In a recent comment “When the former Soviet Union almost became a democracy,” former Secretary of the Navy J. William Middendorf made some timely observations on the Russian economy.
We know that Russia’s progress in market-oriented reforms has been uneven and often reversed at the behest of those who wish to maintain the status quo.
Large public institutions have increased their dominance of the financial sector at the expense of domestic and foreign private banks.
Corruption pervades the economy and continues to erode trust in government.
Indeed, the Russian economy continues to underperform, making economic declines inevitable. Three decades after the collapse of communism and the disintegration of the USSR, the Russian government still has not adopted any of the significant structural economic reforms the country needs to make its economy truly competitive for its people.
According to the 2021 edition of the Heritage Foundation’s Economic Freedom Index, Russia’s economic freedom score is only 61.5 out of 100, making its economy the 92sd-the freest among the 178 countries whose economies were rated. Russia is ranked 42nd out of 45 countries in the European region, with an overall score below the regional and world average.
The cold reality is that, based on the current trajectory, the long-term outlook for the Russian economy is bleak.
Russia is a corrupt petro-state (a nation whose economy relies heavily on the extraction and export of oil or natural gas) with a rapidly aging population. Its economy is deteriorating.
As long as the impartiality of the rule of law is not considerably strengthened, the investment code is liberalized and the government’s pursuit of to bribe and if the distorting state economic policies cease, however, it will be difficult, to say the least, to further extend economic freedom in Russia.
Worse yet, Russia has unambiguously violated the economic and property rights of individuals, further undermining the country’s attractiveness at home and abroad for investment and economic diversification.
These current problems are likely to have serious and lasting economic, political and social consequences. In the absence of reforms aimed at stimulating stronger and more widespread economic growth, it is not difficult to assess that Russians are likely to continue to lose hope and confidence in their country’s future.
From a broader political perspective, deteriorating economic conditions may make Russian economic and foreign policy less predictable.
It is always possible that Russian President Vladimir Putin will respond to an economic crisis by becoming more aggressive. It will likely continue its economic and foreign policy pivot to China, also.
Unlike the Cold War, Russia is not the main rival of the United States, even though Russia has defined itself as a geopolitical adversary of the United States.
But precisely because Russia’s authoritarian and misguided strategy rests on a return to the Soviet approach of clinging to a state system of command and control. economic model and playing the spoiler, Russia is irresponsibly involved in many of the world’s problems, hot spots and crises.
The best way to prevent Russia’s economic problems at home and its adventurism abroad is a healthy dose of economic freedom.
As Middendorf pointed out:
The advantages of economic freedom are well documented. People in [an] economically free societies have better jobs and are less likely to live in poverty.
They enjoy greater political freedom and can better defend their human rights.
The most critical lesson for today’s tumultuous times is the proven superiority of the free market system and the value of economic freedom.
We couldn’t agree Following.
This piece originally appeared in The daily signal.