The Pathetic Failure of Putinomics
In the annals of “signs of the Russian economic apocalypse,” we can’t think of many more jolting revelations than the report last week that Aeroflot — yes, Aeroflot — was planning to open a “budget carrier” subsidiary.
Do you dare, dear reader, imagine what it might be like to fly on a version of Aeroflot that openly cut corners? Aeroflot itself is already world famous as one of the cheesiest, most offensive, revolting and dangerous airlines in world history. What will it be like when Aeroflot starts cutting back on services? It’s not something we care to contemplate and as for boarding such a plan, even if bound for Vladivostok from Murmansk in winter, we’d rather walk. Or crawl.
A recent economic analysis of Putin’s Russia by the British website WhatInvestment pulls no punches in echoing the dark warnings of economic doom echoed by Aeroflot’s decision.
Just for starters, it calls the overall Russian economy “shockingly imbalanced.”
On Russia’s manufacturing economy: “Its innovation culture is non-existent, its marketing is bad and its products are worse. Nothing there to interest an investor, then. And especially not in an age when China does all those consumer things so well.”
On Russia’s banking system: “There was a time when Russian banks looked like a good bet, or when government bonds were all the rage but, when inflation is nudging 8 per cent and the government’s bailout is driving the official overspend above 9 per cent of gross domestic product, finance suddenly doesn’t seem like such a great idea any more.”
On Russia’s stock market: “The RTS stock exchange index soared from around 540 at the start of February 2009 to nearly 1,600 in mid-January 2010. Marvellous, except that it then crashed by almost 15 per cent in the space of three short weeks – more than twice as fast as the Footsie and the American S&P 500. You’ll receive an average dividend of 1.7 per cent, which sounds OK until you hear that Russia’s inflation is running at 9 per cent and that its government bonds are paying about the same.”
The ultimate conclusion? The Russian economy is a wonderful gambling casino “if you have the nerve.” As in any casino, the vast majority of punters will lose their shirts, but a tiny sliver will become instant millionaires, if they can not only make the right bets but pull their chips off the table at exactly the right moment.
But Russia isn’t a casino, it’s a country. And no country can long survive being thought of as a casino, no more that a business like General Electric could do. Russia must reform, or perish.