the national bureau of asian research nbr project report | may 2010 russia’s peacetime demographic crisis: Dimensions, Causes, Implications By Nicholas Eberstadt ++ The NBR Project Report provides access to current research on special topics conducted by the world’s leading experts in Asian affairs. The views expressed in these reports are those of the authors and do not necessarily reflect the views of other NBR research associates or institutions that support NBR. The National Bureau of Asian Research is a nonprofit, nonpartisan research institution dedicated to informing and strengthening policy. NBR conducts advanced independent research on strategic, political, economic, globalization, health, and energy issues affecting U.S. relations with Asia. Drawing upon an extensive network of the world’s leading specialists and leveraging the latest technology, NBR bridges the academic, business, and policy arenas. 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FOR FURTHER INFORMATION ABOUT NBR, CONTACT: The National Bureau of Asian Research 1414 NE 42nd Street, Suite 300 Seattle, Washington 98105 206-632-7370 Phone 206-632-7487 Fax [email protected] E-mail http://www.nbr.org Russia’s Peacetime Demographic Crisis: Dimensions, Causes, Implications i FOREWORD his report represents the culmination of a three-year research project, commissioned by The National Bureau of Asian Research and led by Nicholas Eberstadt (American Enterprise Institute), to investigate Russia’s emerging political economy through the unique prism of that country’s demographic profile, and assess the implications thereof for Russia’s future.T As posited by Dr. Eberstadt in his initial research proposal, Russia’s dependence on resource extraction for economic wealth at the expense of investment in human resources and capital not only bears inherent risks for Russia’s ability to sustain domestic economic prosperity and stability in the long run, but also has significant implications for Russia’s future political outlook and foreign policy framework. The challenge of the project undertaken by Eberstadt was to synthesize the disparate issues of Russia’s demographic prospects, educational situation, economic outlook, institutional and legal development, domestic political tendencies, foreign policymaking, and security policy into a coherent overall explication of modern Russia’s political economy. Toward this effort and to help inform Eberstadt’s research, the project’s first phase (2007–08) brought together an international team of experts in April 2008 to discuss “Russia’s Political Economy: Trends and Implications” at a workshop co-sponsored by NBR and the Hudson Institute in Washington, D.C. Through a series of panels addressing Russia’s demographic challenges; policy priorities in the country’s health and education sectors, natural resource development, and public finance infrastructure; and the impact of Russia’s resource-based economy on its domestic politics and foreign policy outlook, workshop panelists discussed and assessed the complex interplay among social, economic, and political pressures shaping Russia’s emerging political economy. It is significant that the workshop took place prior to the global financial crisis, and the subsequent fluctuation in resource prices, of late 2008. Confidence in Russia’s ability to sustain its decade-long economic successes, attributed largely to its vast natural resource wealth and fortunate happenstance of high global price and demand for oil and natural gas, took on a new meaning in the face of the inevitable impact on gas demand and price of a weakened global economy. In that light, the portent of the workshop’s conclusions that the “long term growth potential, and indeed the health of its socio-economic fabric, will be threatened when Russia either runs out of resources or when global demand and oil prices decrease” loomed closer on the horizon than perhaps anyone had anticipated. The impact of the crisis also spotlighted the workshop’s findings regarding the vulnerabilities of Russia’s political economy, described as a “political complacency and lack of economic diversification” that is “compounded by the country’s looming demographic problems in the face of a declining population and the concomitant challenges of a healthy and viable critical mass working force to contribute to long-term sustainable growth.” ii The implications of Russia’s demographic crisis are explicated in grave detail in this final phase (2008–09) project report on “Russia’s Peacetime Demographic Crisis: Dimensions, Causes, Implications.” Eberstadt paints a compellingly grim picture of Russia’s future demographic profile, which has serious implications for the country’s domestic policy priorities as well as its ambitions to regain a preeminent position on the world geopolitical stage. Indeed, Eberstadt’s report leads one to question the very viability of Russia as a resurgent power of the 21st century. The “haunting specter of depopulation,” as described by Eberstadt and exacerbated by the policy framework of Russia’s political economy today, portends a crisis of alarming proportions for Russia’s future human and social capital, with critical implications for the country’s internal stability as well as for its future security outlook. Given the importance of Russia today on the global geopolitical stage, Eberstadt’s report is a highly recommended read for anyone interested in Russian affairs. NBR would like to thank the Smith Richardson Foundation for its generous support of this project. We are also grateful for the support of Pfizer Inc. toward research for this study. Finally, we would like to acknowledge the NBR project team, fellows, and editors, whose efforts contributed to the success of this initiative. A. Mahin Karim Senior Project Director The National Bureau of Asian Research iii iv the national bureau of asian research nbr project report | may 2010 Russia’s Peacetime Demographic Crisis: Dimensions, Causes, Implications Nicholas Eberstadt NICHOLAS EBERSTADT holds the Henry Wendt Chair in Political Economy with the American Enterprise Institute. He is also a senior adviser to the National Bureau of Asian Research. He can be reached at <[email protected]>. v vi DEDICATION To Murray Feshbach Trailblazer who illuminated Russia’s demographic terrain in the dark years; Unceasingly generous mentor to two generations of protégés and students; On the occasion of his Eightieth birthday vii acKNOWLEDGEMEnts If part of the pleasure of any tale is in the recounting, so it is too with the acknowledgement of the considerable debts I have accumulated over the course of this study. The first of these debts is to the American Enterprise Institute for Public Policy Research (AEI), where I have had the pleasure of serving as a research scholar for the past quarter century, and the honor of holding the Henry Wendt Chair in Political Economy for the past decade. Mr. Christopher C. DeMuth, the president of AEI for over twenty of those years, saw to it that the Institute would offer students of public policy an extraordinarily exciting and congenial haven for their work—a platform today unparalleled in America or elsewhere. Under Dr. Arthur C. Brooks, AEI’s current president, I am confident that the Institute’s greatest days still lie ahead. At AEI, my work on this study has been both eased and greatly improved by the superb research assistance of a roster of brilliant and accomplished young research assistants. A special salute is due to the all-stars of “Team Eberstadt.” Ms. Megan Davy distinguished herself in her work on the early phases of this project. Extraordinary thanks, furthermore, are due Mr. Apoorva Shah. This investigation would not have managed to achieve its ultimate scope or depth without his heroic contributions, as he and I both know. Additional thanks go to AEI’s Ms. Kara Flook for her generous and cheerful help with my unexpected inquiries on Russian language sources; to Ms. Emily Putze, who compiled the study’s reference list and offered critical editorial suggestions that have made the study an easier read; and to Mr. Stephen Gunther, whose background research has informed this study, and whose caliber of work set high and exemplary