NEW YORK – The Winter Olympics in Sochi are the first to be hosted by Russia since the Cold War-era Moscow Summer Games in 1980. Obviously, much has changed politically in the interim. But today’s Games also create an opportune moment to look back at Russia’s recent economic history – and to peer forward as well.
Many people who remember the collapse of the Soviet Union in 1991 and its tumultuous aftermath believe that Russia’s economy today must be impoverished and unstable – and far behind booming China. Wrong. According to the International Monetary Fund, Russia’s per capita income in 2013, measured in terms of purchasing power parity, is roughly $18,600, nearly double China’s per capita income of around $10,000. And, according to World Bank data, extreme poverty is close to zero, compared to 11.8% in China in 2009 (the most recent year for which data are available).
Yes, Russia’s economy has been buoyed recently not only by sound macroeconomic policies, but also by high world oil and gas prices. In fact, the collapse of world oil prices after 1985 contributed to the severe economic crisis in the Soviet Union and Russia in the late 1980’s and early 1990’s. This is an important point, given that the economic reforms implemented by former Soviet President Mikhail Gorbachev and former Russian President Boris Yeltsin thus confronted powerful headwinds.
For two years (1992-1993), I was a macroeconomic adviser to Prime Minister Yegor Gaidar and Finance Minister Boris Fyodorov, trying to help Russia to end the high inflation and extreme shortages that characterized the last years of the Soviet era, and to begin Russia’s transition to a market economy. I recommended a macroeconomic stabilization strategy that had been highly successful in nearby Poland, and that called for timely financial assistance from the United States, Europe, and the IMF, just as Poland had received.