А. Аузан, П. Лунгин, А. Новиков, В. Пызин 22.09.2010 Roundtable “Mentality and Economy: National Formula of Modernization” was held in the House of Economist on Tverskaya Street in Moscow. Participants in the discussion tried to answer two fundamental questions. How the national soul and the national economy influence each other? How could we control this influence with the purpose to modernize Russia’s economy?

The keynote report “Mentality and Economy: National Formula of Modernization” was delivered by Alexander Auzan, president of the National Project Institute Social Contract, member of the Council for the Development of Institutions of Civil Society and Human Rights under the President of the Russian Federation and member of the Board of the Institute of Contemporary Development.

The roundtable was attended by:

– Pavel Lungin, People’s Actor of Russia, scriptwriter and film director;

– Nikita Krichevsky, economist, chairman of the expert council of the All-Russian Public Organization of Small and Medium-Size Businesses “OPORA Rossii”;

– Victor Biryukov, economist, member of the Board of the Russian Union of Industrialists and Entrepreneurs, founder and president of Talina Group;

– Vasily Simchera, economist, Merited Worker of Science of Russia, director of the Research Institute for Problems of Social and Economic Statistics under the Rosstat national statistics agency;

– Vladimir Pyzin, a founder of national political consulting, head of the Institute of Problems of Political Management;

– Alexander Neklessa, economist, deputy director general of the Institute for Economic Strategies under the Russian Academy of Sciences. Chairman of the Commission for Sociocultural Problems of Globalization;

– Vardan Bagdasaryan, historian, head of the Chair of History and Political Sciences at the Russian State University of Tourism and Service;

– Evelina Rakitskaya, poetess, editor-in-chief of International Publishing House E.RA, member of the International Association of Writers and Publicists;

– Sergei Smirnov, economist and poet, director of the Institute for Social Policy and Socio-Economic Programs, deputy principal of the Higher School of Economics;

– Ajdar Kurtov, editor-in-chief of magazine “Problems of National Strategy;”

– Natalia Karpova, economist, director of the Institute for International Business at the Higher School of Economics;

– Vladimir Gromkovsky, economist, chairman of the Board of Directors of Finematika Group of Companies; and

– Oleg Sokolov, economist, head of the department of social labor relations and social partnership at the headquarters of the Federation of Independent Trade Unions of Russia.


А. Аузан 22.09.2010 Alexander Auzan said there is no doubt about the existence of interrelation between mentality and economic development because it is proven quantitatively and “this is not the case of a level of country’s development but rather of the availability of various structures: informal networks, informal institutions and so on.”

As a matter of fact, modernization is already in progress in this country. But it is mainly the so-called “consumption modernization” where the sector of services flourishes: “retail networks, mobile telephones have conquered regional centers and are advancing on district ones.” However, in the ‘post-industrial sphere’ there is no modernization at all, primarily because of the low quality of the institutional environment, the quality of institutions being one of the main cultural properties of a society.

“The worst situation is with state institutions, not with economic ones,” Professor Auzan, PhD, was positive. “Therefore it is necessary to find groupings interested in modernization, unite them into a coalition and reach compensation compromise with other influential groupings not interested in modernization.”

 Replying to a query from Lungin what exactly modernizers could offer the “siloviki” in the framework of a compensation treaty when “the latter already have everything,” Auzan said: “They absolutely lack confidence in the future, because groupings which controlled the country in 2003 and 2004 vanished and were replaced by others. Nobody can guarantee that they will not be replaced as well by someone one day… Moreover, they have children.”

The speaker also called to take into account the fact that from the standpoint of international business capitals of groupings that dominate Russia today are not very big, evoke little confidence and, hence, are allowed into the market only on discriminatory conditions: “We believe your assertions that (these capitals) are your property. But since you cannot prove this, pay first a 40-percent discount.”

The speaker said that the reason behind the weakness of Russian institutions is the extremely individualistic behavior of the population despite a myth that the Russians are a highly collectivistic culture: “we know this from our everyday experience.” In reality, ruling elites used to enforce the collectivistic culture “as an instrument of tackling the extremely individualistic behavior of the people.”

The Russians do not respect standards exactly because they lack collectivism: “the value of a standard or a law approximates zero.” That is why “a century was not enough for the national automobile industry to solve the task of mass production.” And if it continues “spitting on standards” it will not be able to solve it during the next one hundred years.”

“It has been proven long ago and many times that compliance even with a bad rule creates a coordination effect,” Auzan stressed. “Even bad institutions produce a coordination effect and help economize in terms of scale. That is why I believe that any institutions are important. Joining WTO? Good! The Customs Union? Marvelous! In a place where rules, not lawlessness, reign the sight reaches farer.”

On the one hand, the high index of individualism is a serious obstacle for major industrial projects. Major productions base their economic success on their size: heaps of people work in compliance with predetermined algorithms and according to unified standards.

On the other hand, choosing an avenue of modernization it is necessary to take into account that “creativity is our high value.” Instead of buying patents and meeting standards, Russians prefer to invent “on a kitchen table” their own technologies or readjust the existing ones.

“Modernization today should focus on small business,” the speaker concluded. “Small business is capable of solving tasks locally and basing on creativity. But major industrial projects will not be a success. Therefore, the antivirus Kaspersky Lab is a real result but in this situation we will never have a Google, because it needs a corresponding institutional environment.”

According to the speaker, the phenomena of extreme individualism, creativity, respect for wit and disrespect for the law were explained in a recently published article “Will Russia become a global leader?” by Victor Biryukov. The article reads that the typical for Russia extensive economy with low labor productivity was historically caused by the excessive territory.

Auzan reminded Russian peasants “changed fields regularly” and it made no sense to fight for a maximum yield on one and the same plot. After several years a peasant simply abandoned it and plowed up a new piece of land. Thus, a new mentality was formed, unappreciative to space and ignoring it.

Touching upon the project of Skolkovo Innocity the speaker said, “It is an interesting technical project but without any direct importance for the country’s modernization. It will be very expensive and will probably yield some results to boast of, being rather a replica of the Exhibition of National Economy Achievements.”


В. Громковский 22.09.2010 Investment expert Vladimir Gromkovsky touching upon the issue of inefficiency of big industrial enterprises in this country, reminded that in the 1930s industrial giants were created separately one from another as universal and self-sufficient enterprises without a US-style broad division of labor. Figuratively speaking, motor works in the United States resemble “a mushroom spawn” whereas in Russia they are like a “tuber.”

For example, Russian auto-maker GAZ until now “makes almost all it needs itself” except maybe only engines produced in Yaroslavl. Hence, there is a problem of components, which in principle “cannot be solved by separate private efforts of separate private plants, since it is a nationwide task.” It will take decades to grow “a spawn” i.e. a system of broad cooperation.


Vasily Simchera, PhD (Economics), doubted the necessity of existence of mentality: “there are mental countries and there are non-mental countries.” Challenging provisions of the report, he insisted that “the contribution of mentality into the contemporary economic growth is the lowest of the low and could be neglected as insignificant.”

В. Симчера 22.09.2010 Simchera even proposed his own classification of mentalities: “There are two economic mentalities. When the society, a human being, myself, the state produce goods and these goods have material or spiritual outcome, like a good housewife cooks borsch and a bad housewife – an instant soup, it is one economic mentality. Another economic mentality is money, gain, profit, etc. The classic formula ‘commodity-money-commodity’ simply does not exist. Today it is ‘money-securities-securities-money.’ Let us sort out what mentality we are speaking about.”


А. Новиков, В. Пызин, В. Бирюков, Н. Кричевский, В. Громковский, А. Куртов 22.09.2010 Victor Biryukov supported speaker’s thesis about the high individualism in the Russian society and specified that this specific feature is typical not only for small producers but also for owners of big companies and landlords.

“It is very difficult for us to reach agreement and enter cooperation with others in order to save money and resources and to reach a higher efficiency due to the synergetic effect,” Biryukov conceded. “Small shifts occur and we have learnt to agree. But things go too slow.”

He noted that a decisive role in the modernization of the national economy might belong to the regional factor, which is practically irrelevant for “compact” economies. He held up as a model Transbaikalia “with the government of which we are jointly implementing a cattle breeding project. It deals mainly with beef breeding, which is almost new for Russia.”

Cattle breeding is a traditional economic activity in the region “because the steppe provides cheap fodder and because simply no other business is possible and no other farming activity will be a success.” However, the branch also needs modernization and industrialization on the basis of Canadian technologies. In question are vast territories neighboring China.

“For such regions as Transbaikalia, bulls and cows are something more than just cattle,” Biryukov is positive. “Modernization of beef breeding in this area is a question of national rather than food security.”

Biryukov believes that the most important avenue of modernization shall be Russia’s turning into a major food exporter. According to estimates made by FAO experts, this country could provide food for more than 1 billion people. “It’s a grandiose business,” he said.


П. Лунгин 22.09.2010 Pavel Lungin said the source of the extreme Russian individualism, which is almost anarchism, is the totalitarian power which strips people from any responsibility.

 “What is a democratic humanistic society?” the film director asked himself. “It is a conscious limitation of own desires for example for the sake of public ones. The democratic society this way or other places limits on a person. A man is afraid to make noise, to do something wrong, to dispose litter improperly, etc. Don’t we have an iron fist hanging above? Innocent till proven guilty, holy cats! Their business is to catch and I will live as I want.”

The film director expressed sympathy to Biryukov: “I understand very well what you are speaking about. Apparently, it is difficult to reach agreement with people. Because still alive is a feeling that was typical for prison camps: you die today and I – tomorrow.”

Lungin believes that this country has not changed since the times of Ivan the Terrible “who broke something in Russia’s progress” and deprived Russia from its Renaissance.

“We go round in circles staying at the level of medieval thinking, medieval attitude to land, money, labor, etc. The famous judicial reform of Ivan the Terrible boiled down to a formula: Judge justly but an oprichnik (tsar’s guardsman) shall always be right.”

So, Russia continues to live in conditions of “dual thinking, dual law, two truths, two words and even two gods: the cruel god of power for government and the kind Christ for ordinary people.” Lungin’s film “The Tsar” is devoted to their collision.

Correspondingly, there are two economies in Russia as well. The first one “burns living people in stoves” like Ivan the Terrible, Peter the Great and Stalin did. “Strange enough, this does not exclude modernization and progress.”

This oprichnik-style economy is opposed by “the economy based on scientific and technological progress.”

“The biggest threat will be when the oprichnik-style economy puts on the mask of true modernization, when authorities in various regions become major modernizers in form but not in content,” Lungin said.

He sees another big threat in the “consumption modernization” as the key speaker put it: “A man with a mobile phone believes he is a truly contemporary person. Mobile phone s substitute culture: an ape can use a mobile phone or a PC, but this will degenerate the true culture demanded by modernization.”

The master of the national film industry also touched upon such a crucial issue as the dismissal of the Moscow mayor. Among obstacles on the way of modernization Auzan mentioned the high level of uncertainty avoidance displayed by the Russians: “When you opt not for the best but for a lesser evil you always choose the old-fashioned way, because the old evil is known and this alone makes it better than a new one.”

Lungin responded: “Well, we all see what is happening with Luzhkov. And we all see that people who live under Luzhkov’s prices, under Luzhkov’s pressure, under Luzhkov’s police, under Luzhkov’s courts join in saying again: Luzhkov would be better, at least he is ours, we know him and we don’t know what will be without him. (And I ask) will it be really worse? Will it be like in Kampuchea?”

In conclusion, the film maker lamented that his film “The Tsar” outraged a considerable part of the Russian society: “Hands off! It is our power, though all in blood, but ours. Get out!”


В. Пызин и В. Бирюков 22.09.2010 “Apparently the authorities were not happy with your analysis of mentality,” Vladimir Pyzin said addressing the film director. “Moreover, your final metaphor, when the Russians turn out fit for nothing except abolishing holidays, offended some people…”

Then political scientists Pyzin tried to prove that there is no correlation between mentality and economy: “Take, for example, love for risk. It lies within mentality, doesn’t it? As once the boldest people went to America in small boats, in this country the most risky went to Siberia. So what? Do we have a Silicon Valley there? Nothing of that kind! People in Siberia could be stronger, more risky and more energetic but the system is the same as everywhere in this country. There is no economic breakthrough. That is why there is an impression that it is not mentality that gets in the way. Simply the system does not work.”

In Pyzin’s opinion, modernization is hampered by Russian officials who receive kickbacks from foreign companies “in order to prevent Russia from manufacturing the majority of high-tech products:” “(Academician) Kapitsa in his last interview frankly said that all works of the Academy of Sciences which could be competitive to foreign analogues are blocked and receive no financing.”

The political scientist called to change the system of government formation and to strengthen the civil society that should control authorities particularly in combating corruption. So far, officials themselves are in charge of fighting corruption: “As for today, in the fight against corruption subject and object coincide.”


Э. Ракитская, С. Смирнов 22.09.2010 In the opinion of Sergei Smirnov, PhD (Economy), the speaker was wrong addressing only “the modernization from above, i.e. the efforts of the federal government,” because “modernization is under the great effect from regional communities too.”

As an illustration of resistance to modernization Smirnov mentioned the town of Sokol in the Volgograd region where the authorities and common people joined in rejecting any diversification of local economy which is today presented by two obsolete pulp and paper plants: “Let us keep on old capacities, old productions, the old structure of employment with its mentality and endless drinking on the job…”

Meanwhile, the demand for paper might fall sharply as new generations are coming who prefer to read from a monitor. The renowned economist also believes that the country should halt the massive state support of inefficient industrial giants such as AvtoVAZ and redirect this support to small and medium businesses mentioned by the speaker.


Наталья Карпова Natalia Karpova said she was excited by remarks by Lungin who was speaking about two parallel systems of values in this country. Moreover, Russians infect their foreign partners with their moral duplicity and the latter “have already realized how to play according our rules of the game and joined the corruption…”

“Duality reveals itself differently. Say, over the past 25 years we have been reiterating that we want to attract foreign direct investments to Russia. But we have been acting poorly in changing investment climate and its infrastructure (roads, warehousing facilities, communications, etc.). We have been doing a lot in fact to slow down or even prevent international capital flow into the real sector of economy,” Karpova said. “We can’t get rid of out-dated tune that the foreign investors would grab something from us and bring the local producers to the knees. Meanwhile, those ‘red directors’, who are in many cases still in power,  had nicely registered their companies abroad and are happy mooching on their status of national producers successfully milking the state (for different financial subsidies) and their underpaid employees. In addition they involve into this duality their foreign partners who for more than two decades have been paying them various kickbacks.”


The renowned expert in economic strategies, Alexander Neklessa, centered on terminology: “Modernization is a very imperfect word hiding some other realities. What is modernization? There was a rather natural and organic modernization of society in Western Europe. There was an artificial and fragmentary modernization of the colonial world especially applicable to transitional processes during the post-colonial period. The word modernization appeared exactly during that period. This technological modernization placed the notion ‘technical’ onto the front stage and removed the notion ‘cultural’ from the limelight.”

О. Соколов, А. Неклесса, В. Багдасарян 22.09.2010 Neklessa also was annoyed by the frequent use of the word “state” by roundtable participants. An attentive look at the etymology of the Russian word gosudarstvo (the state) shows that it is a notion rather applicable to classes than to civil society. A person reasons like a subject of an empire rather than like a citizen.”

The term “country” in the 21st century denotes people rather than a territory. Previously, certain “risk groups” had to oppose “the ruling groupings” if they did not want to see “a further decay of their territories.” In the contemporary world the situation is quite different. “Risk groups simply abandon their territories. We have an enormous number of migrants.”


Historian Vardan Bagdasaryan cited an aphorism of Nikolai Berdyaev: “Economy is a means not a goal of life. When it becomes the purpose of life, people degenerate.”

He asked himself: “Modernization, is it a means or an objective? Once we already fell in the same trap and there was perestroika. From a means perestroika was transformed into the purpose and as a result the Soviet Union collapsed.”

Putting it in a nutshell, Bagdasaryan said: “There are three methodological approaches to development. The first model is extrapolation. We simply bring Western experience and in this case a national mentality is out of the question. The second approach presumes the choice of options: socialism, capitalism, or something else. And the third way, if we finally recognize the importance of national mentality, is the way of self-identification, and the creation of our own model of modernization through this self-identification.”

Каминный зал московского Дома экономиста 22.09.2010 Traditionally, the event was moderated by Alexander Novikov, member of the board of the Free Economic Society of Russia and editor-in-chief of magazine “Our Power: Deeds and Persons.”

To see the complete Russian record of the discussion click here.

The Roundtable was the 5th in the series of discussions conducted upon the initiative from Victor Biryukov and with support of the Free Economic Society of Russia and magazine “Our Power: Deeds and Persons.”

At previous similar discussions held at the Moscow House of Economist:

– on June 23, 2010, the keynote address “Diversification: socio-cultural aspects” was delivered by Professor Sergei Kara-Murza, PhD (Chemistry), chief associate with the Institute for Social and Political Studies of the Russian Academy of Sciences;

– on April 13, 2010, the keynote address “Diversification for the viewpoint of labor market” was made by Yevgeny Gontmakher, board member of the Institute of Contemporary Development and deputy director of the Institute of World Economy and International Relations of the Russian Academy of Sciences;

– on February 10, 2010, the keynote address “Diversification: myth or reality” was delivered by Ruslan Grinberg, corresponding member of the Russian Academy of Sciences and director of the Institute of Economics of the Russian Academy of Sciences;

– on December 9, 2009, the keynote address “Diversification of Russia’s economy” was delivered by Academician Viktor Ivanter, director of the Institute of National Economic Forecasts at the Russian Academy of Sciences.