Russia: Slacker Nation

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We are inclined to nominate this brilliant essay from the Moscow Times by Vladislav Inozemtsev, the director of the Research Center for Postindustrial Society and the publisher and editor-in-chief of Svobodnaya Mysl magazine for the title of most devastating critique of Putinomics ever written by a Russian. Just goes to show there is still some hope left, while great patriots like this have the courage to speak out:

Russian experts and policymakers have increasingly raised the question of productivity, stressing that the country’s lag behind leading global economies has become an acute nationwide challenge. On May 15, President Dmitry Medvedev addressed the issue at a meeting on modernization and technological development and emphasized that “we must not forget one simple, unfortunate fact: Labor productivity in this country is currently equivalent to only one quarter of the labor productivity in the United States.”

According to the World Bank, every employed Russian contributes only $16,100 to the country’s gross domestic product, compared with $38,100 in South Africa, $48,600 in Greece, $59,400 in France and $74,600 in the United States.

But these numbers alone do not reflect the true scope of the problem. Russia’s low productivity is exacerbated by the fact that the country is dominated by natural resource extracting with relatively little industrial development in the real sector. Although the overall productivity in Thailand ($12,500 of GDP for an employed person), Brazil ($16,700) or Malaysia ($22,900) do not differ from Russia’s in a dramatic way, in these countries’ high-tech industrial exports account for 16.2 percent, 22.4 percent and 36.7 percent of all exports, while in Russia they constitute a meager 2 percent. Thus, Russia suffers not only from a low level of productivity but also from a counterproductive economic structure, slow technological progress and outdated labor relations.

The country’s economy in recent years shows two distinct features. First, an unprecedented economic boom from 2001 to 2008 failed to produce significant additional employment. For example, in the mid-1990s there were 66.3 million people employed. In April, the number stood at 67.5 million, indicating an increa-se of only 2 percent. The United States in the same time period increased from 123 million employed to 144 million, or by more than 17 percent.

Second, real wages increased 12.2 percent a year in Russia during these seven years, while the expansion of the country’s GDP was roughly 6 percent. In the United States, the labor costs in manufacturing between 2001 and 2008 declined by more than 25 percent in U.S. dollars when compared with 14 major countries from the Organization for Economic Cooperation and Development. This underscores how much Russia lags behind developed nations in terms of productivity.

Can the situation be improved in the near future? Productivity is bound to be low for several reasons. First, an improvement will depend on the overall level of economic development in the country. But in Russia, where the prices for domestically produced goods and services are from two to three times cheaper than in Western Europe or in the United States (absent a few exceptions such as real estate and construction), the absolute amount of value added is limited — and so is productivity.

The second reason why the future looks bleak for improving the country’s productivity has to do with the woefully low output per worker. Automobile manufacturing is the most glaring example. In 2007 at AvtoVAZ, 106,000 full-time production workers manufactured only 734,000 downscale vehicles. BMW, employing 107,000 workers at its German plants, produced 1.54 million upscale vehicles. The main reason for this large discrepancy is Russia’s outdated technical basis and the unwillingness of companies to adjust their labor force to the requirements of the market. Another factor was the huge inflow of low-skilled workers from former Soviet republics, which also decelerated technical change.

A third factor is the excessively high number of people employed in security services. About 4 million people are employed in the military and law enforcement agencies, while an additional 700,000 people work for private security companies and in corporate security services. This is terribly inefficient, particularly if you look at Western countries where so much of security services has been automated.

Leading companies facing a falling demand on their products should optimize their workforce and cut the dead weight even if that means laying off as much 30 percent of their personnel. This is a good time to implement this restructuring since expanding production during the crisis is not an option. The main obstacle, however, is the country’s increasing unemployment, which has become a volatile political issue. The government has urged entrepreneurs not to be too harsh in terms of layoffs. AvtoVAZ, for example, has followed the Kremlin’s cue by cutting workers’ shifts to one day per week instead of laying them off.

In the end, modernizing the country will truly be a formidable task, and this will remain the case as long as the Kremlin is obsessed with protecting and strengthening state-controlled “strategic industries.” This is a productivity dead end, and it leads me to believe that 2009 productivity levels decline even further.

11 responses to “Russia: Slacker Nation

  1. One need only go to wikipedia and look up “Homo Sovieticus” to understand Russia’s productivity problems:

    The idea that the Soviet system would create a new, better kind of person was first postulated by the advocates of the Soviet system; they called it the “New Soviet man”. Homo Sovieticus, however, was a term with negative connotations, invented by opponents to describe what they said was the real result of Soviet policies. In many ways it meant the opposite of the New Soviet man, someone characterized by the following:

    Indifference to the results of his labour (as expressed in the saying “They pretend they are paying us, and we pretend we are working”), and lack of initiative.
    Indifference to common property and petty theft from the workplace, both for personal use and for profit. A line from a popular song, “Everything belongs to kolkhoz, everything belongs to me” (“все теперь колхозное, все теперь мое”), meaning that people on collective farms treasured all common property as their own, was sometimes used ironically to refer to instances of petty theft. The Law of Spikelets, which made stealing from the collective punishable by ten years’ imprisonment, was a failed attempt to break this attitude.
    Isolation from world culture, created by the Soviet Union’s restrictions on travel abroad and strict censorship of information in the media (as well as the abundance of propaganda). The intent was to insulate the Soviet people from Western influence; instead, “exotic” Western culture became more interesting precisely because it was forbidden. Soviet officials called this fascination “Western idolatry” (идолопоклонничество перед Западом).
    Obedience or passive acceptance of everything that government imposes on them (see authoritarianism). Avoidance of taking any individual responsibility on anything.

    The Sovok mentality is alive and well in Russia.

    There will never be a middle class with a western work ethic until people have legal ownership of property which totalitarian states like Russia avoid at all costs.

    • This mentality, those problems you just described are present in every European post-communist country.

      Western work ethic sucks by the way (the French for example are lazy bums). The best work ethic is confucian. The Chinese, Vietnamese, Korean or Japanese are the best workers.

      • I agree, Pavel, but at least the liberated EU affiliated Eastern Europeans can get past that piece of communist culture sooner.

        Socialism kills individual initiative no matter where you find it.

        • Yeah, I know… That’s what socialism does. It’s funny though, how we in eastern Europe (most of it) got rid of socialist and communist economic shackles and are now the most capitalist countries of Europe, while on the other hand the West is more and more inclined to socialism. We switched the roles. Too bad that because of this stupid socialist EU my country must accept and enforce socialist laws. :/

      • Hahaha you made me laugh =]. The French are really the laziest people I’ve countered, they’re prolly even lazier than Italians.

        And Russians? They just drink too much, that’s maybe why they are not so effective at work.

        • Too bad you can’t read before you open your mouth.

          “….every employed Russian contributes only $16,100 to the country’s gross domestic product, compared with $38,100 in South Africa, $48,600 in Greece, $59,400 in France and $74,600 in the United States.”

          The French are 3 times less lazy than Russians. Your personal observations are useless. Hahaha!

          • Ever been to France? If not, then shut up. They are damn lazy. But their work is just highly valued. Prolly too highly valued. Oh and did you know that according to French laws one cannot work more than 35 hours a week? :D Such a hardworking nation!

          • PS: Those numbers actually mean nothing. I wouldn’t be surprised if some migrant Ukrainian migrant worker was working day and night, but his contribution to country’s GDP would be extremely low.


            You are demented. This is the report of a professional scholar, an expert, based on data from the World Bank. Apparently, you think your “instinct” (or is it ESP?) is superior to that. That’s just plain crazy. Meanwhile, you fail to recognize that ALL THE OTHER COUNTRIES also have migrant workers doing exactly the same thing.

            • We do not measure how lazy people are and how hard they work at their dachas. We’ve been so wrong in our data, just look at how we keep failing Africa.

  2. I’ve just recently read that the new saying is that “we pretend to work and they really do pay us”. That must have been during the recent period of economic expansion. Nowadays, I suppose that no one is getting paid, as before…

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