The Russian Economy: Can growth be restored within the Economic System?


  • Susanne Oxenstierna

Publish date: 2014-05-20

Report number: FOI-R--3876--SE

Pages: 54

Written in: English


  • Russia
  • economic system
  • rent dependence
  • rent management
  • institutions
  • civil society.


What are the characteristics of the Russian economic system and what potential does it have to spur growth? Would strengthening of the institutions underpinning the market economy make a difference? And is there any chance for reform initiatives from below through democratization? The purpose of the report is to analyse the systemic characteristics of economic development in Russia after 2009 and to assess the potential of the present hybrid economic system to resolve the impediments to future growth based on the improvement of productivity and innovation. Fundamentally this is an investigation of the extent to which the economic system can facilitate a more efficient allocation of resources between sectors, reduce resource waste, increase productivity and strengthen competition by enabling entry of new actors into different markets. The study develops a model based on Gaddy and Ickes (2010) and analyses the effects of rent dependence and Putin's rent redistribution system on small and medium-sized enterprises, 'the new private sector', which has been added to the original model. It is argued that when a dominant part of the economy is ruled by the management of oil rents to secure the power of the regime, the role of market-oriented institutions becomes limited. Weak institutions have a background in the democracy shortage in Russia, which is reflected in weak channels of 'voice' for citizens and organisations to express their opinion. The report analyses the effects of the present restrictions on voice and civil society development and concludes that there is little hope for 'reform from below' of the system. The confidence crisis caused by the Ukrainian crisis of 2014 further aggravates Russia's problems of stagnating economic growth.