The Foreign Service Journal, April 2007

in various regions of Russia and the average January temperature of those regions. (If relatively more housing is built in warmer regions, the index rises, and vice versa.) That index rose by two full degrees Celsius between 1991 and 1999. It has since remained flat, and there are signs that the trend may even be reversing. Plans for Siberian development and repopulation are back on the national agenda. In June 2006 President Putin announced a new migration program designed to attract ethnic Russians from abroad to return to Russia in order to repopulate Siberia and the East. What explains the change since 1999? This, of course, is the year Putin came to power (appointed as prime minister in August and then tapped as acting pres- ident at year’s end). It is tempting to conclude that the renewed emphasis on Siberian development is simply a reflection of Putin’s policy preferences. There is, how- ever, a more fundamental factor, one suggested by Figure 1. Misallocation is costly. During the 1990s Russia simply could not afford to keep pumping money into the east. People therefore moved away and less housing was built. This also implies that to the extent that mistakes of the Soviet past were corrected in the 1990s, it may not have been because the old policies were recognized as wrong. It was only because the gov- ernment could not afford to continue them. Since the 1999 oil boom, Russia again has had the physical and financial resources to misallocate. And of course, the space is still there. This time around, though, the really scarce factor is labor — people. People The main parameters of Russia’s demographic crisis are well-known. The population is shrinking rapidly. On average, 840,000 more Russians have died than were born each year since 1993. See Figure 4 (p. 38). There are only three ways to correct this: (1) increase births; (2) decrease deaths; (3) increase net immigration. The Russian government is aware of all three approach- es, but has focused its policies on the first and third options. However, the second option is actually the most important for Russia. Why? Because it is most directly concerned with the quality of the country’s human capi- tal. The most significant aspect of Russia’s death rate is that it is young men who die in such great numbers. Russian males of prime working age — 25 to 55 years old — are dying at rates more than four times higher than American men and seven to 11 times higher than Scandinavian, Dutch and Japanese men in that age range. Russian 26-year-old men die at the same rate as Swedish or Japanese 56-year-old males. Figure 5 (p. 38) shows that the problem is getting worse. The shrinking of Russia’s population is inevitable. Even radical measures will not be able to prevent it. One logical conclusion is that people — the country’s human capital — need to be regarded as a very precious asset. Clearly, this would dictate much more attention to the health of the population. (Russia’s rampant alco- holism problem is a major reason for the high death rates among men.) Also, human capital needs to be located geographically where it can be most productive. Mobility should be facilitated to the greatest extent pos- sible. But instead of becoming more mobile, Russians have become less so. Each year only one-third or one- fourth as many Russians move to a new city as do Americans or Canadians, and the rate of internal migra- tion has declined by nearly 40 percent since 1992. In an economy that needs much more dynamism, this is not a good sign. Unfortunately, to the extent that mobility is encour- aged in Russia today, it is in the wrong direction. If peo- ple are valuable, then moving more people to the east — as the government wants — is particularly wasteful. Instead, the goal ought to be to use as few people as pos- sible to develop the resources of Siberia. The strong new policy statements by Russia’s leadership to “repop- ulate the East” are alarming. Such statements typically include phrases such as: “Less than 5 percent of Russia’s population lives in the region, which occupies 36 percent of the country’s territory.” In fact, if one makes an inter- national comparison, one sees that Siberia and the Russian Far East are not underpopulated. Rather, they are vastly overpopulated. Compare East Siberia and the Russian Far East with Alaska in terms of their relative shares of population and territory for Russia and the United States. If Alaska had F O C U S 36 F O R E I G N S E R V I C E J O U R N A L / A P R I L 2 0 0 7 The shrinking of Russia’s population is inevitable. Even radical measures will not be able to prevent it.