Russia: between work and capital

15 Jan '09
Svetlana Zabalueva, Editor

The Christmas and New Year holidays are over, crackers got silent and champagne frothed away. Russia is returning to day-to-day matters. Joyless worries are back too as the crisis is far from over. The holidays were just a moment's respite. Why did the country get involved in the crisis? Are those analysts right who claim that its causes are not only external but domestic too? What economic, social and political consequences of the recession are in store for Russia?

These questions are still agitating the public mind. A senior researcher at the Russian Academy of Sciences’ Institute of Sociology, Alexander Prudnik, is convinced that one of the main reasons for the economic downturn is our society’s preoccupation with consumption to the detriment of creation.

Hell is paved with good intentions…

Fast crisis spreading in Russia was predetermined by weakness and one-sided character of the Russian economy.

Russia's current economic structure based on raw materials, mainly hydrocarbon ones, originates in an erroneous strategy selected to quickly restore the country's economic potential after the crisis of the 90s and the 1998 default.

At that time an emphasis on the oil and gas sector appeared to be quite an optimum, natural and, not least, fast way out. We should not forget that initially the strategy was quite successful, which resulted in formulating the original national concept of “Great Energy Power”.

However, as the temporary – and very opportunistic – program turned into a long-term strategy, it has shifted from being the country's economic vehicle to being the main threat to the country's welfare. The affluence of quick oil and gas money, on the one hand, allowed for a sharp rise in commodity imports; on the other hand, it made investment in the real economy extremely unattractive since payback terms and profit levels of this investment cannot be compared with profit raw material industries gain.

This would lavishly, and discriminately, nurture the sectors involved in consumptive use of funds that were received from export of energy products. Thus, the country's wealth that was supposed to bring capital gains was being squandered for “devouring.” Almost no one was alarmed as everybody was sure the flow of oil money would never run dry. But then the crisis broke out...

Consumption or production?

We have to honestly confess that although it was the state that formulated and carried out the energy policy, it was the general public that gave it full support, demanding from authorities that quick growth of welfare and personal consumption levels be ensured. It was quite rational for the government to “heed” social demand in a then favorable commodity market situation.

Is there any point in looking for the guilty? In my opinion, attempts to find a scapegoat are fruitless and false. Because what we have got is natural outcome of the current state of Russia's society.

A real economic upturn is possible only when doing creative work and gaining from it become a driving force for the majority of population and mainly for a country’s elite. In this case hard work gains in value as earned funds are invested in real production, the main objective of economic activities, while consumption is minimized and expenses on luxury and pleasures are reproached for.

There is nothing new in this as even back in the late 19th century Max Weber wrote about it. Germany, Japan and China all went this way towards their “economic wonders”.

Economy for a “chewing holiday-maker”

Let us ask a simple question: why is the leisure economy developing
so fast in Russia?

Certainly, we can allude to the well-off, the nouveau riches, or even oligarchs and their clientele. But it would be wrong to focus only on this category of the Russian population. Let us have a look at what our middle class spends its more or less “decent” money on. It is pretty much along the same lines with how their richer fellow-citizens splurge but on a lower scale though, gorging in Turkey rather than on Maldives.

The main thing uniting all society strata is common economic morals bent on spending rather than investing. In other words, if society brings to a value the idea that “work is a necessity while rest is a pleasure,” it is unlikely to see any bright economic future.

No capitalism crisis in Russia…

So where are Russia's oil and gas super profits to be “found”? On the beaches of Cyprus, Turkey, Spain and Thailand, to be honest. They have flown abroad to local makers of electronics, household appliances,
clothes, perfumery products and foodstuffs; they have dispersed throughout car showrooms, fitness clubs, shopping malls, and so on. Indeed, it is easy and nice to endlessly spend money on yourself and your beloved ones while hateful work can wait.

This way Russia’s parasitic socio-economic system was formed. Only when the crisis hit the country it turned out that a habit of enjoying one's life could neither protect nor provide stability and self-sufficiency.

There is no capitalism crisis in Russia as there has never been any capitalism in this country. It is still to emerge. Perhaps, the current firestorm of the crisis will force us to roll up our sleeves and get to work.

From the triumph of belly to the triumph of intellect

Undoubtedly, it is a trial time for all of us. One should not deceive oneself with hopes that the crisis will sort itself out and business as usual will resume. No, there will be no way back to the former world we got used to over the past eight years. Beyond all doubt, the economy based on hyper-consumption will never be restored to the previous level.

However, the very crisis that has ruthlessly destroyed the current economic system is opening new prospects for the country and its active population. We have to admit that the price that everyone of us was paying for the petrodollar-based welfare is far too high. A country whose economy is centered on power exports does not need many educated people, qualified workers, intellectuals, scientists, or art people.

In a society like that they appear to be redundant, “unclaimed human lumber,” and this is a reason for swift degradation of Russia’s education and level of culture. A nation's creative and intellectual potential can only be revealed in a developed, robust, innovative and dynamic economy as only this kind of economy makes high demands of every person while society is constantly motivated to invest significant funds in developing its members.

Russia's future remains uncertain and it does not depend on the world market situation as much as it does on ourselves and the quality of our elite. The crisis – a source of shock and fear for the future – should become a real gift for us, a way out of the impasse unlooked-for, and the finding of a new prospect.
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