Why are almost all of RUSSIA’S neighbors poor? 2022-23
Russia has the 11th largest economy in the world, measured by GDP, but in terms of GDP per capita, which is an indicator used to get an idea of the level of development of a country. Russia is at an intermediate level. RUSSIA’S
It is a long way from the most extravagant nations, however, it isn’t among the least fortunate by the same token. Europe is home to a large portion of the most evolved nations on the planet, however, others are too poor to possibly be situated in this landmass, and practically every one of them is neighbors or is in Russia’s range of prominence. RUSSIA’S
There are just two neighbors of Russia that could be qualified with a medium to the elevated degree of improvement, which is Estonia and Lithuania, and one that could be viewed as rich and one of the most evolved on the planet, which is Finland. furthermore, one of the most evolved in the
So there are three questions worth trying to answer on that topic. Why are almost all of Russia’s neighbors poor? Why was Finland able to escape that trend, and why do leftist politicians often mistakenly put Finland as their example to follow most of Russia’s neighbors are poor because they still have the legacy of socialism from when they were part of the union of soviet socialist republics,
better known as the soviet union when it was dissolved in 1991, it was hoped that the 15, now independent republics, would evolve towards democracy and a market economy and thus find their way to prosperity. However, they did not take exactly that path. Most of them still have the same problems that caused in part the economic collapse of the soviet union since its founding in 1922,
the soviet union aimed for an economy in which the state owned the means of production and the distribution of the goods produced. Therefore, private property was limited to the maximum and the state was the one who fixed the prices of goods and not the market. As a consequence, several problems appeared. RUSSIA’S
First, the collectivization of the countryside destroyed agricultural production, the state forced millions of peasants to cultivate their land, but they were integrated into collective farms and what they produced did not belong to the farmers but the state. RUSSIA’S
As a consequence, there were three famines in total. Some 15 million people died because a large part of the production expropriated from the peasants was exported by the state. Another part of the production was used to supply the big cities and the little that remained was destined for the rural areas, thus condemning the countryside to misery and hunger. RUSSIA’S
Secondly, another structural problem of the soviet economy was its low productivity. This was because most workers received wages that were fixed by the government. These tended to be low so workers had no incentive to exert themselves beyond what was necessary because they were always going to receive little and the same regardless of whether their productivity was high or low. RUSSIA’S
In addition, enterprises in general tended to be unproductive because those that performed poorly were given subsidies by the state to keep them running, so they had no incentive to manage their resources efficiently, improve their processes or lower their costs. RUSSIA’S
A third problem of the soviet economy was precisely high production costs. Soviet enterprises did not compete with each other to improve and lower their products. The main objective was to meet the production quotas assigned to them by the state. RUSSIA’S
The important thing was to meet that quota. No matter if the products were of low quality, if more expensive raw materials were used or if more resources were used than necessary, such as labor. As a result, production costs increased because companies didn’t care about being efficient in a market economy. RUSSIA’S
Companies have to focus on the consumer and be efficient, or else they disappear. So these problems, coupled with corruption and heavy bureaucracy, caused the soviet republics to stagnate, unable to compete internationally, and unable to leap development in the best of cases, they implemented elements of capitalism, RUSSIA’S
but this ended up being crony capitalism where clientelism and oligarchs play a very important role in economic decisions, despite the collapse of the soviet union more than 30 years ago, many of the republics that were still part of it have the same structural problems, including Russia itself. Three small countries belong to the union and are on their way to reaching a high level of development.
These are Estonia, Latvia, and Lithuania, which have oriented their economy and politics toward western Europe moving further and further away from their soviet past and adopting freer markets. RUSSIA’S
But Finland, which is also Russia’s neighbor is at a higher level of development, and the initial reason why Finland took a different path is that it was part of the Russian empire only until 1917 when it became independent and the soviet union was founded in 1922. RUSSIA’S
So Finland escaped being part of a centralized economy and soviet totalitarianism, although it must be said that Russia has always kept an eye on Finland’s internal politics and has always tried to influence its destiny. Even in 1939, Russia invaded Finland and the latter lost 10 percent of its territory, including its largest length, its second largest city, and two important ports. RUSSIA’S
There is a common belief, especially among leftist politicians, that countries like Finland are a successful example of how interventionist redistributive socialist policies would work, but that doesn’t make much sense if we compare Finland’s per capita income with that of the united states in the year 1900. It turns out that Finland’s per capita income was only 33 percent of that of the united states.
At that time, Finland was a poor agrarian country that also suffered a civil war in 1918. If the comparison is made, in the year, 1970 Finland’s wealth had grown so much that it reached 64 of that of the united states, and that year it could be said that it was already a developed country. Its level of wealth was similar to that of japan by 2018. RUSSIA’S
Finland’s per capita income was 70, that of the united states. That is a level similar to that of 1970. Therefore, it can be deduced that Finland was as developed in 1970 as it is in 2018 concerning the united states.
These percentages may vary depending on the years chosen, but the point is that it was in the 1970s that social democrats and leftist politicians began to increase public spending to expand welfare and subsidies. So the increase in Finland’s generous public and redistributive policies was not the cause of its successful economic model, but rather a consequence. RUSSIA’S
In other words, these policies were not the cause of success because when they were implemented, Finland was already a developed country, even egalitarian. After all, historically it has always been so. In other words, Finland could afford to charge high taxes to redistribute the wealth generated by companies and workers, but, after having allowed the creation of wealth,
it would not make sense for a poor country to apply this type of redistributive policy, because if it has not created enough wealth, the only thing it would achieve would be to distribute poverty even with high taxes. RUSSIA’S
Finland is a country that respects private property and is business friendly on the index of economic freedom. It ranks number nine in this country. There is no crony capitalism or cronyism. On the contrary, meritocracy is a characteristic feature in all economic and social areas of the country.
In addition, trust in political institutions is high and corruption is very low. It also has successfully carried out privatizations of state sectors from telecommunications to electricity generation, and even some forests have been privatized, something that would shock the most moderate liberal. RUSSIA’S
In short, the Finnish model is based on competition, private initiative, and meritocracy, very contrary to the system implemented by the union of soviet socialist republics for 70 years, and that is why Finland is the richest and most developed among the countries that were in the soviet union sphere of influence.