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Bear Traps on Russia's Road to Modernization

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If sustainable growth is a key goal for the economy of every nation, its desirability is perhaps even more acute in Russia. Even President Medvedev argues that the country's heavy reliance on natural resources makes it primitive and uncompetitive, calling for innovation and diversification. But the authors of this provocative new book argue that this modernization may not be the best thing for Russia. Two factors present major obstacles: first, the country's physical and human capital was inherited in the Soviet era and was allocated geographically in a way that was not conducive to development; second, there has been uneven allocation of the proceeds coming from oil and gas. Russia has two particular characteristics space and cold that lead to misallocation of resources but if physical geography is immutable, economic geography need not be. Having analyzed the particular tenets of the economy that restrict sustainable growth, the authors argue that Russia should take advantage of its resources but move non-resource industries into regions that are closer to the market.

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