Image by World Economic Forum
Former Russian Finance minister Alexei Kudrin bluntly said in a report issued last week in Moscow that Russian President Vladimir Putin’s vastly increased military spending, to the detriment of social priorities, has stunted Russian economic growth and spending levels resemble more a third world country than a great power.
Kudrin was fired in 2011 after a public showdown with Prime Minister Medvedev after voicing these same concerns that ultimately came to fruition.
“Spending on the social sphere fell across the board in this period: education fell from 3.7% to 3.5% of GDP, health and sports from 3.5% to 3.3%, and security and law enforcement from 2.5% to 2.3%. But spending on the defence sphere grew from 2.5% to 3.1% of GDP, especially in 2014-2016 when it ballooned from 3.2% to 4.4%. Kudrin calculates that this reorientation from social spending to military has shaved 0.3pp off growth rates in the period,” said Kudrin in a report to the Kremlin, wrote bne IntelliNews.
Kudrin recently represented his preferred budget plan to Putin as the Kremlin has decided to bring down the levels of military spending in favor of more spending on healthcare, education, construction, and security. Kudrin expects the Russian economy to grow 25% over the next several decades if the reforms are put in place.
The levels of social outlays are still vastly lower than Western democracies. Russia does not have a big welfare state. Many see this as a positive instead of a negative, as Western nanny states deal with bloated budget deficits and massive amounts of sovereign debt.