Gloomy prospects for the Russian economy

Europe - Asia Studies

Volumn 48, Issue 5, 1996, Pages 735-750

  Birman, Igor ^a  

^a NONE

Author keywords

[No Author keywords available]

Indexed keywords

ECONOMIC CRISIS; FUTURE PROSPECT; NATURAL ECONOMY; TRANSITIONAL ECONOMY;

RUSSIAN FEDERATION;

EID: 0030477638     PISSN: 09668136     EISSN: None     Source Type: Journal    
DOI: 10.1080/09668139608412378     Document Type: Article

References (76)

1. And not only in the USA. The London Economist, 29 April 1995, wrote that 'The money supply [in Russia] grew by a mere 1% during the first quarter of this year. If the authorities continue this savage monetary squeeze, the official inflation target of 1-2% a month by the end of the year ... may be achievable'.
2. See Izvestiya, 1995, No. 62 (no mention of the conference in US media). El'tsin's assistant on national security, accompanied by an academic colleague, argues with the assessment in No. 79. At the Brown University dialogue in December 1994, on the eve of the Chechnya tragedy, the US Ambassador to Moscow, Pickering, was very upbeat about the Russian state of affairs, while the Russian Ambassador to Washington, Vorontsov, spoke quite convincingly about tremendous problems.
3. See in particular The Wall Street Journal (Europe), 9 March 1995.
4. In addition to everything else, the statisticians' salaries are so low that qualified people go to work elsewhere.
5. The following deserves a note. According to the last statistical annual, Roskomstat-1994, p. 200, Russian per capita consumption of alcohol (5.6 litres) was lower in 1990 than in 15 countries; only in Bulgaria (!) and Norway did people drink less.
6. The recorded wage arrears amounted to R5.6 trillion ($1.2 billion) in February, The Economist, 29 April 1995.
7. The Washington Post, 23 April 1995. This was disputed by Dr Joseph Froomkin in The Washington Post, 24 May 1995.
8. Izvestiya, 1995, 70, p. 1. Anders Aslund, How Russia Became a Market Economy (Brookings, 1995), argues that 'the [Russian] statistics are of poor quality, but the nature of their biases is reasonably certain. Moreover, the scale of the change in Russia has been so great that no hesitation about overall developments is needed'. Indeed!
9. Izvestiya, 1995, 70, p. 1. Anders Aslund, How Russia Became a Market Economy (Brookings, 1995), argues that 'the [Russian] statistics are of poor quality, but the nature of their biases is reasonably certain. Moreover, the scale of the change in Russia has been so great that no hesitation about overall developments is needed'. Indeed!
10. Including the El'tsin-Gaidar promise to improve living standards not later than by the end of 1992.
11. It is known that Burbulis made the choice of Gaidar, which El'tsin approved, but it is still not certain why Gaidar was chosen. One version is that he was against the Union more than others (Yavlinsky tried hard to preserve it). El'tsin (interview in Izvestiya, 10 June 1995) hints that the post was offered to Yavlinsky; but the latter said then that it was impossible to work with El'tsin.
12. Around that time there was a lot of talk in Moscow about the Swedish model.
13. I am not blaming them, not least because I myself thought more or less similarly. Only my old friend Jack Alterman, seeing from the very beginning how impossible the task was, was completely pessimistic.
14. In my, and not only my, opinion, the first is not possible without the second; the opinion dangerously widespread in Russia is that the second could be achieved without the first.
15. Quite recently Gaidar said he 'basically (v osnovom) supported the principles and provisions of the government stabilisation programme ... and was concerned merely about difficulties of forecasting [!] of the structural factors', Finansovye Izvestiya, 1995, 27, p. 11.
16. 'Gaidar stated that the "capitalist revolution started in 1991 was completed with success", and that the formation of a capitalist economy in the country has occurred'. Nezavisimaya gazeta, 23, May 1995, p. 1.
17. Jumping ahead, if only a small group of tycoons own most of property in the country it is not, in my opinion, really meaningful privatisation.
18. A. Illarionov, Voprosy ekonomiki, 1995, is not too bad on this topic but still not very convincing.
19. A highly positive result of Gaidar's activities was the substantial reduction of military production, but the goal was to lighten the burden on the budget.
20. A Russian observer wrote that 'the occasional closing of the emission tap, which is done by postponing payments to those who work in the organisations funded by the state budget (in order to present the inflation indicators in a better way) is analogous to teaching a horse not to eat. To put it briefly, the "teacher" could be proud of the horse which is not eating, but soon it will rebel or die'. Finansovye Izvestiya, 1995, 24, p. IV.
21. The mafia flourished by extorting money from those who did not pay their clients on schedule.
22. While there are pros and contras, the latter seem to me more substantial. During 1994, individuals and organisations (mainly non-government banks) brought to Russia $21.7 billion in cash. In January 1995 the figure was 2.6 billion, and 860 million in February. Finansovye Izvestiva, 1995, 32, p. 1.
23. Izvestiya, 1995, 89. The following Moscow anecdote is untranslatable: Man', slysh', dollar to padaet. Luchshe by uzh u tebya tak stoyal, kak on padaet.
24. I am hardly unfamiliar with the problem, and note immodestly that the 'Over-savings' of the Soviet population and their grave significance was my first issue with sovietologists, at the end of the 1970s.
25. In May 1993 I had a chance to explain this to the Constitutional Court of Russia. The Government was represented by Sergei Dubinin, whose only argument was the lack of money. The Court decided to compensate for the loss of savings; in 1995 the Duma adopted such a law.
26. In a speech to the government in June 1995 El'tsin spoke about 2%.
27. Finansovye Izvestiya, 1995, 24, p. IV. The headline was 'Budget-95 promises crash of hopes for financial stabilisation'.
28. Finansovye Izvestiya, 1995, 36, p. 1. During the first quarter of 1995, 18% of all taxes collected in the country were gathered in Moscow, where less than 6% of the total population reside. Finansovye Izvestiya, 1995, 32, p. 1.
29. Finansovye Izvestiya, 1995, 36, p. 1. During the first quarter of 1995, 18% of all taxes collected in the country were gathered in Moscow, where less than 6% of the total population reside. Finansovye Izvestiya, 1995, 32, p. 1.
30. Interestingly, in Roskomstat, Sotsial'no-ekonomicheskoe polozhenie Rossii (January 1995) nothing is said about the budget, and the January-February issue gives some data about revenue but nothing about expenditure.
31. The list is published in Izvestiya, 1995, 108, p. 4. The largest taxes are on profit - 12.4%; VAT - 5.2%; on pensions - 13.2%; for roads - 2.9%, on excess wages - 3.9%.
32. For example, Evgenii Vasilchuk, Finansovye Izvestiya, 1995, 37, p. 11, writes: 'Practically, the central bank no longer has real, except maybe only emergency, measures to struggle with inflation. But victory over inflation has still not been accomplished'. (However, the article on the opposite page of the paper argued that some hidden reserves would allow the budget deficit to be eliminated).
33. According to his logic, the money would help with the financial stabilisation, but I have already said that I do not believe in its magic. The Sacks approach was disputed convincingly by Maxim Boyko, Proceedings of the World Bank Annual Conference on Development Economics (1994).
34. Ekonomika i zhizn', 1995, 14. I wonder who, how and why, in view of at least these circumstances, advised the IMF to give another $6 billion or more to El'tsin and his government. This is also the position of the Wall Street Journal editorial writers. See, for example, the editorial 'Getting Russia Wrong' in the European issue on 9 March 1995. Characteristically, immediately after Camdessus personally flew to Moscow to give the money, Moscow TV, 12 April, showed the First Vice-Premier Oleg Soskovets making a government pledge to give $1.5 billion to the military industry.
35. The worsening of Russia's demographic situation comprises various (including economic) facets and factors. Besides, the criteria are arguable: I for one do not think that population growth is nowadays beneficial.
36. In The Economist, 15 April 1995, p.74, Big Mac index, Russia was cheaper by 30%.
37. For example, prices for housing in the centre of Moscow are in the same league with West European capitals. However, in Elektrostal' (20 miles from Moscow) the cost of housing is a third of that, and in Omsk (Siberia) it is even lower (anecdotal evidence).
38. A significant exception is retail turnover during 1993-94. By itself it is excellent; however, I am not sure that the figures are correct. We should take into account, at least, the following points: • we do not know exactly how the figures were calculated, how the dramatic changes in the commodity structure were dealt with, but we do know that Russian price indices are awful; • we do not know how full the data are, in particular about bazaar and kiosk trade and the so-called chelnoki; • we know about the plunge of production including, as the same table shows, agricultural production and output of consumer goods; on the other hand, the amount of stocks in trade fell dramatically.
39. Washington Post. 23 April 1995.
40. I was the first to criticise sovietologists for not taking this into account in comparisons of the USA and the USSR.
41. In January-April 1995 the production of the following goods, compared with January-April 1994, was, in %: radio receivers 92 sewing machines 20 tape-recorders 50 TV sets 44 including colour TV sets 29 refrigerators 64 Roskomstat, Sotsial'no-ekonomicheskoe polozhenie Rossii, 1995, 4, p. 21.
42. Literatumaya gazeta, 17 May 1995, p. 10.
43. Nezavisimaya gazeta, 23 May 1995, p. 1.
44. See 'Health Care, Medical Practice, and Medical Ethics in Russia Today', JAMA, 273, 20, 24/31 May 1995.
45. The chairman of the Russian State Committee on water resources said that '70% of cities and other localities use water which does not meet Russian standards, to say nothing about international standards'. Izvestiya, 1995, 75, p. 2.
46. I note, especially in relation to the freedom of the Russian media, that all the printing-works still belong to the state.
47. Although small individual garden plots are in practice in the hands of the people who work them.
48. By the end of 1995 the state shares in 7186 enterprises were to be sold. In addition, a great many enterprises, privatisation of which had been postponed until 1995, were to be sold as well. Izvestiya, 1995, 70, p. 1.
49. Senior government officials are on the boards of many new large companies - for example, the First Deputy Minister of Finance, Vavilov, and Deputy Chairman of Goskomimushchestvo, Kokh, are on the board of Noril'sk Nickel (apparently they are directly paid for this).
50. A characteristic example. A new and extremely profitable industry has been created in the USA: managers of FSU enterprises are brought there for a couple of weeks to look around, to listen to a few lectures on loosely related subjects, and basically to have a good time. I have talked to the participants, and none said that he would do it even for half the price it actually cost their enterprises. The number of bureaucrats has increased very significantly in comparison with the times of bureaueconomics. The nomenklatura won. The Kremlin, the Moscow White House and local authorities spend (waste) colossal sums for their indecently lavish offices (and projects like the Moscow-Petersburg high-speed railway).
51. I do not want to put myself in the same position as The Wall Street Journal which had to publish an apology to Gusinsky in April 1995. Still, I cannot blame the ordinary Russians for not liking him and his kind.
52. A particularly striking example is the privatisation of Gazprom. See, for example, Boris Fedorov, Izvestiya, 21 March 1995, p. 2: 'The impression is that we have witnessed the largest robbery of the century, or even in history'.
53. In Moscow there are 360 000 private small businesses (including the self-employed); 65% of them are in trade and 'middle-men' services, only 25% are in production. However, the volume of everyday services is sharply declining, Izvestiya, 1995, 86, p. 2.
54. Izvestiya, 31 May 1995, p. 9.
55. Izvestiya, 1995, 84, p. 2. The figures apparently are from Roskomstat, Informatsionnyi statisticheskii byulleten', 1995. 6, pp. 19 and 35. However, Statisticheskoe obozrenie, 1995, 2, p. 60 gives 33.5% for 1992, 31.5% for 1993, and 24.4% for 1994.
56. Izvestiya, 1995, 84, p. 2. The figures apparently are from Roskomstat, Informatsionnyi statisticheskii byulleten', 1995. 6, pp. 19 and 35. However, Statisticheskoe obozrenie, 1995, 2, p. 60 gives 33.5% for 1992, 31.5% for 1993, and 24.4% for 1994.
57. Izvestiya, 1995, 84, p. 2. The figures apparently are from Roskomstat, Informatsionnyi statisticheskii byulleten', 1995. 6, pp. 19 and 35. However, Statisticheskoe obozrenie, 1995, 2, p. 60 gives 33.5% for 1992, 31.5% for 1993, and 24.4% for 1994.
58. The Washington Post, 23 April 1995.
59. 'Newly-rich Russian tourists spent $6.8 billion abroad in 1994', Economist, 29 April 1995.
60. Tat'yana Zaslavskaya, Sotsis, 1995, 3, p. 6.
61. There are supporting figures in the same article, but they must be taken with caution.
62. Roskomstat, Informatsionnyi statisticheskii byulleten', 1995, 6, p. 22.
63. The Economist, 29 April 1995.
64. Roskomstat, Informatsionnyi statisticheskii byulleten', 1995, 6, p. 21. The figures for the last group are: 1990 - 12.9, 1991 - 24.8, 1992 - 16.1, 1993 - 24.4, 1994 -38.0.
65. Roskomstat, Informatsionnyi statisticheskii byulleten', 1995, 4, p. 27.
66. Finansovye Izvestiya, 1995, 31, p. VIII. According to Statisticheskoe obozrenie, 1995, 2, p. 61, during the fourth quarter of 1994, 5.3 million were unemployed, including 1.6 million registered, and 4.8 million worked pan-time. See also O. Latsis, Izvestiya, 1995, 70, p. 1. In the first quarter of 1995 there were 5.6 million unemployed (according to the definition of the ILO). Roskomstat, lnformatsionnyi statisticheskii byulleten', 1995, 6, p. 19.
67. Finansovye Izvestiya, 1995, 31, p. VIII. According to Statisticheskoe obozrenie, 1995, 2, p. 61, during the fourth quarter of 1994, 5.3 million were unemployed, including 1.6 million registered, and 4.8 million worked pan-time. See also O. Latsis, Izvestiya, 1995, 70, p. 1. In the first quarter of 1995 there were 5.6 million unemployed (according to the definition of the ILO). Roskomstat, lnformatsionnyi statisticheskii byulleten', 1995, 6, p. 19.
68. Finansovye Izvestiya, 1995, 31, p. VIII. According to Statisticheskoe obozrenie, 1995, 2, p. 61, during the fourth quarter of 1994, 5.3 million were unemployed, including 1.6 million registered, and 4.8 million worked pan-time. See also O. Latsis, Izvestiya, 1995, 70, p. 1. In the first quarter of 1995 there were 5.6 million unemployed (according to the definition of the ILO). Roskomstat, lnformatsionnyi statisticheskii byulleten', 1995, 6, p. 19.
69. Finansovye Izvestiya, 1995, 31, p. VIII. According to Statisticheskoe obozrenie, 1995, 2, p. 61, during the fourth quarter of 1994, 5.3 million were unemployed, including 1.6 million registered, and 4.8 million worked pan-time. See also O. Latsis, Izvestiya, 1995, 70, p. 1. In the first quarter of 1995 there were 5.6 million unemployed (according to the definition of the ILO). Roskomstat, lnformatsionnyi statisticheskii byulleten', 1995, 6, p. 19.
70. An excellent analysis of the situation and prospects may be found in Ekonomicheskii Monotoring Rossii: Global'nye tendentsii i konyunktura v otraslyakh promyshlennosti, 1995, 4-5. The same authors published an article in Finansovye Izvestiya, 1995, 36, p. V,. with the title 'Russia is coming to the frontiers of uncontrolled devastation of the economy'.
71. An excellent analysis of the situation and prospects may be found in Ekonomicheskii Monotoring Rossii: Global'nye tendentsii i konyunktura v otraslyakh promyshlennosti, 1995, 4-5. The same authors published an article in Finansovye Izvestiya, 1995, 36, p. V,. with the title 'Russia is coming to the frontiers of uncontrolled devastation of the economy'.
72. Finansovye Izvestiya, 1995, 30, p. 11.
73. Izvestiya, 2 June 1995, Two days earlier another leading article was titled: 'Attack of the Russian Government on the import of food-stuffs can make shops in Moscow and other cities empty'.
74. Roskomstat, Informatsionnyi statisticheskii byulleten', 1995, 6, pp. 3 and 7.
75. Finansovye Izvestiya, 1995, 26, p. 11.
76. Even if not entirely accurate, the words of Oleg Bogomolov, Nezavisimava gazeta, 'according to some estimates the total number of bodyguards in the country is about 800 000', are nonetheless significant.