Logistics: Roads Paved With Gold


July 28, 2012: Since the Cold War ended, corruption in the Russian government has become a major source of income for criminal gangs and their politician allies (or hirelings). One of the major casualties of all this thieving is transportation. While air freight has become cheaper and more widely used (mainly because of the general effort to improve the safety of passenger aviation) and Russia's vast river and canal network has remained in good shape, the same cannot be said for roads and railroads. While Western states invest six percent of GDP into transportation (roads, rail, air, waterways) Russia spends about 2.5 percent.

Actually, Russia spends much less. For example, building roads in Russia is about ten times more expensive per kilometer than in the West. Most of the additional cost goes to criminals and dishonest officials. On top of that the new roads are usually poorly built and soon need rebuilding. That doesn't always happen because the refurbishment funds get stolen as well.

Russia, the largest country in the world, is more dependent on transportation than most other countries. That's because many natural resources cannot easily be exploited because there's no easy way to get in and out. For example, Russia possesses a rich band of fertile land (the "black earth belt") from its western border to Mongolia. But much of this land has never been farmed, at least not on a large scale, because there was no way to get people, equipment, seed, and other supplies in and the harvested crop out.

In the West, especially nations with their own "black earth belt" (like the U.S., Canada, Australia, and Argentina), plentiful (and well maintained) roads and railroads were a key factor in the enormous agricultural output of these places. Before World War I Russia was a major food exporter because a market economy had created an effective transportation network for farms in the black earth belt. The communists did away with the market economy and the resulting bureaucracy and corruption destroyed an effective transportation network based on rivers, canals, and railroads. Russia soon became a food importer, a situation that was never reversed by the communists, largely because they never fixed the roads and railroads.

Now Russia is faced with another agricultural crisis. Most of the farms are now owned by entrepreneurs and more efficient food production has created growing surpluses. But the corruption and poor administration of the roads and railroads causes harvest time losses because grains and other foods cannot be moved quickly enough. Much of the stuff spoils. This is discouraging the new "farm managers" that have developed in the last two decades. Using foreign advisors (because the Soviets wiped out Russian farm management traditions) and technology, Russians are making the black earth produce to Western standards of quantity and quality.

Unless the government can deal with the corruption and poor management of building and operating road and rail networks, the new farms will be restricted to the few areas with reliable transportation (like along rivers). Russia will be able to feed itself that way but will never become a major food exporter. That will stifle the economy and the lack of taxable income will further retard military reforms. That last item tends to get the attention of government officials more than anything else. That's because the Russian armed forces fell apart after the Cold War ended, with 80 percent of the troops disappearing and all the abandoned weapons being melted down or still rusting away in distant corners of the largest country on the planet. Those vast junkyards of old Cold War artillery and tanks could be turned into tourist attractions, if only there were decent roads for getting there. But first the new rulers have to confront and deal with the corruption problem. Everybody talks about but so far not much has been done about it.





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