Tag Archives: economy

Book review: Russia’s Response to Sanctions

Do sanctions work? More precisely, have the sanctions imposed on Russia in recent years worked? Given the growing tendency of Western states to resort to economic sanctions against countries they dislike, these are important questions. In the case of Russia, sanctions are the main tool used by the West to express its opposition to Russian foreign policy, and more generally to the ‘Putin regime’. Discovering whether they are achieving their supposed objectives (whatever those may be) should be a priority for students of international affairs, as well as for politicians.

According to the University of Birmingham’s Richard Connolly, however, ‘do sanctions work?’ is the wrong question, or at least it’s a question that can’t be answered until other questions have been answered, most notably ‘what is the effect of sanctions on the targeted country?’ And to answer that question you have to consider other ones, such as ‘how exactly do sanctions impact the targeted country?’ That in turn requires one to investigate in depth the political and economic structure of the target to understand how it operates and how it responds to external pressure. Every country is different, and operates according to a set of ‘intricate relations’ between the state, its citizens, and the various institutions within it. As yet, however, studies of the sanctions imposed on Russia have not sought to take these into account, leading to simplistic analyses. As Connolly says in his new book Russia’s Response to Sanctions, ‘Policymakers and other public figures prone to making hyperbolic statements about the state of the Russian economy today, and then using those statements as a basis for formulating policy and attitudes towards the country, often appear to do so without the aid of even a rudimentary understanding of Russia and its economy.’

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Soviet economy

I will be giving a talk at Carleton University this Wednesday on the subject of ‘The Economics of the Soviet Union.’ The lecture will begin at 7:00pm in University Centre 180, and will be preceded by a reception with pizza and soft drinks at 6:00pm in the foyer of the Tory Building. Details and registration here.

The limits of power

Vladimir Putin gave a short speech on Wednesday at the opening of the Russian State Duma, in which he said a couple of things which I found worthy of note. I’ll write about the second in a separate post tomorrow, but the first was the following statement.

In order to put the economy a new trajectory of growth, we must remove the legislative barriers which stand in the way of developing competition, the flow of investment, and the introduction of modern technologies, and must guarantee the balanced development of Russia’s regions, of the northern and far eastern territories.

Legislation will be introduced in the State Duma concerning support for entrepreneurship and individual initiative. This will include strengthening the legal protection of business from pressure exerted by unscrupulous employees – unfortunately, these still exist – of the regulatory bodies.

This supports my previous analysis that, economically speaking, Putin’s instincts are largely in favour of the free market. Having strengthened state control over the energy sector during his first presidency, and having thereby assured a steady stream of revenue for the state coffers, he sees further development of the economy as dependent upon small businesses. This requires a degree of deregulation. As he said in a speech in December 2014: ‘It is essential to lift restrictions on business as much as possible … It is crucial to abandon the basic principle of total, endless control.’

The speech also reveals that these deregulatory instincts are not having much impact in practice. In his December 2014 speech, Putin drew attention to the burden businesses faced from regulatory inspections. A year later he reiterated the need to create better conditions for business, but he also complained that although all the necessary decrees had been issued to reduce the regulatory burden, they were having no effect. Regulators were continuing to harass businesses. The fact that Putin today once again felt the need to talk of removing ‘legislative barriers which stand in the way of developing competition’ and of ‘strengthening the legal protection of businesses from pressure exerted by unscrupulous employees of the regulatory bodies’ provides further evidence that past decrees have not been wholly effective.

In short, Putin’s statement contains an important clue about why the Russian economy is struggling. Year after year, the president outlines a similar vision. He issues decrees. The Duma passes laws. But down on the ground nothing very much changes. For all the talk of Russia being an autocratic state, its leader’s power is remarkably limited.