By Alex Liao
The Russian economy has traditionally been focused on natural resources rather than innovation and entrepreneurship. During the global recession, oil prices hammered the Russian economy, prompting government stimulus, which similarly protected its financial sector. Nonetheless, the Russian economy has picked up slightly over the couple of years, achieving a modest though disappointing 4-5 percent growth. Although unemployment and currency rates are at pre-recession levels, inflation is rising and the budget deficit is expanding. Labor productivity is less than half of what workers in other OECD states achieve. Hence, the status quo is unsustainable.
Russia must, as a whole, become a more competitive economy. It is currently moving towards more efficient use of its resources, closing its capacity utilization gap by instituting new production processes, decreasing the amount of surplus labor, and having better organization of administrative tasks. A more competitive Russian economy is one that is attractive to foreign direct investment, one that is an attractive exporter of goods and services, and one that is has a productive manufacturing, pro-industrial base. There are several areas where economic reform will lead to a more competitive economy:
First, Russia must reform its administrative framework to be more conducive to business interests and foreign direct investment. Legal institutions must be able to protect intellectual property and drive investment and corporate development. Bureaucracy must be tamed, regulation must not stand in the way of innovation, and judicial transparency must create a secure economic environment where businesses can equitably settle disputes. A thorough review of all regulation, with the intention of making it comparable to international regulations, will send a clear message to foreign markets.
Nevertheless, the financial and banking industry must also be placed on a stable footing. Reforms implemented between 2002 and 2006 to increase transparency in financial reporting, privatization, and credit bureaus must be extended and furthered to cover weaknesses exposed during the global recession. For instance, recent proposals which will tighten capital requirements, or others which will strengthen the Central Bank of Russia’s regulatory powers, will be able to dampen business cycles and bring more stability to the financial framework for the Russian economy. An expansion of the financial industry will also be beneficial, as it will open up new avenues for capital.
Government itself, too, must reduce fiscal deficits to be able to effectually react to fluctuations in the business cycle. It must convey a readiness to keep inflation low, so companies can plan for the future. Corporate taxes must be kept lower to promote competition and increase incentives for productivity. Corporate taxation is relatively high in Russia, making it less competitive than many EU countries. Tariffs and other customs procedures similarly should be streamlined to make the economy more competitive, and make it easier and faster to start a new company. Currently, Russia’s high import tariffs and customs processes have created large barriers against trade. Changing these will reduce the amount of foreign competition while increasing foreign direct investment. Specifically, foreign direct investments would also improve if a 2008 law on protection of strategic sectors was reformed – the law limits foreign investments in the energy sector. Moreover, placing a priority on full accession to the WTO will enable Russia to access new markets and foreign investments.
In the past, corruption has run rampant amongst businesses and the judiciary, fomenting uncertain regulations and creating a rough business environment. Not only that, corruption stifles competition, giving many a reason to stay away from the economy. Corruption creates legal, financial, and reputational risks. Companies do not want to be involved in any allegations about corrupt dealings in Russia. Reform must also be focused on property rights, stable and protected access to land and resources, and intellectual property rights. These must be clearly defined to allow businesses to make clear investment decisions, as problematic administrative barriers will hinder growth. For intellectual property rights, Russia will need to solidly enforce the Trade Related Intellectual Property Rights agreement as per its obligations to the WTO.
Russian businesses that institute accountability standards to reduce fraud and corruption will also increase consumer confidence for economic stability. These may include collective action or zero-tolerance programs, where management takes the lead in anti-corruption measures. There are several private sector initiatives already in place, such as the Russian Initiative for Corporate Ethics and the Partnering Against Corruption Initiative. These programs aim at fostering a best-practice system to stem bribery and corruption between businesses, and should be publicized and further developed so that they become industry standards.
A clear governmental anti-corruption framework must include a sound corruption prosecution mechanism, grounded in legislation and a judiciary that can objectively and independently render decisions that are publicly respected. Moreover, these processes, as well as any other government contracts, must be transparent. Civil service codes should be more standardized to eliminate governmental corruption. Finally, citizens and the media should be able to contribute to these protections. Their voice must be protected, and whistle-blowers must be granted legal protections and incentives. These, combined with private sector efforts, will be seen as a large step towards reducing corruption.
Second, Russia must further develop its infrastructure and technology with innovation in mind. Companies who can access efficient infrastructure can expand with fewer costs to neighboring regions, and integration of infrastructure will increase both the quality and profits for businesses. Energy and transportation infrastructure will improve the density of the job market, while advanced communications systems can ensure that businesses make the soundest decisions in any given environment. To directly improve the job pool, investments must be made in education and healthcare. This will reduce economic inequality, opening up new potential workers and increasing their productivity. Those who have more advanced educations and training can more easily adapt to changing job markets and innovation in a particular sector. The private sector should also contribute to better training of workers, training them from within and providing them the skills to continue to thrive in their sector.
In particular, Russia’s educational system has not seen significant reform in the past few years relative to those of its peers. A brain drain has been observed, where the educated population has elected to leave Russia rather than stay and benefit the economy. Emphasis must be placed on math and science skills, as well as management skills, to shape the next generation of Russian business leaders. A transition to more highly trained management through an expansion of Russian business schools will create a more dynamic economy.
Third, technological innovation must be emphasized. More advanced business practices, as well as access to new products and processes will contribute to a more vibrant private sector. For example, businesses should form clusters to increase efficiency and make it easier for new companies or entrepreneurs to be established. Research and development must be supplemented by research from educational and scientific institutions. An innovation hub, named Skolkovo, has recently been established, and has been compared to the United States’ Silicon Valley. Stimulus measures should be focused on developing these areas. Relationships should be cemented to ensure collaboration between each partner to create homegrown, innovative systems. To this end, market inefficiencies must also be closely monitored. The government must break down monopolies and should write a tougher competition law than the one it wrote in October of 2006, which established a Federal Antimonopoly Service.
Economic reform in these areas must be supplemented with leverage from Russia’s economic strengths. Natural resources will continue to fuel economic growth, though the byproduct – appreciation of the exchange rate – must be tempered to maintain a competitive manufacturing base. Moreover, while natural resources remains important, government investments should focus more on the manufacturing and services industries, which will make the economy more diverse. This, combined with anti-corruption and smart resource management, will allow the Russian economy to continue to grow despite the global financial liquidity difficulties. Russia must use the revenues it can still draw in from natural resources to invest for its future – one with energy efficiency and renewable energies in mind.
Another strength Russia must leverage is its location and broad population. It must use these to attract foreign direct investment, while also entering into agreements with its neighboring countries. Working with the EU, as well as working with CIS states, will prove to be beneficial looking forward. It should also look to establish more Common Economic Zones, like the one it has joined with Kazakhstan, Belarus, and Ukraine. These agreements will enable Russia to lower its tariffs and trade barriers, bringing in more foreign direct investment. Furthermore, Russia’s population ranks among the most educated in the world. It must focus on retaining the population in Russia and avoiding the brain drain. In order to do this, the government must invest in new, attractive jobs in the domestic market.
Thus, in the wake of the global recession, Russia should focus on streamlining its administrative framework to provide incentives for foreign investment, and investing in higher-level management and science education. This will enable the economy to become more competitive and attract innovators. Along the way, Russia should also push for full accession to the WTO, which will provide greater investment opportunities as well as buttress confidence in the Russian economy’s future.
1 World Economic Forum. “Russia Competitiveness Report 2011,” World Economic Forum, 2011.
By Michael Shaw
Throughout high school, teachers, guidance counselors, parents, and even fellow peers all contribute to the rule that college is unequivocally the next step following graduation. Logically following this comes the idea that one must attend the most “prestigious” college or university possible in order to secure one’s standing in the world from a young age. Such pressures beget behaviors like cheating, and often even manifest themselves mentally in chronic stress. While college can undoubtedly provide one with opportunities to succeed that would otherwise be unavailable, research indicates that it is not in fact as vital as many claim. In fact, many might be better off not attending college.
One important consideration to take into account is the massive cost of college. The average American college student graduates with a significant amount of debt; the Project on Student Debt puts the average debt for the Class of 2011 at 27,200 dollars or 34,000 dollars if parents’ loans are factored in. In fact, this debt can be so bad that according to the Department of Education, 8.8 percent of students default on their loans within just two years after graduating. Most would agree that going to college is not worth the cost if one defaults on his or her loans within just a few years of graduating, before he or she even has the chance to gain the benefits of a college degree. Therefore, those not in an economic position to go to college might want to consider other options. That being said, there are significantly cheaper avenues, such as receiving financial aid, attending community college, or even taking classes online. However, the traditional 4-year institution might not be the best path for everyone.
Even if cost is not an issue, something else to consider is actually graduating college. A surprising number of students that enroll in a four year degree program do not end up completing that degree. Specifically, the American Council on Education Rates notes that 6 year graduation rates for B.A. students have fallen to 56 percent. As discussed above, these dropout rates could be due to the high costs associated with attending college, which force students to drop out before completing their degree. This theory is supported by Dana Goldstein of The Nation who writes that “nearly one in five [students] who drop out leave only after accumulating $20,000 in debt.” However, another explanation independent of cost is offered by ACT College Readiness Benchmark statistics, which reveal that 75% of ACT-tested high school students are not educationally prepared to succeed in entry level college courses. Such striking statistics indicate that a large number of high school graduates simply did not receive a quality of education on par with college level education, meaning attending a 4-year institution might not be the best option for them due to their initial disadvantage. Attending college evidently is not worth the costs if one drops out before receiving a degree.
Finally, one must consider the current labor market and its relation to college graduates. Jacques Steinberg of the New York Times says “Of the 30 jobs projected to grow at the fastest rate over the next decade in the United States, only seven typically require a bachelor’s degree.” This means that in the current US economy, jobs that do not require a college degree will be more abundant than those that do, meaning that going to college might turn out to be a superfluous decision. In fact, Richard Vedder of Ohio State University notes that even today, “about 17 million college graduates have jobs that do not require a college degree. Not only is that 11 percent or so of the total labor force…but, more relevantly, it constitutes well over 30 percent of the working college graduates in the U.S.” Therefore there is little guarantee that obtaining a degree will obtain one a job corresponding to that educational attainment, rendering the time and money sacrificed essentially useless for those who do not. In fact, many researchers note that going to college sacrifices several years of work experience that could help open advance in the labor market more than a college education would. Some have gone even further and suggested that one could actually gain more money in the long run by investing money in the stock market than by putting that same amount of money into a college education. Such conclusions, although certainly varying for each individual, do provide reason to perhaps consider alternatives to a college education, especially when looking at recent trends in the US labor market.
In high schools across the country seniors are frantic about where they will end up next fall. While college is undoubtedly a sound investment for many, for others it simply might not meet the expectations built up around it. Possible reasons include staggering student loan debt, low graduation rates, trends in the labor market, and perhaps more beneficial alternatives. Unfortunately, pressure from sources like parents, teachers, and peers renders many unable to peel away from societal pressure to attend college. College should remain an important part of the United States, but high school students should not be afraid to consider alternatives as well.
By Daniel Pittaro
The government should not intervene to help individuals; people should take care of themselves. America was created based on the idea of freedom and a free market. If the government intervenes in a free market economy, then it is no longer a free market. When someone is dependent on something, like their government, they become unable to take care of themselves without that dependency, and this is not the way the America should work. People when they are offered a product or service decide for themselves whether that product or service is worth the price and whether they want to buy it or not. That is how prices are set; the government should not be forcing certain items to be sold at specific prices. Also, if the government tries to help every individual they would quickly run out of funds, making them unable to do the jobs they are supposed to be doing, such as protecting our nation from foreign threats, and creating laws that protect the citizens from themselves. As Robert Nozick explained, a minimal state should be able to enforce contracts and stifle anarchy without provoking violations of the free market.
The idea that the United States government needs to start minding its own business extends even further to the Government’s affair with foreign nations. America should put its own needs before the needs of foreign countries. Right now the U.S. is in an economic downturn, so our priorities should be focused on getting our nation back up on its feet, instead of helping other nations. No money should just be given to other countries, as is the case right now with Israel. Currently we are giving Israel money, when their income as a nation is actually much larger than a majority of other nations. This is a waste of money. If we want Israel to be our ally we should try getting them to respect us in a way that does not require throwing our money away on a wealthy nation. A nation should be able to stand on its own without gifts from a foreign nation, and if they cannot, they are not fit to be a nation, and need to find a change in leadership and government.
When the government intervenes to help every individual, it heads the government in the direction of an almost socialist, paternalistic government, which is the opposite direction our government should be headed in. This leads to the bigger idea that the government should reduce its size. The government is trying to enforce its will in more areas than they should be allowed for example, gay marriage, and healthcare. People function better without a ton of rules to follow, they just need a few groundwork ideas laid out for them and they can accomplish what they need to from there. The government does not need to make a decision on ever topic the country debates, the only things they should be concerned with, is what it specifically tells them they have power over in the Constitution. Things like creating an army for the defense of the nation, or making sure every citizen of the country gets the rights entitled to them, life, liberty, and the pursuit of happiness. The governments should only have power over what is specifically stated in the Constitution, and nothing else.
By Atreya Misra
Every year, Columbia University invites many heads of states, government officials, and major politicians to the United Nations General Assembly, and every year, these invitations go without controversy. This lack of controversy exempts 2007, when Iranian president Mahmoud Ahmadinejad was invited to speak on Columbia University’s campus. This one invitation sparked protests not only among the students of Columbia, but of people from all over the city of New York. The events of 2007 foreshadowed what is being observed today with the conflict in Iran as well as the tensions in that region. The United States should take a stance against Iran not through a radical act of war, but rather a method that will keep both United States and Middle Eastern countries safe, however improbable it may be.
Currently, the situation in Iran boils down to two issues, the first being Iran’s threat to close the Strait of Hormuz. The closure of the strait would pose as significant downside risks not only on the military front, but on the economic front as well. On the military front, the closure would present major threats to all Middle Eastern Nations because of the limited navigation and security that would result from the closure. As for economic issues, the downturn would not be contained in the Middle East but rather it would spread throughout the world. Outside the Middle East, the closure would mean limited oil supply, harming nations such the China, the UK, as well as the US. Within the boundaries of the Middle East, countries, especially the United Arab Emirates, would not be able to trade as the paths that the cargo ships would have to go through would be blocked off. The United States’ job is to stop this, as it will risk the success of industries all over the world relying on oil from the Middle East. The US also has the moral obligation to prevent the closure because it was the first country to take a stance against Iran with sanctions bringing many other countries with it. If the United States does not do this soon, it will jeopardize the security of countries all around the globe, and no country can afford this danger.
Furthermore, the situation also boils down to Iran’s conflict with Israel. The two have been enemies for over sixty years and there are no signs of that changing soon. Just last Saturday, Iran’s Supreme Leader Ayatollah Ali Khamenei displayed his opinion on Israel, and in no way was it quaint. The fact that the US is in firm support of Israel couldn’t worsen the situation any worse. Throughout the sixty years of conflict between Iran and Israel, tensions have never been higher. Both Israel and Iran are threatening each other with war constantly, and it seems as though Israel is getting impatient. For the U.S. Senate, holding off on war is the best thing to do and we cannot let Israel go forward. If Iran and Israel were to go into war, we wouldn’t see constraint. Iran would use its recently developed nuclear facilities while Israel would use tactics of total warfare, killing innocent Iranian citizens. Both of these situations must be avoided with any means necessary it would permanently scar Iran’s relations not only with Israel, but the United States as well.
The solution to this problem isn’t simple; it will require a lot of thought as well as tough decisions. Targeted sanctions, diplomacy – it is not necessarily a question of what, but how. The next few months are crucial; nonetheless, the United States must be guided by cautious yet forward-thinking leadership rather than naïve ignorance. It’s time we take active steps to prevent the closure of the Strait of Hormuz, it’s time we prevent an ultimate war from breaking out, and it’s time we take a firm stance against Iran.
By Caroline Margiotta
For the first time since former President Hosni Mubarak resigned last February, Egypt – the most populous Arab country – seems to have finally taken great strides in recovering from over three decades of autocratic rule; however, Egypt’s success as a democratic nation seems fragile at best given the civil unrest which was sparked by military rule.
In a monumental action which followed a long period of National Democratic Party dominance, Egyptian civilians voted to elect 498 members of the People’s Assembly over six weeks, with the remaining ten Assembly members yet to be elected by the military . According to the BBC, Islamist parties saw an overwhelming victory in the parliamentary elections, with the Muslim Brotherhood’s Freedom and Justice Party (FJP) followed closely by the ultra-conservative Salafist Nour Party in having gained an overwhelming majority— approximately 73 percent– of seats.
Despite the promise of a fair democracy presented by these elections, however, Egypt has remained under military rule since Mubarak resigned on February the 11th of last year, and the period of unrest in Egypt is far from over. Ironically, many Egyptians had hoped that a system of temporary martial law would be an excellent means of transforming Egypt’s government into a democracy. Islamists believed that the military would pave the way for their domination in new parliamentary elections, while Liberals believed that the military would prevent Islamists from gaining excessive power.
While the Islamists were indeed victorious in the recent Parliamentary elections, the military has surprised all parties concerned in expanding its power over the troubled nation. At this point, despite the FJP’s victory, the military council is set to remain the highest authority in Egypt until at least the end of June, and it has recently drafted a document which would exempt the military from any civilian management. Additionally, although many senior generals have promised the Egyptian people that the council’s rule has a time limit, the military has failed to put forth a date for presidential elections.
Given the seemingly indefinite end of military rule, waves of protest have continued across Egypt. On January 25th, for example, approximately 100,000 Egyptians from across the country gathered in Tahrir Square to protest the rule of the military council and to observe the first anniversary of the protests which led to Mubarak’s ouster. In this particular demonstration, the previously-outlawed Muslim Brotherhood also celebrated its victory in the Parliamentary elections, demonstrated its support for the military’s decision to end martial rule by the end of June, and proclaimed that “the people want the end to the military trials of civilians… [and] the handover of power. ” However, because members of the Muslim Brotherhood linked arms in Tahrir Square to prevent protestors from reaching Parliament to demand the military’s previous surrender of power during the January 25th protest, liberal demonstrators struck out against the Muslim Brotherhood on January 31st, demanding an end to rule by both the military and the Muslim Brotherhood.
In the midst of these political protests, protests against the police, the Interior Ministry, and the military council have continued in Egypt as a result of a February 1st brawl in Port Said between rival soccer fans which left over 70 casualties. Thousands of Egyptian soccer fans (often called “ultras”) have gathered in Cairo and other cities across the country to protest against what they perceive as the police’s inaction in preventing these deaths . Many protestorsbelieve that the police aided in the violence at the soccer match on Wednesday, and have suggested that the police either failed to seize weapons from fans or turned off the field lights to aid Port Said fans in their attacks; they have also blamed the military council and Interior Ministry for failing to prevent the violence.
Given the fragility of a newly-formed democracy, the irrefutable difficulty of a complete power transition, and the historical difficulty of putting an end to military rule, Egypt’s chances of success were slim to begin with. However, because the Middle East as a whole has been plagued by unrest over the past two years, and because Egypt’s military has had a history of political corruption, the next few months will certainly have the Western world watching with anxiety and anticipation in equal parts as the new Egyptian government attempts to restore peace and stability to the tumultuous nation.