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China stressed economic development and GDP growth in the 1970s when Deng Xiao Ping proposed the economic reform in 1978. China never stopped after that.

Regarding the USSR, Gorbachev tried to bring about economic reform, and it backfired and caused the dissolution of the USSR. During the 2000s, Putin came to power and saved the country from an imminent bankruptcy with the help of the then-finance minister Alexei Kudrin, Russia never seemed to go beyond its effort of gas production. They seemed to be complacent about their vast gas reserve and have been behaving like a gigantic gas station ever since.

For instance, Russia has the technology of semiconductors, but never tried to market them on a large scale. Russian civil aircraft never made a cut into the global aero market. Russia has some of the biggest shipyards but is not a famous shipbuilder like Denmark. Russia doesn't have any successful car brands. Russia is not known for producing electronic home appliances. Russia is not known for selling railway locomotives or rolling stock.

Recently, Pakistan was in talks with Russia about producing the Sputnik vaccine in Pakistan. I am not sure if that talk made it to production.

Why did the Russian Federation never stress GDP growth as China did?

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    "economic reform, and it backfired and caused the dissolution of the USSR" That's not how the story is usually told. The usual explanation is that the Russian economy was in decline because of large spending on military and mismanagement. Without economic reforms the crash would have been even stronger. Equally, Putin did not really save the Russian economy. They were just lucky that in between 2000 and 2010 resources got more and more expensive. Between 2000 and 2008 GDP grew a lot (comparable to China).
    – Trilarion
    Apr 5 at 10:57
  • 4
    I’m not sure how much it applies to Russia, but it may be worth noting that a resource-based economy is often said to be more amenable to centralized autocratic control than a manufacturing-based economy or even more so a service-based economy. If you control the resources, you control the economy and therefore the country. Much less need for cooperation from the populace or, ya know, “consent of the governed.”
    – KRyan
    Apr 5 at 19:38
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    How did Putin save the country from bankruptcy when he came to power?
    – Joe W
    Apr 5 at 21:18
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6 Answers 6

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"Went for GDP growth"?

Of course they did, what they didn't do was getting it.

Russia is a bit of an odd state in a way. Its people are educated and have a long tradition in science and literature. However it remained very backward until WW1, with a large component of old style peasantry and really repressive hereditary nobility.

Then you have the Communist revolution. They went after GDP in a big way. Or rather they went after military industrial GDP, at the exclusion of everything else. It worked during WW2, and their weapon systems were good enough during the Cold War. They were also a resource economy, with all the economic risks that entails. What they never developed was anything like mass market consumer production capability. They could design stuff, but their manufacturing sucked. A Le Bourget airshow I went to in the early 90s had a lot of their space gear on display. Clever stuff, but with big ugly soldering joints, looking like someone's high school shop project. Lada anyone? Another case in point was in the early 90s in France, reading through the local equivalent of Consumer Reports. Lada was in last place, right after Austin Minis (the old model was notoriously unreliable). So not barebones, cheap and reliable. Just barebones and cheap.

Communism comes crashing down in early 90s? Those state owned enterprises got sold, theoretically as shares to the public. In practice, the well-connected got first dibs. This is where the oligarchs come from, extracting rent from previously state-owned assets. Often in resource companies.

Al-Jazeera has a timely write up on how Putin got the job - bringing oversight on the anarchic robber barons. He did - by putting in his own robber barons.

It can buy superyachts for the top guys. But it doesn't result in service or goods that get sold to other countries. Nor does it necessarily result in a large middle class. Or a middle class that would buy Russian goods rather than imported ones. Take Roscosmos, Russia's space services company. Large salary for the Putin-connected CEO, crap for engineers.

What brands and industries are associated with Russia that you or your employer buy? It doesn't have to be high end stuff. Scandinavia might be furniture for example. Italy might be kitchenware. Or when did you last directly see Russian goods? Elevators? Airplanes? Ferries? Cars? One place where Russia does shine is computer programming. Stuff like Kaspersky is an actual brand name. But even that is tarnished by an even larger association with computer criminality. Contrast that with the situation if you had to think up of a list of Russian Nobel prize winners or mathematicians.

Russia was also fairly confused in the early post Soviet days. Taxes were levied willy-nilly by different ministries. In theory you could be taxed more than your profits so bribes had to be paid.

China in contrast has resolutely chased first low end, then middle end manufacturing. They did not go after the design, at first, just the manufacturing. They got no respect early on: "Made in China" was not a sign of quality. But guess what, they evolved and their good stuff is pretty good (even though the low end remains). "Made in Japan" also used to be a mark of derision among Westerners, for those old enough to remember. They've come a long way since the Cold War.

I also don't want to give the impression that it's all about manufacturing, just manufacturing. That's not what most economists would tell us. But services are also hard to pull off if the conditions are bad and manufacturing is often the early stepping stone on the way up.

China is big enough to have a large class of national consumers. Chinese people are pretty entrepreneurial and mercantile by nature. It may not be democratic and it may often be corrupt in local governments. But it has largely let private companies develop organically rather than handing out the spoils to the well-connected. Look through a list of oligarchs and you will see numerous ones whose primary business asset was close personal connections to Putin.

Corruption rankings? China is #66 (#1 is best), bracketed by Montenegro and Romania. Russia is #136, between Mali and Myanmar. Along with corruption comes lack of trust. Trust is a strange intangible, but the best performing nations are often found among those with the most internal, intra-society, trust. Do Russians trust each other or their government?

Make no mistake however. China's massive population, with about 400m middle class consumers, sets it apart from other countries and gives it a lot more opportunities than Russia. More opportunities than India, which has a lot smaller middle class by now. More opportunities than say Canada, which, like Russia, struggles to develop an across-the-board industrial/services capability and often falls back towards either resources or niche higher values offerings.

In some ways, modern China is more like the US, with a critical size internal market. Not everyone can be a top player amongst nations. But Russia, an industrialized nation with 140M educated people, is definitely punching under its weight class.

Claims that Russia looked good till 2014? Of course it did, just crosscheck the years of growing GDP with oil prices.

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    There is an interesting correlation of the GDP over time for Canada and Russia (growth in 2000-10, stagnation in 10-20). I wonder if that simply reflects resource prices.
    – Trilarion
    Apr 6 at 15:57
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    @Trilarion most likely, Australia's another big resource extraction-based economy with a similar pattern
    – llama
    Apr 6 at 17:40
  • Or Norway. We should compare Russia to Australia, Norway, Canada and the like.
    – Trilarion
    Apr 6 at 20:04
  • "Its people are educated and have a long tradition in science and literature". There used to be some high quality textbooks (e.g. Irodov's physics book) from Mir publishers. Nowadays there's a lot of Russian physics and computer science grads working in the west.
    – hojusaram
    Apr 7 at 7:04
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From 2001 to 2012 Russia had quite good GDP growth:

GDP growth chart

Most of it came from the domestic market - you sell the same amount of oil but learn to make and sell more stuff inside the country, creating new jobs. Usually it is done by letting foreign businesses open their localized production, you don't really have to export the goods.

You can see there is very little GDP growth past 2014. I would theorize that Russian government actually expected a serious conflict with the West in the future, so the efforts were directed in reinforcing existing economy rather than trying to grow GDP (which would crash anyway in the case of conflict) - such as by introducing own credit card payment infrastructure, paying off debts, investing in infrastructure instead of wages growth.

With regards of high-tech exports: It really takes time to build and it's very easy to disrupt. Airbus, Intel or TSMC have decades of time advantage compared to any Russian high-tech manufacturer, can access large markets at favorable terms, can borrow money cheaper, etc, etc. Moreover, any serious sanctions would mean disruption in the supply chain and grinding those exports to halt.

Whereas Russia exports not only oil, gas and coal (three different products), but also a lot of metals, wheat, fertilizers, wood, etc.

Russian exports

These have several advantages. If Germany or the USA does not want your copper or fertilizer, you can just sell it to India or China for basically the same money - there's an open commodities market. Whereas with airplanes or chips it's not so easy - you often need to cater to a specific customer.

The competition is not as fierce since you can always sell a spare ton of copper or a bushel of wheat, whereas you can't sell a chip if it becomes outdated or a market failure.

Such production is harder to disrupt since it depends on some capital investments and technologies, but does not need a constant stream of parts to continue.

Also, in some areas the existing players will not let Russia through to the market they control, such as passenger airplanes where Airbus and Boeing have a duopoly. You can't really control raw materials market by not letting new players in. The same applies to mentioned Sputnik vaccine whose recognition and adoption was directly hindered by existing players, turning a development success into a regional, niche product.

Finally, Russia had a huge international trade surplus so it's not obvious why it would become even more export-oriented.

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    If Russia is to become richer in that span, the USA will just have to freeze $400B instead of $300B of Russian assets, which they would happily do. What's the point of hoarding money? You could make a point that Russia did not sufficiently convert their income into weapons and operational army, and that one would probably bite. But not the "competitiveness of economy".
    – alamar
    Apr 5 at 11:05
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    Not only did they not convert their money into weapons and military stuff but also not in cars, TVs, sofas and ovens or education, health, fast broadband, chocolate or holidays. If all others grow and you don't then you basically shrink (relatively).
    – Trilarion
    Apr 5 at 11:14
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    @Trilarion For all their chat about "free market capitalism", you can look no longer than the Airbus vs. Boeing saga to see that, in the real world, national interest trumps free market. Another question not many days ago asked when Russia stopped trying to integrate in "the West", and all answers pointed to 2008. If Putin decided that Russia and the West were going into collision course, it's only logical he tried to steer the russian eonomy into a collision-proofed mode. Russia trying to compete with the West in high-tech and IT would be like trying to sell an OS to compete against Windows.
    – Rekesoft
    Apr 5 at 11:19
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    According to Wikipedia the Russian crisis in 2014-2016 was caused by the devaluation of the ruble, which had two main reasons: the fall in the price of oil (due to fracking) and the international sanctions due to the annexation of Crimea. Apr 5 at 18:34
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    I have read a theory that dictatorships are unable to produce complex goods because whoever knows how to produce them has economic power in the country and is therefore a threat to the dictator's reign. This might be worth commenting on.
    – user253751
    Apr 6 at 8:48
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5 important factors are not discussed in the other answers:

  1. An aggravated, decades-long Dutch disease that no one cared to mitigate. Good for maintaining a dictatorship, bad for the economy as a whole.

  2. Traditional, centuries-long, really poor protection of property rights of any kind - at cultural, legislative and practical levels alike. See e.g. here.

  3. The bad image of the enterpreneurship in Russia. This is since the USSR times. The enterpreneurship was considered pretty much anti-communist in itself, the inertia stays pretty strong even today.

  4. Low population density. This spoils a lot of "network effects" that more densely-populated countries enjoy.

  5. Weak sea transport because of the geography and the climate. Most of the Russian population and industry is "landlocked". Half of the year, the country as a whole is almost landlocked, too. Combine it with the sparse population and the cargo overhead adds up.

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    One wonders how Russia then ever could obtain a decent GDP, even if it's not growing that much lately and they are falling behind but at least between 2000 and 2010 there was plenty of progress and the governmental balance sheet is so positive, there would have been plenty of money left to invest in almost everything. Even by selling resources alone, Russians could have been much richer, it seems, if only they hadn't decided to turn to war in the long rung and if only corruption would have been lower. I wonder how much growth the widespread corruption has cost.
    – Trilarion
    Apr 6 at 15:50
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    @Trilarion bear in mind that the official GDP figures are inflated by unknown, but probably large amount. Dictatorships are good at doctoring the numbers. What they COULD be, should they were much less militarized and much less corrupt is probably a hybrid between Germany (the European part) and Canada (the Siberian part). Or maybe like USA if they somehow happened to be twice the population they are now. They are only 140M - probably also somewhat inflated number - exactly because their militarism (a lot of people lost to wars) and their corruption.
    – fraxinus
    Apr 6 at 16:27
  • The creation of the Reserve Fund may be viewed as an attempt to mitigate Dutch disease. Many people here ask why Russia did not spend more - which then would lead to more acute Dutch disease.
    – alamar
    Apr 6 at 16:43
  • @almar this is the usual approach and it usually works, but the devil is in the details.
    – fraxinus
    Apr 6 at 16:54
  • @fraxinus Russia is still a country with large manufacturing sector, in this sense it has escaped Dutch disease. But it is almost completely targeting domestic market.
    – alamar
    Apr 6 at 18:12
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This is somewhat of a frame challenge. In general, significantly increasing GDP is very difficult. Almost all countries try to do it almost all the time. Most succeed to a certain degree but the growth of the China in the last few decades is very exceptional. The global economy grew by quite a bit over the last few decades and most countries GDP grew along with it (including Russias) . The Chinese GDP (per person) today is much higher relative to the world average than in was in the 1980s. That is the exception.

So the better question would be what explains the spectacular growth of China, instead of asking why was country X not able to also grow as fast as China.

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  • But still, Russia could also have performed sub par compared to other economies or the world as a whole. At least the last decade looks like a lost decade economically for Russia.
    – Trilarion
    Apr 6 at 7:09
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I'm surprised no one seemingly yet mentioned that the GDP increase was a huuuuge talking point for Putin back in a day.

After 2014, it has explicitly transformed into "replacing imports (with domestic products)". Very essentially, Russian government seeks to go back to the "Soviet-era glory" where "we could directly compete with the US and didn't have to rely on the imports so much". This answer captures most of these sentiments brilliantly.

TL;DR: The flawed assumption in your question is that Russia wants to go to the global markets. Instead, they seek economic growth, but in isolation, and watching China probably made them think this is possible with the cards they were dealt.

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  • Russia wanting isolation is also somewhat a flawed assumption. They pretty much know they need the international trade. They proclaim they don't need the global markets when they are under sanctions (not that this is a rare occurence) and when they fail to convert a particular international market into domestic one. Otherwise they boast their exports and they also have a fetish on imported goods deeply entrenched in their culture.
    – fraxinus
    Apr 8 at 10:13
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    @fraxinus Isolation is probably not the best way to phrase it indeed, self-sufficiency is more fitting. But it sometimes could take extreme forms: aiming to integrate with anything Western instead of investing everything into the domestic market is routinely being outcried as treason. This is not a popular stance, but the government mostly assumes it and it was somewhat successful in pushing it onto people. Sanctions have to do with it only so much, the crash course seems to have been plotted well before the 2014 events. Medvedev went with "let's replace iPhones" circa 2009, to much ridicule.
    – Lodinn
    Apr 8 at 11:25
  • And the fetish bit is quite complex. Ordinary Russians these days don't have as much of a fetish for imported goods as a deep distrust in domestic ones. It takes a long while to convince them that yes, it was actually produced domestically and not just underwent a brand/label swapping, yes, it is actually competitive on an international level. If someone manages it, they get a patriotic fit and become immensely proud. And the government is very itchy about the perceived "dependence" on imported goods: they don't see playing nice internationally as an option.
    – Lodinn
    Apr 8 at 11:27
  • The self-sufficiency is an isolation with an improved PR. Otherwise, I agree - esp. about the fetish origin. But the fetish does exist and is constantly fed by facts - I own a Soviet/Russian lego-type toy called UAZ, so I know what I am talking about. In regard to "Let's replace IPhone" idea - it happened after the 2008 Georgia events. Looks like the sanctions were already calculated in.
    – fraxinus
    Apr 8 at 11:49
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    Russia and China do not have any other choice ATM, they are apparently too large to be accepted into whatever West is building. Russia wanted to join NATO in 2001 and China wanted to be a part of International Space Station. Tough luck.
    – alamar
    Apr 8 at 15:26
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In the mid 50s Nikita Hrustsov released all prisoners including criminals. Already in the 60s this criminals took over the soviet economy, which was the birth of The Red Mafia. This criminal groups have dominated the soviet economy and later russian economy. As can be seen from the article, this is the main reason why russian economy doing so bad.

While coruption is still the main problem of Russian economy stoping it from growth, there are some other smaller reasons as well. The size of the market for russian goods is very small, it´s limited to internal market which is 10 times smaller then chinese one and even on this small market russian goods have to face competitors from the West, so they have no chance. China, other then Russia, has tried to protect its industry from western competitors and has even forced western companies to make jointventures with chinese ones.

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    That article was written in 1995, whereas the question is asking about 21st-century Russia. Is there any evidence that the modern Russian economy is still run by a "Red Mafia"?
    – F1Krazy
    Apr 8 at 13:52
  • @F1Krazy Corruption are still there and even it become a bit weaker it stil there and the main problem.
    – convert
    Apr 8 at 13:57
  • @F1Krazy Hard to tell - I wouldn't say the connection is direct but the impact of mass incarceration in the SU still could be felt in many aspects of modern Russia. One thing the state actually tries to combat is the romanticisation of the criminal way of life by the youth (cf. hip-hop culture).
    – Lodinn
    Apr 8 at 14:37
  • @Lodinn Pretty hard task in a society with an essentially feudal culture (this is what "понятия" means). The Russian criminal-world unwritten code ("понятия"), the basis of this romantics, predate hip-hop anything, as well as the USSR.
    – fraxinus
    Apr 8 at 16:28
  • @fraxinus Do you mean the code commonly traced back to this guy? ru.wikipedia.org/wiki/…
    – Lodinn
    Apr 8 at 17:30

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