'We will continue to stagnate, nothing will change'. Highlights from an interview with economist Konstantin Sonin

‘“We will continue to stagnate, nothing will change”. Highlights from an interview with economist Konstantin Sonin 

One of Russia’s most famous economists, Konstantin Sonin has worked abroad for many years. He has been a professor at Chicago University since 2015, and before that he worked at two of Russia’s leading universities: the Higher School of Economics and the New Economic School. You can read the full interview in Russian here. Below, we have some highlights. 

Does Russia have stability or stagnation? (GDP growth has been less than 3 percent since 2012 and real incomes are flatlining)

“Stability and stagnation are often the same thing. Stagnation means there is no risk of a sharp fall in the standard of living — no-one in Russia is angered by stagnation. In France, for example, voters don’t want stagnation, they want reform — just like the U.S. or Germany… But in Russia people are very calm about stagnation.” 

Does Russia need a higher birth rate? (Natural population loss in 2019 was almost 260,000 people, and Putin has announced a raft of measures to boost the birth rate)

“Demography is not our most acute problem — you could even say it’s insignificant. It’s very stupid to worry over a 5 percent or 10 percent contraction in the population. You should be worrying about how to stop the emergence of a new Stalinism or another civil war… There are few examples of successful measures to boost the birth rate with material incentives. Instead, incentives mean people give birth earlier — not that there are more children in families. They simply bring forward the birth of the first child.” 

Is Russia rich or poor? (13 percent of Russians live below the poverty line)

“If you measure by world standards, Russia is a poor country. We have high levels of inequality and most people don’t live well, or have any savings. But the government has a lot of money. People feel like the government doesn’t have enough money because it is spent very ineffectively.”

Will Putin eradicate poverty? (Putin has announced $15.6 billion of social handouts to the poor)

“When the battle against poverty consists of social handouts it’s not only not effective, but creates negative incentives for the labour market. You’re better off raising salaries for workers or increasing economic growth that will ‘lift the whole boat’ like in the 2000s. At the same time as the battle with poverty, there are powerful forces at work in the country creating poverty. For example, the counter-sanctions [a ban on imports of food products from most Western countries] simply take away money from ordinary people and re-distribute it to large agricultural companies.”  

What will happen with the economy? (Putin wants a minimum of 3 percent economic growth per year, but in 2019 economic growth was only 1.3 percent) 

“Russia has such an isolationist stance, spends so much money on unnecessary things and places so many limits on the economy that you could achieve a minimum of 3-5 percent growth a year simply by removing these restrictions and getting rid of corrupt politicians… If this doesn’t happen, Russia will continue to stagnate, nothing will change.”