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Russia: Conference Examines Economic Health

  • Andrew Tully

Russia's economy is currently growing, thanks to the rising price of oil over the past two years. Economists and other analysts looked at whether this economic growth is sustainable at a recent conference in Washington that looked at where the country stands almost 10 years after the breakup of the Soviet Union. RFE/RL correspondent Andrew Tully attended the two-day conference and filed this report.

Washington, 11 June 2001 (RFE/RL) -- Participants at a recent Washington conference on Russia gave mixed assessments of the country's economic future. Some said the government's current fiscal policies are essential to ensure sustainable economic growth, while others portrayed the economy as viable regardless of what the Kremlin does.

But there were dire warnings about the fate of the Russian people themselves, an essential component in any direction their economy takes.

All these views of Russia's economic status since the breakup of the Soviet Union were outlined on Friday and Saturday (June 8 and 9) at a conference called "Russia: Ten Years After." The gathering was organized by the Carnegie Endowment for International Peace, a Washington-based think-tank.

The conference devoted several seminars to exploring various aspects of Russia's status today and the direction in which it is headed. Most of them focused on Russian economic, political, and security issues.

One session, on Saturday morning, dealt with Russia's economy in general. And the consensus among the participants was that the country is rich enough in natural resources -- and not just energy -- to enjoy at least modest long-term economic growth.

Andrei Illarionov, Russian President Vladimir Putin's chief economic adviser, said his government forecasts that the country's gross domestic product, or GDP, will grow by 24 percent from 2001 through 2004, an annual average of 6 percent. He said it would be unrealistic to expect Russia to sustain such growth in the medium- and long-term. But for the time being, he said, the growth is sustainable -- on one condition:

"It could be sustainable only in a very short period of time if oil prices would be rather high, and would be not only rather high, but would have a tendency to increase further, which does not look very realistic."

Illarionov said Putin's economic policies have a good chance of fostering economic growth even without the help of Russia's energy sector, which has enjoyed a windfall over the past two years because of rising oil prices. And the adviser conceded that the president has been able to pursue what he said were proper economic policies, at least in part because he has had the benefit of learning from the mistakes of his predecessors:

"When we are asking ourselves, 'Who is Mr. Putin?' we can also say that Mr. Putin is to some extent the product, or the baby, of the failures and mistakes of economic policy which have been pursued for a number of years."

Another Russian took a very different view of Putin's role. He is Andrei Fedorov, a former deputy foreign minister who now serves as chairman of the board of the Russian department of the Political Research Foundation, a policy research institution.

Fedorov said he is of two minds over whether Russia's current economic growth is sustainable. On the one hand, he said, he believes it is sustainable because Russia's economy, bolstered by a wealth of natural resources, was growing long before anybody realized that it was growing. On the other hand, however, he believes it may not be sustainable because of Putin's policies:

"It's clear that most of this growth has nothing to do with the state, with the government, with economic policy. It's just something which occurs despite the efforts of the state." Fedorov said the inherent strength of the Russian economy is that it is growing despite state officials who disparage the government's efforts that they are supposed to be leading.

The former Russian government official acknowledged that problems remain, but he attributed them to the country's huge energy and transportation monopolies. Reforming them, he said, will accomplish far more than any government or institutional reform:

"If these -- I don't know, a dozen companies in Russia -- were reformed and became more efficient, the whole [of] Russia would be reformed."

According to Fedorov, Putin and his advisers have not really developed new economic reform policies, but merely set modest economic goals. Instead of this, he said, Putin's government should set goals that appear difficult, if not impossible, to achieve. Such bold goals would be impossible for the government to ignore.

That way, he said, the government would have to work far more diligently. It might not meet those goals, he said, but it would far exceed the more modest goals it is setting today.

A third speaker -- Clifford Gaddy of the Brookings Institution, another Washington think-tank -- said he agrees with Fedorov that Putin appears not to have changed the economic structural reforms put in place by his predecessors. But Gaddy said that even without the oil windfall of the past two years, Russia's small but steady economic growth can continue because of Putin himself:

"He's used these two years of windfall for consolidating political control of the economy. He's concentrated on strengthening the state, the central government, and all reforms have been measured by this criterion."

A far more pessimistic view of Russia emerged at a second seminar on Saturday. This session focused on what was called Russia's "human capital" -- its people as implementers of a new economy.

One participant was Harley Balzer, a professor of education at Georgetown University in Washington. He noted that Russians have long been proud of their educational achievements. But he said the country's educational system has suffered since the breakup of the Soviet Union.

According to Balzer, Russian education faces deep cuts in funding -- and a related decline in quality -- at a time that educational institutions elsewhere in the world are being strengthened. He said this is particularly true in technology education, which is more expensive and therefore less accessible in an economically struggling Russia.

Balzer said that because of these educational shortcomings, there is little likelihood that Russia can ever regain its former stature as a world power:

"Russia is not going to be back as a great power. It's going to be very hard to sustain economic growth. And the reason is that the human capital stock in Russia is under serious threat."

A second participant in the session was Murray Feshbach, a specialist in demographics at the Woodrow Wilson International Center for Scholars, yet another Washington think-tank. Feshbach's presentation was even more pessimistic than Balzer's.

Feshbach quickly displayed a flurry of charts and graphs on a projection screen. They outlined Russia's rapidly rising death rate and equally rapidly declining birth rate. For example, he said that in the United States, up to 90 percent of current 16-year-olds are expected to survive to the age of 60. But in Russia, he said, only 56 percent to 58 percent of 16-year-olds are likely to reach the age of 60.

Feshbach said such trends will have a profound effect on Russia's economy:

"Essentially, the bottom line is, I think they'll be dead before they solve their economic and political reforms. That's a very serious statement."

But the moderator of this session on "human capital" -- Loren Graham, a professor of the History of Science at the Massachusetts Institute of Technology (MIT) -- had a much more optimistic view, particularly regarding Russian education.

Graham reminded the audience that most companies in Russia are accused of "redistributing wealth" -- that is, focusing it on a few industrialists known as "oligarchs." Graham said its technology companies, on the other hand, are creating wealth -- allowing employees and managers to prosper by doing their jobs well.

Graham said that at a recent U.S. competition in computer programming, students from Saint Petersburg placed first and second. But the competitor from MIT -- which has a reputation for programming excellence -- placed only sixth.

According to Graham, when U.S. technology giants like Intel need to go to programmers outside the company, they look for Russian programmers. That, he said, is a testament to the quality of Russia's technical education.

But Graham's opinion was a minority view. The other speakers made it clear that Russia must vastly improve its health, social, and educational infrastructure, or it will risk not having enough people to rebuild its society.