Five years later, the World Bank’s Chief Economist for Russia Apurva Sanghi leaves his post. In his farewell column for Kommersant, he reflects on Russia’s invaluable successes.
In 2016, just after taking office as the World Bank’s Chief Economist for Russia, I started writing about the Russian economy. Now that my term in Russia is coming to an end, it’s time to write the final column.
As a professional analyst who has specialized in the Russian economy for the past five years, I can summarize my experience in one sentence: things in Russia are not as bad as they seem, but they are not going as well as they could. In the past six years alone, Russia has managed to achieve impressive macroeconomic stability. Double-digit inflation is now under control. The country is less dependent on oil and gas than it was five years ago. These are significant achievements. On the other hand, I, like many other experts, have already written that forward movement is holding back sluggish potential growth.
These are all well-known things. In this column, I would like to highlight three of Russia’s lesser-known development achievements that are often overlooked.
The first is an increase in average life expectancy in Russia from 65.3 years in 2000 to 72.7 years in 2018.
This is primarily due to a decrease in mortality from noncommunicable diseases (that is, noncommunicable diseases such as heart attacks and strokes) and external causes (such as road accidents and homicides). In addition, since the first decade of the 21st century, there has been a decrease in mortality among adults and especially among children. Recently, there has been a decrease in infant mortality (in the period from 2011 to 2017 it decreased by 36%) and maternal mortality (during the same period it decreased by 49%). Despite the fact that now we are all busy with a pandemic, in order to assess the real achievements of Russia in the field of increasing average life expectancy, one should focus on a more distant future.
The second is Russia’s progress in raising the level of financial literacy.
Russia is not familiar with financial crises by hearsay. While governments have the primary responsibility to prevent and overcome them everywhere, an important factor that is just beginning to gain recognition is that citizens need to become more informed about financial decision-making. Russia was one of the first to realize the benefits of financial literacy and has made great strides in improving financial literacy for both adults and schoolchildren. This was due to top-down initiatives by the Ministry of Finance and the Bank of Russia, and bottom-up initiatives to reach a large and diverse segment of the population through schools, libraries and other public spaces. Indeed, in 2016 Russia took first place among 132 countries in the Child & Youth Finance International Global Inclusion Awards. It is also one of the top ten countries in terms of financial literacy among the G20 countries.
The third is Russia’s achievements in improving the quality of tax administration.
The history of taxes in Russia goes back to the Middle Ages, when Prince Oleg introduced the collection of tribute from the ruled tribes. We know the words of Catherine II, who said the following: “Taxes for the state are the same as sails for a ship. They serve to bring him into the harbor rather than to overwhelm him with their burden. ” Drawing on centuries of lessons, Russia today is one of the world leaders in the use of technology and raw data in real time and has been able to move away from the culture of tax evasion in favor of compliance with tax laws. Failure to comply with tax discipline, in particular value-added tax, has dropped from double-digit levels a few years ago to less than one percent today; the tax is collected with minimal human involvement. Russia’s successes in modernizing the tax service are not as well known as they deserve, but global interest in them is slowly but steadily growing.
Of course, these achievements are not the end of the road. If we talk about the average life expectancy, then for men it is, on average, almost ten years less than for women – and this gap needs to be closed. As cryptocurrencies and digital fraud become more prevalent, there is a need to maintain financial literacy and consumer protection and improve privacy and data protection mechanisms. And in the absence of additional tax policy measures, advances in tax administration can be nullified. Yet these invaluable successes deserve greater recognition both in Russia itself and abroad.
The World Bank has conducted an unusual analysis to determine how wealthy Russia is. We came to the conclusion that the source of Russia’s wealth is not huge reserves of natural resources (for all their importance) and not physical infrastructure (no matter how powerful its individual components).
Russia’s wealth is the ingenuity and creativity of its people. Indeed, almost half of all Russia’s wealth is associated with its human capital – the accumulated experience, knowledge and skills of Russians.
It is followed by physical (about one third) and natural capital (about one fifth). By the way, based on my personal observations, I can confirm that this is exactly the case. Communicating with students at different universities and universities, I witnessed their keen interest, acute and purposeful questions, a sense of humor, and most importantly, their desire to make their country better. I was really fortunate enough to play a modest role in this process.
PS There is one more question to which I would like to draw your attention. It’s about climate change. Politics is a given, but you cannot argue with science and economics. The good news is that in Russia, in addition to federal initiatives, positive examples are beginning to appear in the regions – for example, in the Sakhalin and Murmansk regions, which are striving to build a carbon-free economy. As I wrote earlier, one mistake should not be made with regard to Russia: it should not be analyzed as a single entity. This is tantamount to considering the matryoshka empty! In fact, the Russian regions may be at the forefront of the fight against climate change, and a pleasant surprise may await us. This means that this territory should not be left out of sight in the future.