Russia: a brief history and the prolonged impact of COVID-19

One year on, how has the Russian Government performed during the COVID-19 crisis? The Wheeler Institute for Business and Development invited Sergei Guriev – Professor of Economics at Sciences Po – to share his views on the state of the economy, politics and business in Russia before discussing the government’s response to the COVID-19 crisis over the past year. In May 2020, Guriev joined the Wheeler Institute COVID-19 series to discuss the impact of the pandemic on emerging markets.

Tertiary education will play a pivotal role in the advancement of the Russian economy

Over the last decade, we have seen many postcommunist countries join the EU to become high-income nations, fully integrated into the EU both politically and economically. Guriev considers that these countries are not free of their own political issues or divides, but have escaped the trappings of corruption that their neighbours continue to face. Russian politics continue to be shaped by oil and connections to ruling families, who have captured and retained power only to exploit it for their own benefit. If Russia is to grow into an advanced economy outside of the EU, Guriev posits they must utilise their human capital advantages and develop new, knowledge-based sectors for growth – which would require a change of regime. Russia is by no means behind on levels of tertiary education – conversely, they are globally in the top 3 for quantity of tertiary education per capita – but to increase innovation and R&D, Russia must focus more closely on business and social sciences education. He estimates that as Russia reaches advanced economy status, growth will slow to 1-2% per year, falling short of the EU, USA and average world growth rates. Increasing access to global markets and mobilising human capital around new sectors will be crucial to assist this growth going forward and invite more foreign investment into Russia. Guriev states that you can build a great company in today’s Russia, highlighting the growing ‘pockets of meritocracy’ in the system, the rise of world-class homegrown rivals to companies like Facebook and Whatsapp and lower asset prices as three benefits to investing in Russia.

Putin’s government has developed a sophisticated and multifaceted approach to shaping political discourse online

Guriev speaks of Putin’s regime as an informational autocracy, wherein autocrats utilize propaganda and censorship to control the populace over brute violence or killings. This type of political regime is much more suited to the modern world, where we have information and investment flows in and out of borders, and international media to track repression and violation of human rights. Guriev states that autocracies pretend to be democracies by manipulating information, highlighting the importance of propaganda in maintaining the regime – not only to legitimize its leaders, but also to denounce viable alternatives as incompetent or corrupt. Today’s informational autocrats are increasingly sophisticated, using online debate and propaganda to infiltrate spaces that are traditionally skeptical of the regime. Putin spends a large amount of money building the storyline that the alternatives in Russia and abroad are even worse than the current regime, utilizing pro-Putin voices on messaging channels such as Telegram to target a younger audience, or establishing pro-Putin channels on Youtube to the same effect. The goal with this form of propaganda is to draw parallels between Russian autocratic political events and governments elsewhere e.g. US alternatives are not much better than Russian police and still have a high degree of police brutality. Guriev believes that Russia may now be coming a more openly repressive regime similar to those in other ex-Soviet countries, such as Belarus.    

Anti-vaccine sentiment and public distrust leaves Russia at risk of new variants and prolonged effects of the COVID-19 pandemic

The government response to the COVID-19 pandemic demonstrates both economic unpreparedness and opportunities for propaganda to be used.  In March 2020, the immediate risk posed to Russia was economic – oil prices tanked and Putin chose not to utilize Russia’s substantial sovereign wealth fund to support the public due to a fear that oil prices would never recover. This meant that the subsequent 6-week lockdown was largely ignored and ineffective. Many Russians did not have the savings to sustain their households through a period of lockdown and kept working – leading to increased mortality. We know now that in the year to March 2021, Russia lost half a million people to COVID-19, despite its ability to protect its citizens relatively well economically over the period. In terms of per capita excess mortality, Russia was initially one of the worst hit places during the first year of the pandemic, with the regime brushing over the effects in order to avoid a second lockdown: Guriev states that official reports show mortality numbers 6x lower than actual numbers to keep the economy open. Putin saw the vaccine rollout as a chance to gain public support and push pro-Russia sentiment, registering the Sputnik V vaccine in August 2020 and claiming it was the first on the market despite Pfizer being further along in Stage 3 trials at that time. There was murkiness around the later stage testing for Sputnik V, resulting in trepidation and large-scale public skepticism of the vaccine. In Russia, only Russian vaccines are available, with Sputnik V being the most reputable. Only 12% of the public is vaccinated with a further 20% considering inoculation; 60% of the public are now against the vaccination. This has created a black market for vaccination paperwork, where patients will pay for a certificate and refuse the injection. Guriev opines that we should be wary of this level of distrust, leaving Russia as a potential breeding ground for new variants to develop amongst a largely unvaccinated population. He believes there will be a Russian strain in future, which could be even more costly to Russian lives and the economy.

Sergei Guriev is the Scientific Director of Sciences Po’s Master’s and PhD programmes in economics. He is a Research Fellow at the Center for Economic Policy Research (CEPR) and member of the Executive Committee of the International Economic Association. In 2016-19, he served as the Chief Economist at the European Bank for Reconstruction and Development. 

Victoria Henderson (MBA 2021) has three years’ experience in management consulting at Bain & Company, and a background in Law and Politics. She is an intern for the Wheeler Institute, contributing to the creation of content that amplifies the role of business in improving lives.

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