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Part 9 (2/2)

Russian Roulette Samuel Vaknin 56020K 2022-07-22

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Russia's informal sector is a vital, though crime-tainted, engine of growth. Laundered money coupled with reinvested profits - from both legitimate and illicit businesses - drive a lot of the private sector and underlie the emergence of an affluent elite, especially in Moscow and other urban centers. According to the Economist Intelligence Unit, Goskomstat - the State Statistics Committee - regularly adjusts the formal figures up by 25 percent to incorporate estimates of the black economy.

Russia faces a dilemma: to quash the economic underground and thus enhance both tax receipts and Russia's image as an orderly polity - or to let the pent-up entrepreneurial forces of the ”gray sectors” work their magic?

Russia is slated to join the World Trade Organization in 2004. This happy occasion would mean deregulation, liberalization and opening up to compet.i.tion - all agonizing moves. Russian industry and agriculture are not up to the task. It took a ma.s.sive devaluation and a debilitating financial crisis in 1998 to resurrect consumer appet.i.te for indigenous goods.

Farming is mostly state-owned, or state-sponsored. Monopolies, duopolies and cartels make up the bulk of the manufacturing and mining sectors - especially in the wake of the recent tsunami of mergers and acquisitions. The Economist Intelligence Unit quotes estimates that 20 conglomerates account for up to 70 percent of the country's $330 billion GDP. The oligarchs are still there, lurking. The banks are still paralyzed and compromised, though their retail sector is reviving.

Russians are still ambivalent about foreigners. Paranoid xenophobia was replaced by guarded wariness. Recently, Russia revoked the fast track work permit applications. .h.i.therto put to good use by managers, scholars and experts from the West. Foreign minority shareholders still complain of being ripped-off by powerful, well-connected - and minacious - business interests.

With the b.l.o.o.d.y exception of Chechnya, Putin's compelling personality has helped subdue the cla.s.sic tensions between center and regions. But, as Putin himself admitted in a radio Q-and-A session on December 19, this peaceful co-existence is fraying at the edges.

The president will try to reach a top-down political settlement in the renegade province prior to the 2004 elections, but will fail. Reform is anathema to many suborned governors of the periphery and the Kremlin's miserly handouts are insufficient to grant it a decisive voice in matters provincial. Devolution - a pet Putin project - is more about accepting an unsavory reality than about re-defining the Russian state.

The economic disparity between rural and urban is striking. The Economist Intelligence Unit describes this chasm thus:

”The processing industry is concentrated in the cities of Moscow, St Petersburg, Yekaterinburg and Nizhny Novgorod. These larger cities have managed the transition relatively well, as size has tended to bring with it industrial diversity; smaller industrial centers have fared far worse. The Soviet regime created new industrial centers such as Tomsk and Novosibirsk, but Siberia and the Russian Far Eastern regions remain largely unindustrialised, having traditionally served as a raw materials and energy base. Owing to the boundless faith of Soviet planners in the benefits of scale, one ma.s.sive enterprise, or a small group of related enterprises, often formed the basis for the entire local economy of a substantial city or region. This factor, compounded by the absence of unemployment benefits, makes the closure of bankrupt enterprises a politically difficult decision.”

The politically incorrect truth is that Russia's old power-structure is largely intact, having altered only its ideological label. It is as avaricious, nefarious and obstructive as ever. Nor does the Russian state sport any checks and balances. Its inst.i.tutions are suspect, its executive untouchable, its law enforcement agencies delinquent.

Russians still hanker after ”men of iron” and seek tradition rather than innovation, prefer unity to pluralism, and appreciate authority more than individualism. Russia - a ramshackle amalgamation of competing turfs - is still ill-suited for capitalism or for liberal democracy, though far less than it was only ten years ago.

Conspicuous consumption of imported products by vulgar parvenus is no subst.i.tute to true modernity and a functioning economy. Russia is frequently praised by expats with vested interests and by international financial inst.i.tutions, the long arms of its newfound ally, the United States.

But, in truth, ”modern”, ”stable”, Russia is merely a glittering veneer beneath which lurk, festering, the old ills of authoritarianism, lawlessness, oligarchy, aggression, ignorance, superst.i.tion, and repression mingled with extremes of poverty and disease. Here is one safe prediction: none of these will diminish next year.

Russia Straddles the Euro-Atlantic Divide

By: Dr. Sam Vaknin

Also published by United Press International (UPI)