The blog provides a left-wing non-partisan perspective on socio-economic issues in Russia and throughout the world. The focus is on qualitative development of national economic systems and ensuring flexibility in economic policies to meet the challenges of the 21st century. Email: leftistobserver@gmail.com

BUSINESS ALONE IS NOT A PANACEA

Those who have been paying attention to the recent news from Russia already know about a river cruise ship that sunk on the Volga river about a week ago. The death toll is approaching 100 people. It is being investigated what brought about this disaster, but numerous reports indicate that the technical condition of the boat was very poor and was, most likely, the cause.

News agencies reported that the deplorable condition of the vessel had not prevented the management of the cruise company from sending the boat off to another voyage, which unfortunately resulted in a tragedy. Former members of the crew and other witnesses confirmed that the vessel required a substantial overhaul, but the owners of the company remain deaf to the voice of reason and refused to pay up.

The most horrifying realization, which is gradually dawning on many Russians, is that that particular occurrence is not unique. There are other cruise ships in Russia that require either major overhauls or replacements, both options being unfavorable to the business community due to the need to make investments. This problem haunts many other industries of the Russian economy – business is not willing to part with funds even when people’s lives are in danger. I can think of several other disasters in recent years that were caused by lack of funding. This is something that the entire Russian economy is facing nowadays.

So where are the efficient private owners willing to foot the bill of Russia’s technological development? Where are those small- and medium-sized companies full of desire to replace Russia’s crumbling infrastructure at their own expense? Where is the free market that should have provided those volunteers as numerous economics professors promised us at the outset of the liberal reforms in Russia? Why is it that the economic reality in modern Russia is even uglier than in the Soviet times?

We were amazingly na├»ve to believe that business per se was a panacea for our economic woes. Business is part of an economic system in general and the way that system operates influences all its component parts – business is not an exception. What is it that business is after? Profits, for sure! If those are hard to come by for whatever reason, it will be almost impossible to convince the business community to develop new industries, to open up new lands, to finance new scientific breakthroughs. Business is short-sighted by definition and is reluctant to participate in undertakings with extensive payback periods.

The gradual collapse of the former Soviet infrastructure in Russia testifies of the gruesome underfunding of the entire economy. And it is pretty easy to see why that is the case. The costs associated with the tough climate and territorial coverage are obvious enough. The critical part of the dilemma is consumers’ solvent demand, which has been rather low in Russia. While the US consumer used to be able to compensate for insufficient purchasing power by taking out new loans, the Russian counterpart had to fend for himself. As a result, the overall profitability of the Russian economy has been low. Also consider the enormous credit rates in the country, and you will start wondering how in the world the Russian business manages to stay afloat at all. The answer is also simple – by cutting all possible costs, compromising safety regulations and quality standards, and cheating customers, etc. That is why the voice of greed speaks louder to Russian entrepreneurs than the voice of reason. As soon our liberal-minded government removes regulation in a particular sphere, the cash-starved businesses immediately turn all safety precautions and quality requirements into a Potemkin village. Should any problems with the law arise, all matters end up being solved a couple of bribes later.

When signing praises to free market, those neoliberal professors were obviously turning a blind eye to the fact that western countries live in conditions hardly reminiscent of their laissez faire ideal. In “developed” countries, small businesses have long lost their role in determining directions of strategic development, which fully rests with the government and major corporations. Independent mom-and-pop businesses simply do not have enough financial resources and political power to have a say in such matters. When it comes to planning the national economic development, let alone the nation’s geopolitical agenda, big business and government officials run the show.

As for markets for small- and medium-sized businesses, it is demand from major economic players that creates them. This in turn boosts employment and investments within the national economy, which then result in higher purchasing power and more spending thus generating revenues sufficient to cover the costs through the economy. That is when businesses become less reluctant to spend on safety and quality.

This brings us to the main point I am trying to get across – the mechanism for ensuring the expanded social-economic reproduction in post-Soviet Russia has been annihilated by two decades of neoliberal reforms mainly aimed at boosting foreign corporate profits at the expense of the entire economic system. Russia is dragging along by using up what has been left behind after the Soviet Union’s economic empire, but as soon as that resource is utterly depleted, Russia is likely to experience a severe economic blow it may not recover from. The way its economy is run only makes certain that, no matter how much input has been provided, the output will always remain insufficient to restart the reproduction processes. To my mind, that seems like a deliberate act of sabotage on the part of the post-Soviet pro-Western elite, who can be rightfully called compradors.

The tragedy on the Volga river only testifies of the gruesome economic reality Russia has been foolish enough to place itself in.

Boris Anisimov