Russia is Falling Behind

One of the greatest things a country can have is a plethora of natural resources because it provides a large amount of money coming into the country. This money can be used to develop the country and help diversify the economy so that the country becomes less reliant on the funds that come in from these resources. One of the worst things that can happen to a country is to become so reliant on natural resources that the elite of the country would rather bask in the wealth instead of diversify the economy when they have the chance.

Russia has seemed to take the road more traveled and focus heavily on their natural resources (oil and natural gas) that they export instead of trying to diversify their economy. Instead of making economic changes in the country, they’d rather threaten European countries so that they can continue the flow of their resources to other countries in return for large wallets of profit.

This is so dangerous because economies that rely on natural resources for all their profits suddenly die when those resources aren’t needed any longer. There is a huge push globally to try and get off natural resources like oil and gas and replace it with renewable sources such as solar and geothermal. This is great for the environment, but it is catastrophic to the success of Russia because once oil and gas is no longer needed, their bank accounts will run dry. This, in turn, will result in no money to develop the country farther.

Another example of how Russia is falling behind is to compare it to what is commonly called BRIC: Brazil, Russia, India, and China. This year, China’s GDP will rise by 8.6%, India by 6.0% and Brazil by 0.3%. Russia, on the other hand, will most likely drop by 8.5%. In other words, while the other three globalizing countries are really starting to prosper, Russia is falling behind and losing speed. The primary reasons for this are because of corruption and an apathy towards diversification.

Russia is considered the most corrupt country in the G20. All projects that the government attempts to do, some level of bureaucrat’s makes their cut which makes something that might cost only $1 million turn into something that might cost $3 million. Fortunately, there is a little bit of change happening in Russia. President Medvedev fired Putin’s old media minister because he was controlling all of Russia’s television through the government while, simultaneously, controlling a business empire in the same niche. Conflict of interest anyone?

If Russia wants to survive and continue to grow as a member of BRIC, they need to make some changes. Firing the media minister was one step, but if that is an exception and not setting precedence, nothing is going to change. This needs to be the new line drawn so that those in Russia understand that if they are corrupt, they will be sacked. The fundamental issue is that there are two controlling parties in Russia: Vladimir Putin and his old ways and the Reformist Group led by Dmitry Medvedev.

If Vladimir Putin assumes control again, Russia will continue to grow and attempt to throw their influence around in negative ways. However, if Medvedev can keep power for his next term and really put his foot down on corruption, Russia might turn around. Unfortunately, the only way that there is going to be real, lasting change in Russia is if they make economic changes and start diversifying their economy. They made one step by forcing 2,500 government run businesses go private.

Will that be enough, though? Or, is BRIC going to lose the R for good? Russia still has a chance to make a change in their policies, but they are quickly falling behind the powers that are growing fast. If they don’t move efficiently, they will forever be forgotten as a once great power that lost as the demand for oil disappeared.