How the Russian Economy Can Grow Based on Its Reindustrialization

Abstract

ABSTRACT Russia’s rapid transition from a closed to an open economy occurred at the beginning of the post-Soviet period and within the Soviet framework of production. This resulted in the deindustrialization of the Russian economy, which has had many negative effects, including capital flight, the loss of manufacturing, and an increase in the import of manufactured products. This article considers the primary challenges to the reindustrialization of the Russian economy, and argues that this process must involve government subsidies, especially for the creation of vertically integrated interindustry corporations (VIICs). VIICs have long production-technology chains that begin with the extractive industries and end with process manufacturing enterprises. The creation of VIICs and the introduction of new technology will make Russian manufactured products more competitive both domestically and internationally. The problems facing Russian manufacturing and the ways in which VIICs can help address these problems are analyzed on the basis of five groups of producers: 1) the key producers of investment mechanical engineering; 2) the industry producers of investment mechanical engineering; 3) producers of manufactured products intended for industrial consumption; 4) producers of consumer goods; and 5) the producers of high-tech durable goods.