Arguments about economic growth in Russia usually revolve around short-term aspects, such as whether the recession has ended, and whether GDP will grow by more than 2 percent in 2017. These questions are of course important, but of far greater significance are the political and economic changes that could substantially increase the long-term rate of Russia’s economic growth.

If in the coming decades we plan to reduce how much we lag behind developed countries, the debate over whether the Russian economy will grow by 1 or 2 percent this year is totally insignificant. Russia’s per capita income is about a third of what it is in the United States. To halve that gap during the next twenty-five years, economic growth in Russia would have to outpace that in the United States by 3 percentage points each year. If U.S. per capita income grows by 1.5 percent annually, as the International Monetary Fund predicts it will, Russia’s would have to grow by 4.5 percent. And to catch up with the United States in twenty-five years’ time, Russia’s per capita income would have to grow by 6 percent annually, about the same as China’s current rate.

Long-term economic growth depends on four fundamental factors that change slowly, if at all: human capital, economic and political institutions, geography, and culture (understood as a set of values and social norms).

The causal relationships between these factors work in all directions. If reforms can facilitate increased international competitiveness of human capital, accountability and transparency in the political system, improved protection of private property, the formation of an independent judiciary, increased trust between state and society, and the rejection of corruption by society, then any of these reforms will increase economic growth, both directly and by influencing other fundamental factors.

The interaction of these factors can create either a vicious circle or path dependence. For instance, if ordinary people distrust business, believing that it only cares about its own short-term interests at the expense of society’s, they may come to approve of officials extorting bribes from businesses. That, in turn, reduces the incentive for entrepreneurs to invest in their reputation: no one trusts them anyway. Yet a different stable equilibrium is possible in which entrepreneurs behave responsibly and enjoy the trust of the public, who demand that officials protect their rights.

Since both of these equilibriums are stable, transitioning from one to the other is not so easy. So, as the Russian economist Alexander Auzan has noted, it is advisable to think about transitional institutions: bridges for crossing the abyss in two jumps.

The concept of transitional institutions was first introduced in Chinese economist Yingyi Qian’s 1999 paper “The Institutional Foundations of China’s Market Transition.” Qian showed how Chinese reformers refrained from immediately building optimal institutions, preferring to first create functional transitional institutions.

To understand how and why these institutions worked in China, it is enough to consider the example of dual-track liberalization in agriculture and industrial enterprises. The main idea was that the enterprise would as before have to fulfill a plan, delivering a specified number of products at regulated prices, but could sell its surplus at market prices. In this way, China managed to avoid the collapse of enterprises’ connections—planned deliveries continued—while creating market incentives, since each extra unit was valued at market prices.

A precondition for such a system is the confidence of enterprises that the state will fulfill its obligations, guaranteeing both the enterprise’s right to sell its surplus at market prices and suppliers’ obligations to deliver the specified quantity of raw materials at regulated prices. If the first rule is not observed—for example, if the state acquires excess produce at the lower price—the market incentives disappear. If the second rule is not observed, the enterprise understands that it must purchase raw materials on the market or through barter, and will try to make some extra money by selling even its basic quota at market prices.

As such, the work of transitional institutions is impossible without confidence in the state’s ability to fulfill its obligations. To convince economic agents that the rules of the game do not depend on the whims of a particular leader, Deng Xiaoping and his successors built a complex system in which the Chinese Communist Party’s leadership rotated and meritocratic principles drove promotion within the party and state hierarchy.

Transitional institutions require political systems oriented toward long-term development and able to accept the existence of checks and balances. For various reasons, in Russia, there is still no certainty that the democratic political system satisfies these demands. The European Bank for Reconstruction and Development (EBRD) has always been certain that democracy and political competition are not only valuable in themselves, but also help to build a stable market economy.

That democracy facilitates economic growth is proven in the bestseller Why Nations Fail, by Daron Acemoglu and James A. Robinson. Statistics show that democracy protects investors from expropriation and from arbitrary changes to the rules of the game better than dictatorships do, thereby bringing about increased economic growth.

Democracy and a market economy are perfectly compatible. The myth that inequality in a market economy leads to the rise of populism stems from a misunderstanding of the nature of different types of inequality. Inequality, like equality, can be just or unjust. When work-shy layabouts receive as much as hard-working and talented employees, that is unjust equality. When success comes through connections and bribery rather than through talent and industriousness, that is unjust inequality. In a recent publication, I described how ordinary people reject market reforms in transitional economies where unjust inequality is greater and support market reforms in those where inequality is just.

This is why the EBRD considers the creation of equal opportunities its key priority. If market reforms bring about unequal opportunities, those reforms are rightly considered unjust and rejected by the majority of voters. Developing and advancing such reforms is pointless and even counterproductive, as they undermine trust in market reforms altogether. On the other hand, if democratic institutions make the government accountable to the majority of voters, and the market economy increases everyone’s incomes, not just those of a small circle of elites, that is a recipe for stable long-term economic growth.

One of the risks involved in creating transitional institutions is the emergence of coalitions of lobbyists with no interest in facing competition from new enterprises, which begin to impede the transition to optimal institutions, resulting in stagnation. That is the main mechanism of the so-called middle-income trap, but not all countries fall victim to this tendency.

Auzan rightly notes that institutions are not built in a day. This is true of both optimal and transitional institutions, which require the existence of strong political institutions. It also applies to other fundamental factors driving economic growth: human capital and culture. But the longer the journey, the sooner change must begin.