Thoughts on the Russian Economy

As I board the train to Irkutsk (how exciting – at the shores of Lake Baikal!), a few rather superficial comments about what I have seen of the Russian economy. Of course (as my work colleagues will no doubt testify), I am not an economist but I have been wandering around Russia for the past week and a few things have struck me, not least those things that seem to jar with some of the Western commentary I have heard.

There is a school of thought that Russia has become a giant, hedonistic kleptocracy that will collapse under the weight of negative demographics (life expectancy here is a bit rubbish – cognac anyone?), corruption, falling oil prices and popular discontent. Indeed only today the Russian newspapers were carrying stories of a trillion rouble hole in the Government’s budget, rescued only by the Rainy Day Fund that was set up when oil prices were much higher, meant for investment, not social spending. I’ve spoken before about rejecting the notion that the bulk of society has lost its compass from my wanderings in Moscow, and my walks elsewhere have served to reinforce that view. The various guidebooks I’ve read exhort the need to watch your valuables etc, but I’ve actually felt safer than in London, and that feeling increases as one goes East. Yes, Novosibirsk is apparently an important nexus in the drug route from Asia, but any large city will have those sort of problems. It is certainly hedonistic in the sense of being bit brash: but that is because they don’t share our odd desire to hide any light we might possibly possess under the biggest of bushels. So, I’ll admit, there are a lot of smoked out Porsche 4X4s, men in silly jeans and women with extraordinary heels, all juttin’ out.

Corruption and kleptocracy? Yes, most probably. But when Westerners comment on this, they tend to imply how much this is a break from the past: however, they might just have been fooled by the Soviet propaganda, with its wonderful imagery of spartan egalitarianism, which was very far from the truth. From the NKVD (KGB) chief (Beria) with a taste for young ballerinas to the wholesale mendacity of the system when reporting on progress against five year plan targets (China, anyone?), the Soviet Union was less ascetic than its gorgeous posters would suggest. And anyway, the Communist system itself went through many different cycles, some of which have echoes of today: Lenin’s New Economic Policy introduced a whole class of economic operators much resented by society (spivskii?) before they were swept away in the Stalinist “reforms” that followed (I went to Kirov’s old shack in Novosibirsk today – how cool is that?). I’m certainly not suggesting that we are about to see equivalent bloodletting in Russia, but that we are at a particular point in its cycle, not on some path to decline.

What about the political situation? Western commentary has been full of the latest twists of the Khodordhovsky case, the “draconian” anti gay legislation and other episodes to paint a picture of a worsening regime from a human rights perspective. Clearly I am not particularly qualified nor inclined to wade in on this one, except to pass on what I hear and see. Which is that most people seem monumentally disinterested.