Russia: Traveling Scylla and Charybdis of Economic Nationalism – Could Economic Nationalism Be a Useful Tool to Boost Economic Growth and Development?

Russia: Traveling Scylla and Charybdis of Economic Nationalism – Could Economic Nationalism Be a Useful Tool to Boost Economic Growth and Development?

Mikhail Yevgenievich Kuznetsov (Moscow State University, Russia) and Anatoly V. Zhuplev (Loyola Marymount University, USA)
DOI: 10.4018/978-1-5225-7561-0.ch005


International economic developments are driven by two conflicting trends: globalization and localization with rising protectionism in many global regions and nations. Russian economy seems to be well globalized and integrated into the world economy. But it is still composed mostly of mineral fuels, oils, distillation products (48%), commodities (15%) with the sign of economic nationalism and state capitalism in the growing degree of direct and indirect state participation in the economy, rising from 35% in 2005 to approximately 70% in 2015. During the last 15 years the model of state capitalism, combined with a significant level of world integration, supported economic growth, development, and even rising competitiveness of Russia. On the other hand, the Russian economy is slowing down and balances between stagnation and recession, and a significant share of state-owned economy in the long run can lead to slowing down the internal competition and innovation.
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Nations rely on a system of production, resource allocation and distribution of goods and services, which, in their entirety, constitute national economic systems. Historically, the analysis of economic systems has been focusing on the dynamics and comparative characteristics of market economies vs. planned economies and on the political-social/economic distinctions between capitalism and socialism. The current dominant form of economic organization across the world leans toward market-oriented mixed economies with varying degrees of state participation and control.

Within the market economies vs. planned economies continuum, state capitalism in a nation is an economic system in which the state participates, through direct ownership, in commercial economic activities and where the means of production are organized and managed as state-owned business enterprises (SOEs). State capitalism also takes place where there is a dominance of corporatized government agencies (those organized along business-management practices) or of publicly listed corporations in which the state has controlling blocks of shares. Marxist literature defines state capitalism as a social system combining capitalism with ownership or control by a state. Under this definition, a state capitalist country is the one where the government controls the economy and essentially acts like a single corporation, extracting the surplus value from the workforce in order to invest it in further production.

Scholars also use the term “state capitalism” in reference to a private capitalist economy controlled by a state. This often means a privately owned economy that is subject to statist economic planning and other forms of government control and regulations. State capitalism has also come to refer to an economic system where the means of production are privately owned, but the state has considerable control over the allocation of credit and investment as in the case of France during the period of dirigisme after the WW2. Current examples of state capitalism can be found in China, Japan, Korea, Singapore, or Brazil. The term “state capitalism” is also used (sometimes interchangeably with state monopoly capitalism) to describe a system where the state intervenes in the economy to protect and advance the interests of large-scale businesses or powerful political interests. Beyond the boundaries of economic control, state capitalism in authoritarian political regimes often relies on non-economic mechanisms, such as subjugated judiciary systems, extra judicial enforcement (oppressive police and security apparatus, paramilitary forces loyal to the government, violation of human rights, political repressions, government dominance in control of mass media, ideological propaganda, etc.). Additional information on democracy and authoritarianism across nations worldwide can be obtained from Freedom House (2018).

In the context of interdependency, an economic system correlates with a certain type of social and political system. State capitalism as a system translates into the patterns of economic policy, a targeted system of activities of the state in the field of production, distribution, exchange, and consumption of goods. Such economic policy exists to reflect the interests of society and all its social groups and aims at strengthening the national economy. Economic policy corresponds with the economic strategy of the state that exerts government action in order to achieve its economic goals. There is a close interconnection between politics and economics. Vladimir Lenin, the man behind the Russian Bolshevik Revolution (1917) and the founder of the Soviet Union (1922), infamously emphasized that economy manifests itself in politics, and politics is the concentrated expression of the economy. At the same time, economic policies must have primacy over the economy, because without proper political approach the economy is doomed to failure (Ленин, 1921). Lenin’s transitory model of state capitalism in Russia of the 1920s was supplanted by Stalin’s command economy that had been in existence during his three decades in power until the mid-1950s.

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