400 kilometers from the nearest town is the place in Russia where Annmari Sätre studied entrepreneurship. Here the groundwork is being laid for an expanded tourist industry. PHOTO: Ann-Mari Sätre

Conference reports Baltic Worlds Annual Round Table Russian market reforms. Lack of trust and institutions

“Market Reform and Socio-Economic Change in Russia” was the subject of an ambitious full-day seminar held October 6, focusing on the period since the fall of the Soviet Union.

Published on balticworlds.com on januari 16, 2012

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“Market Reform and Socio-Economic Change in Russia” was the subject of an ambitious full-day seminar held October 6, focusing on the period since the fall of the Soviet Union. The Centre for Baltic and East European Studies at Södertörn University in Stockholm thus kicked off what will be an annual gathering of forces in the field: the Baltic Worlds Round Table. Seminar participants included several prominent Russian, British, and Swedish experts, who were firmly but cordially moderated by Elisabeth Hedborg, former Moscow correspondent for Swedish Television.

The period after the dissolution of the Soviet Union in December 1991 can be divided into two distinct phases. First, the years 1992—1999, when the domestic policy mess led most Russians to associate the word “democracy” with chaos and anarchy. The plundering of state-owned enterprises by the corrupt robber baron capitalists, the “oligarchs”, sapped the government’s financial resources, and the buffoonish President Boris Yeltsin lacked the capacity — or the will — to manage the centrifugal tendencies in the country’s economy.

Thereafter came   what was essentially a complete turnaround in 2000. The surprise appointment on New Year’s Eve 1999 of Vladimir Putin as Yeltsin’s successor has come to be understood by many Russians as “the right man ending up in the right place at the right time”. Putin’s first policy statement focused on the “dictatorship of the law” — instilling law and order and strengthening the powers of the state. Another of his favorite expressions is “to recreate the vertical”, referring to the central government’s taking back control over the regions and the oil companies. A third is “to fulfill the historical social contract”, by which he means giving the citizens bread and security in exchange for not openly opposing the way the state is governed.

What then has been the outcome of all this for the Russian people? It was difficult to find a participant at the Baltic Worlds seminar who could bring up any actual bright spots. Philip Hanson of Chatham House in London, the dean of British Russian studies, pointed out that Yeltsin, Putin, and Dmitri Medvedev have all failed at — or not focused on — creating functioning institutions in society that could have guided and assisted private enterprise towards honorable and long-term productive initiatives. Hanson also noted that Russian society suffers from a permanent lack of trust between people, authorities, and companies, that corruption is rife at all levels, and that there are actually no reliable guarantees of private ownership.

Tina Jennings of   Oxford University agreed completely. And she pointed out that the scandalous Yukos affair that occurred a few years into the 2000s, when principal owner Mikhail Khodorkovsky was arrested, indicted, and punished severely for having misappropriated state property in connection with the wave of privatizations after the fall of the Soviet Union, was more than anything an indication that there is no legal protection for private property in Putin’s Russia. Nevertheless, nearly all of the other oligarchs have been allowed to continue operating as if nothing had happened. That is because most of these oligarchs are Putin and Medvedev’s allies, many of them taken from the security service, Putin’s actual political power base. The lack of legal security applies to the competition, new entrepreneurs who might pop up and challenge the established power and finance structure, and of course to the ordinary people. Under the control of Putin and his running mate Medvedev the state has, according to Jennings, taken total control of business and strategic decisions within the utterly dominant energy sector.

Ann-Mari Sätre   of the Centre for Russian and Eurasian Studies in Uppsala provided striking evidence that legal insecurity is par for the course even at the local level. She has studied conditions for small business owners within the textile industry, tourism, and retail trade in parts of the country far removed from Moscow and other large cities, where local politicians and civil servants often demonstrate strong willingness and ambition to develop private enterprise as a way to create jobs and improve service. But Sätre has found that such spirited private initiatives are often stymied by the vehement resistance of local big business to being subjected to new competitors: the companies simply buy up the new entrepreneurs or use legal and bureaucratic action to put obstacles in their path.

Nadezhda Azhgikhina,   general secretary of the Russian Union of Journalists, had another, even more depressing, explanation, if this is even possible: “Quite simply, no business culture exists in our country, no entrepreneurial spirit. Instead, the prevailing culture is based on acquiring hidden income” — corruption, in other words, but also the remains of a Soviet system that choked and forbade capitalist and entrepreneurial drive. Azhgikhina claimed that Russians are infatuated consumers of mobile phones, computers, and fancy cars — but the goods have to be foreign imports, because Russian products are considered unreliable and are not status symbols.

It is certainly food for thought that the major industrial country of Russia — after seventy years of Soviet rule and twenty years of post-Soviet capitalism — still has not managed to produce a single make of car, or computer, or any other reasonably advanced consumer product of decent quality and suitable for export. Other middle-income countries have actually done it — including China, India, Iran, Brazil, and South Africa. The only Russian exception is the aircraft industry, which has been selling Antonov and Ilyushin planes to quite a lot of countries — but the driving force here is not a private business initiative of any kind, but rather the defense sector, which has been highly prioritized for many decades.

Russian business   thus still does not work in a particularly market-oriented or capitalist fashion, even twenty years after the Soviet system went to its grave. Considering that, are the people at least doing better — physically and/or socially? To this question as well, the Baltic Worlds seminar provided less encouraging answers.

As an example, take the expected average lifespan in Russia. David Stockler of the London School of Tropical Medicine reported that it is barely 57 years for men and higher by only a few years for women — far below the Western average of about 75. And this is a trend that is once again on the downslide after a few years of improved average lifespan during the 1990s and the early years of this century. The question is, however, whether this is due to a poorly functioning social structure in Russia since the fall of communism. American scientists back in the 1970s found that average lifespan in the Soviet Union had stagnated and actually begun to decline — for the first time in history in a developed industrial nation.

There may be several causes, but one is obvious: Russians drink far too much. One striking statistic is that of all deaths among men age 25—54, fully half are due to a combination of liquor and violence. This means, Stockler related, that 170,000 men die every year in “overmortality”, which is to say they would have lived longer if they had not put so much effort into drinking and fighting.

Suicide also claims   many victims in today’s Russia, Ilkka Henrik Mäkinen of SCOHOST at Södertörn University said. Every year, almost 30 out of 100,000 Russians commit suicide: twice as many as in France and almost three times as many as in Sweden. Here as well, the negative spiral seems to have begun before the demise of the Soviet Union: suicide figures increased by 3—4 percent every year from 1956 to 2004, except during the five years of tough alcohol restrictions of 1985—1990 imposed by the last Soviet leader Mikhail Gorbachev. Paradoxically enough, according to Mäkinen, current research indicates that suicide frequency is rising in pace with the modernization of Russian society — suicide is now most common in the developed north Russia. In earlier phases, it was most common in the quiet south, to this day dominated by agriculture.

Has Russia then at least become a freer society since throwing off the yoke of Soviet communism? On this point, the Baltic Worlds experts were cautiously optimistic. In her field studies, Ann-Mari Sätre found that people feel they have greater scope for private initiative and found evidence of a budding civil society of voluntary clubs and associations and inspired local politics. Economist Rolf Eidem, with a long history in Swedish public administration, argued that the most important positive change of all was the reintroduction of the joint stock company in private business. And demographer Michael Gentile of Södertörn University recounted detailed statistics showing that housing segregation in large Russian cities has actually not become worse, despite sharp increases in income disparities over the last twenty years.

“It’s always something”, groused many members of the audience at the 2011 Baltic Worlds Round Table. Communism was against all types of freedom, but Putinism permits individual freedom. Such as the freedom to drink oneself to death, buy muscle cars (often stolen) from the West, watch increasingly lousy television shows, and shop at IKEA and other temples of consumption. ≈

  • by Per Jönsson

    Editor at the Swedish Institute of International Affairs (UI), Stockholm, foreign affairs reporter for the daily Dagens Nyheter 1980—2010.

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