Mr. Putin's Neighborhood: The Wealth - and Poverty - of Nations

Measuring the relative health and wealth of nations has long been the subject of debate. In the post-indusrial internet era, however, intangible wealth, like that ascribed to human and intellectual capital has increased exponentially in value, especially when compared to the historic tangibles.

So, as the following article explains, the fact that a 15 year old Russian boy has a lower life expectancy than a 15 year old Afghan, does not bode well for the former country's prospects.

Attempts to overawe others through intimidation and physical threat in this era may be perceived more as a sign of weakness than of strength. JL

Nicholas Eberstadt comments in the Wall Street Journal:

Notwithstanding Russia's nuclear arsenal, the distinguishing feature of the country today is its striking economic weakness. For all Russia's oil and gas, the country's international sales of goods and services last year only barely edged out Belgium's. There has never been an "energy superpower"—anywhere, ever.

History is full of instances where a rising power, aggrieved and dissatisfied, acts aggressively to obtain new borders or other international concessions. In Russia today we see a much more unusual case: This increasingly menacing and ambitious geopolitical actor is a state in decline.

Notwithstanding Russia's nuclear arsenal and its vast territories, the distinguishing feature of the country today is its striking economic underdevelopment and weakness. For all Russia's oil and gas, the country's international sales of goods and services last year only barely edged out Belgium's—and were positively dwarfed by the Netherlands'. Remember, there has never been an "energy superpower"—anywhere, ever. In the modern era, the ultimate source of national wealth and power is not natural resources: It is human resources. And unfortunately for Russia, its human-resource situation is almost unrelievedly dismal—with worse likely in the years to come.

Let's start with the "good" demographic news for Moscow: Russia's post-Soviet population decline has halted. Thanks to immigration chiefly from the "near abroad" of former Soviet states, a rebound in births from their 1999 nadir and a drift downward of the death rate, Russia's total population today is officially estimated to be nearly a million higher than five years ago. For the first time in the post-Soviet era, Russia saw more births than deaths last year.

Yet even this seemingly bright news isn't as promising as it seems. First: Russia's present modest surfeit of births over deaths comes entirely from historically Muslim areas like Chechnya and Dagestan, and from heavily tribal regions like the Tuva Republic. Take the North Caucasus Federal District out of the picture—Chechnya, Dagestan, etc.—and the rest of Russia today remains a net-mortality society.

Second: Despite its baby surge, which takes Russia's fertility level from below the average to just above the average for the rest of Europe, the 1.7 births per Russian woman in 2012 was still 20% below replacement level. According to the most recent official Russian calculations, on current trajectories the country's population, absent immigration, is still set to shrink by almost 20% from one generation to the next.

But while Russia's childbearing patterns today look entirely European, its mortality patterns look Third World—and in some ways worse. According to estimates by the World Health Organization, life expectancy in 2012 for a 15-year-old male was three years lower in Russia than in Haiti. By WHO's reckoning, a 15-year-old youth has worse survival chances today in Russia than in 33 of the 48 places the United Nations designates as "least developed countries," including such impoverished locales as Mali, Yemen and even Afghanistan. Though health levels are distinctly better for women than men in Russia, even the life expectancy of 61 years for a 15-year-old Russian female in 2012 was an estimated three years lower than for her counterpart in Cambodia, another of the U.N.'s least-developed countries.

How is this possible in an urbanized and educated society? In least-developed countries, life is foreshortened by such killers as malnutrition and communicable "diseases of poverty" such as tuberculosis, malaria and cholera. Data from WHO in 2010 show that in Russia the major threats are cardiovascular disease (resulting in heart attacks, strokes and the like) and injuries (homicides, suicides, traffic fatalities, deadly accidents).

For decades, Russia's death rates from cardiovascular disease have been higher than the highest levels ever recorded in any Western country. For Russian women in 2010, the rate was over five times higher than for Western European women. In 2008—the latest such global figures available from the World Health Organization—working-age Russian men had the worst cardiovascular-disease death levels in the world.

As for injuries, death rates for working-age Russian men were four times higher than would have been predicted for their income level—with absolute levels of violent death exceeded only in a handful of places, civil-war-riven Iraq and Sri Lanka among them. Violent death is overwhelmingly a male problem more or less everywhere, but in today's Russia the injury death rates are higher for Russian women than they are for Western European men.

Russia's "high education, low human capital" paradox also shows up in Russia's extreme "knowledge production" deficit. Long-term economic progress depends on improving productivity through new knowledge—but this is something Russia appears mysteriously unable to do.

Patent awards and applications provide a crude but telling picture. Consider trends in international patent awards by the U.S. Patent and Trade Office, the world economy's most important national patent office. Of the 1.3 million overseas patents awarded since 2000, applicants from Russia have taken home about 3,200—a mere 0.2% of the overseas total. In this tally Russia is behind Austria and Norway, barely ahead of Ireland. The Russian Federation's total annual awards from the Patent Office regularly lag behind the state of Alabama's.

Or consider applications under the Patent Cooperation Treaty, the international convention associated with the World Intellectual Property Organization. Once again Russia's performance is miserable. In 2012, the latest such data available, Russia comes in No. 21—after Austria—racking up less than 0.6% of the world's total. The population of Russia is more than 15 times that of Austria. Russia's "yield" of patents per university graduate is vastly lower than Austria's—35 times lower. By this particular metric Russia is only fractionally better placed than Gabon.

And sure enough, Russia performs like a knowledge-poor economy. With about 2% of the world's population, 3% of its GDP and 5% of its college grads, Russia generates only just over 1% of the globe's service exports—which is essentially a trade in human skills. Russia fares the worst in the most knowledge-intensive sectors, such as exports of computer and information services, where its share of the global market is only slightly ahead of the Philippines'.

Grim as Russia's current human-resource inventory may appear, the outlook is worse. Given the birth slump of the past two decades, Russia's labor force will be smaller in 2030 than it is today. The U.N. Population Division's projections suggest that the country's life expectancy will remain below Third World averages through at least 2030. Moreover, there is reason to expect that Russia's depopulation will resume. Thanks to the post-Soviet baby crash of the 1990s and the early 2000s, the pool of Russian women entering their 20s will shrink sharply for the next decade and more, while the overall population gets grayer.

These trends promise pressures for fewer births and more deaths—and thus for what demographers inelegantly call "negative natural increase." Projections by international demographic authorities—the U.N. Development Program, the U.S. Census Bureau and the like—all see Russia as a net-mortality society in the years ahead. Strikingly, this vision is shared by Russia's official statistical service, Goskomtat, even in its most optimistic demographic scenario.

If all this were not bad enough for Moscow, Russia's geopolitical potential is being squeezed further by the rapid world-wide growth of skilled manpower pools. According to the International Institute of Applied Systems Analysis in Austria, in 1990 Russia accounted for nearly 9% of the world's working-age college graduates; that share is declining and by 2030 will have dropped to 3%. On this front, as on many others, Russia is simply being left behind by the rest of the world.

Despite Vladimir Putin's posturing, he is leading a country in serious decline. If his dangerous new brinkmanship is a response to that bad news, then we should expect more of it in the future, possibly much more.