Russian Arrogance gets its Just Desserts: Turns out they Still have Lots to Learn

Andrei Kortunov, president of the New Eurasia Foundation in Moscow, writing in the Moscow Times:

Look around at your Russian colleagues, business partners, clients, bosses and employees. Remember how self-assured and optimistic they were just this summer. Remember their grandiose business plans and strategies. It was as if Russia had forever lost the need for the thousands of expat managers, analysts and consultants who were working in the country. It seemed that Russia’s business elite had mastered Western management and finance skills so well that they would begin giving their U.S. and European counterparts a run for their money not only in Russia, but throughout the world.

Where did all of that enthusiasm go? Today, the Russian business community is a state of near panic. Judging from interviews with many Russian business leaders, they are expecting the end of the world — mass bankruptcies and layoffs, sharp declines in salaries and benefits, the devaluation of the ruble and stagnation of the real economy. The transition from extreme optimism to extreme pessimism hit the country like a brick.

Now is the time for expats to teach their Russian colleagues a few simple lessons based on the West’s long experience of developing its market economy.

First, try to explain to the doomsayers that this is not the end of the world — it is only a natural part of the economic cycle. During a crisis, the economy rids itself of its most ineffective and outdated components. A crisis is an occasion to reflect on ways of developing new business models, new management principles and innovative goods and services to offer the market. It is no coincidence that many successful Western companies began their ascent during periods of crisis when they were forced to invent new technologies and more efficient ways of doing business.

Second, Russian managers need to understand that their ambitious dreams of career advancement and success do not always correspond to their qualifications and professional experience. They were able to get away with being underqualified only because the country’s overheated economy created a shortage of managers on the labor market. But a crisis will enable the country to correct this labor inefficiency. Good managers have little to fear because they will always be in demand, regardless of economic conditions. But those in the “mediocre majority” may have reason to be concerned.

Third, the crisis showed the importance of individual financial strategy. Here again, expats could share their experience with their Russian coworkers. Unfortunately, the traditions of long-term financial planning and the careful analysis of personal financial risks are slow to take root in Russia. As before, many Russians spend a lot and save little, seldom reflecting on the fact that years of living high on the hog will be followed by lean years. A crisis is like a cold shower after a long consumption binge.

Finally, the current crisis makes it clear to everyone that economic problems cross global borders. There is no point in gloating over the financial problems in the United States. In today’s intertwined world, a U.S. financial crisis will eventually affect every country to one degree or another. It is useless to speak of Russia as an island of financial stability in the world when even the most powerful financial systems cannot shield themselves from the destabilizing influence of external factors. We are all in the same boat, and we need to search for solutions together, not separately. The idea of a “sovereign economy” is just as absurd and counterproductive as the idea of “sovereign democracy.”

Perhaps you have been trying to convince your Russian colleagues of these basic truths for a long time already. The Russian business elite should have learned all of these lessons from the default of 1998.

Unfortunately, people have short memories, especially when times are good. It is therefore worthwhile to repeat the lessons that crises can teach us once again.

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