Import Substitution in Russia: The Need for a System-Strategic Approach

ABSTRACT Russia is currently implementing a policy of import substitution. Although some positive results have been achieved (e.g., in the agricultural industry and the pharmaceutical industry), there are still significant problems with the current approach. The present article considers the successes and challenges of Russia’s current import substitution policy and offers several solutions that should facilitate significant economic growth. In particular, we argue that a systematic approach to import substitution should focus on stimulating the industrial base through government regulation and support, which is better than the present policy of maintaining a relatively unregulated domestic free market and relying on the import of foreign technology. This article reviews several arguments in favor and against this approach and concludes that under current economic conditions, the best way forward for the Russian economy involves the transition to a system-strategic approach to import substitution, which requires a reevaluation of macroeconomic policy and the rejection of certain liberal principles (e.g., rigid monetary policy, floating exchange rates, and abstaining from currency restrictions). In light of foreign experience, we argue that this model has been successfully implemented in countries that are currently technological leaders in global value chains and that this model can likewise help Russia develop its industrial base.