One BRIC to rule them all?

Words by Eugene Sebastian

Which of the BRICs will wield the most influence in twenty-five years?

Easy. China and India are rising powers. Both economies are recording higher growth rates. China’s sheer size makes it easier to mount a challenge on the U.S. Even international political economic theory points to either one or both. But stretch the boundaries of theory the answer may be different.

Mr Rudra Sil, at the University of Pennsylvania suggests that Russia stands a better chance in the longer term. If demographic changes and access to vital resources determine a rising power’s capabilities in the global economy, then Russia has the best prospects for boosting its global clout and living standards over the next 25 years.

On the surface, this conclusion seems perplexing. In 2009, in the midst of a global economic crisis and falling oil prices, Russia’s economy contracted by a stunning 8%. India and China recorded GDP growth rates of 7.4% and 9.1%.

Lesser evil

Many consider the Russian economy corrupt, its institutions rigid, its infrastructure crumbling and low productivity. Even Paul Krugman points that Russia’s reliance on oil and gas exports for 40% of government revenue made its “petro-economy” more similar to Saudi Arabia than the rest of the BRICs.

Mr Sil acknowledges while Russia’s economy has serious deficiencies and may well be underperforming, the picture becomes less bleak when considering a wider range of economic data across the BRICs.

Russia’s GDP growth rate has fallen, but it still exceeded that of Brazil and the world as whole, in 11 of the 13 years from 2000 to 2012. While Russia ranks lower than the other BRICs in perceptions of corruption, none of the BRICs score well on the transparency index. Even cross-national studies of actual corruption offer no evidence that Russia is significantly more corrupt than the other rising economies. The latest World Bank’s Doing Business Report ranks Russia 92nd in the ease of doing business – a 19 spots gain over previous years. China is ranked 96th, Brazil 116th and India 134th.

Population blessings

Sil consider’s Russia’s population decline a positive in the long run. Its population rate fell from 0.26% per year between 1992 and 2005 to 0.12% per year between 2005 and 2010. The United Nations projects Russia’s population would fall to 104 million by 2050. Though population rate is falling, its declining at a lower rate. Moreover, the decline is offset by in-migration now matches out-migration, halving of infant mortality rate and rising fertility rate.

Russia’s population size means that it is in a “position to extend its lead over the other BRICs in living standards without drawing away resources from other objectives”, says Sil.

“While China’s per capita income has nearly quadrupled since 2000, Russia’s advantage over China ended up tripling in that period thanks to Russia’s much larger absolute increase in its per capita income.

Sil is clear to point out that this is not to reaffirm the “truism that countries with smaller population can more easily convert growth to increases in per capita income”. He simply highlights the fact that Russia is in a much better position than the other BRICs when it comes to boosting living standards without significant opportunity costs with respect to other objectives.

Russia is also pulling away from the other BRICs on the United Nations’ Human Development Index (HDI), which provides a composite of per capita income and various indicators on education and health. Russia’s current HDI rank of 55th puts it far ahead of Brazil (85th), China (101st), or India (136th), all of whom have seen their rankings drop since 2005 (United Nations 2013).

Resource rulers?

While vital resources are becoming more scarce and costly, Russia’s per capita shares of these resources are growing. In terms of arable land, Russia’s per capita acreage stands at 0.85 ha, four times greater than the world average of 0.2 ha and ten times the per capita acreage for China at 0.08 (World Bank 2013). With just 2% of the world’s population, Russia controls 11% of the world’s arable land, while China and India have a combined 36% of the world’s population with access to just 24% of arable land. “The proliferation of genetically modified grain might lessen the pressure on some populations in some regions”, points Sil. This gives Russia more flexibility than the other BRICs in a world where global stocks of cereals are declining and food prices rising.

In terms of renewable fresh water resources, Russia’s per capita access is five times the world average. China is one-third of the world average and India’s just one-fifth. Sil is clear to point out that this does not suggest a coming crisis for China and India. Just the long-range forecast is far from reassuring. China and India may have to expend more resources to pre-empt water scarcity at least in some locales.

While the other BRICs scramble to satisfy their growing energy needs, Russia not only remains a net exporter but has proven oil reserves that are almost double that of the other BRICs combined. Brazil, India, and China together consume nearly five times as much total energy as Russia, but Russia’s per capita energy usage is four times that in the other three combined. Moreover, there are indications that revenues generated by Russia’s energy exports are not all being squandered. Between 1999 and 2012, Russia’s world rank in international currency reserves rose from 39th to 5th, while its rank in total gross fixed capital investment increased from 32nd to 7th.

Mr Sil points that China and India will likely face increasing complex trade-offs as their massive population continues to grow. While India contends with its food security issues, China’s challenge of the U.S. may be impossible to sustain. “The costs of satisfying China’s rapidly growing energy needs will run up against the imperative of improving living standards in a country where 300 million people still live under the World Bank’s $2 per day poverty line”.

“Russia is no more likely to launch a successful challenge to the present global order. Yet, thanks to its much smaller population and much larger share of key resources, Russia is far better positioned to pursue both higher living standards and greater clout in the international system.”

Rudra Sil, 2014, Which of the BRICs will wield the most influence in twenty-five years? Russia reconsidered, International Studies Review



Categories: Economies

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1 reply

  1. Very interesting article and a different take on recent commentary.

    On the other hand, one has to ask the question why Russia’s resources have not been tapped into – will it just remain as “potential ” or come to fruition some day in the near future.

    Like

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