Authors

Discussion

The paper examines the influence of two main growth strategies on the socio-economic system of Russia under Putin’s rule: a supply-side and a demand-side strategy, which involve mutually exclusive geopolitical orientations. The supply-side strategy aims at creating a favorable business climate for (foreign) investment and exports. It focuses on macroeconomic stability based on an independent central bank, while keeping labor and social costs low. Government revenues from energy exports must be removed from the market to reduce inflationary pressure and create a buffer for future crises. Proponents of the supply-side strategy usually belonged to the neoliberal camp, which promoted privatization, open markets, and a human-capital-oriented welfare state with a safety net for the poor. They sought to integrate Russia into the existing economic and political world order.

The demand-side growth strategy prioritizes public investment and government protectionist measures to rebuild domestic value chains. It calls for integrated monetary, industrial, and innovation policies, including indicative plans to catch up with the West and, increasingly, with China. To achieve this, its proponents favor capital controls and reject the independence of the central bank, which they see as primarily responsible for providing affordable credit to the "real economy" and private households. The tax system and the welfare state are supposed to support public and private demand for domestic products and services. In geopolitical terms, this strategy emphasizes the need for Russia's "full sovereignty" to restore its great power status.

The paper argues that neither strategy has fully taken hold. Instead, a non-dynamic growth regime with a high dependence on energy exports has emerged. While statist elements have increased over time, the conflict over the appropriate growth strategy for Russia has never ended, not even after the regime's open anti-Western turn and the war against Ukraine. The full-scale invasion in 2022 has further fueled these disputes. A key issue is the central bank. On the one hand, the Bank of Russia continues to raise the key interest rate to fight inflation and does not abandon the inflation targets set before the war. In addition, the Finance Ministry is pushing for a return to strict budget rules after three years of "military Keynesianism." On the other hand, representatives of the manufacturing sector, and especially the proponents of the demand-side growth strategy in the State Duma, the media, and academic institutions, question the effectiveness of the Bank's actions. They condemn the drastic increase in the cost of credit for businesses and households, while calling even louder for a return to a state bank that provides credit directly to the economy. Building on the framework of the paper, the presentation will focus on recent conflicts.