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Preview: Comments on Russia Economy Watch: Is Russia Just Another Emerging Economy, Or Is The...

Comments on Russia Economy Watch: Is Russia Just Another Emerging Economy, Or Is There Something Special About The Present Bout Of Financial Turmoil?





Updated: 2009-12-11T09:53:43.900+01:00

 



Hi Jesse,"what is the Russian government's ideal r...

2008-09-22T08:35:00.000+02:00

Hi Jesse,

"what is the Russian government's ideal response? Assuming there will be no rapid turnaround"

This is a very difficult question to answer.

"do they need to focus on raising productivity levels?"

Clearly this is important. The world bank noted in their study that up to 2006 a lot of the increase in living standards and wages was accompanied by improvments in productivity, as resources were moved from less productive to more productive sectors. It has only been in 2007 and 2008 that wage rises have exploded to far outstrip any meaningful contribution from productivity, and this of course is the overheating component.

Productivity is a lovely word to use, but you have to imagine that virtually every government on the planet is trying to focus on getting more of it, but few of them are being that successful, so it isn't that easy, and it isn't a miracle cure all.

Russia needs MASSIVE institutional reform. You simply can't run a modern complex economy the way they are trying to run Russia without having problems, as we are now seeing.

Having a serious anti inflation policy would be a first step I think. This means higher interest rates and larger fiscal surpluses in the short term. As I say, Russia could try taking a look at some of the things they have been doing in Brazil, and copy them.

In the longer run they need to address the demographic issue, although again this is going to be hard, since we now have a lot of very low fertility societies, but have very few examples of successful responses in recent times.

Of course France and Sweden noticed the problem in the 1930s, responded, and now have a lot smaller problem than most. But, this is very long term. Short term a much more positive environment for non ethnic Russians who want to come and live in Russia would be a start.



I don't share your assesment, that the industrial ...

2008-09-20T18:32:00.000+02:00

I don't share your assesment, that the industrial base in Russia is lagging GDP growth, acutually it is only the ressource extracting sector, where growth is hovering around 0-1% percent and I don't see a problem in this, while manufacturing is outperforming GDP growth, last year it was 9,6%, this year so far it is 7,6%



As for the structural problems (i.e., the demograp...

2008-09-19T18:12:00.000+02:00

As for the structural problems (i.e., the demographic and industrial capacity issues), what is the Russian government's ideal response? Assuming there will be no rapid turnaround demographically, do they need to focus on raising productivity levels? And if so, what is the best route - state investment, foreign investment?