Russia: Land of the Slaves and Home of the Craven

The Heritage Foundation has just released the results of its 2009 Index of Economic Freedom.

Russia ranks #146 out of 179 nations under study, the bottom 20% of all countries in the world,  and #41 out of 43 nations in its region — the bottom 5% of that group.  Russia’s score on the index of 50.8, ten points below the world average, is virtually indistinguishable from that of Haiti, and well behind such nations as Djibouti and Syria.

Only 33 countries on the planet are less economically free than Russia, yet it holds a seat on the G-8.  Go figure.  The lowest of the G-8 other than Russia was Italy at #76. India is 123rd, Brazil 105th. Georgia is 32nd and the highest former Soviet republic  is Estonia at 13th.  Plainly, Russia is totally unqualified for G-8 membership.

Poland, for instance, scored a 60.3,  placing it 82nd on the list, the upper half of the world, and 35th in its group, eight places ahead of Russia.  Poland posted $13.9 billion in net foreign direct investment, or $365 per capita. With nearly quadruple Poland’s population and vast oil reserves that Poland lacks, Russia had only $28.7 billion in net FDI or a puny $205 per capita, over 40% less than Poland.

HF’s commentary on Russia’s results tells the tale:

Financial Freedom

Russia’s financial sector is not fully developed and is subject to government influence. Supervision and transparency are insufficient, although regulation improved in 2006. The more than 1,000 licensed and registered banks are generally small and undercapitalized, but consolidation is underway. The Central Bank of Russia regulates the banking sector, which is dominated by two state-owned banks. Foreign banks may establish subsidiaries, but the government has not permitted foreign banks to set up branches in Russia. As of 2007, there were 857 insurance companies, 27 of which are foreign-controlled. Capital markets are relatively small but growing and are dominated by energy companies.

Property Rights

Protection of private property is weak. The judicial system is unpredictable, corrupt, and unable to handle technically sophisticated cases. Contracts are difficult to enforce, and an ancient antipathy to them continues to impede Russian integration into the West. Mortgage lending is in its initial stages. Violations of intellectual property rights continue to be a serious problem.

Freedom From Corruption

Corruption is perceived as pervasive. Russia ranks 143rd out of 179 countries in Transparency International’s Corruption Perceptions Index for 2007. Corruption remains all-encompassing, both in the number of instances and in the size of bribes sought. Manifestations include misuse of budgetary resources, theft of government property, kickbacks in the procurement process, extortion, and official collusion in criminal acts. Customs officials are extremely inconsistent in their application of the law.

Labor Freedom

Russia’s relatively rigid labor regulations discourage overall employment and productivity growth. The non-salary cost of employing a worker is high, and the difficulty of firing a worker creates a disincentive for additional hiring. Regulations related to the number of work hours are rigid.

4 responses to “Russia: Land of the Slaves and Home of the Craven

  1. I think what they mean by labour freedom are the social benefits. Most of the EU countries also have rather low labour freedom.

    As for the other criteria, shame on Russia! And to think that this report is not taking into account the rapid degeneration – which, agreed, is taking place everywhere right now – of the economy and which will have its own consequences in legislation as well as practice.

  2. Marquis de Custine

    These ratings of course are not absolute, indeed they are pretty fuzzy and rankings (i.e. country x is one point ahead of country y) are rather dubious. But to be 61 points behind Burkino Faso (formerly Upper Volta, as in “the USSR is Upper Volta with missiles”) is quite an achievement.

    The other question, of course, is any of this news, except perhaps to the leaders of large states in the EU, for whom this does not matter anyway?

  3. And for all the Russophiles claiming Georgia is as corrupt as Russia, it is placed no 32, 114 places BETTER than Russia.
    Saakashvili may have his faults, but he has certainly tried to clean up corruption.

  4. In the interest of fairness – two things need to be pointed out.

    1) This is a survey of ECONOMIC freedom, not POLITICAL freedom (though I doubt highly that Putin’s Russia would fare well on that poll either – in fact, I think he’d probably place still lower, though the world is full of petty dictators.) Note that Hong Kong (that would be that city that belongs to China) took first place and Singapore (that would be the personal fief of the Lee Family that will beat you with sticks for vandalism) took second.

    2) Ukraine actually scored lower than Russia. People have made much about why Ukraine’s economic state is so awful – here’s the reason. Again, political freedom is not the issue: Ukraine has made great strides there, but if we really want the Ukrainian people to permanently escape the Muscovite grasp, we have to encourage Yushchenko and the Orange Party to make the reforms they promised in the first place.

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