Why Sergey Shoigu started talking about the development of Siberia

A number of leading Russian media published a short message that Russian Defence Minister Sergey Shoigu spoke about the development of Siberia and formulated it quite specifically: it is necessary to build three to five medium-sized cities of 300,000-500,000 inhabitants, or even better up to a million, and these cities will be large economic and scientific-industrial centres. These centres should be aimed at a specific field of activity, that is, they should become clusters of economic development of the region.

At the same time, Shoigu noted that the USSR had developed such plans shortly before its collapse, but unfortunately, due to "known reasons", they were stopped. What do Shoigu's words mean, and how should they be understood?

Sergey Shoigu is the Minister of Defence and a member of the country's top political leadership that is part of the inner circle of Russian President Vladimir Putin. For this reason, Shoigu does not say anything just like that. Each of his statements, and especially on the topic of the country's strategic development, should be considered in several dimensions: as a declaration of intent, as a sounding of the ground, and as a message to elite groups about new assessments and approaches in politics.

Specifically, Shoigu spoke about the preference for creating several cities that initiate economic growth trends. But Shoigu understands that it is not enough to state an idea, it must be justified. Siberia is now in crisis, even in the existing cities with millions of people, there is a steady outflow of population and degradation of the economic potential inherited from the USSR. Where can we build new cities here, when there is nothing to support the old ones?

In addition, new cities should take a certain place in the economy. What will they produce, who will they sell to, where will they get resources from, at what prices? How will the supply chains be built? How to stimulate them and at the expense of what funds?

In the centralised economy of the USSR, all these issues were solved in a natural way. Gosplan (USSR State Planning Committee of the Council of Ministers) made up plans for sectoral and regional development, the State Committee of Prices under the Council of Ministers determined prices, the State Security Service connected suppliers and consumers to each other, the State Bank provided calculations with a cash plan, and the Council of Ministers controlled the process through ministries and central administrative board. Above the Council of Ministers there were branch departments of the Central Committee of the party, the State Statistics Committee recorded statistics and sent data to open or closed sources.

If such a system suffered from a lack of flexibility in the consumer market, then in the long-term development it was the best in the world. It was thanks to her that the USSR won the Second World War, which was a clash not only of armies and intelligence services, but also of socio-economic systems. Europe was unable to accumulate funds for the war and fell into a century-old debt to the United States. But the USSR was able not only to transfer industry to Siberia and beyond the Urals, but also to ensure strong and sustainable development there in the post-war period.

It is quite obvious that the development of a region like Siberia requires centralised state management measures, such as planning, price and tax regulation, assistance in choosing a specialisation and building supply chains. The USSR called it a combination of sectoral and territorial management.

Perhaps it is advisable to solve such problems within the framework of the Siberia Development Corporation. But this is how it was initially mastered – Ermak's campaign, this is the same corporation, only in the conditions of that time.

And this is true: the personnel for the industries live on the territories, and therefore a combination of centralised and local management is necessary. There are no coordinating organisational structures for this function in the Russian economy. Any manager will say that this is unacceptable.

The implementation of national projects has shown that the existing management structures for long-term large-scale projects are unsuitable for fulfilling the tasks set. There is no coordinator and arbitrator between the Ministry of Finance, the Ministry of Industry and Trade, the Ministry of Energy, the Central Bank and the corps of governors. As a result, deputy prime ministers turn into nomadic crisis management headquarters.

In this situation, the Cabinet of Ministers is forced to deal with operational management, descending several floors lower in the managerial hierarchy. It is, roughly, as if the Headquarters of the Supreme High Command began to develop a plan for the liberation of the city or an operation on the scale of the front, instead of entrusting it to the army or front-line headquarters. Manual control is a sign of the lack of a system that is adequate for the tasks.

The market economy is not able to solve the problems of developing such a huge territory as Russia is. It will inevitably have problems of connectivity and logistics, which are solved only centrally. But there is not even a body in Russia that could even think about how to combine sectoral and territorial development, and what kind of state policy is required for this.

The state is an organism where all organs are interconnected. For the development of strategically important remote and depressed regions, it is necessary to return a powerful public sector with an appropriate management apparatus. This requires political reform, even if it is creeping. The ruling class is vitally interested in it, since dependence on the selfish instincts of offshore barons puts the entire statehood on the verge of survival.

Behind the series of local conflicts between Reshetnikov and Siluanov and the disputes between Belousov and Nabiullina, there is a conflict between the state administration system under construction and the old system of protection from the state by the privatisation elite tied to the United States.

Shoigu talks about the creation of three or five cities in Siberia that specialise in certain spheres. It is clear that these cities should be both suppliers and consumers for each other, and be tied to the strategy of the centre.

But what is this strategy? Kudrin spoke about the need to focus on export (to create one’s own iPhone). He is rightly objected to - that there are no free markets, and competing there with China, Korea and the United States is a rather stupid idea. We need to look for our own competitive advantages, which others do not have. Innovations should both create internal demand and find sales outside.

In any case, there is talk about completely innovative projects. One can't do without the state here. Soviet methods are unacceptable, since they were created under a different technological structure. But market methods are also unacceptable, since this way of life is also exhausted.

What Shoigu says is a warning that the centre is looking for ways to change the management of macroeconomics. This will lead to changes in the policy. They are overdue, inevitable, and an attempt to resist them will put them outside the system and its connections. The fact that Shoigu's statement was short means that the authorities are still looking for sparing methods and are not forcing the transition.

But Shoigu is a military man. The fact that such a statement is not made by the head of the Cabinet of Ministers, not a civil politician, not an official, not a governor and not a nationalised oligarch, indicates who in the near future will be the client of the policy in the state. The defence factor (with its civilian sector) will be decisive. From the point of view of this factor, optimal models of regional and macroeconomic development will be selected.

The political system will be transformed under these models. The current one is not suitable, there are too many braking elements in it. The upcoming model will deviate from the consensus, especially the Washington one. State investments, resource provision, social development, methods of managing prices and taxes - all this will require a change in the political superstructure.

Without these changes, the priorities declared by Shoigu (and in fact, by Putin) will remain wishes. But Shoigu, neither by position nor by character, belongs to the group of dreamers who do not know how to achieve their goals. Accordingly, the development of Siberia requires not so much three or five 300,000 cities, but a radical change in the management of the economic development of the country as a whole.

This is how Shoigu's words should be understood. He said something that Putin or Mishustin could not say yet. But he spoke on behalf of this group, and therefore it is worth seeing in what he said a little more than what was said. This course will be started after the end of the September Duma elections, will continue for the 2024 election, and after will become the main content of the policy of the Russian leadership. Another option means the continuation of the liberal-market project, for which there are no prerequisites anymore.