Russia’s new road to economic growth

There is a great macroeconomics feature in the Times today about a massive road building programme being launched by the Russian government. I was watching The Long Way Round the other week and one of the most memorable sections is when Charlie and Ewan attempt to journey through the Road of Bones, perhaps one of the least hospitable and most dangerous stretches of roadway in the world. The Times reports that

“Russian roads are in a parlous state. The Soviet Union invested much more money into the nation’s railways and the country still lacks motorways between big cities - between Moscow and St Petersburg, for example - or to nearby European capitals, such as Minsk. In rural areas, many villages have little more than dirt tracks. The bad roads cost the economy an estimated 10 per cent of GDP, according to VTB Europe, the investment bank. It also costs lives: 34,000 people a year die on the roads in Russia, ten times more than in the UK. The Kremlin wants to start one of the most ambitious roadbuilding programmes ever, building 50,000km of roads in the next six years, at a cost of £2 million per kilometre. The plan includes tunnels, bridges and motorways between big cities and to borders with neighbouring countries.”

The article can be used to illustrate many economic issues

The multiplier effects of the road building programme Applying some of the principles of cost-benefit analysis Road building and externalities - including the environmental costs and benefits The importance of infrastructure in driving economic growth How Russia is planning to finance this programme - the Russian government is looking for half of the money to come from the private sector What this road building programme might do to the prices of raw materials and to wages in the Russian construction sector How might British firms be able to benefit from the huge road building investment programme?