Paul
Goble
Staunton, January 1 – “The most
probable prognosis” for Russia is “stabilization at a lower level: less
investment, less production and less consumption,” according to Natalya
Zubarevich, who adds that “this ‘stability’ may last several years and result
in the economic and social degradation of the country.”
There is the additional risk, the director
of regional programs at Moscow’s Independent Institute for Social Policy, that
there will be a further decline in oil prices on which both the federal budget
and regional ones (because of transfers from Moscow) rely (polit.ru/article/2016/01/01/new_zubarevich/).
But she says that even in the worst situation,
Moscow is likely to find money for the republics of the North Caucasus, where
any cutbacks in spending could lead to new violence; but the fate of other
regions is likely to be increasingly dire with the center increasingly
transferring unfunded liabilities to them.
If oil prices stabilize or unexpectedly
rise to a “more comfortable level,” the regional geographer says, the Russian
economy could eventually grow by one to two percent a year, “but these tempos
would be below that of other countries. And that means that [Russia] will fall
further and further behind [them].”
Zubarevich, Moscow’s leading
specialist on developments in Russia’s regions, backs up her projections with
an analysis of the current situation.
She points out that the current economic crisis in Russia is very
different from its predecessors in that it is not part of a worldwide trend but
rather an internal one driven by “Russian ‘rules of the game’ which block
growth.”
The crisis began in 2013 “with the
stagnation of the economy and the slow reduction in investment.” The following
year, it was intensified by “external factors” including Western sanctions
after Crimea and the decline in the price of oil and by internal ones like the
counter-sanctions of the Russian authorities which unleashed inflation.
In the past year, the geographer
says, world prices for other Russian raw material exports also began to fall;
and as a result, “the Russian economy passed from stagnation to recession” and
has remained “at the bottom” since the summer.
Declines in income and trade have
affected “almost all regions” of the country, she says, “Russians are adapting
to the crisis by sharply reducing consumption.” Investment has fallen in 51
regions, industrial production has fallen in 34, and processing industry output
has declined in “more than 40.”
The only reason that production hasn’t
fallen in more of them is that defense industry production has increased in
some. “But do not forget what this costs,” Zubarevich says. About 21 percent of the federal budget now
goes to defense, but that rise has been possible only by cutting back social
spending significantly.
Given the absence of investment,
talk about import substitution is just that talk: “without investments, there
will not be import substitution.” Instead, there will be inflation, a decline
in quality and a reduction in consumption. “The Russian powers that be have
forgotten that it is impossible to move the economy by television” alone,
although some Russians may be affected.
Zubarevich advises her readers on
this New Year’s day to stop watching television and stop participating in
social networks online. Instead, she suggests, they should turn to “wise books
and good friends” and they should maintain their sense of humor about the
authorities. Any country whose people do that “has a future.”
But she warns in conclusion that “in
Russia one will have to live a long time in order to see a positive trend.
There won’t be any rapid changes, but,” the geographer says, “time is working
for us.”
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