World economic trends and Russia

Les 26 et 27 mars prochain se tiendra à Moscou de 2ème Forum Économique de Moscou (Moscow Economic Forum). La revue scientifique Mir PEREMEN publiera à cette occasion un numéro spécial consacré aux débats qui auront lieu. Voici mon texte qui sera publié à cette occasion.

World economic trends and Russia

 Mir Peremen

The Second Moscow Economic Forum is to discuss the development of Russia in times of changes. Among questions arising and most discussed issues four have been pinpointed.

1.    The revival of the world economy: is it a temporary stabilization or a  strong and steady growth?

The first and obvious question is to know if we have exited from the 2007-2008 crisis. In emerging country we had a quite strong rebound from 2010 to 2013. But the situation is quite different in the USA and Europe. In the USA, the GDP per capita is now on par with its 2007 level. However, employment is lagging behind. It is still missing 2 millions of employed people compared to 2007. The labor participation rate, which was over 66% on the eve of the crisis is still at 63%[1]. The low unemployment rate USA are now experiencing is much more resulting from discouragement of unemployed people who are no more registering than from a real increase in jobs. As a matter of fact we are seeing a similar, and even worse situation in Europe. Here, the GDP is even lower, and the fault being the crisis of the Eurozone. But unemployment is also to be looked for. The level of unemployment of the Eurozone appears to be bad but not catastrophic. However figures are misleading for two reasons.

The first one because it mixes some countries with a low unemployment rate (Germany, Finland, Netherland) and others, like Spain, Portugal, Greece and Italy where figures are terrible: more than 26% in Spain and Greece. But it is misleading for another reason. When you look to the aggregated number of worked hours in a year you will see  a declining trend in Germany, France and Italy.

Table 1

Average annual working time per worker











1 565

1 566

1 560

1 567

1 549

1 551

1 576

1 574


1 495

1 473

1 485

1 492

1 472

1 480

1 482

1 479


1 431

1 424

1 422

1 422

1 383

1 407

1 406

1 397


1 819

1 815

1 816

1 803

1 771

1 772

1 772

1 752



This situation could be linked to the fact that most jobs «created» since the crisis have been part-time, with a very low wage level. As a result retail trade actual data are showing a continous fall since the beginning of the crisis.

Figure 1


 Commerce de détail-Ang - copie

It is then clear that we are, at best, speaking of a stabilization, at least in the European Union and the USA. If we can be more optimistic for emerging countries we have to keep in mind the fact that most of the world solvent demand is still concentrated in the EU and the USA.

2.    The post-industrial world: is it a myth or a reality?

There have been in all industrialized countries a decline of the industry’s share of labour, and a lower level of GDP. Some have used these data to proclame the birth of a «post-industrial» world. The actual situation is however quite different.

First, the declining share both of the labour force and GDP of the industry is linked to the externalization drive industrial firm have known during these last 30 years. They externalized a lot of their «services» activities, be they managerial services, logistics or industrial services. The dismantling of the large «integrated» industrial firm has gave birth to an automatic growth of the service sector. But one has to remember that these activities are now just statistically computed in «services activity» when they were before in «industrial activities». Second, we have seen a constant growth of services linked or related to the industry. This is particularly true with new technologies, and the huge development of computer-assisted engineering and design. But, without a strong industrial sectors these services would not exist. Third, industrial labor productivity has made enormous gains in the last 30 years, but not consumption and particularly in Western advanced countries were the median wage has been declining in a lot of country (USA, Germany, France…). This explains too a reduction in the share of labour for the industrial sector. Fourth, some industries have migrated to emerging countries or low-developped ones either for reasons of cost or because of environmental regulations in developped economies. This explains also the reduction of the share in GDP and labour of the industrial sector in developped economies. As these latter are used as a benchmark to assess what is to be the new «economic model» we get an highly distorted image of what the future will be. Fifth, we have experienced a very strong growth of financial services and, for aging population in health care services. These two sectors accounts too for the development of the service share in GDP and labour. But what would be the future of these sectors without industrial products?

The actual truth is then more emergence of a new balance between industry and services, both in termes of activity and of the repartition of firmes than a so-called «post-industrial» economy.

3.    The new industrialization: is it the world trend or the Russian imperative?

The new trend toward global industrialization is still blurred by a reshaping not just of industry but also of industrial powers. However it is obvious that industrialization is a strong and clear Russian imperative. Industry is to be an important part of the Russian economy for numerous reasons. First, only a strong and innovative industry could give a competitive edge to Russia. One important thing is of course to be dominant on its internal market, but it is not enough. The «soft» power, its ability to positively influence others of any country is to a large extent determined by its industrial competitiveness. Only industry could enable Russia to make a full use of its natural ressources and in the same time to protect environment. The second reason is the nature of the society, and income repartition generated by the industry. In services activity, those upper-hand are very well paid (in finance or design). But they are not very numerous, and the Russian population is a large one. The lower-hand service activities are badly paid, usually at the minimum wage level. A service economy is linked to a highly income polarized society. Only industry is able to give the more equal income repartition needed leading to a much less polarized society. The third reason is that in the long run only industry could directly and indirectly fosters the high rate of labour productivity which will in turn generates the possibility of advenced social benefits and advantages. The fourth reason is also one concerning the future. Only industry could employ large numbers of highly educated people. If Russia goes toward a service industry its level of education, and by necessity of culture, will decline.

For all these reason, it is of particular importance to foster the development of a strong industry in Russia.

4.    The industrial policy for Russia: is it the private and state or the state and private partnership? 

Industrial policy had been a concept rejected for years by so-called «liberal» economists. But it is now again quite fashionable to speak and write about industrial policy[2]. Comparative advantage could no more be the main driver in a «real» world plagued by information asymetry and high uncertainty[3]. The role and repetition of market failures is now better undertstood. To be clear, industrial policy means both the creation of an economic and social context favouring the development of industrial activities, and some industrial policies specifically tragetting precise sectors and activities. This implies not a choice between «state», or «private» or «state and private partnership» but a combination of the three.

The role of the State is crucial when it comes to the global context: how to make Russian territory attractive (from exchange rate to the development of infrastructures), the development of the educational system and of an effective health service, guaranteeing a skilled and effective labor force. But it is too crucial when one looks the development of highly uncertain activities and the way they are funded. This is known as the «infant industry» situation[4], and here the role of the State is obviously extremly important. In some natural monopolies, where returns to scale are increasing and then concentration more important than competition, the role of the State is crucial.

The private sector is at its best when it comes to innovation or developping activities under less acute uncertainty and under diminishing returns to scale. Here, competition is the main source of effectiveness. One can look at the car-making industry, the food and becerage industry and so on. The State is here principally acting through regulations and taxes.

Then we have a «grey zone», concerned by market «nearly-failures» that is project where a market efficiency could be blurred or by uncertain development in what is a probabilistic activity (an advanced project in a non-advanced branch). Here, the combination of State and Private sector is to be utterly decisive. Devising the funding institutions for emerging activities, no more «infant» but not yet «mature» or «developped» is a typical case where the public to private pertnership is to be an important factor of success.


[1] A. Puzder, «What does the unemployment rate really mean for Americains», in The Daily Caller, December 23rd, 2013,

[2] Rodrik Dani, The Return of Industrial Policy, Project Syndicate, April 12, 2010, URL,

[3] Imbs, Jean, and Romain Wacziarg, “Stages of Diversification,” in American Economic Review, vol. 93(1), March 2003, pp. 63-86.

[4] Klinger, Bailey, and Daniel Lederman, “Discovery and Development: An Empirical Exploration of ‘New’ Products,”, report to the World Bank, August 2004, Washington DC.

Jacques Sapir

Ses travaux de chercheur se sont orientés dans trois dimensions, l’étude de l’économie russe et de la transition, l’analyse des crises financières et des recherches théoriques sur les institutions économiques et les interactions entre les comportements individuels. Il a poursuivi ses recherches à partir de 2000 sur les interactions entre les régimes de change, la structuration des systèmes financiers et les instabilités macroéconomiques. Depuis 2007 il s'est impliqué dans l’analyse de la crise financière actuelle, et en particulier dans la crise de la zone Euro.

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