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The author of dozens of scientific papers on the theory of economic growth and political development of the economy, Ph.D., holder of a PhD at the Sorbonne (Université Paris 1 Panthéon-Sorbonne) Dmitry Veselov talked about why some countries are poor and others rich, why it is important to invest in education and why human capital is the main driver of economic development.

The Russian economy – it is an office building

– Dmitry, I confess honestly, hardly I found your office in this building on Shabolovskaya quite difficult to navigate. And with what building would you compare the Russian economy?

– Probably, the Russian economy – it’s an office building, a state-owned large extent. Because the public sector in our economy now plays a major role. It operates on the principle of hierarchy have a boss, there are a slave. And Russia’s economy lives largely on this principle.

– And who’s the administrative building? Who is in control?

– It seems to me that the modern Russian economy moves to a hierarchical management system, that is, the main decisions are taken on economic development bureaucracy – be it government or state-owned companies. This mechanism of management of the economy can be effective only in certain stages of development. As soon as the economy enters a phase where you need to create something new – goods, services, find new ways to increase productivity, to fill the niche unknown – much more efficient it becomes a different structure. It’s called networking.

– What is the difference between the hierarchical and the network economy?

– In a hierarchical economy you have a large factory. You can invest a lot of money, and it will have an enormous impact in it. This economy of Soviet industrialization. In a networked economy, this resource has been exhausted: You do not need the ore, but you have a million people. And among them there are 10% of people with ideas. And if they implement them, even 1% of these ideas – your economy will change. But in order for them to implement them, we need the institutions of equality of all before the law, protection of property rights, institutions that encourage entrepreneurial initiative and, therefore, access to credit facilities. And the most important, fundamental institution – an independent judicial system: protection of property rights, guarantee of rights and freedoms.

To develop the economy, it is necessary to provide the opportunity for talented people to create their own companies

– For such a transition, as I understand it, you need a lot of time. What are the measures to support the economy, in your opinion, you need to take right now?

– The Russian economy is now on the verge of stagnation. This is not due to the global financial crisis, it is rather an internal matter. Therefore, I think, long overdue, especially reforms aimed at reducing the number of state corporations and state influence in the economy. To develop the economy, it is necessary to provide the opportunity for talented people to create their own companies, to implement their projects. And thus remain in Russia. And power structures of power, all power, should win the confidence of entrepreneurs. budget funds, which are now sprayed state corporations, government agencies on a variety of targets, should be investment in human, that is, in education, health and social policy.

– The economic model (the theme of your dissertation at the Sorbonne) can tell you where to go next?

– My model was not designed for the development of specific measures of economic policy. It is necessary to enhance our understanding of why some countries are rich and others – the poor. That is the understanding of the impact of different interest groups on the economic life of the country. In particular, in my model, I tried to answer the question: “Under what conditions can a society to support reforms aimed at strengthening the freedom of entrepreneurship, increasing competition, reducing the monopoly of the economy, the creation of equal conditions for all before the law?”

– How do you answer this question?

– Get the two options. First, when there is an incentive or interest in a coalition between the elites. The elites – politicians, business owners, etc. -.. Interested in reducing competition. They benefit from the existing assets, it does not make sense to compete. At the same time the middle class, or a skilled workforce in this coalition, as you know, is not included. In this sense, the coalition majority chooses closed institutions. This is just due to the hierarchical structure, which we discussed with you. With the dominance of the state. With access only certain persons to economic activity. Another option, when we go out on the reform, promote economic development. To implement this option, there are several possibilities. First – raising the general level of education, there is an emphasis on human capital as the engine of economic development. If a large part of the society will have access to quality education, it also needs to create a demand for open access institutions – the equality of all before the law, access to credit for business development, an open legal system. The second point – the decline in income inequality. Third – opening up new opportunities for growth. These three factors can alter the political balance.

When we talk about human capital, it is important to understand that each person – edinichka

– In one of your interviews you said: “All my scientific way linked to the question” Why “and an attempt to find the answer to it?”. Answers to any “why” you are looking for right now?

– Specifically, we are now developing an interesting project related to the dynamics of inequality in modern society. There is a theory of why the social conflict that existed in the industrial society, has come to naught. More precisely, there were two conflicts. One – between capitalists and workers. The second – between the capitalists and landowners. The story is that there are two completely different economic development driver. The first driver – is the physical capital. This large factories, buildings, equipment, machinery and infrastructure. When we speak of the physical capital, we understand that it is necessary to concentrate resources. We need to invest heavily to create the capital. That is the highest level of inequality here encourages the development. But if we look at today’s society, it is often a situation where new ideas or projects are not so much in the power of investment, as the presence of a group of interested talented people who decided to do something new in this civilization. That is, there are entire industries and the forces that are oriented to the second device driver development – human capital: education, skills, talents of people. When we talk about human capital, it is important to realize that people, everyone – edinichka. And you need to invest in each person. It turns out, on the contrary, we need to ensure that resources are distributed equally among the people so that everyone can achieve the best. If the company goes to industries that are focused on human capital, it changes its structure. We see why some societies have done this, and others do not.

– You – the researcher who makes predictions for decades ahead. What would you ask the economists, who will be living in 50 years and see firsthand, these predictions will come true or not?

– I would be interested to learn from them how to change economic theory, economic theory as very harsh, we can say, revolutionary changes in recent decades. Economy is interesting in that it is a qualitative change in their condition. And to make a long-term prediction is very difficult in this sense. Therefore, growth theory, which I do, is intended to explain what we see today. To explain it in the context of the whole history of the world – a very interesting task.

Tatiana Belyuga

By author Tatiana Belyuga