We Need Production Economists, Not Just Western Degrees

A few words on the transformation of civil servants

I recently talked with an acquaintance about education, hiring, and the competence of graduates of various programs. In Soviet times, having a degree was considered an important part of a career, especially in science. That attitude was passed down to us. In the 1990s and early 2000s, it was fashionable to hold a candidate's degree, and better still a doctorate. Many of our officials were, almost without exception, great scholars. Then a new trend emerged: those with a Western education had good prospects of landing a coveted position, and everyone rushed to get a master's degree or an MBA abroad. Many executives received a Western education, most of them through the Bolashak program. I am a strong supporter of this program, and what it does is a great benefit to our young people and to the education level of the country. But there is a catch. For some reason, a person with a Western degree immediately gets priority in hiring for senior positions in state corporations and ministries. Bypassing the lower rungs, and without having worked a single day in the real sector, he goes to run parent companies. Many Bolashak graduates prefer a career in the civil service to one in the real sector of production.

I remember looking for an economist and having three candidates: a graduate of KIMEP, a Bolashak graduate, and a shop-floor economist from Ust-Kamenogorsk. The Bolashak graduate asked for the highest salary, then the KIMEP graduate, and the shop-floor economist last. I gave them an elementary task: I had a set of company transactions, and they needed to use them to put together a balance sheet, an income statement, and a cash flow statement using the indirect method. The ordinary shop-floor economist solved it. Then I asked them to calculate the cost of 1 kg of uranium, given the cost of producing one cubic meter of pregnant solution. It was a school-level problem of converting from one unit of measurement to another. As you may have guessed, the shop-floor economist solved it. No, I am not against a Western education. They study many useful things there, such as sociology, ethics, and project management.

But how do we intend to transform subsidiaries when any production manager can easily justify any cost, and a manager with a "Western education" will not always be able to verify it? On the other hand, it is simply hard for a production manager to prove anything to someone who understands nothing about production, and production suffers as a result. This is how misunderstanding and the discrediting of management are born.

We need to understand that a country's economy is made by production workers and laborers, not by economists and financiers, and certainly not by the state apparatus. When production staff cannot speak the same language as managers, it is hard to achieve outstanding results.

We have plenty of managers, marketers, sociologists, and financiers, but very, very few real production economists who can break down any production process into norms and prices, carry out a factor analysis of variances, and name the real cause of any given deviation.

A good production economist must know production like a process engineer, make journal entries like an accountant, calculate cash flows like a financier, and build business processes for document flow like a manager. Ideally, he should have a virtuoso command of 1C, Excel, and PowerPoint.

Do state management companies have such economists? I think there are only a handful, or perhaps none at all.

So my advice to Samruk-Kazyna is this: try hiring an economist with hands-on work experience rather than a graduate with no experience, even one from Harvard. Believe me, you will get more value. And fresh graduates, whatever their education, should be sent into the field to apply their Western knowledge there. If one is truly educated and smart, he will raise the performance of his unit, and then he can be trusted with a place in a parent company.