Sunday, May 11, 2008

Window on Eurasia: Private Sector Wants Russia to Resume Soviet-Style Gigantist Projects

Paul Goble

Ankara, May 12 – For the first time since 1985, Russian officials are being pressed to launch a gigantist economic development project of the kind typical of the Soviet era, a step that may inspire some but will entail serious problems both because such projects involve massive interregional transfers of resources and inevitably collapse from their own contradictions.
But now pressure for this is coming not from the government but from the private sector: Aleksandr Politov, the head of the Urals Construction Technology Company, is calling on the Russian government to support the construction of a dense network of highways in the northern regions of the country, (
Such a project may be defensible in its own terms, but the way in which Politov advances his case suggests that an increasing number of Russian officials now are prepared to view Soviet-era gigantist projects as a solution to challenges the country faces that some in the private sector will now exploit that attitude.
And that in turn suggests that other Russian companies, regions, and ministries will push for such projects, confident that they will receive a favorable hearing for the first time since December 1984 when, even before coming to power, Mikhail Gorbachev denounced them as expensive, inefficient, and a hidden form of the transfer of resources from one region to another.
According to Politov, “over the past ten years, construction projects of that magnitude have not been undertaken” in Russia. But now his firm, whose core staff consists of specialists “trained in the best traditions of the Soviet school,” is prepared to undertake just such projects once again.
Russian firms have built some highways in this region over the last 25 years, he continued, but the fulfillment of the transportation part of the Industrial Urals – Polar Urals project “presupposes the realizing immediately of several major projects not only at one and the same time but very quickly.”
Politov said that he “loves the expression that roads are the blood of the economy. In fact, this is so. If there is a road, then around it, there will be life.” In Europe, there is a dense network of roads and hence much economic progress, whereas in Russia, the network is much less dense and economic progress that much more difficult.
Russians sometimes act as if climate prevents Russia from catching up, but “today in Finland, where the climatic conditions make it comparable to Russia, there are practically no population points which are not linked with automobile roads. But with us,” the situation is different because Moscow is pursuing short term profit rather than longer term economic gain.
That means, Politov continued, that the economic consequences of the roads that are built quickly exhaust themselves, forcing a new round of highway construction to meet new short-term economic needs and thus on and on, in a never ending cycle. The only way out is for the government to undertaken the comprehensive development of highways.
Recognizing this, the construction firm head said, some in government are proposing the use of toll roads, but an examination of world practice shows that “no more than five percent” of highways can be of this type without adverse economic consequences. And consequently, such roads are not “the panacea” many claim.
Instead, Politov continued, the government needs to launch a new project of the kind the Soviet regime did, one that will be based on a public-private partnership, to ensure that the country has the infrastructure not just that it needs now and in the next year or two but that it will need in a generation of more.
Given the changes in Russia since Gorbachev complained about gigantist projects, it is possible Moscow will be able to take this step without entailing all the problems of the past, but it seems certain that however that may be, these projects will offer a new opportunity for elite enrichment via corruption – something ultimately more destructive than anything else.

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