Russian oil vs. Russian high-tech

One of the critical stream in developmental literature, namely dependency theory, suggests that one of the main reasons for the growing gaps between developing and the developed worlds are extractive institutions set up during the colonial times. Such institutions favor export of natural resources of a developing country to the developed world, while neglecting investment in local sustainable infrastructures needed for socioeconomic and political development. The idea is that those institutions are so deeply rooted and have entered a path that it will be very difficult to change.

Recently i read this article from Washington post about Russia neglecting development of high-tech industry in favor of natural resources industries. I couldn’t help myself but noticing a conflict. Russia is probably one of the largest developing countries today and has never actually been colonized. At the same time, here it is investing in the same extractive institutions, while it could invest in industries that would probably contribute to a more sustainable development in the long run, such as the MITs.

Why is it happening? Is it the global economic system that forces a country to sell it assets in order to survive? Or is it lack of vision of the leaders combined with personal ambition/greediness motivating instant gratifications?

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4 Responses to “Russian oil vs. Russian high-tech”

  1. Sam Carson Says:

    Though there certainly are elements at play, does Russia conform to dependency theory? It isn’t being exploited by external corporations. Gazprom, for example, is the sixth largest corporation in the world. And the wealth is staying in Russia, Moscow has more Millionaires in it than any other city in the world (New York and London are next).

    A better description of the phenomenon might be Dynamic Dutch Disease, named after the Dutch economy in the 1960s when the North Sea Oil Fields were at their peak. The exploitation of resources lead to such a strong currency that manufacturing suffered, as the cost of exported goods was too high. Industry moved elsewhere, to places where the currency was weaker and therefor production was cheaper.

    I think in the long run what we are seeing is a Russia using resources in a bid to return to it’s Political and economic superpower status.

  2. Dima Says:

    Thank you Sam! (and BTW, i think you have an interesting blog)

    The comment about Dynamic Dutch Disease is interesting. I’ll have to learn more about that. What were the long term repercussions of it?

    As to the wealth staying in Russia and the number of millionaires, i am not sure the numbers actually speak in favor of Russian money working for the Russian people. I am no way a specialist on Russia, but i ran a very quick search on inequality in Russia. For example, here is a report showing that in terms of income distribution Russia is closer to Latin America model, and the gaps are growing. Here is another Russian research institute presenting some data, some of which is showing that except of natural resources, other industries have actually declined. And I believe further, more detailed search will reveal that the number of millionaires and strength of oil exporting industry, are not indicators of economic development.

    The point I was trying to make is that despite that it seemingly doesn’t have to, Russia seems to set up extractive institutions, which in turn are counter-development. I wonder how is that supposed to help it to return its political, and more so economical, superpower status?

  3. Nadya Says:

    Russian money is working for the Moscow people and the tasteless luxury of Moscow streets. After all, someone has to fund Tseritelli’s creativity…

  4. dan cap Says:

    Russia’s oil boom is an interesting issue. The U.S. is not the only country interested in the production of oil in the Russian province. Here is a list i found of the companies and countries involved.

    http://www.whiskeyandgunpowder.com/ppc/RussianOilReport2.html

    Cheers!

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