Russia's march toward self-reliance
As its oil revenue drops and Western sanctions over Ukraine take hold, Russia seeks to cut its economic dependence. Yet the history of prosperity shows the need for nations to share in mutual dependence.
Feeling rather alone in the world these days, like a schoolyard bully who suddenly finds himself friendless, Russia is now singing a song of economic self-reliance. On Thursday, President Vladimir Putin asked Russians to depend more on their own goods and to create their own businesses.
“We should wipe the critical dependence on foreign technologies and industrial production,” he said in his annual state of the union message. “The main thing we need to understand is that our development depends on ourselves first and foremost.”
The new inwardness is partly a result of Western sanctions on Russia for taking Crimea as well as a drastic drop in the global price of Russia’s main export, oil. Inflation is now nearly 10 percent. The economy may be in recession next year. And more Russians are fleeing the country than ever.
Yet Mr. Putin’s drive for more economic independence may also be a way to restore patriotism and an identity centered on his notion of “Russian civilization.” He points to the West for what not to do:
“If for some European countries national pride is a long-forgotten concept and sovereignty is too much of a luxury, true sovereignty for Russia is absolutely necessary for survival,” he said. Russia must be sovereign, he adds, “or we dissolve without a trace and lose our identity.”
Putin now plans to support entrepreneurs who can supplant foreign goods or services. Rather than remain dependent on the foreign banking system, he plans a national payment system like that in China. His government has already cut off imports of many food staples from the West and has warned Russians against traveling abroad. Many state employees are banned from leaving the country. And global access to the Internet is now tightly controlled.
For nearly a quarter century, ever since the collapse of the Soviet empire, Russia has embraced global markets, even joining the World Trade Organization in 2012. But if it now returns to a form of autarky (economic self-reliance), it risks becoming more like North Korea – proud and stable, yes, but weaker, fearful, and perhaps dangerous.
Russia does not have a strong history of entrepreneurship, given its long dependence on government to run the economy. A poll by the Russian Academy of Sciences found that more than half the middle class were employed by the state. Small and mid-size businesses are only about a fifth of the economy, far less than in other wealthy countries. Yet Russia can surely do better at creating value from its abundant resources and the natural talents and creativity of its people. It is well-known, for example, in producing software geniuses.
This should not be done, however, out of national pride or fear of imagined foes. The history of prosperity and freedom in the world is built on mutual dependence between nations, as Germany and Japan discovered after World War II. National greatness can be built on sharing and cooperation.
Russia has certainly violated international norms in Ukraine. But it is not a permanent pariah. A nation of 144 million people spread across 11 time zones can hardly pull up the economic drawbridge.