As the macroeconomic environment stabilized, business rushed to invest. Westerners often focus on ‘capital flight’ out of Russia, but the reality is that the 2000s were a boom period for investment by Russian and foreigners. The results were widely evident, as new businesses opened and productivity shot up. In sectors such as retail and steel, for example, productivity levels doubled relative to the United States, the productivity leader. Russian firms still trail far behind, but during the 2000s they made great strides.
Russia is often criticized for being overly dependent on oil and gas. Certainly the country would benefit from a more diversified economy. Yet it is wrong to credit economic growth during the Putin era simply to high oil prices. Windfall oil profits are capable of boosting consumption, but they do not increase productivity. The fact that Russian firms increased productivity so rapidly shows that other factors—a stable macroeconomic climate coupled with the tenacity of Russia’s entrepreneurs—were powering the economy forward.
Gabon
