For Russians, What Recession?

By Chris Monday

For some time I had most eagerly awaited my yearly summer voyage to Russia. Top experts had been trumpeting the fragility of Russian society.

Indeed, Russia has suffered a much more massive downturn than other developing countries, sponsoring wags to quip that BRIC (Brazil, Russia, India, China) should be re-dubbed BIC.

Notably, Evegni Gontmakher, an expert closely connected to the liberal wing of the Kremlin elite, ominously foretold a round of crippling strikes.

He maintained, and his views have been loudly echoed by articles in the Economist and the New York Times, that the current crisis will inevitably lead either to dramatic reform or regime change.

Indeed, political science teaches us that regimes, based on predatory rent-seeking and bolstered by ideologies promising ever-growing prosperity, are particularly susceptible to bad economic times.

Therefore, in Russia, as opposed to France or South Korea, bands of disgruntled workers have the power to overthrow the state. The prospect of eminent upheaval presents a boon to Western researchers, such as myself ― a chance to eyewitness the revolution, a la John Reed.

This summer I traveled not only to the city of St. Petersburg but to a village in the Vologda region, an area close to such troubled industrial towns as Pikalevo and Cherepovets ― seemingly the very caldron of the percolating revolution.

In fact I was soon disappointed; the majority of the people I talked with seemed more complacent than ever. Income has remained stable for Russia's police, librarians, professors and schoolteachers.

As concerns today's true hegemonic class ― not the proletariat, but the ``pensioners,'' a huge social group of retirees who determine elections ― their standard of living has actually increased.

Because most Russians own no stock, have no loans, and don't comprehend the credit card, the ``recession'' in their daily reality often brings tangible benefits such as less traffic and less illegal construction.

Most importantly, inflation has been greatly muted by the crisis, although prices are still increasing, owing to the domination of monopolists in Russia. My own feeling was that, however ironically, enthusiasm for the Putin-Medvedev duumvirate seems to have increased this year.

While personal impressions are always dubious, my observations seem significant. What could explain these paradoxical attitudes from the land of revolution?

In the 19th century, an innovative group of economists called the Populists (narodniki) contended that Russia was characterized by a dual economy divided between the city and the country.

The economy of the city was dominated by railroads, war manufacture, and the metal industry. But these enterprises were artificially created by the state; they had no potential to compete against the West and there was no real domestic demand for their products. Hence, during global economic downturns, this sector suffered inordinately.

By contrast the second national sector, the village, was the true backbone of economic and cultural life. Because peasants fed themselves and produced supplemental home crafts, the populists demonstrated that the peasant was sheltered from European crisis.

In a way, this Populist theory describes today's situation. A whole class of citizens seemingly lives apart from the general economy, although now depending not on the land, but on the largess of the state.

Another reason for this year's gleefulness can be found by turning to examine Russia's infamously idiosyncratic mentality. Russians traditionally feel happiest when disaster strikes a neighbor.

They are especially pleased to see the wealthy humbled; this is an embodiment of Russian ``Pravda'' (truth-justice). Indeed the oligarchs have ``justly'' suffered far more than any other group during the current downturn.

Even more fortuitous, from the point of view of the majority of Russians, is that the arrogant West has been taught a lesson. The haughty predictions of Russia's popular pundits, such as Mikhail Leontev, that the West is doomed, have proved particularly prescient.

Besides the isolated oligarchs, the group hardest hit by the economic crisis has been the guest workers, the ``hands'' of the new Russian Empire. These migrants mentally and physically live apart from Russian culture. If anything, most Russians are glad to see them disappear.

Of course, there are more prosaic reasons for Russian acquiescence. Firstly, media censorship allows little discussion of the crisis.

While Korean media morbidly obsesses over every twist and turn of the stock market, most Russians are completely oblivious of macroeconomic indicators, which appear as vague abstractions.

In general, the Asian understanding of the ``crisis'' is far different from Russia's: kong-huang (afraid-panic) connotes a visceral mental psychosis.

Hence, Korean news focuses on the stock market almost as a medical indicator; the ``crisis,'' in their lights, has concrete physiological roots.

For Russians, ``ekonomicheski krisis'' with its conceptual, foreign sounding roots conjures up half-Marxist, half-Mankiw notions gleamed from university cheat sheets (shporgalki). In the Russian mind, ``macroeconomic analysis'' is lifeless data spewed out to fool foreigners.

Reinforcing the Russian view is the lack of contact with flesh and blood unemployed workers. As pointed out by the research of Fiona Hill, Russian towns are geographically isolated.

With poor ― and increasingly dangerous roads ― huge distances and little infrastructure, there is no incentive to travel for new work, or even vacation. Moreover, Russians, like the serfs of old, still require authorization to permanently resettle to a different town. This means that direct information is lacking.

In short, in Russia there is little ground for speculation of an impending upheaval, but, unfortunately, this means that needed structural changes lacks impetus.

Chris Monday is a professor of economics at Dongseo University in Busan. He can be reached at chrismonday@gmail.com.