State University – Higher School of Economics with participation of the World Bank and International Monetary Fund ________________________________________________________________ VIII International Academic Conference «Modernization of Economy and Public Development» April 3–5, 2007 Moscow Evgeny Yasin MODERNIZATION AND THE SOCIETY Moscow, 2007 1 Contents 1. How the world is changing……………………………………………………………………4 1.1. Modernization: what does it mean?....................................................................................4 Capitalism and modern economic growth ........................................................................ 4 The postindustrial stage and a new balance of power ........................................................ 6 1.2. Five civilizations ............................................................................................................... 8 European civilization ........................................................................................................ 10 East Asian civilization……………………………………………………………………10 India .................................................................................................................................. 11 India and China—different paths?..................................................................................... 12 Tectonic shifts in the world economy ................................................................................ 13 Latin American Civilization ............................................................................................. 16 Islamic civilization............................................................................................................ 18 1.3. And what is there in Russia? ............................................................................................... 19 2. Conditions of innovative development and the necessary institutional changes..................................................................................................................... 22 Freedom of creativity ............................................................................................................... 22 Freedom of enterprise .............................................................................................................. 25 Competition............................................................................................................................. 25 Education................................................................................................................................. 27 Science..................................................................................................................................... 29 Industry of innovations ............................................................................................................ 34 Full set of conditions required.................................................................................................. 35 3. Culture ...................................................................................................................................... 37 3.1. Social capital...................................................................................................................... 37 Credibility level: Russia and the world.............................................................................. 38 Social cynicism................................................................................................................. 40 Confidence in public institutions ...................................................................................... 41 Credibility radius............................................................................................................... 44 Responsibility and participation ........................................................................................ 46 3.2. Civil society........................................................................................................................ 48 3.3. Culture matters ................................................................................................................... 50 Definitions......................................................................................................................... 51 State of culture today......................................................................................................... 54 Comparing universal values: three international projects….............................................. 56 Value trends in modern Russia ......................................................................................... 58 3.4. Measures of trust ................................................................................................................ 61 References .................................................................................................................................... 64 2 The key question that the author of this report is asking himself is the following: Russia needs to modernize, but is the Russian society willing to accept modernization? This question has been extensively discussed in the recent years. According to the majority, the Gaidar reforms, a shock therapy undertaken to transform the economy from planned to market-oriented, have proven unsuccessful, and the society was not ready to accept them as they were too radical. This opinion has become commonplace. But later, when it became clear by 1999 that the key challenges of the market reform had been resolved, new challenges arose—economic modernization, democratization of the political system—then again they started saying that the society is not ready for democracy, that business is irresponsible, and citizens are not willing to take an active part in public affairs. There are other opinions as well: Russia does not need to modernize at all, it is more important that it keeps its traditions, its identity, and its original culture. Therefore, first thing we need to agree on how we understand modernization, and whether Russia really needs such modernization. 3 1. How the world is changing 1.1. Modernization: what does it mean? Clearly, by the end of the Soviet era Russia was noticeably behind the developed countries in technology and technical engineering (except for a few areas associated with defense) and even more so in terms of well-being. The growing gap was more and more painfully perceived by the elite and finally became the key cause for the beginning of transformation. But it is not just a matter of replacing equipment or updating products. We are talking about achieving global competitiveness for the country as a whole and a fairly wide range of sectors to ensure its sustainable development and a position it deserves among the most prosperous nations. To achieve that, making a few products better than others is not enough. Productivity needs to boost to the highest level. In addition to state-of-the-art equipment, you also need people with up-to- date competences, highly educated and well motivated, included in a system of social interactions that ensures low transactional costs. Therefore, this is not about modernizing just the economy alone but the society at large. This is what causes resistance since a significant part of the population would like to live a better life, but does not want changes, is afraid of them, particularly when they make you change your lifestyle, make an effort. But modernization becomes compelling not only due to the transition towards a market economy, but because of the changes that are happening in the world and the challenges that this country has to face. Capitalism and modern economic growth A lifestyle that used to be steady for centuries in Europe began changing at a faster pace in the XVII–XVIII centuries. Table 1 below borrowed from E. Maddison shows the implications of these changes. The changes were primarily in the development of market relations, free trade, private ownership, and competition. Table 1. Average annual GDP and population growth rates in Western Europe and the world from 1000 to 1998, % Periods 1000—1820 1820—1913 1913—1998 GDP Western Europe 0.3 1.9 2.4 World 0.22 2.1 3.0 Population Western Europe 0.20 0.73 0.47 World 0.17 0.59 0.41 Years GDP per capita (in international dollars, 1990) 1000 1820 1913 1998 Western Europe 400 1232 3473 17 921 World 435 667 1510 5709 Source: [Maddison, 2001, p. 267, 242, 264]. They finally resulted in a huge flow of innovations that soon transformed the world's image and in something that was later called the modern economic growth. England and Holland were pioneers later joined by other major powers—France, Germany, USA, and finally Japan and Russia. 4 The rapidly growing power of these countries led to a wave of colonial acquisitions and two world wars for the repartition of life space. The countries that failed to join in the race and continued with their usual invariable course fell victims to aggression, humiliation and defeat. Essentially, the gap in the level of development and well-being between the leading countries, all from Europe and America plus Japan, and the countries that kept a traditional agrarian economy and feudal social arrangements, consisted in the fact that the former entered the era of industrialization and urbanization earlier than the latter. But then the fruits of industrial economy and technology became gradually available in other countries, and they too followed in the steps of industrialization,