(Fwd) Wall Street Journal: Russia's Rebirth
Vladimir Butenko
The Wall Street Journal Interactive Edition September 5, 1997
Russia's Rebirth
By MARTIN FELDSTEIN
MOSCOW--This city is enjoying a remarkable renaissance, both architectural
and economic. But unlike the capital cities of most other emerging nations,
Moscow is not sprouting the usual array of steel and glass skyscrapers.
Instead, the city is refurbishing and repainting the glorious
turn-of-the-century buildings of the Romanov era. The dull gray scene that
has long been Moscow is giving way to the pastel colors and bright
ornaments of the city's pre-Bolshevik past.
Shops in Moscow today also contrast sharply with the drab consumer
warehouses of the Soviet days. The shelves are full of a dazzling array of
consumer goods. While few Muscovites can afford the top-of-the-line
imported designer clothing now available, many of the young people on the
Moscow streets look indistinguishable from their American and European
counterparts.
The city's residents obviously appreciate the improved quality of life:
They recently re-elected their mayor with an amazing 90% of the vote in a
fair and open election.
While the rest of Russia is not enjoying an economic resurgence on Moscow's
scale, nationwide economic conditions are certainly better than official
statistics imply. According to the Russian statistical bureau, Russia's
gross domestic product has declined steadily during the six years since the
collapse of the Soviet Union. But much of the fall in industrial production
is due to the decline of military output, which never contributed to the
well-being of Russian consumers. Other industrial production has been
halted because the products were so inferior to those now available from
abroad that they could no longer be sold, or because the raw materials
previously used in production can now be sold on the world market for more
than the value of the old finished products.
Misleading Statistics
The official statistics are also misleading because Soviet bureaucrats were
rewarded for overstating the actual output, whereas today managers
understate output in order to avoid the taxes levied on each company's
total sales. The underground economy may represent 40% or more of total
Russian GDP.
The standard of living has also improved because the end of price controls
in 1992, combined with the shift to a system of private ownership, ended
the widespread shortages of virtually all consumer goods at the end of the
Soviet period. When I visited Moscow in 1991 there was no bar of soap in my
hotel room, or in any of the city's shops. Muscovites had bought every
available bar because they knew that soap would hold its value when prices
were allowed to rise to market-clearing levels, while rubles would become
virtually valueless. Since the old communist ideology prevented paying a
high enough interest rate to compensate for the expected inflation,
households bought up items that could be expected to last. As a result,
almost every durable good disappeared from store shelves throughout Russia
in the months before price controls were abolished, exacerbating a long
tradition of consumer product shortages.
Years of Soviet budget deficits financed by money printing caused a
currency overhang that made a price explosion inevitable when price
controls were removed. Inflation surged to an average of more than 800% a
year from 1992 to 1994, enough to eliminate the inherited overhang of
excess currency. A shift to a more sound traditional monetary policy since
then brought inflation down, to about 22% in 1996 and an expected 15% this
year. A continued pursuit of such policies stands to reduce Russian
inflation to the low-single-digit levels of Western Europe and the U.S. Of
course, with market interest rates now reflecting expected inflation, the
artificial shortages of the Soviet era are gone.
Russia's privatization of virtually all businesses and housing has been one
of the most remarkable achievements of the late 20th century anywhere in
the world. The shortcomings caused by the inevitable political compromises
involved in the privatization process are regrettable, but minor in
comparison to the magnitude of the achievement itself. Ownership of
industry has been successfully transferred from the state to shareholders
(including managers, other employees and the general public), all of whom
are free to sell their shares to private investors.
That privatization has not yet produced a substantial increase in
industrial productivity reflects the recentness of the transformation, the
shortage of individuals with the skills to manage and innovate in a market
economy, the limited availability of credit in an economy in which banks
are not accustomed to making commercial loans, the underdeveloped system of
commercial laws, the heavy burden of ill-conceived regulations, and a
massive amount of political and bureaucratic corruption.
But banks are beginning to provide commercial credit, and the legal system
is being reformed to establish property rights and to make bankruptcy and
mortgage foreclosure possible. The government has proposed a radical
overhaul of the very faulty 1992 tax code that would provide strong
incentives for business investment and personal saving and a reduction in
marginal tax rates aimed at increasing taxpayer compliance. The Russian
stock market has reflected the expectation of reform, rising more than 150%
so far in 1997. George Soros's recent investment of $2 billion in Russia is
further endorsement of the favorable outlook.
A visitor to Moscow is also struck by the transformation in service
employees: The sullenness and indifference of the Soviet days is giving way
to a cheerful professionalism. Local American businessmen report that
younger Russians are quick learners and eager workers. Russian industry
will no doubt develop quickly as growing internal markets create new
opportunities for profitable production.
The decline of industrial production has led to a high level of hidden
unemployment, most notably among older workers who are nominally employed
but rarely paid. They survive through a combination of free privatized
housing, publicly provided heat in winter, substantial amounts of
home-grown food, earnings from work in the underground economy, and
financial support from children and other family members.
To what extent the restructuring of industry will lead to open unemployment
among older Russians will depend on the speed of downsizing and the natural
pace of retirement. But the low level of unemployment among young Russians
is noteworthy. Unlike much of Western Europe, where unemployment rates
among those under 25 range from 15% to 25%, Russian youths can and do find
jobs.
The speed of privatization, the opportunities for corrupt government deals,
and the ruthlessness of some industrial and financial leaders has led to
the amassing of enormous wealth in a few industrial-financial groups
dominated by a small number of individuals. The frequency of financially
motivated murders and the prevalence of political-business corruption
remain major challenges for the Yeltsin government. Russia's current
experience reminds some of the "robber barons" of early American capitalism
and the violence of the Old West. Those with a longer historic view might
see parallels in earlier centuries in England and continental Europe. The
recent privatization auction of a Russian telecommunications company marks
a hopeful shift toward eliminating sweetheart deals for political favorites.
Although some critics decry the concentration of large segments of
privatized industry in a small number of conglomerates, industrial
concentration is not a serious problem in an economy that is now open to
competition from imports. The availability of foreign goods provides the
competitive check that prevents monopolists from charging excessive prices
or allowing the quality of goods to decline. The shelves of Russian stores
are full of such imports, and Russian roads are crowded with foreign cars,
showing how effective this competitive force can be.
Enormously Impressive
So much has changed in Moscow that it is easy to forget how recently Russia
changed from a communist dictatorship to a democracy and shifted from state
planning to a market economy. In just six years, Russia has taken the
crucial steps of privatizing ownership, freeing prices, opening the economy
to international trade, moving toward sound monetary and fiscal policies,
and beginning the creation of the institutional and legal structure that a
market economy requires. Despite some economic policy mistakes and much
political turmoil, the progress is enormously impressive. Although more
problems and setbacks will inevitably arise, the future of the Russian
economy now looks very bright indeed.
Mr. Feldstein, former chairman of the President's Council of Economic
Advisers, is a professor of economics at Harvard University.
--
--
Vladimir Butenko
Stalker Software, Inc.
dmi...@engr.mun.ca
In article <butenko-0809...@stalker.com>,
but...@stalker.com (Vladimir Butenko) wrote:
>
>
> The Wall Street Journal Interactive Edition September 5, 1997
>
> Russia's Rebirth
> By MARTIN FELDSTEIN
>
> MOSCOW--This city is enjoying a remarkable renaissance, both
> architectural and economic.
[.....]
> The standard of living has also improved because the end of price controls
> in 1992, combined with the shift to a system of private ownership, ended
> the widespread shortages of virtually all consumer goods at the end of the
> Soviet period.
[......]
> Despite some economic policy mistakes and much political turmoil, the
> progress is enormously impressive. Although more problems and setbacks
> will inevitably arise, the future of the Russian economy now looks very
> bright indeed.
>
>
> Mr. Feldstein, former chairman of the President's Council of Economic
> Advisers, is a professor of economics at Harvard University.
Что забавно, ровно 60 лет тому назад некто по имени Леон Фейхтвангер
тоже посетил Москву и тоже написал очень даже похожие слова. Ну а уж
бывшему председателю и профессору экономики сам Бог велел...
__________________
Dmitri Matskevitch
St. John's, NF, Canada
-------------------==== Posted via Deja News ====-----------------------
http://www.dejanews.com/ Search, Read, Post to Usenet
Yury Mukharsky
Vladimir Butenko wrote:
>
> The Wall Street Journal Interactive Edition September 5, 1997
>
> Russia's Rebirth
> By MARTIN FELDSTEIN
> Russia's privatization of virtually all businesses and housing has been one
> of the most remarkable achievements of the late 20th century anywhere in
> the world. The shortcomings caused by the inevitable political compromises
> involved in the privatization process are regrettable, but minor in
> comparison to the magnitude of the achievement itself. Ownership of
.....
> That privatization has not yet produced a substantial increase in
> industrial productivity reflects...
Так а в чем тогда, собственно, achievment? Самолетопоклонники, блин.
Бамбук некачественный на антенну пошел, знать. Не сыплются с неба дары.
Юра