Re: Russian shadow economy, GDP and Marx's value theory

["Chris Doss" <nomorebounces@xxxxxxx>]

Hi Michael,

Caveat emptor: I am not an economist. However, these are my two kopecks' worth.

There is no doubt that a great deal, possibly the majority, of the economic boom has been the result of high oil prices. The federal treasury gets the great majority of its money from sales of natural-resources, mainly oil and natural gas, but also diamonds, nickel, platinum-group metals, etc. (in fact Gazprom is the source of something like 25% of the federal budget). The government has, I think wisely, used this windfall to pay off the foreign debt, so that Russia's dept/GDP ratio has fallen from over 60% to something like one-fifth. 2003 was the year in which Russia's debt payments peaked, and it was able to meet them all without a problem.

That said, it is also true that the devaluation in 1998 contributed considerably. In fact, economic growth began almost immediately after the devaluation, while oil prices were still rock bottom (and while Yeltsin was still in the Kremlin). The Communists like to take credit for this, since they were influential in the government at that time; I don't know to what extent this is true. As an aside, the era in which having a Russian name on a product was the kiss of death (the 1990s) is over. Back in the day, Russian producers would use foreign-sounding names to fool consumers into thinking they were buying Western products, which were believed to be of higher quality. An example of this is dairy producer Wimm-Bill-Dann. Nowadays, "patriotic" marketing is more the norm; Peter the Great cigarettes, for instance. (They had a great ad campaign: a picture of a bedraggled looking Napoleon with a black eye, next to the slogan, "The Ministry of Health warned him it was dangerous!" Chocolate-maker Red October's ad campaign involves a woman on a train who stops at the border and starts walking back to Moscow after discovering that there are no Red October chocolates in the West.) I have noticed a lot fewer ad campaigns using Soviet imagery: I have not seen Union cigarettes (dedicated to "the great Soviet peoples") for quite some time, for example. (On the other hand, Soviet imagery is appearing in the political campaigns -- lots of shots of tractors working the fields, factory workers, cosmonauts, etc.)

Corruption has if anything increased. However, it has become streamlined and is predictable in a way it was not before. Everybody knows that if you want to start a business, you are going to have to pay x, y and z for licenses a, b and c.

One other thing that should be mentioned: The role of the so-called "Russian Mafia" (I saw "so-called" because ethnic Russians actually play a secondary role in it). The heyday of the mob was around 1995. Gun battles over property have become very rare. The various local and ethnic mafias have transformed themselves into big and medium business, and big and medium business wants stability, a good relationship with the authorities, and an opportunity to make a profit in a predictable way. The days of "bandit capitalism" are over.

-----Original Message-----
From: Michael Perelman <michael@xxxxxxxxxxxxxxxxx>
To: PEN-L@xxxxxxxxxxxxxxxx
Date: Fri, 12 Mar 2004 08:53:07 -0800
Subject: Re: [PEN-L] Russian shadow economy, GDP and Marx's value theory

>
> Rather than making sweeping determinations about the Russian election,
> which seems to be a foregone conclusion, I would like to know about the
> Russian economy.  Since Chris is there on the ground in Russia, what
> accounts for the supposed that improvement in the economy?  Oil prices
> increasing, a dead cat bounce, crack down on corruption, or divine
> intervention?
>
>
>
> --
> Michael Perelman
> Economics Department
> California State University
> Chico, CA 95929
>
> Tel. 530-898-5321
> E-Mail michael at ecst.csuchico.edu
>