The Siberian Curse: How Communist Planners Left Russia Out in the Cold
Everyone knows that Russia is big and cold. Hill and Gaddy argue that Russians, during the Soviet era especially, have treated the first condition as an advantage and the second as surmountable -- and that in both respects, they are deeply mistaken. Distance and temperature, they argue well with ample data to back them up, have been critical drags on Russia's economic development. Efforts to populate and industrialize the frozen reaches of Siberia have always been economic folly. If Russia is to escape the past, it must, as Canada, Sweden, Finland, and Norway have, concentrate people and activity in large urban areas in the country's warmer regions: Europe should be its target market, fifteenth-century Muscovy its heartland, and Siberia a commodity-producing hinterland (as is northern Canada). How is this to be accomplished? Make other cities livable, not just Moscow and St. Petersburg; rethink internal migration policy; reverse the development strategy for Siberia; and economically link the Russian Far East with Northeast Asia.
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Russia does not need a Pinochet, but it does need the Chilean economic model. For Russia to grow at self-sustaining annual rates of seven to ten percent for a decade or two -- the only way it can pull itself out of poverty -- it needs much more economic liberalization. Four reforms inspired by Chile's dramatic turnaround can help Russia out of its doldrums: pension privatization, tax reform, radical deregulation of coddled industries, and the replacement of the ruble with the euro. The indispensable element is not a strong four-star general but a team of determined economic policymakers who know that freedom works.
Russia's popular new president is better positioned than his predecessor was to enact needed reforms. But all of Vladimir Putin's efforts will come to nought unless he can do what Boris Yeltsin never did: rein in Russia's plutocrats. These ruthless oligarchs have fleeced Russia of staggering sums, seizing control of its oil industry -- one of the world's largest -- in the process. Through payoffs and intimidation, they have insinuated themselves into electoral politics and virtually immunized themselves from prosecution. None of Russia's problems -- neither its crippled economy, nor its emaciated infrastructure, nor its wheezing democracy -- will be solved while the robber barons retain their power. America cannot afford to sit on the sidelines any longer.
