The entire discussion of how to modernize Russia has developed in a rather strange manner. In most countries that have undergone modernization, the process involved accelerating industrial development, increasing the level of integration into the global economy, exploiting competitive advantages and enacting political reforms as a prerequisite to economic growth.

Everything is just the opposite in Russia today. Rather than strengthening the country’s highly uncompetitive industrial sector, the authorities have focused on creating an innovative “smart economy” from the top down. Moreover, instead of developing sectors with products that enjoy broad market demand, Russia’s leaders are fixated on reorganizing the space and nuclear industries, two fields that in all other countries depend on government support for their existence. And even when it could significantly reduce expenses for domestic firms by regulating the price of the raw materials and energy that Russia has in great abundance — thereby giving the country a competitive edge analogous to China’s cheap labor — the government instead raises those prices to world levels.

This is how the authorities turn Russian modernization plans into another illusion. Plans to develop nanotechnology under the aegis of Anatoly Chubais and Rusnano or to build an “Innovation City” according to Kremlin deputy chief of staff Vladislav Surkov’s vision are both classic examples of siphoning away huge sums from the federal budget with little or no results to show for it.

The fundamental problem in Russia’s approach to modernization is that it doesn’t seem to understand — or at least it blatantly ignores — the fact that you can’t have a centrally planned innovative economy. Such economies only appear as a result of real-sector demand and competition among numerous researchers and engineers striving to create something new and to benefit financially from their efforts. Nowhere in the world has a Silicon Valley blossomed because of decrees issued by bureaucrats, even if the decrees are backed up by government financing.

And that is not the only misconception. The liberal Institute of Contemporary Development recently issued a report titled “21st-Century Russia: Reflections on an Attractive Tomorrow” that emphasizes the importance of democratic institutions as a necessary prerequisite for economic modernization. But the vertical-power structure that Prime Minister Vladimir Putin has created is dominated by corrupt and incompetent bureaucrats and continues to be the primary obstacle to Russia’s modernization.

The country’s big push toward modernization started when President Dmitry Medvedev took office, but it is becoming clearer with every passing day that his modernization visions are illusionary. Even more depressing is the fact that some former Soviet republics have managed to formulate constructive modernization plans. The semi-authoritarian regime of Kazakh President Nursultan Nazarbayev is promoting a program to achieve an “industrial and innovative breakthrough” that emphasizes the industrial component. In Ukraine, former presidential candidate and potential prime minister Arseniy Yatsenyuk built his platform on the idea of a “new industrialism.” Both programs appear to be realistic in contrast to Russia’s dreams of nanotechnological miracles.

There is only one path Russia can take if it is serious about modernization. That is the path of industrial revival based on Western technologies, the rapid liberalization of the economy in combination with gradual political reforms and a fundamental rapprochement with Europe and the United States. Those are tasks requiring political will and competency, not demagoguery, populism and pie-in-the-sky dreams. Unfortunately, neither the authorities nor the opposition is ready to implement these reforms and changes in policy.

This is why modernization in Russia remains nothing more than a empty slogan. When Putin returns to the presidency in 2012, we won’t be hearing the word “modernization” anymore because Putin’s overly vertical political and economic models are completely incompatible with modernizing anything in Russia.

Vladislav Inozemtsev is a professor of economics, director of the Moscow-based Center for Post-Industrial Studies and editor-in-chief of Svobodnaya Mysl.