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October 25, 2005
Tristram Hunt.
The shorter Tristram Hunt column.
"Ewww, rich people, icky!".
Slightly longer version:
The 90s saw a legal ram raid of Russian resources that sent life expectancy and GDP rates plummeting.
Anyone who believes pre 1991 figures on Russian GDP needs their head examined. Even the CIA grossly over estimated them. One expert on the subject is Richard Layard. I’m sure he’d be delighted to speak to an enquiring Guardian journo. One (possibly apocryphal, I’ve not been able to find direct reference to it on the net) comment was made by Gorby back in 1986. That absent increased resource extraction and population growth, Russian GDP in that year was the same as it was in 1913. That isn’t what the published figures were saying of course, so the collapse in the 90s was actually a recognition of reality.
October 25, 2005 in Business | Permalink
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Comments
"Anyone who believes pre 1991 figures on Russian GDP needs their head examined."
As does anyone who thinks that Russian GDP didn't plummet in the 1990s - or do you think that all that unemployment, hyperinflation and falling real wages, and falling life expectancies were just a coincidence?
The claim that incomes fell sharply in Russia is not based just on official GDP but is also supported by household income and expenditure surveys - in fact, these surveys show an even bigger drop than the official figures.
Tim adds: Really? That’s exactly what Layard was working on in Russia, sorting out those statistics. I remember going to a talk given by him in Moscow, the thrust of his speech being that looking at household spending did not support the idea that there had been a massive drop.
Posted by: Jim | Oct 25, 2005 10:49:38 AM
Yes, really. This document has a good summary (see especially Figure 3.6):
http://www.worldbank.org/research/inequality/inequalityand%20transition/BrankoEd3.pdf
Tim adds: I’ll admit I haven’t read all 250 pages but it appears to be in direct contravention to what Layard was saying at the time. I simply don’t trust any figures coming from pre 1991 Russia.
Posted by: Jim | Oct 25, 2005 11:35:32 AM
Okay, the figures are debatable. But doesn't this all prove the point that socialism in whatever form generally hinders growth and that solving the problem will be painful? The duration and intensity of the pain being somehow correlated to the duration and intensity of the socialism that preceded it.
RM
Posted by: Remittance Man | Oct 25, 2005 11:53:04 AM
"I simply don’t trust any figures coming from pre 1991 Russia."
Except, apparently, when you agree with them, like that supposed comment from Gorbachev.
Posted by: Jim | Oct 25, 2005 12:38:20 PM
RM,
Like Thatcher fixing the economy after the left wrecked it.
Posted by: Rob Read | Oct 25, 2005 1:16:38 PM
RM,
Like the Chinese socialist government is doing with their own country? Heck, they are even worse than 'socialist' they are communist!
Posted by: angry economist | Oct 25, 2005 3:22:18 PM
My Grandparents just came back from China, and the Chinese system they saw where not communist in anymore than the most superficial ways. China is a Capitalist dictatorship, red in tooth and claw.
Posted by: chris | Oct 25, 2005 3:56:03 PM
Chris, that just begs the question, why hasn't China's transition from communism to capitalism been as painful as Russia's? Not that I have the answer or anything ...
Posted by: Jim | Oct 25, 2005 5:00:02 PM
Tim, Layard doesn't support your view that shock therapy wasn't a disaster. Think what you're saying here; that productivity increased massively between 1991 and 1998 (because in your view of the world, GDP was basically the same despite massive unemployment) and that the "recognition of reality" was so traumatic to the Russian population that lots of them died of the schock. The unemployment and life expectancy figures are the hard numbers here because a person is either alive or dead, working or not. The GDP figures have to either agree with that story, or the GDP measure isn't measuring what it's meant to.
In any case, even if Russia had seen an economic miracle in the 1990s, that still wouldn't make it OK to steal the country's entire natural resources, would it? Hunt's basic point is that the Russian oligarchs did not come by their wealth honestly and should be treated as something closer to Robert Mugabe than Bill Gates.
Posted by: dsquared | Oct 25, 2005 8:08:00 PM
I've no answer for that either. However one of the factors might have been that it didn't happen as explosively as the Soviet collapse. The communist party is still there, it's just not that communist anymore.
Posted by: chris | Oct 25, 2005 8:47:11 PM
Jim, Chris: I argued in an old blog post that the basic answer is that China has capital controls. This means that it's not possible (or at least, nothing like as easy) for Chinese oligarchs to convert their assets to a liquid form that can be taken out of the country. It was this massive capital outflow that really did the damage in Russia, because it needed to be financed by a current account surplus, which in turn was only achieved by a massive domestic demand crunch.
Posted by: dsquared | Oct 25, 2005 8:59:09 PM
It's also worth pointing out that the Russian economy today (and in Soviet times) is probably stronger than its reported GDP would indicate, due to the importance and size of the black market.
Posted by: Andy | Oct 25, 2005 9:34:50 PM
Hmm and how many of the 11 of China's Fortune 500 are in Private hands... none! All of China's most productive companies and assets are owned by the state.
China - capitalist without any capital owning class? a socialist country that looks like a capitalist one?
Personally I think China defies being put in the capitalist/socialist box. But I also think something is going deeply wrong in that country.
Posted by: Angry_Economist | Oct 25, 2005 10:09:14 PM
Agreed, Angry Economist.
Of course, we appear to rely on the distinctly non-capitalist China to fulfill our oh-so capitalist need for consumer goods (not to mention foriegn investment and the rest).
Which kind of reminds me of the kind of the self-styled anarchist types who actually live off the dole...
Posted by: N.I.B. | Oct 25, 2005 11:41:59 PM
And remember, GDP can rise via two ways:
1. Increasing GDP
2. Decreasing the population
Slaughtering several million people can do wonders for your growth figures....
Posted by: AJE | Oct 26, 2005 12:50:18 AM
And remember, GDP per capita can rise via two ways:
1. Increasing GDP
2. Decreasing the population
Slaughtering several million people can do wonders for your growth figures....
Posted by: AJE | Oct 26, 2005 12:51:20 AM
Angry,
I always thought communism was a very extreme form of socialism.
RM
Posted by: Remittance Man | Oct 26, 2005 11:54:22 AM
