Avakumova N.N.

Orlovskiy state institute of the economy and trade

The State of Economy in the Context of Economic Development

The state of economy from the point of view of providing national security is characterized mainly by the economic development level, its dynamics, scientific and technical development level, structure and state of research and production potential.

The main reason of supercritical state of national security in Russia was almost two fold production decrease in 90s, which together with two fold reduction of country's economic space as a result of USSR disintegration resulted in reduction of state profitable base more than four times. Only this year the GDP will have been reached the level achieved in 1990. At the same time the investments volume is two times less than the one before the reforms, actually all the time after the disintegration economy used the production potential created before. Depreciation and the mean age of fixed assets which increased twice for 15 years of reforms demonstrate this fact.

Low economic activity doesn't allow not only to maintain simple reproduction, defence and achieved level of well-being but to provide minimal level necessary for economic development of the territory and to keep the available infrastructure. This manifests in mass population outflow from the North and the Far East regions, catastrophes and accidents which happen very frequently in the basic industries -transport, energy, chemical industry. With such tendencies economic space cleared out by Russia will be inevitably filled with foreign capital. It is clearly seen from the lobbyists increasing pressure upon the authorities concerning foreign companies 'interests in transferring them the most valuable natural resources, growth of foreign control over country's information space, replacement of Russian airplanes for imported ones and so on.

There are threats of depletion and degradation of country's resources potential. The most dangerous is the problem of the most important development resource, that is, human capital. It is caused by a sharp decrease of living standards and curtailing of the most complex industries. A considerable decrease of life duration and tendency to the reduction of population, rapid growth of society's alcoholism and socially caused diseases, quality decrease of compulsory education and public health services make impossible the provision of the basic conditions for modern economic growth.

It is well-known from modern economic growth theory that country's specialization in raw materials and its integration to the world economy according to the scheme «raw materials export - import of manufactured and consumer goods» result in non-equivalent foreign exchange, chronic lag in economic development level and loss of possibilities and stable self-development. This happens from pricing peculiarities for manufactured production and the raw materials.

In the former case the major component is intellectual rent (which is formed due to temporal monopoly on scientific and technical innovations and is the financing source of further scientific and technical development and consequently economic growth. In the latter case the major factor is natural rent which is mainly spent on -manufactured production and can be used only partially for financing investment. Thus country's raw-materials specialization leads to natural rent in exchange for import of inflation and economic growth financing abroad due to non-equivalent economic exchange. The scope of such resources overflow may be large. For example the share of intellectual rent in the price of a new electronic engineering and its software may constitute a half.

Thus the reduction and devaluation of scientific and technical and intellectual potential under modern conditions of international competition mean the loss of basic inner source of economic growth and dooms the country to constant was away of the national wealth in non-equivalent foreign .exchange.

Reasonable macroeconomic policy oriented on creation of favourable conditions for economic growth must solve at least two fundamental problems. First, it must provide survival and development of industrial sphere including those segments which lack cash assets due to their outflow to the sphere of capital circulation. Second, it must result in elimination of barriers between manufacturing sphere and the sphere of capital circulation and inside them, restoration of integration necessary for effective economy functioning between them. If these problems are not solved, any reasonable methods both macroeconomic and industrial or structural policy will be ineffective.

Provision of economic growth in the transitional period of economy demands coordinated solution of formation problems of technological, institutional and organizational structures capable to combine all necessary elements in a general reproductive contour of new technological structure growth and to create conditions for modernization and effectiveness increase of economy as a whole. Favourable macroeconomic environment should be provided and adequate behavioural motives and organizational forms at the microlevel should be formed.

In the sphere there is a problem of production-technological system formation for a new technological structure and stimulation of its growth together with modernizing of contiguous industries. To solve this problem it is necessary to create competitive on the world market industrial-financial institutions, import of necessary technologies, stimulation of quick emanation of new technologies, a system for training of personnel of required qualification, protection of domestic production markets from foreign competition, insurance of favourable for new technological structure pricing proportions and other parameters of economic mechanism.

In the institutional sphere there is the problem of formation of economic mechanism to provide the redistribution of resources from obsolete and unpromising industries to production technological systems of new technological structures, concentration of resources in the points of its growth, modernization of economy, its effectiveness and competitiveness growth on the basis of innovations. Measures on enterprises privatization, financial and monetary policy, price and income policy, fiscal policy and trade policy should help solving these problems.

The same goals must determine the policy in the sphere of organization-production economy structure improvement. It is important to stimulate the forms of financial, industrial, trade, research and educational organizations integration that could develop steadily under conditions of tough international competition and provide the non-stop efficiency increase on a new production technologies application basis.

The macroeconomic policy should provide favourable conditions for the solution of the listed problems ensuring stability, good investment and innovation climate, maintaining national economy competitiveness and appropriate international monetary and financial policy. At the microlevel it is important to provide property rights accuracy and certainty, ensuring observance of the high management responsibility level, stimulating proper entrepreneurial motivation aimed at production efficiency increase, progressive innovations and modern management methods.

Proposals on the economic growth policy under conditions developed in the Russian economy are formulated proceeding from these obvious problems. This policy is divided into two constituents: creation of favourable general macro- and microeconomic conditions for the increase of industrial, investment and innovation activity and special measures for stimulation of progressive structural changes on the basis of the new technological way industries distribution, as well as progressive development of basic technologies of a new level.

As for macroeconomic conditions along with liquidity crisis and economy disintegration characterized above continuous depression and impossibility of transition to growth are the results of:

– prices disparity (price increase of raw materials and energy in contrast to finished goods prices). As a result, the greater part of manufacturing industry and agriculture are unprofitable or low profitable;

– prolonged rouble exchange rate (for the last three years the fall in exchange of rouble has lagged behind its inner devaluation more than six times), leading to noncompetitiveness of domestic finished goods and loss of both foreign and domestic markets;

– inaccessibility of credit resources necessary for production development;

– devaluation of enterprises funds as a result of high inflation and mass nonpayments;

– productive efficiency decrease as a result of sharp reduction in productive capacities load;

– the fiscal tax system based on high taxation of industrial sector;

– devaluation of population savings in the «Sberbank» and financial pyramids, that undermined public confidence to financial institutions. Creation of favorable conditions for production activity and investment activity rise should become the macroeconomic policy core.

Efficiency of special measures for economy structural reorganization decisively depends on chosen priorities accuracy. From the scientific and technical point of view, chosen priorities should correspond to the perspective tendencies of the new technological way formation and timely reserves creation necessary for the following structure formation. From the economic point of view the state support of activity at realization of priority trends should be characterized by two chief features:

1) to possess considerable external effect, improving the general economic environment and conditions of business activity development;

2) to activate the business activity growth in the wide complex of branches connected with priority industries - i.e. to possess multiplying effect, creating amplifying demand and business activity growth impulse.

All economic state policy should be oriented to realization of Russian economy competitive advantages. World experience of successful economical structural changes proves the support of those areas of national economy that can be the basis of economic growth on world market scale to be the key aspect of structural reorganization.

As a whole, realization of the Russian economy competitive advantages is impossible without diverse, constant and strong state support. It should be combined organically with market mechanisms not substituting and suppressing their activity, supporting competitive choice of the most effective production methods technologies.