Saturday, May 20, 2006

The Russian Diaspora and Russian Economic Growth

In a recent article published in Post-Soviet Affairs (vol. 22, no. 2, 2006, pp. 90-98), Gérard Roland constests the widely-held view that despite rising oil revenues the Russian economy has been slowing down. Arguing instead that Russia has been experiencing steady growth, he challenges the notion that investor concerns stirred up by the breakup of oil giant Yukos - a goodly portion of which subsequently was purchased by the state-owed gas monopoly, Gazprom - have seriously undermined the Russian economy. Roland makes the case by pointing out that GDP and private consumption have been on the rise since the first quarter of 2003, during which time government consumption has remained flat. While much of this owes to world oil prices, he points out that GDP has been growing across a number of non-energy sectors.

Roland contends that these positive trends together with an improved unemployment rate, a strong fiscal surplus, and low inflation portend continued growth in spite of increasing corruption and a decrease in Russia’s competitive ranking (as well its rankings on protection of property rights and judicial independence). Nonetheless, not all is rosy. While the outlook for the mid-term appears good, prospects for the future are clouded by, among other things, Russia’s demographic problem.

Virtually every one of the world’s most developed economies is faced with a similar challenge, but Russia’s is quite a bit worse on a number of dimensions. For starters, the average life span of a male is now less than 59 years, and the average number of children borne by a Russian female is below 1.35. If this continues, the country will have lost one-sixth to one-fifth of its current population by 2050.

In order to sustain economic growth, Roland predicts that Russia will have to open its doors to mass immigration by Turkic-speaking Muslims from Central Asia. I quite doubt that it will look in that direction. During the Soviet era, central planners were quite concerned by the prospect of core Slavic areas, Russia among them, being overwhelmed by Central Asian peoples. The Russian population, as well as the country’s elites, remain firmly opposed to such an occurrence.

A more likely source of replacement population is the Russian diaspora. During the Soviet era, Russians moved to virtually every corner of the empire to provide a loyal and well educated work force in the defense industrial sector, a sector that thoroughly dominated the economy. Upon the breakup of the Soviet Union, these Russians became citizens of a “foreign” country, often unwillingly so. While many of them have since immigrated to Russia, millions remain outside of Russia’s borders, providing the country with a population reservoir for the future.

Russia is loath to tap this reservoir at present as it provides the country with a “fifth column” of sorts in those states immediately bordering it. While not directly involved in subversive activity, the Russian diaspora remains largely unassimilated in many of these states. Further, the diaspora provides a conduit for Russian business (and state influence) to maintain a major presence in places such as Ukraine, Estonia, Latvia, Moldova, Georgia, Azerbaijan, Kazakhstan, and Uzbekistan. However, were Moscow to engage in a concerted effort to entice a sizeable portion of this diaspora to leave for jobs inside Russia, not only would the Russian economy be strengthened, but the resulting migration potentially would constitute a brain-drain that would leave many countries economically more dependent on Russia, among them Ukraine and the Central Asian states.

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