Reforming Russia's Economy: First Things First
It is hard to overestimate the immensity of the challenge that Russian leaders face in terms of economic reform. Consider the following:
While this comparative data begins to illuminate the macro-economic issues facing the nation's leadership, when we look at the situation on a more practical level, Russia's condition looks even more bleak. According to the Russian State Statistics Committee, in the first quarter of 2000, 41.2% of the population (59.9 million people) fell below the official poverty line of $40 per person in monthly income.
Russia's middle class, which slowly emerged in the 1990s, was devastated by the financial crisis of August 1998 and is now still vulnerable to shifts in the economy. A recent study notes that Russia's middle class accounts for 4 million people, or 7% of the population between the ages of 18 and 50. America's middle class, by comparison, totals about 64% of its population.
The Seeds of Change
Our university is a member of both the U.S.-Russia Business Council,
headquartered in Washington, D.C., and the American Chamber of Commerce
in Moscow. These two highly respected associations are working hard to
build positive relationships with Russia's leaders and are regularly offering
counsel on how to develop a better foreign investment climate, a simpler
and fairer tax system, more transparency in commercial dealings, and other
important reforms. This conversation needs to be ongoing, despite political
climates that can shift dramatically during presidential elections in
both countries. A long-term partnership between our two nations is in
the best interests of both; great care must be taken to prevent any resurgence
of the animosities of the Cold War period.
The Whisper of Hope
The Moscow Times recently reported that a group of 30 young Russian business owners and managers have formed a political discussion group called "Club 2015." Rather than buying politicians, which is the usual approach in Russia, these leaders want to reshape the economic and political mentality in their country. They are pushing three concrete proposals: adoption of international accounting standards, free movement of capital, and reform of the customs system. These proposals are not new; the difference is that now Russians themselves want to adopt them. They want a world in which honest companies are not at a disadvantage.
There are other encouraging economic signs in Russia. One is the various grassroots efforts by Russians to change the way they think. Dr. Alexander Zaichenko, a former economic advisor to the Gorbachev government and currently a Trustee of our university, has established a network of "Clubs for Fair and Ethical Business," groups of business and government leaders who meet regularly to discuss how they can work with integrity in the Russian marketplace. They share their own stories, seek counsel from each other, and encourage one another as they strive to rebuild Russia one person at a time and from the bottom up. In addition, a number of non-governmental organizations, such as Opportunity International and the International Service Center's Integra Venture program in Russia, are helping to establish small businesses by giving local entrepreneurs access to capital from revolving credit funds and then providing counseling services, assisting with the development of business plans, and holding these companies accountable to repay their loans.
While these advances may seem small-scale, they are critical to Russia's
economic rebirth. Top-down change, often radical in nature, has been a
pattern in Russia's history. Real change, long-standing change, will not
come from government decrees or heavy-handed Kremlin leaders. Real change
will come from the Russian people themselves, when their government reduces
its all-encompassing system of controls and creates a climate that frees
the people to exercise their own initiative and creativity. Once that
happens, the Russian people will begin the long, slow process of building
for the future.
Dr. John A. Bernbaum