Re: Russia’s economy (was Kvetching, Sarkozy etc.)
On May 9, 2007, at 10:14 AM, James Heartfield wrote:
But then Russia is a developed economy, in a way that China was not. Russia’s development followed a slightly perverse path, because the bureaucratic planning system was not very good at allocating social
labour (to borrow Hillel Ticktin’s analysis). That made some big problems,
but Russia did industrialise and urbanise under the Stalinist system
(whatever we call that) in a way that China did not.Also, I think it is wrong to extrapolate from the GFCF rates over the 1990-2007 period when they are expressed as a percentage of GDP,
because GDP has grown quite quickly, meaning that the series masks a large
increase in investment, in a declining rate of investment.
James, the growth has to come from somewhere - there has to be a
dynamic leading sector. In rapidly growing economies that is usually
investment in equipment and machinery. Yes Russia was developed in
some sense, but the inheritance from the USSR was mostly junk by
international standards, so any exposure to foreign competition would
have killed it. Aside from weapons production - which is not a small
thing - what advanced technology did/does Russia have?
The leading sector in Russia is unquestionably oil. I have no idea
what the multiplier for spending on the oil sector is in Russia, but
in the U.S. it’s 2.79, meaning that every dollar spent in the oil biz
results in another $1.79 of spending elsewhere in the economy. This
is one of the highest multipliers for any sector in the U.S. So a
doubling of oil prices over the last several years has an enormous
impact on Russia’s non-oil economy (oil itself doubles, and the
nonoil sector nearly doubles beyond that).
I’m not hostile to Putin at all, so this isn’t motivated by any
desire to trash talk Russia. It’s just a very different ball of wax
than China or South Korea. Look how SK developed - starting with
basic industry, moving up the ladder (steel to shipbuilding,
assembling cars made from foreign components to designing and
manufacturing them, etc.). I don’t see anything like that happening
in Russia, though maybe I’m wrong. I don’t even know of them building
on the oil sector. Is there a Russian company that’s breathing down
the neck of Halliburton in oil services?
Doug