For the past decade, up to the first half of 1999, arguably the most dramatic
indicator of Russia's economic crisis was the decline of aggregate capital investment
by a stunning 80 percent (in real terms). For a while afterwards, the most promising
indicator of a beginning economic recovery has been the accelerating surge of
aggregate capital investment, with its rate of growth reaching almost 18 percent for the year 2000 as a whole, again in real terms. Unfortunately, the most recent data
point to a rapid slowdown of investment growth, with the latest (annualized) rate
falling to below 8 percent for the first two months of 2001. Although monthly data
should clearly not be overinterpreted, indications are that the slowdown is accelerating,
with growth rates of investment falling first to 9.2 percent (year-on-year) and
then to 6.3 percent in January and February 2001, respectively.
Policies that might be conducive to a revival (or at least a continuation) of the
previous positive trend seem to presuppose some diagnostic clarity as to why those
developments, i.e. the post-crisis recovery of investment and, possibly, its subsequent
slowdown have occurred. Clearly, there are some quite plausible explanations. However,
as we shall see below, at least one of them seems to have been neglected so
far, with potentially serious consequences.
It is hardly surprising that not all segments and sectors of the economy participate
equally in the movements of aggregate investment. The specific structural
patterns of investment deserve attention. As we shall see, by looking at investment
from the perspectives of company size, capital-intensity, and sectoral profit shares
several pertinent insights and policy lessons can be derived.