It’s been three-and-a-half years since I was in Moscow. The city does not look or feel different now—in the second year of the war (a.k.a. “Special Military Operation”) and massive Western sanctions—in its usual bustling, often chaotic and brutal self. The stores are still full of Western goods; the prices of groceries are stable and similar to those in Central Europe. There is no sense of urgency or impending doom. Life in Moscow goes on as if Ukraine were on another continent. There is still money to be made here, except that the Chinese in business suits have replaced their Western counterparts as they talk deals with the Russians at the Alexandrovsky bar, in the Hotel National.
The opening of this year’s Moscow Economic Forum (MEF) on Tuesday morning, April 4, also produced a jolt of déjà vu. It brought to mind my 2018 MEF report, which was posted here five years ago: “Speaker after speaker complained that President Putin has no coherent strategy for Russia’s comprehensive development.”
Five years later, little has changed.
Oksana Dmitrieva, member of the State Duma Committee on Budget and Taxes, presented nine charts comparing three periods of Russia’s development: late czarist (1891-1913), early socialist (1928-1940), and contemporary (2014-2022). In the two decades before the Great War, Russia’s industrial production grew by 460 percent, and during the 12 key interwar years by 600 percent. During the eight-year period after 2014 its overall growth was a paltry 12 percent. Under the last czar, three factors were generally favorable to growth: ready availability of both foreign capital and technology and a growing domestic pool of highly trained engineers. Under socialism, in the interwar period, capital had to be generated from within—at a huge cost to domestic consumption—but all other factors were favorable to robust growth.
Today’s Russia has ample reserves of domestic investment capital. It is lagging technologically, however, and it is suffering from an acute and growing shortage of highly trained engineers, technicians, and scientific researchers, whose numbers have been declining for over two decades. Economists now outnumber engineers, and the trend is certain to continue, short of a decisive long-term government program to encourage young people to choose a career in engineering.
The results for the Russian economy, as presented by Dmitrieva and other speakers, are staggering: Russia produces only 20 percent of its own machinery. Depending on the specific sector, it depends 40-60 percent on imported equipment and machine tools. No car or airplane can be made in Russia without foreign components. Machine building, the chemical industry, and the entire high-tech sector are the most glaring weaknesses. The country has human and material prerequisites, but it has no industrial development strategy to make use of those resources. Investment in the huge and vitally important energy sector is declining; machine building is minimal; metallurgy and shipbuilding have all but disappeared. The culprit may be the system of taxation, which does not encourage any investment in domestic manufacturing.
Robert Iskanderovich Nigmatulin, a prominent member of the Russian Academy of Sciences, pointed out that while China has thousands of miles of high-speed railways, Russia has failed to build its only proposed project of this kind—the 800-kilometer (500 miles) Moscow-Kazan high-speed railway—which was canceled “for no good reason.” He also warned that Russia has “no experts in the exact sciences and engineering” and that no improvement is possible without serious government action. In the ratio of college-educated engineers to general population, Russia ranks 29th in the world.
Nigmatulin’s other key points are worth recapitulating because they are both alarming and little known outside Russia. Since 2013, Russia’s economy has grown at 0.9 percent per annum. During the same period, the world economy has outgrown Russia by 310 percent. Poland has done so by 470 percent, South Korea by 320 percent, the United States and the European Union by 270 percent, and China by an astounding 750 percent. Russia’s per capita income is now lower than that of Turkey or any former Soviet-bloc country in Europe, save Bulgaria or the three Baltic states.
On current form, the gap will only continue to widen to Russia’s detriment, Nigmatulin insists, because the return-on-investment capital is 1.5 times below that of Europe and the United States, and two times less than in China. For the past 30 years, Russia has been spending 9 percent of its GDP on health, education, science, and culture, Nigmatulin went on, while the Western world has been spending more than twice that much on human development—20 percent on average.
One of the results is Russia’s very high mortality rate—“the highest in all of Europe,” according to Nigmatulin—and collapsing birth rates, which are declining again after a slight and, as it turned out, temporary recovery in 2015. In that year, Russia recorded 1.94 million newborns, but in 2022, only 1.31 million live births. And based on 33 public health indicators, Russia occupies the 119th place in the world.
The problem is not with others, Nigmatulin concludes, “it is with us!” Russia’s future is uncertain without government strategies for comprehensive investment, social and economic growth, acquisition of new technologies, development of small and medium businesses, and development of the economy of knowledge. These priorities, he insists, demand a change in decision-making structures and a new economic order.
Nigmatulin’s final slide included a famous quote by one of Russia’s greatest generals of all time, A.V. Suvorov: “For the Fatherland, the greatest danger lies not in the external enemy, but in its own idiots.”
After this visit, I am having some serious concerns about Russia’s resilience to the enormous external and internal pressures it is facing. Even though my time there was brief, I’ve had several significant exchanges—both with other conference participants and with a few friends—which have made a disconcerting impression. There is a sense of uncertainty about the future, angst even. I had never encountered this mood before on my many previous visits to Russia over the past decade. It is somewhat comparable to the prevailing spirit of the 1990s, but back then, at least, it was possible to ascribe Russia’s many misfortunes to the legacy of a failed system that had only recently collapsed.
Today, a quarter-century later or more, there is an implicit sense that the country is on the wrong track, but since this is no longer due to vis major (“overwhelming force”), there is no apparent alibi. A prominent Russian author was in fact quite explicit when we talked last Tuesday afternoon. “Everything needs to be swept away if a new, potentially promising start is to be made,” he said in essence. “If we just go on muddling through like at present, there will only be further decline, decline without an end, and nothing to warm my heart over what will be passed on to those who come after us.”
A Muscovite friend took me out to dinner on Wednesday night, April 5. He sounded resigned rather than angry when he said that “the promise of the Russian spring has fizzled out, and all my hope with it.” He is a solid patriot, let me add, and not some bleeding-heart liberal who routinely denigrates his country to foreigners (in which case he wouldn’t be my friend in the first place). He sees a system “which is on the way to become almost as calcified as the late Brezhnev era, with no bold thinking at the top, no vision, and certainly no burning heart.”
The conflict in Ukraine may have aggravated such feelings, but they would be likely present even without the “Special Military Operation”: the unresolved structural problems remain, quite apart from Ukraine. But with regard to the war, I have not met anyone who thinks that Putin’s two clearly stated objectives—disarmament and denazification—can be attained. My friends agree that the Russian army is not able to make a major breakthrough and that the best we can hope for is some negotiated peace, far short of any meaningful definition of “victory.” On the other hand, it seems clear that leaving any part of the western Ukrainian Banderastan unoccupied will mean leaving unleashed a violently hysterical anti-Russian beast that will never rest.
The move is both a mistake and a crime, a minus-sum game for the declining European remnant. Yet the entire U.S. neoconservative-neoliberal duopoly counts on it continuing indefinitely. Some of them dream of the dissolution of the Russian Federation into many fragments, the imposition of crippling reparations on what remains of Russia, and the maintenance of sanctions in perpetuity. What these people have in store for Russia is incomparably more brutal than what the victorious Allies imposed on Germany at Versailles.
The notion that Russia will be not only defeated but also humiliated, and perhaps destroyed as a sovereign state, reflects the deep emotional longing of those advancing such ideas. They are therefore not at all susceptible to rational arguments. The challenge is huge, and the decision-makers in Moscow are not able or willing to devise an effective counterstrategy. If the Third Rome fails, there will be no Fourth Rome.
A potential positive is that the Russian intervention in Ukraine might actually have unleashed a massive realignment of the world. We could be looking at the last leg of the U.S. global empire, thanks to this conflict. But such a prospect is far from certain, or even likely. The drama will probably end in some sort of deadlock between the continuing American bid for global dominance and China’s resistance, while Russia descends gradually into the status of a second-class power, ever more beholden to the Middle Kingdom.
The Ukrainian campaign is not just the fight to retain strategic depth along Russia’s vulnerable southwestern flank; it is also the struggle to retain its status as a great power. The Biden administration is now more than ready for reckless escalation, a deadly game of chicken with nuclear stakes. The future is dark.
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