Russians Face Sustained Declines in Standard of Living for the Foreseeable Future, Economist Says

Paul Goble

            Staunton, May 14 – Dmitry Prokofyev, a St. Petersburg economist, says that barring an unexpected shock, Russia faces declines of its GDP of 1.0 - 1.5 percent a year for the foreseeable future, a trend that will exacerbate differences between life in the megalopolises which may improve somewhat and life elsewhere which will deteriorate.

            In an interview to the “Svobodnaya pressa” portal, Prokofyev says that “the most probable prognosis for the coming years is a deepening of the structural recession of the present. With each year, things will become a little worse, and even a rise in oil prices will not guarantee economic growth” (svpressa.ru/society/article/148523/).

            “In the best case,” he continues, “there could be a return to the 2010 level of incomes,” although he is clearly skeptical about that.

            “The specific nature of the current situation is that it could drag on for decades, if of course some sort of shock … does not occur,” in large measure because “the basic model of the economy” of Russia – trading resources for technology – “isn’t changing” and indeed hasn’t changed since the days of Ryurik.

            Why should anyone expect it to change in the next ten or twenty years?  “One shouldn’t lie to oneself! It is better to think how to use these resources,” putting money aside in the “fat” years and spending it in the “thin” ones.  But even that will not save the standard of living for a all Russians but only in “powerful urban agglomerations like Moscow, St. Petersburg, Leningrad oblast, and Kazan with their adjoining regions.”

            Those who go on and one about saving the Russian village and maintaining “’traditional ways of life’” are engaging in “economic charlatanism,” Prokofyev says.  “Megalopolises tied to together by a network of air routes” is the only way to hold the Russian economic space together and improve the lives of those who life in the biggest cities.

            According to the economist, “the Russian people have understood this for a long time, and all who can are running to the big cities. To oppose this trend is senseless and unproductive.” There is simply no way for Russia to develop as an agrarian country. Its agricultural output accounts for a maximum of three percent of GDP.

            Summarizing his argument, Prokofyev says that in the next few years, “the level of consumption and the incomes of the population will continue to fall. Instead of the economic growth that Russians are promised, there will be a loss of 1.0 to 1.5 percent of GDP annually, a trend that will result in a kind of ‘return’ to the beginning of the 2000s.”

            No reforms being discussed will make much of a dent on this, he continues, because the economy is “a very inert system.” 

            Looking out further, the economist argues, “by 2030, the quality of life of Russians will depend to the largest extent on the place of residence – much more strongly than now.  ‘Conditionally-unsuccessful’ regions will begin to lose their human capital while ‘successful’ ones will gain it.”

            This is “objectively” the most likely pattern, he says.  “Could there be changes for the better?” Yes, he says, “they are possible, but they will need time” to be implemented and have an impact.