6. Russia in the global economy

While Russia has not fully diversified, it has a stronger presence in the software industry, is one of the world’s biggest exporters of diamonds, and its substantial wheat exports demonstrate increased stability since the days of the Soviet Union. ‘Russia in the global economy’ looks at Russia’s landscape, reminding us that while Moscow resembles other glamorous urban centres, great swathes of this large country are off-grid. When Russia has succeeded financially, the world economy has historically been healthy. Will another downturn in the markets impact Russia? Looking at the success of China and the Gulf States, is a strong state always a barrier to business?

4. The reassertion of the state

‘The reassertion of the state’ looks at Putin’s contribution to macroeconomic stability by reforming Russia’s federal structure and removing power from regional elites, making examples of disobedient oligarchs and businessmen. While Putin’s political management of Russia was authoritarian, his approach to the economy was a balancing act, neither state- nor market-controlled, but a hybrid allowing for the sharing of resources between politically important groups. Dependence on oil and gas continued, with small to medium enterprises constrained to a greater extent than larger sectors. Relaxed budget constraints and state dominance remained a barrier to efficiency. If an enterprise would never go bust, why should it improve?

1. Forces that shaped the economy in Russia

The Russian economy was shaped by three major factors—an excessive focus on security, a dominant state, and a weak market. ‘Forces that shaped the economy in Russia’ traces these features back to Russia’s imperial past. The Mongol Golden Horde was replaced with central authorities who also relied on high levels of taxation. With a large workforce and abundant natural resources, Russia could mobilize considerable resources in responding to external threats or grand projects like the building of St Petersburg. However, the private sector remained weak. Why would entrepreneurs invest in new enterprises when their initiatives were stifled by a cumbersome state that valued connections above innovation?

7. Prospects for the future of the Russian economy

When looking at data on the Russian population and its demographics, averages conceal huge regional variations, not least in economic development and life expectancies. ‘Prospects for the future of the Russian economy’ compares the prospects of ‘first’ urban and developed Russia with a less powerful ‘second’ Russia and rural areas ranked third and fourth. Russia has the ingredients needed for innovation, not least an educated population. However, its historical problems persist—weak property rights, low levels of competition, overdependence on energy and defence, and lack of supporting infrastructure. With access to resources still determined by historical and current state connections, will the state ever be tamed?

5. From modernization to isolation

‘From modernization to isolation’ shows how Russia’s dependence on oil and gas was tested by the global financial crisis of 2008 and Western sanctions imposed after the annexation of Crimea in 2014. During Dmitry Medvedev’s presidency, Putin, as prime minister, held onto much of the power. Medvedev’s ambitious plans to modernize the Russian economy with technology were limited by a legacy of corruption in the system. State involvement in energy, defence, industrial production, finance, and agriculture increased, with slick officials masking unchanged methods. On his fourth inauguration in 2018, Putin showed no sign of changing the conservative strategies that had helped him stabilize Russia.

3. The creation of a market

Boris Yeltsin’s government faced a ‘triple transition’—national, political, and economic. ‘The creation of a market’ maps the transition from a centrally planned to a market-based economy, the roots of which were in place by the late 1990s. Privatization was controversial, with the selling of lucrative state-owned assets and the emergence of oligarchs in the so-called ‘Wild East’. Public frustration with inflation, crime, and underemployment meant the government zigzagged on proposed reforms. When Putin came to power after the 1998 financial crisis, he reaffirmed the state’s importance. What would this mean for an economy that had painfully freed itself from some of the state’s inefficiencies over the past decade?

2. The Soviet planned economy

‘The Soviet planned economy’ details the economic, political, and human consequences of the Soviet Union’s fully centralized economic planning. This bold experiment enabled rapid industrialization and urbanization, helped to defeat Nazi Germany, and defined the Soviet Union as one of only two military superpowers. These developments came at a substantial human cost, from the millions who died during the collectivization of farms to the victims of the Chernobyl meltdown. The discovery of oil in Siberia masked systemic problems in a stagnant infrastructure and rendered the socialist experiment dependent on the vagaries of Western markets. When the Soviet Union collapsed in 1991, many hoped for a better standard of life.