Saturday, September 30, 2017

What prevents Russia from having an economy akin to modern China?

  1. Russian mentality, as well as Spanish (and Latin American) one is not trade-oriented. Unlike Italian, Dutch, English, German and French gentry, Russian nobles never invested money in trade or industry. Russian merchants were not influential under the tsars and were completely exterminated by Stalin. The formation of the capitalistic elite in Russia is painful and contradictory. This is one of the reasons why Russia is not successful enough to fight corruption.
  2. Russian mentality is too much straight-forward. When Russia is hit by somebody, it hits back. China tries to sidestep from the blow and prefers not to hit directly a stronger or equal adversary. The latter strategy is usually better.
  3. Russia has a tradition of extensive development. It is very hard for Russia to learn how to intensify its strength using limited resources.
  4. China’s market is simply bigger. Russia had much better chances to compete when it had the population of the USSR, almost twice bigger than it has now.
  5. Russia has low population density. It hampers the development of infrastructure, especially in its Eastern regions.
  6. Russia is better in inventing new products, but it is not persistent enough to make them eventually perfect. Neither is it good in copying somebody else’s technology.
  7. Unlike the USSR, Russia does not possess anymore the complete chain of any production. It depends on foreign suppliers.
  8. Russia lost too much competence during the deindustrialization in the 90-ies.
  9. This being said, Russia is still competitive. The new generation of Russian elites will be able to show better performance.

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