Russia Economy

The Decoupling Debate

The D word - ‘decoupling’ - is at the heart of the debate regarding global economic prospects for 2008 and beyond.

The term refers to the shift by developing economies - and newly industrialising countries in particular - away from dependence on strong demand in the West for their products. 

Russia’s new road to economic growth

There is a great macroeconomics feature in the Times today about a massive road building programme being launched by the Russian government. I was watching The Long Way Round the other week and one of the most memorable sections is when Charlie and Ewan attempt to journey through the Road of Bones, perhaps one of the least hospitable and most dangerous stretches of roadway in the world. The Times reports that

“Russian roads are in a parlous state. The Soviet Union invested much more money into the nation’s railways and the country still lacks motorways between big cities - between Moscow and St Petersburg, for example - or to nearby European capitals, such as Minsk. In rural areas, many villages have little more than dirt tracks. The bad roads cost the economy an estimated 10 per cent of GDP, according to VTB Europe, the investment bank. It also costs lives: 34,000 people a year die on the roads in Russia, ten times more than in the UK. The Kremlin wants to start one of the most ambitious roadbuilding programmes ever, building 50,000km of roads in the next six years, at a cost of £2 million per kilometre. The plan includes tunnels, bridges and motorways between big cities and to borders with neighbouring countries.”

The article can be used to illustrate many economic issues

The multiplier effects of the road building programme
Applying some of the principles of cost-benefit analysis
Road building and externalities - including the environmental costs and benefits
The importance of infrastructure in driving economic growth
How Russia is planning to finance this programme - the Russian government is looking for half of the money to come from the private sector
What this road building programme might do to the prices of raw materials and to wages in the Russian construction sector
How might British firms be able to benefit from the huge road building investment programme?

An Evening with an Inspirational Economist

Halfway through Jim O’Neill’s talk to the Keynes Society last night I realised properly for the first time in several years why I teach economics. There are few subjects that happen in real time, in internet time – and few where there are so many constantly changing issues to confront and events and trends to make sense of. We live in utterly fascinating times, and lying just beneath the surface of so many of the critical economic and geo-political debates is a seismic shift in the global economy’s Teutonic plates. The rise of the BRIC economies and the Next eleven (N-11) was the subject of an inspiring talk by the Managing Director & Head of Global Economic Research at Goldman Sachs.