It was interesting to see an article this week in the Financial Times covering Russia’s inclusion as an emerging market in the acronym BRIC’s, first coined by Jim O’Neill at Goldman Sachs to cover the emerging market economies of Brazil, Russia, India and China. Not because there is anything new in the grouping but rather because the article concurred with a long standing belief that I have had which is Russia doesn’t really belong in with those countries in the first place. The FT article was reporting on an article by Anders Ãƒâ€¦slund, a senior fellow at the Peterson Institute for International Economics and author of Russia’s Capitalist Revolution who was arguing that Russia is really closer to an “emerged economy or let’s say a second tier European economy in more ways than it is an emerging economy.
At a macro level, Russia’s per capita GDP at US$12,000 per person is four times that of China or India and more than twice Brazil’s. Partly as a result of that and it’s one time position as a super power more than two-thirds of Russians of university age are enrolled in university, compared with less than one-fifth of the Chinese. In terms of education, Russia matches the west Mr. Ãƒâ€¦slund argues in his paper.
Part of the original justification was that for most of the last decade Russia matched China and India in terms of growth rate with a real annual average rate of 7% between 1999 and 2008. But a large part of that was catch up from the hideous fall during the 90’s. The only sense in which it could be considered an emerging economy is its lack of diversification exemplified by the country’s economic performance in 2009, when its GDP collapsed by 8-9% far more than any other G20 economy. Russia, with the third largest foreign exchange reserves (and with a better spread of currencies than any emerging market, over 50% were in Euros that stood up better than the dollar), had thought itself immune from the financial crisis that was engulfing its more “sophisticated neighbors. In fact, the huge levels of corporate debt, heavy dependence on oil and gas revenues and, as Ãƒâ€¦slund makes the point, the regime’s willingness to pour vast amounts of money into poorly run and inefficient state conglomerates was as much to blame.
But a review of Russia really highlights that lumping all the emerging markets together as if they were a homogeneous whole is something of nonsense anyway, even though I will be the first to admit I often do the same. Their main unifying criteria are high economic growth, a certain economic backwardness and large size, but otherwise they vary greatly, not least in the baggage they carry. Quietly highlighted at the Copenhagen climate conference where the BRIC acronym was replaced by BASIC Brazil, South Africa, India and China, all of which need more carbon emissions rights. Russia sat with the Europeans, quietly supporting the Kyoto Protocol, which allows Russia to make a fortune by selling emission rights, since past Soviet carbon emissions will never arise again thanks to the greater efficiency of their new found capitalism.