First meeting of discussion platform “People’s Club” takes place in People’s Council
On August 14, a meeting on the theme “The relevance of development and introduction of the system of state planning in the Donetsk People’s Republic” was held within the framework of “People’s Club” discussion platform in the DPR People’s Council in Donetsk.
The event was attended by the Chairman of the DPR People’s Council Denis Pushilin, Deputy Chairman of the DPR People’s Council Olga Makeyeva, People’s Council’s deputies, Acting Minister of Economic Development Victoria Romanyuk, representatives of an academic community, People’s Council’s members.
Denis Pushilin, in his welcoming speech, expressed confidence that the discussion platform “People’s Club” would allow to develop options for the consolidated resolution of issues concerning the development of the Republic.
ʺThe Donetsk People’s Republic faces a number of economic, political, social, military and other factors, which hinder its development, on the way of its development. The specificity of current realities calls for the fundamental research of socio-economic processes that take place in our state, and their comprehension. In my opinion, the involvement of a wide range of experts, specialists and professionals in addressing such issues is the key to the success of the accomplishment of this objective.
The goal of this platform is to study and jointly discuss the causes and dynamics of the development of phenomena of political, economic, historical, social and philosophical natures, as well as the prediction of their consequences. It gives a unique opportunity to hear and take into account the opinion of every competent specialist, who desires to participate in the discussion of projects and strategies that are fateful for our Republic.
We simply must rely on human and creative potential, as well as human resources capacity, we must be ready to learn and adapt the best world practices and successful experience in addressing the most complex structural issues in building our statehood. At the same time, to give priority to the interests of our citizens.
In this regard, the interaction between state government bodies, deputies, public representatives, academic community, experts and specialists within the framework of “People’s Club” will allow developing the best possible and effective solutions to the problems we are facing.
As an ancient Greek philosopher Socrates said: “Thought thrives on conflict”. Indeed, truth is born in an argument, in a constructive and reasonable one, the goal of which is to achieve the result.
Therefore I sincerely wish you fruitful work, new ideas and constructive decisions, which will be beneficial to the Donetsk People’s Republic!,ʺ a parliamentary speaker said.
In turn, Victoria Romanyuk underlined the importance of interaction between the representatives of academic community and government authorities. She noted that a developed economy creates necessary conditions for the comprehensive solution of the problems of social and cultural development, independent foreign policy, defence and security of the country.
ʺEconomy is a foundation for the prosperity of any state. In four years, we have traversed a course, on which many countries spent decades, moreover, they were in a situation where no one put pressure on them, when they were in a quiescent phase, when no one attempted to purposefully slow down their development.
The backbone of the Republic’s economy is a diversified heavy industry: coal, mining, iron and steel, metal, machinery-producing, chemical, electric-power industries, production of building materials, etc.
In addition, the DPR has the enterprise complexes of consumer and food manufacturing industries, a number of wood-based, furniture and pulp and paper industries.
There are a number of competitive advantages in the economy, reliance on which can allow not only strengthening the economy in the longer term, but also achieving concrete strategic economic goals in the future. The advantages of such approach include:
- unique natural resource potential;
- developed infrastructure;
- enormously rich historical and cultural heritage;
- industrial and raw material resources base;
- highly qualified workforce capacity and scientific and technical potential;
- high demand for quality and high technology products;
- investor’s ability to choose
- far-sighted part of integration chain
Of course, there are competitive disadvantages:
- negative demographic situation – depopulation and decrease in the number of working-age population;
- low level of technological equipment of industrial enterprises (moral and physical deterioration of existing material base);
- lack of sufficient human resources for high-technology sectors of the economy;
- poor development of tourist infrastructure.
Our task is to ensure that modern technologies cover all spheres: from industry to education and health, from trade to public services.
Specific steps, which have to be taken in the near future in order to transform an economic structure, should be:
- production of products aimed at continuous improvement of the quality of life of the population through the creation of new technologies;
- growth acceleration of high- and medium-tech industries, intellectual service economy, entry of enterprises in markets with new competitive and value-added products;
- transition from export of primary raw materials and energy resources to export of products of their deep processing;
- technological re-equipment of enterprises and their readjustment to the needs of other sectors.
In the structure of sold industrial products, 59% accounts for the products of processing industry; 30% – the enterprises that supply electricity, gas, steam and conditioned air; 9% – mining industry and quarry development; 2% – water supply, sewerage and waste management.
At the next stage of this direction, it would be advisable to start developing a consolidated document – a Programme that will be a founding document of the Republic’s state planning in the short term.
This document will present a set of measures that will prioritize development and show how to achieve it step by step.
In fact, this document will form a basis to ensure a balanced system of future management and management decision-making.
The Programme is a document of public consent, because it brings together the interests of authority, business, science and community to the benefit of uniformity and complexity of the Republic’s development.
The work carried out on fixing achievement criteria, which were aimed at ensuring the dynamic development of the Republic in all spheres, from the programmes of cities and districts (for 2015-2018) allowed identifying four primary objectives in order to include them in the development of the Programme in the future:
- enhancement of the quality of life of the population;
- rehabilitation of infrastructure and ensuring stable operation of life support systems;
- intensification of economic growth rates, increase of competitiveness of the Republic;
- creation of favourable conditions for business.
Thus, the Programme is a guide to action, a tool for coordination of efforts and ensuring the continuity of decisions.
It should be not only logically constructed, but also practically realized, because it is impossible to achieve what cannot be measured,ʺ Victoria Romanyuk said.
According to Doctor of Economics, Professor in the Department of Marketing and Business Affairs of the organization of higher vocational education “the Donetsk National University of Economics and Trade” Natalia Voziyanova, any planning should be systemic and systematic and institutionally aligned.
ʺAny process must be managed. It is important to define the nature of institutional organization of planning and it is different in each country and, experience of institutional dynamics has proven that simple copying does not lead to the intended results.
Directive planning was used in the USSR. Germany, Sweden and a number of other countries use programming. Hybrid system is used in the US: planning − programming – budgeting (ppb). Japan, Germany, France, India and China use indicative planning. Russia and South Africa follow the path of strategic planning,ʺ Natalia Voziyanova shared information.
According to Doctor of Economics, Professor of the Department of Management Science and Public Administration of the state educational institution of higher vocational education “the Donetsk Academy of Management and Public Service under the Head of the Donetsk People’s Republic” Galina Gubernaya, directive planning is not suitable for the DPR, but more appropriate option is indicative planning or programming.
ʺI am often corrected by students during the course of my teaching activity. For instance, when I claim that the market is free, they say it cannot be free due to human factor. And I agree with this statement – all people are different.
We can regulate the market only by power, orders and law. Given the reality, we cannot reason about democracy, the state has the right to use all the mechanisms available.
Planning without programming is impossible in extraordinary and uncertain conditions. I am ready to discuss the model I have proposed, I am ready to listen to criticism, including my vision of planning, which I described in a book called “Market and need for government regulation”,ʺ Galina Gubernaya said.
The Director of State Institution “Institute of Economic Research”, Doctor of Economics, assistant professor Alexey Polovyan expressed the need for digital planning of economy.
ʺThe limited use of market-based mechanism is that it takes into account and ensures the satisfaction of only those social needs, which are presented by the effective demand of the population. In this case, the need for public goods such as education, health care and other should be met through tax exemptions. Therefore, such needs are doomed to a backlog, because the mechanism of their satisfaction does not allow realizing all functions of the state fully in a market economy. In this case, there is a need for state regulation of economic development through planning. It is the state planning of the economy that can not only satisfy the population’s needs for public goods, but also will allow achieving a gradual and even development of industries and economy in general.
Modern world tendencies and achievements in the field of information and communication technologies are characterized by the use of global integrated area network in production system, additive manufacturing (3D printing), Internet of Things and so forth, they already appear not only at a micro level, but also at a macro one in implementing the policy of applying advanced achievements of information and communication technologies in state regulation and planning in many countries.
“Digital economic planning” is a qualitatively new system of organization and realization of the functions of state authorities in the area of strategic planning based on integrated processes and advanced technologies (using blockchain, smart contracts and supercomputers).
The use of artificial intelligence in state planning allows creating conditions for operative information exchange and to provide:
- fast data accumulation, data processing in order to shape a plan for the next period;
- rapid response to changes in systems, business process and planned figures;
- monitoring of availability and utilization of production facilities;
- monitoring of labor force distribution;
- monitoring of actual balances and prices of components, raw materials and equipment in all warehouses;
- monitoring of current volume of manufacture of goods;
- monitoring of current consumption of goods and their customers;
- monitoring of financial profiles of most customers (property, income. expenses), etc.
The use of digital planning determines the possibility of regulation of the economy, in which the negative features of the command and administrative economy (problems in distribution, the separation of economic management from the ordinary citizen) will be neutralized.
The digital system of strategic planning allows carrying out functions of government (comprehensively, holistically, in a balanced manner and adaptively) for the achievement of strategic priorities, goals and tasks, taking into account resourcing. This means that the coordination of orders with strategic documents (content, timeline and those responsible) will be respected, as well as it ensures the reduction of data discrepancy between departments and ministries, exclusion of repeated data provision in various authorities, acceleration of economic growth rates, victory over corruption
Thus, the digital planning can be viewed as corporate management, but it is expanded to the scale of a state and aimed not at profit-making, but at sustainable development and a dignified life of the society,ʺ Alexey Polovyan said.
Doctor of Economics, Professor of the Department of Enterprise Economy of the state educational institution of higher vocational education “the Donetsk Academy of Management and Public Service under the Head of the Donetsk People’s Republic” Tatyana Ivanova underlined that goal of the state planning at the macroeconomic level was to ensure stability and sustainability of the socio-economic system.
ʺThe urgency of creating a system of state planning in the Donetsk People’s Republic is difficult to overestimate. Today, the existence of an effectively functioning system of state planning is one of the most important factors in the formation of competitive domestic economy.
On the one hand, planning is the classical leading function of management, on the other – state planning is embodied in the multidimensional vector, which includes state forecasting, state planning, state programming or results-based management approach and the consequent state economic policy.
Currently, a state strategic planning, which is targeted at the future and long-term development, is its backbone. The modern system of state strategic planning should be built in a space-time continuum, which implies:
1) Creation of hierarchical structure of state management at the macroeconomic, meso-economic and enterprise levels, the latter being analogous to microeconomic level of state planning;
2) Deployment of long-term solutions (with implementation time period of 7 years and more) in the set of medium- and short-term tasks harmonized among themselves.
Today, planning as a system of formation of long-term priorities of state activity in the field of state construction and socio-economic development presents a multi layered formation of theoretical researches and practical structures.
Firstly, taking into account the accumulated international experience of their realization, state planning takes place in almost all the world’s economies.
it must be understood in the context of a number of paradigms synthesized at intersectoral and interdisciplinary levels from the standpoint of history, economics, sociology, political science, law, culture, religion, and natural sciences. Joseph Schumpeter claimed that there were four ways to study the economy: through theory, through statistics, through sociology and through history.
The wide historical excursion clearly illustrates not only expediency, but also undoubted pragmatic value of state planning.
The “plan-market” dichotomy proves to be rather controversial and illusory on closer examination. Despite the significant differences in the economies of the countries that have used planning, planning institutions are very similar and are used to achieve many similar (modernization) goals.
State indicative plans, widely developed in the 60-70s of the XX century in France, Scandinavian countries, Japan, India, a number of countries in Latin America, have received significant momentum in recent decades in China, as opposed to total highly centralized planning, have a recommendatory-stimulating character for the market economy and private business and are a guide to action, not a guideline. The concept of state market in France means a contract concluded by central or local government bodies with work performers, suppliers of goods or services.
At first glance, the classical market economy by its very nature excludes the directive of central planning, which is the cornerstone of the liberal ideology, which still exists till today. At the same time, the unique experience of planning in China is well-known, where the public sector is combined with the market one (especially in agriculture, consumer goods production, trade, service sector). Directive planning is maintained in the public sector, but it is flexible enough. In the non-state sector, planning and market regulators are used. As a result, the two-sector economy is regulated by a plan in the first case, in the second one – by the market. The flexible combination of the plan and the market ensured phenomenal economic results and a significant improvement in all development indicators in China. The economic miracle in China has become one of the most important events in the world history of last decades. During the reform period (1978 – 1997), country’s gross domestic product increased 5.7 times, or the average growth was 9.6% annually, 14.2% – in 1992, which does not exclude the poverty level of 128 million people (less than $1 per day).
The symbiosis of a state and large business, which is manifested in the form of social and state partnership in practice, allows us, only at the state level, to implement more than 6,000 programs of economic development and hold the leading position on the level of the entire state. The effectiveness of planning is largely determined by the negotiations and consultations of representatives of government bodies and various business groups representing different regions. The focus of planning shifts towards the definition of development goals. The definition of means of achieving objectives is the choice of the most rational behaviour approved by all the parties concerned. This strategy does not only serve as guidance function, because it is based on the interests of economic agents, but also coordinating one, because it is developed through real interaction. At the same time, it has a recommendatory character and does not place limits on the freedom to choose the ways of development of economic subjects.
The task is to harmonize all possible components in a multidimensional space-time continuum, both in the vertical and horizontal vectors. This is also the problem of choosing a model of social development, an economic model oriented towards the end result, and the introduction of the elements of directive, indirective, indicative planning in a meta- and macroeconomic dimension that organically includes the national corporate or microeconomic level.
Bringing the idea of cultural development strategy to the forefront seems to be innovative or, at the very least, balancing the two most important and, in terms of the model of development, equal components: strategy of sustainable development of the economy in technogenic way and cultural strategy as the basis of effective realization of the first direction. This poses an optimization problem of balancing financial resources on proportional development according to both strategies and symbiosis of scenarios of their realization. There is a staged task: how to connect all these separate parts in a holistic, consistent, logical and successor system of state planning? And each of these questions is worthy of independent discussion and research on this discussion platform,ʺ Tatyana Ivanova presented her report.
According to the information of the Head of the Department of Economic System of “the Institute of Economic Research” Roman Lepa, decisions in the system of economic planning can be justified from the standpoint of two big groups of scientific instruments.
ʺThe results of the study of the European Economic Community attest how much the level of economic development depends on the state’s influence from the standpoint of planning. Over the past 100 years, the countries, which have the status of developing countries and which are developing effectively, have used the most directive methods of planning. Those countries that allowed themselves to use their own experience, the real sector of the economy of which was harmonized and rather independent, used not only indicative planning, but also institutional ways to influence the economy by the state to the maximum.
At the moment, there are two large blocks, two large groups of scientific instruments that allow justifying decisions in the system of planning of economy.
The first group is the balance and all the methods that are associated with the balance. They are relatively non-technology-intensive, but very labour-intensive from organizational point of view and from the standpoint of realizability. Moreover, an input-output balance, which waw adopted in the Soviet Union, have been abandoned and it is used only as a statistical tool that shows who have used resources effectively over the past year and how. Such developments are now underway in order to develop strategic instructions, how to do it, what instruments are supposed to be and how they should work.
Information modelling is the second group of scientific instruments. This is the most technology-intensive instrument that allows you to fully describe the economy in this case. A similar tool allows you to practice different scenarios of what will happen. How a decision will affect the real sector of the economy, how it affects demography, budget, loans, deposits, internal migration and so on. It cannot be done instantly, it is a complex product, which can be created for our state,ʺ Roman Lepa said.
Concluding the discussion, the event’s moderator Olga Makeyeva indicated that planning at the state level should introduced considering the peculiarities of internal and external political conditions.
ʺToday’s discussion has shown to all of us that the creation, survival and development of our state in such difficult internal and external military-political conditions, ensuring of stability and sustainability of socio-economic system is impossible without state planning.
The remaining question is how? How to connect all these separate parts in a holistic, consistent, logical and acceptable system of state planning? Each of these questions is worthy of independent discussion and research on this discussion platform,ʺ Olga Makeyeva summed up.
As a result of the meeting, the participants noted the importance of the created platform and agreed to collaborate in preparation for the next meeting.