I was struck during the Great Hispano-German Cucumber Scare to learn from the BBC that Russia had banned EU vegetables, and this was difficult as Russia imported 40% of its vegetables from the EU. I suspect that figure excludes Russian vegetables grown and consumed in the informal rural sector, but it is nonetheless astonishing that Russia, which has a greater area of unforested potential arable land per head of population than any other major state, is highly dependent on vegetable imports.
A small fact indicative of a huge malaise. As China and Russia hold a key summit today, China is heading for global economic supremacy, probably within my lifetime (though US resilience should not be ignored, and the process will be slower than many think). Russia, by contrast, slips further and further down the league table of global influence. We can predict future importance for China, India and Brazil. Europe faces genteel relative decline.
But Russia faces renewed absolute decline. It is a third world economy, configured around exports of raw commodities, exactly as African countries are. Because commodity, and especially energy, prices are high and likely to remain so, there is a superficial aura of wealth. But because these commodities are exported virtually unprocessed, the employment effects, and thus the distribution of wealth inside the economy, are extremely limited. Russia has oligarchs involved in energy and mineral export. They are unimaginably wealthy. It has a technocratic and labouring class employed in these industries. They are doing well. It has senior officials corruptly gaining from the state interaction with these commodity producers, either through regulation or ownership. They are doing very nicely. It has a limited service economy catering for the above groups.
All of this is the active economy. It just does not spread far enough into Russian society to carry it along. Russia is looking more and more like Nigeria, with a tiny elite, few technocrats, a corrupt officialdom and a few people servicing them, all doing OK, while ordinary people live in squalor.
Like Nigeria, Russia does not make anything. When did anyone reading this last buy a Russian manufactured good? The Soviet system collapsed in large part because it could not provide consumer goods to a population that wanted them. Like Nigeria, Russia makes very little indeed – less than in Soviet times. Russian manufacturing industry as a whole has still not recovered to Soviet levels of production. I am willing to doubt it ever will. Russia just exports commodities and sucks in manufactures – disproportionately for the luxury end of the market, reflecting its crazy wealth distribution. Exactly like Nigeria, in fact.
Of course, government extracts some tax from the commodity industries and puts it into social benefits and funds the bewildered and status diminished professionals in education, healthcare etc. But the government’s tax revenue is exceeded by capital flight, as the oligarchs simply export the mega profits from commodities into numbered bank accounts abroad. No oligarch has ever thought “Wow I made billions from aluminium or gas, now I will invest it in manufacturing expresso machines and cyclone vacuum cleaners in Russia.” They think “Which way is Switzerland? Where do I buy Highbury?”
Foreign Direct Investment into manufacture in Russia is negligible for a country of its size, because there is absolutely no guarantee of a fair rule of law, of redress against a government or that some oligarch will not covet your factory, or local big man decide to shake you down. Democracy has vanished as Putin has made it impossible for opposition groups to operate and tightened his grip on the media. The killing of independent journalists and investigators has become routine. The situation both on human rights and judicial independence is actually worse than Nigeria.
Russia is not a great power in decline. It is a third world country in decline.
Actually, when did anyone reading this buy a British manufactured good?
Tom,
There is certainly huge cause for concern in the long term decline of British manufacturing industry – but we are nowhere near the Russian case.
The still arrived first at Pristina though! 😉
China might be heading for economic supremacy but who is going to produce their food given the exodus from the countryside to the cities?
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This is the plight for 20 million of their people.
http://www.impactlab.net/2011/01/31/20-million-people-live-underground-in-china/
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Another question. If and when the US goes pear shaped, what will China do with their massive US dollar accumulation?
“Another question. If and when the US goes pear shaped, what will China do with their massive US dollar accumulation?”
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http://www.leap2020.eu/GEAB-N-56-Special-Summer-2011-is-available-Global-systemic-crisis-Last-warning-before-the-Autumn-2011-shock-when-15_a6679.html
The Russians have the only method now of reaching outer space. The Russians have an aerospace facility. The Russians have a food industry. The Russians have an oil and gas industry. The Russians have an “art” industry. the Russians have an arms industry. The Russians have a mining industry. the Russians have a software industry. The Russians have a nuclear industry.
The reasons that the Russians do not dominate the “global” industries mentioned above has nothing to do with their ability.
Actually I bought something Russian yesterday..a nice bottle of Vodka.
“When did anyone reading this last buy a Russian manufactured good?”
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I try to buy Baltika whenever I can and once when I was fortunate enough to have a trip to Russia I bought a pack of Russian cigarettes adorned in blocky red Cyrilic lettering with the words “Prima Nostalgia” next to an unsmiling face of Lenin. There was no aluminium foil inside and the fags were pure Gulag quality as though made by people with no will or incentive to live from a piece of barely gummed together paper that is often found in Bibles from which all the floor sweepings that passed for tobacco fell out if not held completely horizontally. I thought I’d buy them as a useful way of bonding with my fellow travellers on the night train from Moscow to St.Petersburg but most of them recoiled in horror from the sight, took pity on me and offered me their Marlboros. In some perverse ways it looks like quite like some people’s idea of a “liberated” place with residents constantly swigging from bottles of beer as they push their baby buggies onto the subway trains where couples spend the ride snogging passionately. Then you see various kinds of police/and/or/military types wandering around harassing Caucasians (i.e people from the Caucusus) and looking for bribes. I wouldn’t say Russia is Third World yet but it isn’t healthy.
Stu: “The Russians have the only method now of reaching outer space.”
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Plenty of countries have methods of reaching outer space. The Russians may be the only country that has a regular manned-space programme but the Chinese and private businesses have that abililty too. Other countries such as Japan, the EU and India can put things in space and I believe that Iran now send worms into orbit. Outer space is soooo, like… yesterday!
By the way, there was some bit of very good news from Russia in the last few days which might at least show a remnant of independence for the court system:
http://www.guardian.co.uk/world/2011/jun/14/russia-acquits-activist-slander-chechnya
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From what I understand Medvedev has stirred ever so slightly into looking somewhat independent himself by flirting with an anti-Soviet-legacy line. Many Russians including Putin still look back on the golden age of Stalin and the “Great Patriotic War” as if Stalin wasn’t one of the main collaborators with that Austrian corporal and as if huge numbers of the victims in that war weren’t the responsibility of Stalin’s in the first place.
My Russian camera still works fine and in many situations produces better photographs than a modern digital camera. I bought it over 40 years ago.
Many Russians sufferred the most appalling abject poverty after the collapse of the USSR and the collapse of the Russian economy. We may yet face the same prospect.
It is impossible to accurately judge the real wealth of a country except by spending a great deal of time there travelling and living with ordinary people.
I would feel much happier about the prospect of spending 6 months travelling through Russia than 6 months travelling through the USA.
Over the past 10 years I have met far more Russians than Americans and haven’t had a problem with either.
I have a friend who has travelled extensively through Russia and loves the place.
Some towns in the North of England which were relatively prosperous 50 years ago are suffering abject poverty now, yet I am convinced the situation in many equivalent towns and cities in the USA is even worse.
There is no real shortage of food, energy or resources. It is just that we are run by powerful elites who have decided to resolve the problem of exponential human population growth. I agree this problem needs resolving, but there are far more graceful methods than crashing the entire financial system of the world and switching off most of the energy and food production.
Tony
Interesting post, I hadn’t thought of it like that.
There is perhaps another depressing similarity with some 3rd world countries: the ‘brain drain’ of talent. Despite the faults of the USSR – and those were, of course, many and terminal – it had a tremendous reservoir of top-notch brain power. I am most familiar with hard sciences, maths and engineering but I believe that many fields were also well provisioned. With no enterpreneurial culture that brain power was most able to earn rewards in academic work (or as part of the cold war nomenclatura). The apparent inability of the new Russia to benefit from that pool of talent must rank as a great missed opportunity. Many of the best of those brains now work in western universities, hospitals, research institutes and indeed in businesses set up in the west as can be seen e.g. from the affiliations of authors in academic papers.
I lived in Russia for nearly 2 years and agree totally with Angrysoba. The flashiness of central Moscow is the face that tourists see…beer is actually considered a soft drink and it is quite normal to see well dressed businessman swigging cans of Baltika at 8am on the streets. They do have the most gorgeous women though. I miss the place !!!
You seem to suggest that the Russkies were better off under communism. For this heresy you should be locked in a room with Tony Blair for oooh, a whole day. We’ll smuggle a Kalashnikov in somehow.
The longer the oligarchs file away at Russia fabric, the more resources they abstract for personal wealth of a few, the greater the chance that divisions and arguments open up rifts, something the west is always up for exploiting.
Do these oligarchs not understand that by their selfish greed they are offering up Russia on a long term platter. Their new found friendship with those who once dare crossed the Ussuri is calculated and self serving on both counts, China needs resources, it is their guarantee of internal security, as long as they can keep their show on the road and keep dissent down on all fronts, they can benefit from such Russian engagements. Russia needs the money, they are struggling to get people to pay taxes, and Kordorkovski’s messages from jail do not inspire foreign investors one little bit.
When was 17 I went to school with Michael Schevschenko, a bear of man he towered some 6ft.9 and had a heart as big as a barn door, strawblond his family came from near Kiev, white Russia. He told me so much of Russia that I dreamt of driving a Triumph and sidecar from Hamburg to Wladivostok, still have that dream and most likely shall take it to the grave.
“Do these oligarchs not understand that by their selfish greed they are offering up Russia on a long term platter”.
Of course they do, Ingo (if they ever pause for long enough to give it a thought), But why should they care? What has Russia ever done for them? And in any case – even if they owe it everything they have – why should they want to reciprocate?
Their case seems to me very similar indeed to that of the American businesspeople who have – according to many angry American journalists and economists – cut the legs from under the US economy by offshoring everything they can. So that, while people worldwide regard the iPhone (for example) as a triumph of Yankee knowhow, it is made in China by Chinese workers. One day some bright, energetic Chinese managers will take over, and the American executives will join their workers on the scrapheap.
You don’t succeed in business by giving way to sentimentality. And of course it’s those who do succeed whose attitudes and actions matter.
I knew the oligarchs’ attitude reminded me of something familiar, but it’s only just surfaced. Towards the end of the film “The Mummy”, Imhotep’s minion Beni – in mortal danger – screams, “Help me, Master!” Imhotep turns for a moment and regards him with sincere surprise and curiosity. “Why?” he asks, before turning and going on his way.
That captures it nicely.
Dear Craig, I know Russia well. I have many Russian friends including some who work in business and industry. I am not going to get into a discussion about Russia, which would take far too much space. I will simply say that in my opinion your view reflects the general or conventional wisdom about Russia, which like much conventional wisdom is simply wrong. I have no doubt at all that time will prove me right.
Angrysoba. Iran and spaceworms:
guardian.co.uk/world/2010/feb/03/iran-launches-rocket-carrying-animals
How surreal, worms in space. What happens when a worm encounters a wormhole? What is it with this phallic thing – fire-rockets, worms? Whatever happened to peacenik space explorers dressed in polyester track-suits (or, in the case of the great Carl Sagan, in elegant corduroy), wearing beatific smiles and serenely gliding through the empyrean on glorified saucers? Whatever happened to Solaris (the far better, original Russian, version of that film)? Question: If you were an alien on your way from, say, Proxima Centauri, at the position of the Bow Shock would you rather encounter Mahmoud Ahmedinejad, John Glen or an earthworm?
Mercouris, I’m sure many of those reading this site would love to hear a discussion on Russia, whether or not it would take lots of space. It’s obviously a very important country. If you disagree with Craig’s analysis, please do explain in what way(s), so we can have an appreciation of the other side of this dialectic (!) So, if you get the time, please feel free to elaborate. Thank you.
Do they still make AK-47s in Russia?
Big business there I’d have thought.
Russia in absolute decline, eh!
What does that say about Old Blighty?
Here some facts: Russian numbers followed by UK in parenthesis.
***************************************************************
GDP: (PPP)$2.23 trillion ($2.173 trillion)
Labour force in industrial occupations: 31% (18.2%)
Population below poverty line: 13% (14%)
Income inequality (Gini Index): 52 (92 — all those illegal immigrants on welfare), cf USA 39.
Investment rate as % GDP: 18.9% (14.4%)
GDP Growth 2010: 4% (1.3%)
External debt: $0.5 trillion ($8.9 trillion)
***********************************************************
Maybe we’ll soon be seeing mass migration of Brits to Nigeria and Russia.
I suspect the UK Taliban from the Bullingdon madrassah would quite like the UK to emulate the Soviet Union.
I wonder how many Matryoshka dolls Russia has made.
Ingo,
If you can’t make it across Russia in a Triumph and side car, you can always go on a 150 hour virtual tour from Moscow to Vladivostok on the Trans-Siberian railway with the additional benefit of sounds such as the rumble of wheels, the balalaika or even the readings of War and Peace or Nikolai Gogol’s Dead Souls.
http://www.google.ru/intl/ru/landing/transsib/en.html
My partners new BT Vision box was proudly stamped Made in Russia!
Just a quick off topic comment Craig.
With the Army about to announce further cuts to the existing 100,000, doesn’t it go from being an Army to a Militia?
An American aeronautical engineer once told me that they were in awe at how the Soviet Union / Russia were able to produce high- tech products like the Mig and Sukhoi fighter aircraft and the Mir space station given the outdated production techniques and computers they had to use. The quality of Russian engineeering was (at least then) second to none; only their political system and quality control problems in manufacturing stopped them being technologically as good as anything the US could make.
Of course, in the last 20 years they have fallen behind drastically. But I wouldn’t write Russia off just yet. They have enormous under-utilised resources of materials, energy and human ingenuity. I doubt if there is any genuine comparison with Nigeria.
Ruth and Ingo, when he was studying in China, my cousin travelled on the Trans-Siberian Railway one summer from Beijing to Europe; although the main line runs from Vladivostok, you could link up with it from China as well (I imagine you still can), back in 1982. He’d had to escape from the military junta in Pakistan and his father was a Communist… which was why he spent several years studying in China. He arrived in Glasgow with the clothes he was standing up in and a small bag. Ah! Glory days!
Is Craig making a statement?
You have some points Craig – but your core points only stand with significant qualifiers and factual corretions.
There cannot be denial that Russia is a scientific and industrialised society. There cannot be denial about its advances in aero-space.
Myself very much a peace activist, one of the most effective cost effective weapons made to this day, I am aware is the AK-47.
Come on Craig, do better than that. Yes – I have visited Russia and I note the disparities in wealth. I am a UK citizen and lived a decade in England, mainly London, and I note the privations of modern day Briton ( compare and contrast Russia).
Other than that – your best point is the disparites and the oligarchic elements within the economic shpere.
But – come on Craig – you also say this:-
“Europe faces genteel relative decline” …duh…huh?
Some gentle action in NATO’S raining down bombs non-stop on Libya I guess – huh?
Russia has an IT industry. Its size is nowhere near that of Silicon Valley but still. Kaspersky Labs is a world leader in security software and probably the best known Russian IT success story.
Russia also has a booming cybercrime “industry”. Which is a very bad thing but it also shows there are plenty of Russians with good skills. Perhaps Russia ought to focus more on IT?