The long-term growth of the Russian economy. The experience of the past for understanding the consequences of the Ukrainian crisis

On March 24, 2022, a seminar on applied macroeconomic research was held under the guidance of Yuri Simachev. Ilya Voskoboinikov presented macroeconomic research: "The long-term growth of the Russian economy. The experience of the past for understanding the consequences of the Ukrainian crisis". The report was devoted to two questions:

1. What are the consequences of the geopolitical shock experienced by the Russian economy?

2. What might be its impact on economic growth in the medium and long term?

Since the situation has not found a new equilibrium, it is still impossible to predict the full consequences of this shock. Although it is clear that there will be change, it is not clear, for example, what the changes there will be in the world economy and how the structure of Russian foreign trade will change, or how it will affect level of Russia's integration into the global financial markets. However, one can speak of individual mechanisms that shape long-term Russian growth that have worked in the past and are likely to emerge in the future.

Over the past four decades, the Russian economy has grown due to the export of natural resources, structural and qualitative changes in the labor force, technological changes, and mechanisms associated with Russia’s integration into the global economy. It survived the shock therapy of 1992, the transformational recession, the crises of 1998 and 2008, and the shock of the pandemic; it adapted to the changing conditions of foreign trade and sanction pressure. Finally, the Soviet period—the last three decades of the planned economy—contains the experience of development in conditions of almost complete isolation from the outside world.

The report examines the role of different sources of economic growth in shaping Russia’s economic growth in 1990–1998, 1999–2008, and 2009–2019, as well as the growth of Russian industry since 1961. Each of these episodes provides a better understanding of the possible consequences of the current crisis. The nature of the 1992 shock is close to the current one and the transformational recession that followed it is connected with the restructuring of technological chains and disorganization—the adaptation of institutions to new conditions. The "fat years" of 1999–2008 show the role of integration into global markets through technological catch-up and access to cheap loans. The stagnation of 2009–2019 provides estimates of growth based on investment in infrastructure and the oil and gas complex in the face of sanctions. Finally, a comparison of the planned and market periods of the development of Russian industry emphasizes the importance of market prices in the efficient allocation of resources, even in conditions of isolation. Much of the growth in non-market prices before 1990 was lost due to overinvestment in infrastructure at the expense of machinery and equipment.

Excerpts from the report are published on the website of the project "Econs"