Paul
Goble
Staunton, February 21 – The Russian
economy today despite some very positive numbers over the last year suffers
from four macro-economic problems that not only will be difficult to correct
but also resemble those the Soviet leadership faced in the 1970s and 1980s,
according to the rector of the Presidential Academy of Economics and State
Service.
Writing in “Vedomosti” yesterday,
Vladimir Mau says that these similarities do not mean that Russia will repeat “the
difficult late-Soviet experience,” but they do mean that no one should forget
how close stability is to stagnation and how rapidly a country can move from
stability to catastrophe (vedomosti.ru/opinion/news/9291791/mezhdu_stabilnostyu_i_zastoem?full#cut).
Russia today “is a country with
stable growth, oriented toward domestic demand, with a balanced budget, low debt,
significant hard currency reserves, and positive numbers” on other measures.
But despite that, Mau says, “at the strategic level, the situation does not
give a basis for an entirely optimistic prognosis.”
That is because behind these good
numbers are “four long-term problems of the social-economic development of
Russia” which will keep growth relatively slow.
The first of these, the presidential economist says, is “the lack of
modernized structural changes.” Over the
last two years, the Russian economy has recovered, but it has not fundamentally
changed.
The second of these problems is the
negative balance in capital flows, with more money leaving the country than
coming in, something that reflects the market’s judgment that there are few
good investment opportunities in Russia compared to other countries and that
the risk of investing domestically is higher than doing so abroad.
The third underlying problem is “the
unprecedentedly low level of unemployment.”
This contributes to political stability, but it points to “the absence
of real structural shifts.” Were Russia’s economy undergoing modernization, the
country would have more unemployed as workers shifted from one sector to
another.
And the fourth of these problems is
the inclination of “a significant part of the educated strata of the population
(the creative class) to leave the country.”
More and more Russians are prepared to study, work, and live abroad, “a strategically
extremely dangerous” trend because it means that the demand for quality education
and health care in Russia will remain low.
These four problems “are not
subject to rapid correct and reflect the qualitative problems of Russian
society and its limited possibilities for modernization, not to speak about the
capacity to make an innovative breakthrough.” And it is not just a matter of
time: there will have to be a political willingness to carry out “serious
institutional reforms.”
To understand just how deep-seated
these problems are, Mau suggests, it is useful to compare the Russian
Federation now with the USSR 40 years ago because “measured by its basic macro-economic characteristics, the
present Russian situation recalls that of the USSR on the cusp of the 1970s and
1980s.”
“Then as now, the Western world was
seized by a structural crisis, which the ideologues of the CPSU characterized
as ‘the third stage of the general crisis of capitalism,” especially since the
Soviet economy was growing albeit at moderate levels, Mau argues.
Just as today, “prices for oil [then]
were at their height and measured in constant prices approximately correspond
to their current level, and the country was actively involved with energy
exports.” The Soviet budget “was balanced but all the income from the export of
oil and gas were used to cover budgetary expenditures.”
Moreover, then as now, “the country
was actively building gas pipelines to supply gas to Western Europe … in
exchange for food and equipment.” And “inflation was low, there was a moderate
state debt, and there was universal employment.
And, Mau continues, “the political
system of the USSR was exceptionally rigid and incapable of flexibly responding
to the appearance of new global challenges, technological, economic or
political.”
Having said all this, the economist
says that of course “the situation at present is somewhat different.” Russia
has taken its past experience into account and it has “significant financial
reserves.” Its fiscal house is in better order, and Russia is not dependent for
food imports to the degree the Soviet Union was.
In addition, Mau writes, “the
political system undoubtedly is much for flexible than was the Soviet one.” The current leadership understands the
problems it faces far better. “However, a number of institutional problems have
not changed over the last three years,” the biggest being a lack of interest in
real innovation and “more generally” modernization.
Russia’s natural resources and financial
reserves, he continues, are in fact “serious obstacles on the path of
institutional and technological renewal.”
They allow those in power to believe that they do not have to act
quickly to overcome them. But that is a trap which could mean far more trouble
ahead than the currently positive figures suggest.
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