Can Russia ever become a normal, free-market, democratic society? Why have so many reforms failed since the Soviet Union's collapse? In this highly-original work, Fiona Hill and Clifford Gaddy argue that Russia's geography, history, and monumental mistakes perpetrated by Soviet planners have locked it into a dead-end path to economic ruin. Shattering a number of myths that have long persisted in the West and in Russia, The Siberian Curse explains why Russia's greatest assetsits gigantic size and Siberia's natural resourcesare now the source of one its greatest weaknesses. For seventy years, driven by ideological zeal and the imperative to colonize and industrialize its vast frontiers, communist planners forced people to live in Siberia. They did this in true totalitarian fashion by using the GULAG prison system and slave labor to build huge factories and million-person cities to support them. Today, tens of millions of people and thousands of large-scale industrial enterprises languish in the cold and distant places communist planners put themnot where market forces or free choice would have placed them. Russian leaders still believe that an industrialized Siberia is the key to Russia's prosperity. As a result, the country is burdened by the ever-increasing costs of subsidizing economic activity in some of the most forbidding places on the planet. Russia pays a steep price for continuing this follyit wastes the very resources it needs to recover from the ravages of communism. Hill and Gaddy contend that Russia's future prosperity requires that it finally throw off the shackles of its Soviet past, by shrinking Siberia's cities. Only by facilitating the relocation of population to western Russia, closer to Europe and its markets, can Russia achieve sustainable economic growth. Unfortunately for Russia, there is no historical precedent for shrinking cities on the scale that will be required. Downsizing Siberia will be a costly and wrenching process. But there is no alternative. Russia cannot afford to keep the cities communist planners left for it out in the cold.
|Publisher:||Brookings Institution Press|
|Sold by:||Barnes & Noble|
|File size:||2 MB|
About the Author
Fiona Hill is a senior fellow in the Foreign Policy Studies program at the Brookings Institution. Trained as a historian at St. Andrews University and Harvard University, she has published extensively on a wide range of issues related to Russian and Soviet history, Russia's economic and political transition, the Caucasus, Central Asia, and energy and security issues.
Clifford G. Gaddy is a senior fellow in the Foreign Policy and Governance Studies programs at the Brookings Institution and a visiting professor of economics at Johns Hopkins University. His previous books include Russia's Virtual Economy (Brookings, 2002) and The Price of the Past: Russia's Struggle with the Legacy of a Militarized Economy (Brookings, 1996).
Read an Excerpt
The Siberian CurseHow Communist Planners Left Russia Out in the Cold
By Fiona Hill
Brookings Institution PressCopyright © 2003 Fiona Hill
All right reserved.
Chapter OneThe Great Errors
As observers have looked at reform in Russia over the decade since the collapse of the USSR, they have assumed that if the old system that produced the wrong results in the past is now changed, the new system will produce the right results in the future. Unfortunately, to be able to put a new system in place, countries in transition must not only dismantle the old system and replace it with a new one; they must also rectify the consequences of operating under the old system for a long period of time. In the case of Russia, the time frame was especially long. For more than seventy years after the Russian Revolution, the Soviet centrally planned economic system produced a certain set of outcomes, which became part of Russian history, society, and political culture.
One of these outcomes was a peculiar and unique economic geography that continues to define Russia and puts it completely out of step with the requirements of a market economy irrespective of system change. Today, despite the abolition of central planning, Russia still has a nonmarket distribution of labor and capital across its territory. People and factories languish in places communist planners put them-not where market forces would have attracted them. Russia cannot build a competitive market economy and a normal democratic society on this basis.
Another specific outcome of the Soviet system is the development of Siberia. In this instance, the freedom of the market was deliberately defied and perversely turned on its head by the use of the GULAG prison-camp system in order to conquer and industrialize Siberia's vast territory. Beginning in the 1930s, slave labor built factories and cities and operated industries in some of the harshest and most forbidding places on the planet, where the state could not otherwise have persuaded its citizens to go en masse on a permanent basis. In the 1960s and 1970s, leaders in Moscow decided to launch giant industrial projects in Siberia. Planners sought to create permanent pools of labor to exploit the region's rich natural resources, to produce a more even spread of industry and population across the Russian Federation, and to conquer, tame, and settle Siberia's vast and distant wilderness areas. This time, new workers were lured to Siberia with higher wages and other amenities-rather than coerced there and enslaved-at great (but hidden) cost to the state. Today's Siberia is the economic legacy and the embodiment of the GULAG and of communist planning.
Thanks to the industrialization and mass settlement of Siberia, at the beginning of the twenty-first century and a new era in Russia's economic and political development, Russia's population is scattered across a vast land mass in cities and towns with few physical connections between them. Inadequate road, rail, air, and other communication links hobble efforts to promote interregional trade and to develop markets. One-third of the population has the added burden of living and working in particularly inhospitable climatic conditions. About one-tenth live and work in almost impossibly cold and large cities in Siberia, places where average January temperatures range from -15 to -45 degrees Celsius (+5 to -49 degrees Fahrenheit). Given their locations, these cities (as they did in the Soviet period) depend heavily on central government subsidies for fuel and food; they also rely on preferential transportation tariffs. Costs of living are as much as four times as high as elsewhere in the Russian Federation, while costs of industrial production are sometimes higher still. The cities and their inhabitants are cut off from domestic and international markets. Russia is, as a result of its old centrally planned system, more burdened with problems and costs associated with its territorial size and the cold than any other large state or country in northern latitudes, like the United States, Canada, or the Scandinavian countries.
From the perspective of today's market-economy imperative, looking back over Russia's history reveals that misallocation was the dominant characteristic of the Soviet period. Resources (including human resources) were misused from the point of view of economic efficiency. The system produced the wrong things. Its factories produced them in the wrong way. It educated its people with the wrong skills. Worst of all, communist planners put factories, machines, and people in the wrong places. For a country with so much territory, especially territory in remote and cold places, location matters a great deal. Not only did Russia suffer from the irrationality of central planning for more than seventy years, but Russia's vast territorial expanse offered latitude for a system of misallocation to make mistakes on a huge and unprecedented scale. Had the Bolshevik Revolution taken place instead in a country as small and contained as, say, Japan, the damage could not have been as great. While central planning would still have distorted the economy, it would not, and could not, have distorted it as much in terms of locational decisions. In Russia, Siberia gave the Bolsheviks great room for error. Towns and cities grew to huge size in places they would never have developed under the influence of free-market forces.
Of course, the Bolsheviks inherited Siberia and the rest of Russia's vast territories from the tsars. It was the tsars who, over the course of five centuries, made Russia the world's largest country-a state defined by its physical geography, with a national identity rooted in the idea of territorial expansion and size ("gathering the Russian lands"). It was also the tsars who first pushed people out into Siberia and planted the seeds of cities on the farthest frontiers of the state to establish and affirm Russian sovereignty. But it was the Bolsheviks-the Soviets and their central planners-not the tsars, who shaped modern Russia's economic geography. Where the tsars had placed forts, villages, and towns in Siberia, the Soviets built cities of over a million. Where the tsars exiled thousands of prisoners to Siberia, the Bolsheviks and Soviets deployed millions of labor camp inmates to build factories, mines, and railways, as well as cities. The tsars bequeathed to the Bolsheviks a huge swathe of the world's coldest territory. The Bolsheviks chose to defy the forces of both nature and the market in developing it. Soviet planning subsequently gave modern Russia a supremely distorted economic geography with a huge portion of the bequest (cities, factories, and people) lost in the distance and cold of Siberia. It was a costly gift that can neither be easily maintained nor adapted to the market.
This book uses economic statistics, economic geography, and history to describe the extent to which people in Russia live and work in the wrong (distant and cold) places and to examine the implications of this for the modern Russian economy. Reviewing the history of Russian territorial expansion and the conquest and development of Siberia, the book outlines when and how this misallocation of resources happened. It explains why market mechanisms alone were not able to rectify economic distortions in the 1990s and why these distortions are likely to persist in the immediate future-given desires at all levels of the Russian government to redevelop and repopulate Siberia, and the fact that Russia's size and ideas of battling the elements continue to define the modern state. Finally, the book considers ways in which the Russian government might be able to address some of the distortions by rethinking the relationship between Russia, its economy, and its territory, especially Siberia.
This last point is especially important. Because the spatial misallocation was on such a massive scale, and went on for so long, it has actually become part of Russia's profile. Russia continues to be defined by its size. In spite of all its upheavals, including the loss of territories associated with the Soviet Union and the Russian Empire, Russia remains the world's biggest country. The discrepancy between its sheer size and its economic potential continues to draw the attention of even the most renowned economists and radical reformers in Russia as well as international observers. Consider, for example, this formulation attributed by Russian journalists to Andrey Illarionov, President Putin's economic adviser, in a December 2002 presentation on Russia's persistent economic difficulties and the prospects for growth:
Today the way Russia looks on the map of the world is as follows: it occupies 11.5 percent of the world's territory, it has 2.32 percent of the global population total, and its share of world gross domestic product (GDP) is 1.79 percent in terms of purchasing power parity and 1.1 percent at market exchange rates. The unavoidable conclusion here is a cruel one. Human history has no precedent of a gap this wide between "territorial power" and economic "insignificance" holding for any extended length of time.
We argue in this book that trying to tie GDP to territory is precisely the wrong way to think about Russia and its economic development. Instead, we should first remember that economies are "big" not because of their territorial expanse or quantity of raw materials, or even because of the amounts of physical output. Economic size is a matter of the quality of the output as measured by value created. Today's "big" economies are big because of the number of transactions that take place within them. Since the time of Adam Smith, we have known that the rate of value creation depends on the degree of specialization of the economy and the intensity and complexity of exchange within it. In this context, Russia is a large economy, but only as measured in the numbers of plants, machines, and the physical quantity of other inputs. The central issue to be resolved in the Russian economy is, therefore, how to put those inputs to their highest-value uses. To accomplish this, Russia needs not to try to bring its population, purchasing power, GDP, or any other economic index into line with its territorial size, but to concentrate people and resources within that territory.
In essence, to become competitive economically and to achieve sustainable growth, Russia needs to "shrink." It must contract not its territory (its physical geography), but its economic geography. "Being big" is a serious impediment to development unless distances can be reduced and connections between population centers and markets can increase. Shrinking distance and increasing connections has been the consistent trend in other large countries over the course of their histories. Responding to market forces, the United States, Australia, and Canada, for example, have concentrated and connected their populations within their own vast territories much more than Russia. For the purposes of both economic productivity and good governance, this gives them a distinct advantage over Russia.
Russia's greatest dilemma today is that it must connect an economy that is both physically vast in size and terribly misdeveloped. This is a costly endeavor, and it is also likely to be inefficient once accomplished if connections are pursued within the framework of Russia's current economic geography. Reconnecting the Russian economy is not simply a question of refurbishing and upgrading the existing systems of road, rail, and air transportation, or of constructing new infrastructure and creating new means of communications. This will simply improve the connections between existing towns, cities, and enterprises-especially those in Siberia-which should never even have been located where they are in the first place. New infrastructure will, at high cost, have made places more livable where, from an economic point of view, few should live. As a result, the Russian government and the population will have forgone alternatives that are better.
In the final analysis, if Russia is to "shrink"-contract its economic geography, concentrate its population, and ultimately connect its economy-then mobility is the key to the future. Modern economies are characterized by mobility of factors of production. Today the world is becoming more mobile as people seek new and better opportunities for themselves and their families. This means that people in Russia need to move to warmer, more productive places, closer to markets and away from the cold, distant cities placed by the GULAG and communist planners in Siberia. Unfortunately, the dominant trend in Russia's imperial and Soviet history has been to constrain as well as direct the movement of population. Today, although the legal right to move is enshrined in the new Russian constitution, Russians are still not really free to relocate to places where they would like to live and work. Residence restrictions in cities like Moscow, resource constraints, poorly developed job and housing markets, and the absence of social safety nets all work against personal mobility, while the Russian government also attempts to direct investment to target locations of its choosing. Ensuring mobility, not just changing the system, will be the major challenge for Russia in the coming decades.
Excerpted from The Siberian Curse by Fiona Hill Copyright © 2003 by Fiona Hill. Excerpted by permission.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.
Most Helpful Customer Reviews
- - Most Westerners with an interest in Russia know their dilemma is palpable. This country with the largest land mass has great natural resources in oil, gas, gold, nickel, diamonds, forest products, and on and on. The Russians I know are generous to acquaintances, have strong family ties and love their country. Contrast this with across the board pay far less than much of the worlds employed with similar skills and education. Compared with the West, tuberculosis and HIV Aids are close to epidemic. - - In a readable and systematic critique, Hill and Gaddy carefully describe Russia's geography and the overpopulation crisis in Asiatic Russia, the coldest of the world's locations. The 39 million Russians living east of the Urals are a tremendous net financial drain on the Russian economy. With clarity, the authors arrive at the solution of relocating over half of this population to warmer, western parts of Russia. - - The authors also present the enormous problems with such a solution. Russia's leadership barely recognizes the problem and continues to urge population development in Siberia and the Far East of Russia. Moscow is Europe's largest city and the Moscow region is the most prosperous in Russia, but local politicians successfully resist all immigration. All other places in western Russia combined do not have possible employment for even a small fraction of the people the book would relocate. - - The Siberian Curse has good argument examples included and laid out so they do not detract from the main text. Any reader should also be aware that the Notes provide much additional understanding. - - Of the many books on Russia I have read in the past six years, only one other provides so much valuable information for the time invested. That is Anne Applebaum's - GULAG: a history - , Doubleday, 2003. When you are ready to understand more about Russia, read these two books.