Richard Connolly

Financial Constraints on the Modernization of the Russian Economy

A British economist examines the main obstacles to economic modernization in the Russian economy. After arguing that increased investment is required if the Russian economy is to undergo significant modernization, he presents a framework for identifying binding constraints on such investment. A number of popular explanations of Russias persistent underinvestment are considered, with particular emphasis on financial constraints. Recent Russian government proposals to restructure the financial system are then assessed in light of their implications for the wider economic modernization. On the basis of the growth diagnostics framework employed in the paper, the author makes the case that the binding constraint on investment in Russia is the poor quality of domestic financial intermediation.

The Structure of Russian Industrial Exports in Comparative Perspective

A British economist presents a comparative study focused on the change in the technological structure of Russias high- and medium-technology industrial exports. The export profiles of 19 countries in the post-communist region, including the former Soviet Union and Eastern Europe are compared with those of China, India, Brazil, Mexico, and Indonesia. Classifying 260 export activities for each of the 24 countries according to the level of technology intensity required in production, the author measures change in export structures by employing the Krugman Specialization Index and the Balassa Index of Revealed Comparative Advantage. The results of measures are followed by a discussion of implications for the future development of high-tech industries and higher value-added exports in Russia. Journal of Economic Literature, Classification Numbers: F14, O11, O30, P50. 4 figures, 2 tables, 36 references.

The Empire Strikes Back: Economic Statecraft and the Securitisation of Political Economy in Russia

Abstract This essay considers the impact of economic statecraft, used by both Western countries and Russia in the aftermath of Russia’s annexation of Crimea in March 2014, on political economy in Russia. The first part of the essay assesses the impact that economic statecraft had on the performance of the Russian economy in the period 2014–2015. The second half of the essay considers how economic statecraft has shaped the development of the system of political economy in Russia. It is argued that the available evidence indicates that economic statecraft has resulted in several unintended consequences, including the strengthening of elite cohesion, and a creeping ‘securitisation’ of economic policy in Russia.

Russia’s Accession to the World Trade Organization

Two noted British economists survey a range of issues linked to Russia’s forthcoming accession to the World Trade Organization (WTO) and its implications for the Russian economy. They describe the far-reaching commitments Russia has undertaken in the realm of tariffs, non-tariff barriers, and openness to inward investment, identifying factors that tend both to support and challenge realization of these commitments. They follow with a brief historical account of the reasons why the accession process for Russia was so protracted and an assessment of the likely medium- and long-term economic impacts of accession for the country as well as for its particular regions and social groups. The arguments suggest that the likely direct impacts of accession will overall be modest (at least over the near- to medium-term), and focused in spheres in which a foreign presence may enhance the productivity of Russian firms in the domestic market (e.g., business services). Potentially, more substantial indirect benefits will largely depend on the scale and seriousness of domestic reform policies launched in support of WTO compliance (i.e., effects of accession on Russia’s political economy). Journal of Economic Literature, Classification Numbers: F130, F500, P330. 3 figures, 6 tables, 54 references.

Climbing the Ladder? High-Technology Export Performance in Emerging Europe

A British economist examines the development of high-technology industrial exports across the emerging Europe region over the past two decades. After arguing that the development of high-technology capabilities is a key component of economic development, he presents an original index of high-technology industrial export performance that is used to describe patterns of high-technology exports across emerging Europe. When these developments are placed in comparative perspective, it becomes evident that although the countries of emerging Europe have made considerable progress in increasing across-product sophistication of exports and in increasing across-product diversification, most have been less successful in improving levels of within-product sophistication. For emerging Europe and other low- to middle-income countries elsewhere, this will remain a key challenge for the future.

Barrels and bullets: The geostrategic significance of Russia’s oil and gas exports

ABSTRACT In 1953, US President Dwight D. Eisenhower warned about the hidden costs of what he was to later describe as the “military-industrial complex.” Ike said: “We pay for a single fighter plane with a half million bushels of wheat. We pay for a single destroyer with new homes that could have housed more than 8,000 people.” The leaders of today’s Russia face a twenty-first-century version of this dilemma, weighing the trade-off between spending on guns or butter. Russia’s own defense-industrial complex (known as the oboronnyi-promyshlennyi kompleks, or OPK) has been the recipient of billions of dollars in the past few years, as the state ordered new weapons such as the T-50 PAK-FA fifth-generation fighter aircraft, the Armata main battle tank, new nuclear-powered submarines, and strategic missiles. Should they continue the costly effort to remake their military into one of the most numerous and sophisticated forces in the world? Or should Russia’s leaders instead focus their efforts on investing in health, education, infrastructure, and other areas to help build a more dynamic and competitive economy? The answer to this question will be partially shaped by how much money Russia’s leaders will have to spend; with the crash in the value of oil exports – the unstable pillar of this Eurasian petro-state – what funds can they expect to draw upon? Decision-makers in the Kremlin will also be influenced by their perception of whether Russia faces a hostile geopolitical environment. If the current view prevails, it is possible that Russia’s leaders may choose to maintain military spending even as the economy sinks into stagnation.

Russian Rearmament: An Assessment of Defense-Industrial Performance

This article addresses two related questions associated with Russia’s rearmament program (GPV-2020). First, it examines how the Russian defense industry has performed in the first five years of the rearmament program, by presenting data describing the quantity and quality of new arms procurement in Russia. Second, the article considers which factors explain the nature of Russian defense-industrial performance over the past five years, including the importance of the increase in financial resources allocated to defense procurement, as well as additional structural and institutional factors. It is argued that, although defense-industrial performance between 2011 and 2015 has not been perfect, it can still be considered to have been relatively successful.

Economic Modernisation in Russia: The Role of the World Trade Organization

Abstract Economic modernisation in Russia will require rapid and sustained productivity growth. The available evidence suggests that a key ingredient of productivity growth is an increase in the intensity of economic competition. This article considers the role that Russias accession to the World Trade Organization (WTO) might play in increasing competition in the Russian economy and, in turn, facilitating economic modernisation. It is argued that while WTO accession provides an opportunity to help those in favour of a competition-based model of economic modernisation in Russia, accession without any corresponding reform of the existing system of political economy in Russia will be unlikely to yield significant results.

Russia’s Natural Resources in the World Economy: history, review and reassessment

Abstract Russia’s role in the global economic system today, and the Soviet Union’s in the past, is dominated by the export of natural resources, particularly oil and gas. The rents earned from these exports are both a source of strength and weakness, as they link the fortunes of Russia’s domestic economy to the volatility of global resource markets. This paper returns to a major research project conducted through the offices of the Association of American Geographers that resulted in Soviet Natural Resources in the World Economy, published in 1983. The project was first conceived in the aftermath of the resource crisis in the 1970s and concluded in the early 1980s as the Soviet Union sought to increase resource exports to support a failing domestic economy. This paper examines the origins, evolution, and management of this seminal work and presents a re-reading of the book in a contemporary context. We develop some of the key themes of the original project and conclude that it has contemporary relevance, as a reliance upon the resource sector remains a defining characteristic of Russia’s political economy and continues to shape Russia’s role in the global economy. We find that the regional dimension that was so important in the original project remains critical as Russia seeks to extend the resource frontier into new regions in the Arctic and the East and, at the same time, reduce its reliance on European markets – that are both stagnant and hostile – by developing new markets in Asia.