Galim Khussainov
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Economy and public policy · 2 min read

A Harvard Case Puzzle About a Country

Translated from Russian with the help of AI. Original: Russian version

A Harvard-style case puzzle about a country that repeats typical economic policy mistakes, with obvious parallels to Kazakhstan.

At Harvard, I am taking a macroeconomics course in which we study the cases of various countries: Mexico, Argentina, the United States, Kenya, Japan and others. It is striking how all of them repeat the same typical mistakes at different points in time. Take our own country: in the years since independence, we have managed to commit practically every mistake in economic policy. Here are some of them: pegging the exchange rate in order to maintain stability, subsidizing business in order to develop it, nationalizing the pension system in order to later distribute its funds to the population and finance the economy, using the central bank to finance the economy, controlling tariffs and prices of socially significant goods in order to contain inflation, imposing capital controls in order to control the exchange rate, increasing government spending in order to raise household incomes, converting foreign-currency loans at a set exchange rate, and so on. There are very many of them, and prominent economists have recognized all of these policies as unjustified in the countries mentioned above, where they led to far from the best outcomes for economic development.

I will describe a certain country, and you can try to guess which one it is (it is not Kazakhstan).

  1. It decided to move straight from an agrarian economy to a post-industrial one.

  2. It ranks 94th in the Democracy Index, and its regime is classified as hybrid, only slightly above autocracy.

  3. Historically, inflation has stayed within a corridor of 4–12% (until 2019).

  4. Over the past 10 years, GDP has grown by an average of 5% a year.

  5. 37% of the population lives in poverty.

  6. It ranks 23rd in inequality, and between 2008 and 2016 the Gini coefficient rose from 42 to 48.5.

  7. It ranks 137th in perceived corruption and 95th in economic competitiveness.

  8. It ranks 84th in economic complexity.

  9. 0.1% of the population controls 33% of the economy and 80% of all investment.

  10. The budget deficit is 7.7% of GDP.

  11. In 2008, it adopted a development program through 2030.

The program declares manufacturing to be the main driver of the economy, and promises a larger middle class and a high standard of living.

  1. Interest rates on online consumer loans reach 180% per annum.

  2. China is the main investor in infrastructure under the Belt and Road Initiative (the Silk Road).

One well-known Harvard economist has said that if the countries of this region want to achieve high and sustainable economic growth, they must pursue a growth model different from the earlier miracles built on industrialization.

I think we have something to think about.

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