On Labor Productivity and the Homonymous National Project

Abstract

The context of national projects, judging by the structure of their financing, involves mobilization of accumulated reserves. In other words, an increase in the standard of living is supposed to be achieved by means of relatively modest investments in sources of economic growth.It is theoretically possible to augment development by mobilizing accumulated reserves when investment and innovation activity in the country may not be significantly improved. Within the recovery period (at the end of the 1990s), such a scheme was successfully carried out. In the industry the accumulated capacity reserves were widely engaged during 2000–2004, a noticeable systematic increase in their load was observed – from 42.1% to 50.8%.The paper addresses the following question: is it possible to repeat such a maneuver in conditions of today? According to the Federal State Statistics Service, the average capacity load in industry remained almost the same (just over half) during 2010–2016. Considering the stagnant nature of the development in recent years, an increase in the average capacity load during the period of the national project with a favorable demand environment may reach 2–3 percentage points.The lack of sufficient demand does not turn the potential of arbitrary large volumes of free capacity into a real source of economic growth. And vice versa. The growing importance of national projects from year to year is not critical for expanding the aggregate demand. In 2022 their financing from the federal budget will be within 12.5% of the total spending. Meanwhile, no visible effect of expanded aggregate demand has been noted.