7.10.10

Brezhnev Calling

One American academic warns that if oil stays around $70/80 a barrel, Russia is headed back to the Brezhnev days.


Scary


Yale Economics Professor, Aleh Tsyvinsky said the stagnation of the 1970s, when a nip of vodka was the common way of getting through the day, is inevitable if Russia does not reform and remove the burdens on innovative small businesses, from corruption to regulation.

Russia is a relatively rich country by world standards but that means growth in the future is much harder than during the catch-up phase of the past. Top-down reform has been tried and has failed, says Tsyvinsky, but it has failed because there is no demand for reform.

Unfortunately, the curse of oil wealth means that Russia's government has little incentive to reform while the oil price brings in enough revenue to grease the wheels of state.

Speaking at the VTB Russia Calling forum in Moscow this week, he says the answer is to sell off the large state corporations which have no genuine interest in reform or innovation and subject them to the rigours of the market.

I tested the idea on my Russian colleagues. Stalin doesn't frighten them but returning to the Brezhnev era scares them witless.

No comments: