transitive economy innovative foreign

1.2 Foreign experience of transition

In the process of post-socialist transformation involves more than 20 states of the former Soviet Union, Eastern Europe and Asia. In the Commonwealth of Independent States (CIS), the transition to a market economy was carried out using different models — from «shock therapy» to an active state intervention in economic management. For example, in Armenia in the early 90's fully promote private sector growth. Since the second half of the 90's.Emphasis on structural changes in the economy, de-monopolization of stock market development and the formation of a modern banking sector. There is creates conditions for the inflow of foreign capital. In Belarus, special attention is paid to the regulated transition of an earthenware pot, preserving state control over economy. In Ukraine, the transition to a market is hampered by a high proportion of heavy industry.

After the Soviet collapse in a relatively prosperous state were some of the republics of Central Asia. In the structure of their economies are dominated by agriculture and light industry, which, compared with heavy industry is easier to subject to market reform.

Significant progress in market reforms have made the countries of Eastern Europe embarked on the path of market reforms much earlier than Russia. In the early 90's. Most of them have successfully implemented economic liberalization and privatization of the toll. The conditions for reforms here were generally more favourable than in our country. During the administrative-command system in Eastern Europe remained the elements of a market economy as the private sector and private enterprise. The structure of the economy was more balanced: Had developed light and food industries, and the proportion of heavy industry was lower than in Russia. Enterprises of the military-industrial complex did not play a big role in the economy. In addition, the relatively rapid formation of the foundations of market systems, improve the «controllability» contributed to the small size of the Eastern European economies and the inflow of foreign capital. This will considerably ease the transition to a market system, in particular the implementation of financial stabilization. In Poland, the Czech Republic and Slovakia in the early 90's was effectively carried out «shock therapy». Thus, in the Czech Republic 2−3 years after the reforms the rate of inflation fell to 10% per year.⁶

Important place in the transformation process in Eastern Europe has been privatized, which together with other socio-economic changes contributed to overcoming the economic crisis. In the mid 90's. Almost all Eastern European countries emerging transformational recession entered the stage of economic growth.

The transition from recession to growth in these countries contributed to⁷:

a) The rapid expansion of the «new private sector» that is, private companies created in recent years with «zero» in the light and food industries. They do not require large capital investments are focused primarily on consumer demand;

b) A large influx of foreign capital. At new factories built by foreign companies with high technical equipment, is rapidly increasing production;

c) Clean-up of banks and enterprise restructuring. As a result, the banks got rid of «bad» debt by the debtor companies. Simultaneously there was a union of banks impose stricter regulation of banking activities. Enterprise restructuring was aimed at a wide range of measures to improve its operations: Isolation from the business viable and nonviable structural units, privatization, dismissal of employees, selection of managers, looking for investors, the modernization and development of new products, marketing organizations, etc.;

d) Selective structural policy: state support of potentially competitive enterprises.

Ultimately, this has greatly solved the problem of financial stabilization, liberalization and institutional reforms⁸:

Substantial interest is the experience of market reforms in China. This process began there in the late 70's. In developing reform programs were developed principles for their implementation: E to copy the experience of other countries that rely mainly on their own resources, to preserve the socialist socio-economic order, make changes gradually and comprehensively, to avoid the social, political, and psychological upheavals in society.

Given that the bulk of the population lives in the countryside, reform was decided to start with them. The peasants have the right to rent land. With the deepening of the reform period contracts for land use is prolonged. This stimulated the long-term investment in allotments. Now ownership of the land was inherited. Land formally is in collective ownership, and in fact — has been privatized. Peasants receive mandatory stable jobs for the sale of the state of several kinds of products. The remaining products are sold on the open market at market prices.

In industry, the task of privatization was not posed. The reforms are carried out through decentralized control. Significant role in China’s economy is state. Pricing is based on a combination of market and state prices. The state sets the prices of the most important kinds of strategic products and services. Exercise tight control of the monetary system. At the same time attach great importance to private sector development, particularly in retail trade and services sectors. Production and sales of approximately are half of all goods by market constraints and prices. A proliferation of commodity is exchanges.

Since 1992, it embarked on the establishment of mixed forms of ownership. In this case, public ownership remains dominant. It allowed corporatization of state ownership, attracting foreign capital, a merger of enterprises of different ownership forms.

As a result of the reforms in China has formed a two-sector model of the economy. Market mechanisms were the main regulators in the production of consumer goods and largely cover the production of investment goods. At the same time the State has not waived and the planned management practices. Until now, there are policy plans and the planned provision of material resources.⁹

Reforms have led to significant economic growth in China. The average annual GDP growth rate is about 10%. Since the early 80's. China has already entered the top ten countries in the world and in the next few years to catch up with advanced Western countries. The country has a relatively low unemployment. In society there is no social upheaval. Raising living standards is particularly noticeable in agricultural areas. Thanks to the «open economy» foreign trade volumes have increased five-fold increased exports. It created quite a large sector of the economy, foreign-owned.

However, in China, there are quite a few serious problems. «Narrow» place in the economy remains the public sector. Here, approximately 40% of enterprises are unprofitable, there are due to subsidies. Many experts see a way out of the inevitability of privatization, but it will cause social upheaval.

Overseas experience suggests that the key to solving the problems should be written not so much the pace of market reforms, as in 1913 the concept of these changes in their quality of certainty and direction.

In general, summing up, we emphasize that in Russia, foreign experience is necessary, but to develop and reform the economy should be based on domestic specifics on the historic traditions and socio-political mentality, manifested in the pursuit of social justice, mutual collegiality of the Russian people.

Chapter 2. Strategic reference points of long-term economic development

2.1 Strategic reference points of long-term social and economic development

In the middle of this decade in Russia largely completed the transition to a market economic system.

A system of basic legal norms and other institutions to ensure the functioning of market relations between economic entities. Earned competitive markets for goods and services, capital and labour resources. Actual there is already debugging of these institutions, ensuring their effective operation, high international competitiveness.

A high degree of openness of the Russian economy. The foreign trade turnover amounted to 45% of GDP (2007), which is one of the highest rates for advanced economies.

Ensured a stable macroeconomic stability. The Russian economy is shielded from external shocks, international reserve assets of the Russian Federation, have exceeded the end of 2007 470 billion dollars.¹⁰

Formed a thick layer growing companies successfully compete in domestic and foreign markets, and actively raise capital for its development. The capitalization of Russian companies has reached nearly 130% of GDP and has a tendency to further increase. The Russian stock market has become a real factor in attracting investment and economic growth. Among the population began to form a broad social layer of investors and shareholders.

Overcome tendencies of social confrontation in society, observed in the nineties. Develop civil society institutions. Reduced political and economic risks of doing business. The international recognition of Russia’s success shows her receiving the status of market economy and the investment credit rating.

Form a new government system, based on the regulatory separation of powers enshrined the Russian Federation, Russian Federation and municipal entities. In the process of government use of modern methods and tools for strategic planning and performance management, is their relation to budgetary decision-making mechanisms, primarily within the program-oriented approach.

Result of systemic changes in the economy is integrally expressed in the parameters of the socio-economic development.

Recent years Russian economy has demonstrated sustained high economic growth (around 7 percent per year), far ahead of the dynamics of the global economy (4.7 percent).

Overcome the decline in production and consumption of the nineties. In 2007, GDP amounted to 1991 level 110%. In this radically changed the structure of the economy in favour of industries focused on market demand.

The volume of GDP (at purchasing power parity) has exceeded 1.9 trillion. U.S. dollars. According to this indicator Russia entrenched in the eight leading countries of the world.

Thus, in recent years, Russia has regained the status of a strong economic power, affirming their right to stay in the group of major countries — world leaders as the dynamics of development and scale economies. In this case, the conquest of the positions of one of the leaders of world economic growth, market-based economic institutions and sustained improvement in living standards.

2.2 Challenges of the upcoming long term

In the middle of the decade the Russian economy is facing long-term systemic challenges that reflect both international trends and domestic barriers to development.

The first challenge — increased global competition, encompassing not only the traditional markets for goods, capital, technology and manpower, but also includes a system of national governance, support for innovation, human development.

The main characteristics of the global economy have a major impact on the socio-economic processes in Russia in the next 10−15 years will be¹¹:

* A dynamic, global economic growth (an average of about 4% per year), which places high demands on the pace and quality of Russian economic growth needed to increase its economic weight in the world, Providing regional leadership and to reduce the backlog by the developed countries;

* The emergence of China and India in the main locomotive of global growth, The emergence of new global centres of economic development in Asia and Latin America;

* Overcoming barriers to the growth of energy through energy efficiency and increased use of alternative energy which tends to rise in price of energy;

* strengthening growth restrictions Associated with environmental factors, lack of fresh water and climate change, which creates additional opportunities for Russia with its vast reserves of fresh water and ecologically safe areas;

* preservation, and probably gain imbalances in global trade, capital movements That will help change the course of world currencies, and rebuilding institutions of the world economy (World Economic Order);

* aging population in developed countries against the backdrop of rapid population growth in developing countries will intensify the global migration processes and increase the burden on social services inlayed systems of developed countries.

The upcoming period is characterized by the restructuring of the world economy associated with the change in the balance between its economic centres, the increasing role of regional economic alliances. Further development of the world economy will be determined by the balance between the prevailing trend of progressive globalization of world economy and the trends of regionalization as a response to growing tensions between the world’s centres of power and the accumulation of imbalances in global trade and financial system. In this case, further accumulation of imbalances in the global financial system may increase the risks of global financial crisis and a sharp slowdown in the global economy;

For the Russian economy, such restructuring, on the one hand, it creates new opportunities in the development of foreign economic integration, Strengthening and expanding position in world markets, on the other hand — creates a threatening to drive Russia to the periphery of the European economy, which, combined with the weakness of our exports and economic positions in Asian markets can dramatically worsen the trade balance of Russia and the possibility to import technology and capital. The answer to this challenge necessitates the competitiveness of the Russian economy, the capacity for renewal and innovation investment.

The second challenge — the expected new wave of technological change that dramatically magnifies the role of innovation in socio-economic development and devalues many of the traditional factors of growth.

In the next decade, developed countries will move to form a new technological basis of economic systems based on the use of the latest achievements in biotechnology, informatics and nanotechnology, including health care and other areas of human development.

For Russia, the availability of research capacity and high-tech production creates the conditions for the benefits associated with the proliferation of new technologies¹²:

— Providing technological leadership in a number of critical areas;

— Formation of complex high-tech industries and expanding position in the global markets of high technology products;

— Upgrading of traditional industries Including through the deployment of a globally-oriented specialized production.

At the same time, the lag in developing new technologies of the last generation can dramatically reduce the global competitiveness of the Russian economy and throw it on the periphery of world development.

The third challenge — the increasing role of human capital as a key factor in economic development.

Level of competitiveness of a modern innovation-based economy increasingly depends on the quality of professional staff, their level of socialization and cooperation. Russia will not be able to maintain its competitive position in the global economy due to cheap labor and the economy on the development of education and health. Russia’s response to this challenge involves overcoming the current negative trends in human development, which requires¹³:

* Stabilization of the Russian population and employment in the economy through the effective management of migration and changing lifestyles, improving the nation’s health and level of social optimism;

* Well-functioning industry that determine the quality of human capital (education, health, Housing) high standards of living;

* Transformation of the middle class of Russian society in its dominant force, the reduction of social inequalities;

* to achieve the level of developed countries in terms of labor productivity, which will be determined not so much the «assets-out» period of industrial development How many levels of education and creativity of the person;

The fourth challenge, generated mainly by internal, rather than global factors — it is the exhaustion of sources of export-commodity development, based on a forced build fuel and raw material exports, Production of goods for domestic consumption due to additional loading capacity in undervalued exchange rate, low cost of production factors — labor, fuel, electricity. And the crisis export raw model of the Russian economy can be greatly accelerated if the slowdown in global demand for hydrocarbons in connection with the active development of alternative fuels and energy, and inhibition of growth of the economies of China and India.

Denote the new internal limits on growth due to the insufficient development of transport and energy infrastructure and shortage of qualified engineers and skilled workers in the labor market. While maintaining the existing trends effect of this factor can lead to a sharp slowdown in economic growth and a rising backlog of leading countries.

Effect of structural constraints amplified unresolved a number of social and institutional problems. Among the most important of them¹⁴:

— High level of social inequality and regional differentiation;

— Maintain a high level of risk of doing business in Russia, including high levels of corruption and administrative barriers, inadequate protection of property rights, an intricate system of land relations, Low corporate culture;

— Poorly developed forms of self-organization and self-regulation of business and society, the low level of confidence, coupled with low efficiency of public administration;

— Low level of competition in a number of markets Without creating incentives for businesses to improve productivity and competitiveness;

— Inadequate development of the national innovation system, the weak link between education, science and business.

Having decided in recent years, the task of creating an institutional framework of market economy and post-crisis recovery of production, ensuring macroeconomic stability, Russia, on the one hand, Was able to set ambitious strategic development goals through the use of new opportunities, on the other — was faced with the need to address the remaining critical issues and overcome the marked long-term challenges.

2.3 Targets

The strategic goal is to achieve a level of economic and social development, the appropriate status of Russia as the world’s leading powers of the XXI century, with an attractive lifestyle, Is at the forefront of global economic competition and secure the national security and the realization of the constitutional rights of citizens. In 2015;2020 years, Russia should enter the top five leading countries in terms of GDP.

Achieving this goal means building a brand new «vision of the future of Russia by the end of the next decade.¹⁵

* Out of Russia on the standards being developed. Summary measure of living standards, GDP per capita at purchasing power parity, will increase from 13,700 U.S. dollars in 2006 (42% of the average OECD) to 30 thousand dollars in 2020 (70%) and about 50 thousand dollars 2030. Average life expectancy will increase to 75 years.

* High quality and comfortable living conditions. Will ensure universal access to education and health services that meet the level of most developed countries, the average level of housing provision will be in 2020 30 — 35 sum. m. per person (or about 100 sq ft. for the average family)

* Enabling human habitats. Percentage of population living in areas with adverse environmental conditions decreased from 43% in 2007 to 14% in 2020;

* Changing social structure in favor of the middle class, reduce economic disparities populations and a sharp reduction in poverty.

* Innovative leadership of Russia in the world based on advanced research and development, high technology and educational services. Russia should occupy a significant position in the markets of high-tech goods (not less than 10 per cent) and intellectual services of 4−6 and larger items. Will create the conditions for the mass emergence of new companies in all sectors of the economy, primarily in the sectors of the knowledge economy;

* Leadership of Russia in energy supplies to world markets, including through geographic and product diversification of supply, Turning Russia into a logistics center of the global energy infrastructure and a key player making rules for the functioning of global energy markets.

* Creation of an extensive transport network that provides high spatial mobility of population and the global competitiveness of Russia’s transport markets.

* Russia’s leadership in the integration processes in Eurasia, turning into one of the global centers of world economic ties, including as a world financial center.

* A new model of spatial development of Russia through the establishment of new regional growth centers and reduce regional disparities.

* to guarantee the realization of the constitutional rights of citizens, including an advanced system of democratic institutions, the availability of effective enforcement mechanisms and systems to ensure national security.

System to achieve this goal is to move the Russian economy from export commodities to innovative community-oriented type of development. This will dramatically increase the competitive potential of the Russian economy by building on its comparative advantages in science, education and high technologies, and on this basis, tap new sources of economic growth and welfare. Formation of an innovative economy means transformation of intelligence, of human creativity in the leading factor in economic growth and national competitiveness, along with a significant increase in the efficiency of natural resources and productive capital. Source of higher incomes is not only an opportunity to obtain rents from natural resources and world markets, but also the production of new ideas, technologies and social innovation.

Innovative way of development can increase social stability and justice in society, as the gains from economic growth not only gets a narrow segment of society involved in the assignment of rent, and export revenues, but also the main social groups associated with the development of infrastructure of agrarian complex, Basic industries and the production of man himself. In this case, strengthening of social orientation of economic development based on the enhancement of national competitiveness and efficiency, not redistribution of existing wealth and social confrontation.

Innovative socio-oriented type of growth has a number of qualitative and quantitative characteristics reflecting the peculiarities of its key factors. This growth, based on¹⁶:

* Diversification of the economy, the structure of which the leading role goes to the branches of «knowledge economy» and high-tech industries. The share of high-tech sector and the knowledge economy in GDP should be at least 17−20% (2006 — 10, 5%), the contribution of innovators in the annual GDP growth — at least 2−3 percentage points (2006 — 1, 3);

* improve the efficiency and competitiveness of the economy, without a significant increase of production resources. Labor productivity is expected to increase by 2020 in 2, 4−2, 6 times (by sector — up to 4 times), and energy efficiency — in 1, 6−1, 8 times;

* High innovation activity of companies associated with the development of new markets, upgrading product range, development of new technologies, creating new forms of business organization. The share of industrial enterprises engaged in technological innovation, should increase to 40−50% (2005 — 9, 3%), and innovative products in total output — up to 25−35% (2005 — 2, 5%);

* Revitalization of basic and applied research and development at radically increasing their effectiveness. Gross domestic expenditure on research and development should go up to 3, 5−4% of GDP in 2020 (2006 — 1% of GDP);

* Improving the quality of human capital and its efficient use, that is characterized by faster growth of wages of skilled workers. The average monthly wage in the economy would increase in 2020 up to 2700 dollars (2007 — 526 U.S. dollar);

* Rapid growth of industries that provide human development, especially education and health. Expenditure on education from public and private sources — 5, 5−6% of GDP in 2020 (2006 — 4,6%), health care — 6,5−7% of GDP in 2020 (2006 — 3,9%), which is comparable to most developed countries.

2.4 Direction of the transition to an innovative community-oriented type of development

Feature of the transition to an innovative community-oriented type of development is that Russia will have to simultaneously solve the problems and catching up, and advanced development. In the context of global competition and open economy can not catch up with developed countries in terms of welfare and efficiency, without providing advance a breakthrough development in those sectors of Russian economy that define its specialization in the global economy and allow the maximum extent possible to realize the national competitive advantage.

The transition from the export of raw materials to an innovative type of economic growth associated with the formation of a new mechanism and Social Development. One of the internal contradictions of the current growth model is that significant, outpacing GDP growth, rising incomes and welfare of the population relies heavily on the assignment of natural resource rents — windfall profits from export of hydrocarbons and raw materials. This growth in wealth is inevitably accompanied by increasing economic stratification of the population, a violation of the principles of social justice, critically important for Russian society. At the same time, objectively increasing social demands of different social groups, including not participating in the distribution and assignment of natural resource rents. Removal of this conflict requires the formation of new mechanisms of social development, balanced with the resource capabilities of the economy and its innovation performance. The basis of this balance — to connect business freedom, social justice and national competitiveness.

This approach requires the implementation of complex, interconnected resource, timing and phasing changes in the following areas of transition of the Russian economy to an innovative community-oriented type of development.¹⁷

The first area — the development of human potential in Russia. On the one hand, it is providing an enabling environment for the development of individual abilities, improving living conditions and quality of social environment to another — increasing the competitiveness of human capital and ensuring its social sectors as a key to innovation development¹⁸:

— To overcome the prevailing demographic trends, population stabilization and the creation of conditions for its growth, the level and quality of life in general;

— Creating conditions for sustainable wage growth balanced with improved productivity and quality of the workforce, The creation of effective mechanisms to regulate the labor market, providing a combination of competitive labor market with partnerships of employees, employers and the state;

— Strengthening the link pensions to wages, pensions, taking into account the development of voluntary pension savings To a level that ensures a decent standard of living for pensioners;

— Ensuring availability of quality educational services, health and culture on the basis of a profound structural and technological modernization of these areas;

— The transition from a system of mass education, which is characteristic for the industrial economy, to the need to create innovative social-oriented economy continuing individualized education for all;

— Provision of affordable and quality housing, creating a comfortable urban environment for humans and effective housing and communal services, building a flexible system of resettlement The multi-regional and national ways of life;

— Creation of effective targeted support system for the poor and providing social services for older people, The disabled and children;

— To create economic conditions for the preservation and multiplication of cultural and spiritual values of Russian people

— Improvement of environmental quality and ecological conditions of human life, reducing crime;

— Ensuring high professional and territorial mobility of labor, The formation of a professional culture, labor and entrepreneurial values.

The second direction — creating a highly competitive institutional environment that encourages entrepreneurial activity and attract capital into the economy¹⁹:

— Creation and development of competitive markets, a consistent de-monopolization of the economy;

— Support for the formation of new companies and new businesses based on innovation (startups), promotion of small business development;

— Reduction of investment and business risks through the development of financial institutions, Macroeconomic stability, protects property rights and enhances the predictability of economic policy;

— Improving the access of companies to long-term financial resources, development of financial markets and other institutions ensuring the transformation of savings into capital;

— Increase transparency of business, including on the basis of self-organization of the business community;

— Ensuring high quality of public administration in the economic sphere.

The third area — the structural diversification of the economy through innovative technology development:

— Formation of a national innovation system, including elements such as an integrated system of higher education research and development;

— Formation of a strong scientific-technological complex, which supports the achievement and maintenance of leadership in research and technologies in priority areas, and on this basis, the insertion of Russia in the global turnover of high-tech products and technologies;

— The establishment of centers of global competitiveness in manufacturing industries, including high-tech industries and knowledge economy;

— Promoting the competitiveness of industries through public-private partnership, the creation of regional production clusters, Support the export of high technology products and products with high added value and reasonable protection of domestic markets in the light of international practice in this area;

— Providing industries highly professional personnel managers Engineers and labor;

— Improving access for Russian companies to sources of long-term investment.

The fourth pillar — strengthening and expanding global competitive advantage of Russia’s traditional sphere (energy, transport, agriculture, processing of natural resources)²⁰:

— Ensuring stability and expansion of energy supplies the world’s largest consumers, geographic and product diversification of energy exports;

— The development of major sites of international energy infrastructure in Russia Based on the use of new energy technologies;

— Formation of a competitive transport infrastructure Ensuring implementation of the transit potential of Russia’s economy;

— To strengthen Russia’s position on the world market of timber industry complex in-depth processing of forest and sustainable reproduction of the forest wealth of the country,

— Implementation of water potential of the Russian economy — into the commercial production of undeveloped water resources in Russia, promoting change in the global patterns of consumption of fresh water, With mandatory compliance with environmental requirements;

— Implementation of agricultural potential in parts of exporting grain and other agricultural products, the production of environmentally friendly products, import substitution in the domestic markets of livestock products.

The fifth direction — the expansion and strengthening of external position of Russia, increasing the efficiency of its participation in the international division of labor²¹:

— Empowerment of comparative advantages of Russia on foreign markets and opportunities of globalization to attract capital into the country. Technology and skilled personnel;

— The gradual formation of an integrated Eurasian economic space of joint development, including the transformation of Russia into one of the world’s financial centers;

— Forming a stable diversified relation with the world’s economic powerhouses to the sustainable development of the Russian economy in the long term for increasing global risks;

— Strengthening the role of Russia in solving the world’s global problems and the formation of the global economic order.

The sixth direction — the transition to a new model of spatial development of the Russian economy:

— Formation of new centers of economic and social development in the Volga and the Urals, Southern Russia, Siberia and the Far East, based on the development of energy and transport infrastructure and a network of regional production clusters Realizing the competitive potential of the territories;

— Leveling the socio-economic development of regions of the country, reduction of excessive economic differentiation Territories, Overcoming areas of underdevelopment and poor living conditions in Russia;

— Strengthening of the strategic management of regional development, providing increasing complexity and balance regional development and deployment of productive forces, increasing the balance of the obligations of the regional and municipal authorities and their financial capabilities.

Conclusion

Russia in the course of economic reform has moved from the administrative-command system to a modern market economy. Initially dominated by the view (with and among domestic and foreign among economists and politicians) that this transition will take years. Now it becomes clear that this transition extends over a decade. In the post-socialist countries for a long time there will be a kind of so-called transitional economic system or economy in transition. It’s sort of a mixture of elements of the command and modern market systems. In some countries, these components are added to the elements of a market economy and free competition, the traditional economic system.

Theoretical and Applied Economics has developed several approaches to solving the problems of transition, but this was a problem of moving from a traditional to a modern market system, ie developing countries. For the transition from a command economy to a modern market, these recipes are suitable only partially and badly needed for post-socialist countries in the new direction of theoretical and applied economics — economic problems in transition — still in its infancy.

Nevertheless, we can already point out some features of the period. This is primarily a peculiar combination of economic laws of the communist and capitalist systems. In this combination, they partially cancel each other out. Moreover, we can talk about their own laws in transition system.

Moreover, if the transition system means the gradual strengthening of the items of the modern market economy in the weakening of the administrative-command system and the process is not uniformly), then such a system is inherent variability, and instability as one of the most distinctive features of it.

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