Sample Essay on GEOS Analysis Essay: Russia

Introduction

Over the years, Russia’s economic outlook has been interesting to watch, as has been its political transformation. As a matter of fact, there has been many similarities between the prevailing political landscapes at any one given time and the economic perspective taken by the country. While the modern-day Russia could be termed as more of a dual state, integrating authoritarian practices with democratic institutions, with the two co-existing in what Sakwa deftly refers to as “a continual state of tension” (n.p.). This aspect of duality is as old as the inception of the tsar regime in the nineteenth century. The emergence of the tsar brought with it political representation in Russia in the form of the Duma, a hitherto unheard-of development, albeit with clipped powers. In addition, the tsar also introduced an extractive coercive economic system characterized by high control and coercion of the masses by those with access to public resources and power. The basic argument of this essay is that while a lot has happened since the days of the tsar in Russia’s political landscape, the same principles that were used by the tsar are still in place. Towards this end, the essay shall endeavor to explore the issue of extractive institutions with respect to the Russia economy. The issue of neo-patrimonial states will also be examined within the context of Russia.  The major transformations experienced by the Russian economy ever since the collapse of the Soviet Union in December 1991 shall also be assessed, with a special focus on  statism, which is where the economy appears to have stagnated.

Extractive Institutions

Economic institutions can be either extractive or inclusive. While inclusive institutions are concerned with the establishment of opportunities and incentives needed to harness the creativity, entrepreneurship, and energy in society, in contrast, extractive economic institutions desist from these things. On average, poor nations tend to have extractive economic institutions. On the other hand, their rich counterparts tend to have inclusive economic institutions. Nations do not adopt extractive institutions through chance but rather, it is a choice that they make via a political process (Kohli 12). Two significant dimensions characterize extractive political institutions. To start with, these institutions apportion political power in a constructive manner. Secondly, extractive political institutions are characterized by a somewhat less strong state precisely because it affords them key public goods.

There appears to be a natural connection between absolutist, extractive political institutions on the one hand, and extractive economic institutions, on the other hand, Absolutism refers to the rule in hindered by the wishes of others or law but in the actual sense, small groups of elites are actually behind the rule by absolutists. For example, nineteenth-century Russia was under the rule of the tsars who by definition were absolutist rulers. In this case, nobility who were a small group of the elite society in the country, accounting for only 1 percent of Russia’s total population, supported the tsars. However, the elite group was responsible for organizing political institutions so that they could carry on their powers (Acemoglu & Robinson 81). Prior to 1905, Russia did not have any political representation or Parliament, and while the tsar is credited with having established the Duma during this time, he son undermined the little power he had accorded to it. Not surprisingly, economic institutions in Russia at the time were characterized by a high level of extractiveness. This arrangement was not by default but rather, was intended ensured that the tsar and the nobility attained as much wealth as they possibly could. The underlying factor, as is the case with majority of the extractive economic systems, was that there was high level of labor control and coercion.

Neo- patrimonial states

            Neo-patrimonialism is a term used in reference to a system of social hierarchy in which patrons win the loyalties of client in the larger population by using state resources (Dibua 8).  Neo-patrimonialism may be seen as an elevation of a state’s bureaucratic structure in the sense that the connected individuals enjoy real power, as opposed to those who higher positions.  In his book, “The Nature of the Third World State”, Christopher Clapham defines neo-patrimonialism as a “form of organization in which relationships of a broadly patrimonial type pervade a political and administrative system which is formally constructed on rational-legal lines.” (Clapham 48).  In neo-patrimonialism, an influential individual uses an office of power for personal gains and uses, rather than to a strict division of public and private spheres (Carter 170).

Kohli (14) argues that in spite of the pretense of a modern state, office-bearers in the public sector still treat public resources as their individual property. Public figures such as presidents have repeatedly been accused on partaking in neo-patrimonialism. Whitmore is of the opinion that “in this schema, the president plays something akin to a ‘neutral arbiter’ balancing the influence of various cliques to ensure none dominate or attain a position able to challenge his position” (1005). At the same time, all cliques have to rely on presidential patronage so that they can have access to various forms of public resources like “rent-seeking opportunities and administrative resources for elections, and this assures their loyalty to the patron” (Whitmore 1005).

Emil Pain’s “The Political Regime in Russian in the 2000s: Special Features, Inherited and Acquired”, has focused on the evolving political system in Russia under Putin.   Pain contends that the current political system in Russia can only be described as a neo-patrimonial regime based on tradition and inertia (51). The success of the neo-patrimonial system is partly due to the atomization of the Russian society that enables those in power to push the masses, literary, in their favor; in as far as, political issues are concerned. Nonetheless, Pain notes that the stability of the neo-patrimonial system is under threat from changing conditions in the country, and this has created a chance for the development of a democratic state under the rule of law.

Pain further contends that the reasons why patrimonial systems tend to be inherently unstable is due to a chronic shortage of legitimacy, as well as the inability to execute the normal social functions of a state (53). Consequently, thee regimes end up becoming a source of self-preservation for the elite and as such, are especially not suited to undertake any form of political or societal modernization. Lack of modernization for Russia means that the country will fall even further down the ladder of global economic system, and this will only act as catalysts for society to demand for political changes.

Statism

Ever since the collapse of the Soviet Union in December 1991, Russia’ economy has undergone a major transformation, “moving from a globally-integrated, centrally-planned economy towards a more market-based and globally-integrated economy, but stalling as a partially reformed, statist economy with a high concentration of wealth in officials’ hands” (The World Factbook 6).  In the 1990s, Russia underwent economic reforms that culminated in the privatization of most of the industries in the country.  Save for defense and energy-related sectors.  Despite this privatization, the state still has a high level of interference on the private sector, and property rights are characterized by weak protection.

Russia is among the leading producers of natural gas and oil in the world, as well as a top exporter of primary aluminum and steel. This being the case, the country’s manufacturing sector is yet to become competitive on the global markets and is thus oriented towards domestic consumption. One of the major weaknesses of the Russian economy is its over-reliance of commodity exports so that any time there are volatile swings in the global commodity process, the country remains highly vulnerable to bust and boom cycles. Between 1998 and 2008, the Russian economy enjoyed an average growth rate of 7 percent, thanks in large part to the rapid rise in oil prices (The Economist n. p.). During this period of economic growth, foreign investors had to make do with large number of permit required of them before they could set up their businesses in Russia. In addition, there were a lot of legal contradictions and gaps that caused delays, obstructions, and even kickbacks (The Economist n. p.).

Despite these setback, Russia continued to enjoy increased investment, largely as a result of the energy boom riding in the country at the time, “even despite increasing regulatory hurdles to foreign investors” (The Economist n. p.). However, the economy bore the greatest brunt of the 2008-09 global financial crisis following the plummet in the price of oil and the consequent drying up of the foreign credits that Russian firms and banks had come to rely on.  In the last few years, It has been hard for Russia to attract foreign direct investment as oil process have slowly declined, in effect slowing down the country’s GDP growth rates to noticeable levels.

There is a widely held hypothesis by economic experts that in 2015, Russia could ensure an entrenched recession, mainly because of falling oil process.  Still, the International Monetary Fund (IMF) indicates that Russia is still remains the eight largest economy in the world, with a GDP (gross domestic product) of $ 2 trillion. The sheer size of the Russian economy implies that in case of a recession the economies of other nations would also be affected and more so its largest trade partners namely, the Netherlands, China, Germany, United States, and Ukraine.  In its September 2014 publication titled, “Russian Economic Report”, The World Bank noted that the Russian economy has nearly stagnated (The World Bank 10).

Domestic demand has been on the decline, with the country only having recorded a 0.8 percent growth in the economy in the first two-quarters of 2014, compared with a 0.9 percent growth rate over the same period in 2013. Such economic projections are a pointer to the significant risks that the Russian economy could be exposed to in its medium-term outlook for the next 2 years. Such has been the sorry state of the economic growth of the Russian economy in recent years that in 2013, the country’s Economic Development Ministry was forced to reduce its annual economic growth forecast to just 2.5 percent, from its previous forecast of between 4.0 and 4.2 % (The World Bank 12). This target had been set up to 2030.

Conclusion

In sum, institutional choices are a leading cause of economic growth. Inclusive governments characterized by private property rights, rule of law, modest taxes, reel of law, and wide distribution of power across the population are more likely to experience economic growth in comparison with states with extractive institutions. Narrowly distributed political power, tenuous property rights, high taxes, and serfdom and slavery that greatly curtail the population’s ability to pursue better opportunities elsewhere characterize the latter. The tsar was a true symbol of extractive institutions. While the days of the tsar are long gone, some critics argue that the Putin regime was an extension of this very regime whereby public figures have treated public property ad their individual property under his watch. They have also used public resources to meet their individual political ambitions. At the same time, even as the collapse of the Soviet Union in December 1991 led to a wave of massive privatization of most sectors of hr economy, the government did not privatize the oil and military sector because it wanted to retain its influence. Still, the government still retained a strong foothold in the private sector, as evidenced by the large number of permits, delays, and obstructions faced by foreign investors. Nonetheless, foreign direct investment in Russia rose to an all time high between 1998-2008 following an oil boom, but the economy was significantly hurt by the 2008-09 global financial crises. Economist project that Russia could be headed for a major economic crisis in 2015 and the country has already revised its economic growth downwards from a high of 4 to 4.2 percent, projected up to 2030.

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