Why was Russia ever in BRIC’s to begin with?
We understand the long term growth story of China, India, and Brazil. They have compelling stories based on demographics, proof of an increasingly important private sector, and development-minded governments.
Yet Russia’s growth recently has been of a far different variety than these countries. Russia was simply riding high energy prices, and that’s it. 70% of Russian exports beyond the former Soviet Union are energy-related. Meanwhile, the country’s political system has actually been driving in reverse.
Second quarter GDP numbers are making the dissimilarities of Russia painfully obvious: Russian GDP fell a sharp 10.9% in the second quarter while in contrast, China was up 8%, India about 5%, and Brazil is expected to log nearly 2% GDP growth.
“We can’t develop like this any longer,” President Dmitry Medvedevsaid yesterday during a meeting with political party leaders in the Black Sea resort of Sochi. “It’s a dead end. And the crisis has placed us in a situation where we will have to make decisions on changing the structure of the economy.”
We hope he passes this message up the chain of command, but it might not be enough. Besides being far too dependent on energy prices, the country’s shrinking population is a further reason to exclude them from BRIC’s.
Lower birth rates and higher death rates reduced Russia’s population at a 0.5% annual rate, or about 750,000 to 800,000 people per year during the late 1990s and most of the 2000s. The UN warned in 2005 that Russia’s then population of about 143 million could fall by a third by 2050 if trends did not improve.
Even if energy prices return to previous levels, it still won’t make Russia comparable to the other BRIC’s and could even hinder the restructuring efforts Mr. Medvedev publicly hopes for above. A return of easy energy income would likely further entrench political complacency. So please, while it might not roll off the tongue like it used to, let’s drop the R from BRIC’s.
Note: As a glimmer of hope, we should mention that President Dmitry Medvedev has indeed embraced the modern era with a video blog. But as one would figure, no comments are allowed.
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