EDITORIAL: The Russian Economy is Collapsing

EDITORIAL

The Russian Economy is Collapsing

In 2008, nearly $130 billion flew out of Russia, erasing the modicum of inflows registered in 2006 and 2007. For its size, Russia as an investment destination pales in comparison to South Korea. Total equity portfolio inflow into Russia in 2009 was just $3.4 billion, according to World Bank data, making it the lowest of the big emerging markets by far. India, China and Brazil all registered inflows over $20 billion. A recent opinion poll by the Levada Centre shows that 22% of Russia’s adult population would like to leave the country for good, up from 7% in 2007. It is the highest figure since the collapse of the Soviet Union, when only 18% said they wanted to get out. Over 50% of Russian entrepreneurs said that they wanted leave the country. “From a macro perspective, I don’t want to be in Russia,” says Justin Leverenz, emerging markets portfolio manager at Oppenheimer Funds in New York. “From an investor’s point of view, Russian politics are far beyond what I’m able to analyze.”

Believe it or not, those words appear in a recent article in which the author is trying to put a positive spin on Russia.  Can you imagine what Russia’s economic critics are saying these days?

Spectacular Russian Failure at the US Open

Play began at this year’s U.S. Open tennis tournament on Monday, August 29, 2011, with 21 Russians represented in the main draws. Only France and the USA had contingents of equal or larger size at the year’s final grand slam event, so Russia might have taken some pride in the achievement.

But within days, Russia probably wished it had skipped the tournament entirely.

Before play had begun on Wednesday, August 31, a mere two days in, 11 of those 21 Russians were gone.  Only the USA saw more players eliminated from the draws in the first two days, but the USA had one-third more entries in the draw and as a result lost only one-third of its contingent. It had twice as many active players going into day three as Russia. Russia’s contingent had been cut by more than half and the tournament had hardly even begun.

And it wasn’t just Russia’s second-rate players who were cut down. Russia’s top-seeded male player, Mikhail Youzhny, lost his first-round match to an unseeded opponent in woefully noncompetitive fashion, showing the way to ten of his fellow Russians out the U.S. Open’s swinging door.

Russia’s next major humiliation was provided by Maria Sharapova, the country’s second-highest-seeded female player, in the third round.

The Horror of Childbirth in Neo-Soviet Russia

Journalist Natalia Antonova, writing on Foreign Policy’s website:

“Russia needs babies” may as well be the unofficial slogan of Prime Minister Vladimir Putin’s ruling United Russia Party. The country is in a demographic crisis, shedding 2.2 million people (or 1.6 percent of the population) since 2002, and the government is trying to encourage more women to bring Russian citizens into the world. This year, when I unexpectedly got pregnant soon after receiving my visa to work in Moscow, I became a test case.

Since the Soviet days, having a baby in Russia has been commonly understood as a nightmare of understaffed state hospitals and forbidding bureaucratic mazes. Feminist author MariaArbatova‘s My Name is Woman, an alternatively harrowing and hilarious account of childbirth in the 1970s, was the grim reality for many. Arbatova described being left completely unattended during the final stages of labor, which nearly resulted in her death and the death of her twin sons.

Stuck in a Russian Elevator

Michele Berdy, writing in the Moscow Times, shows bilingually how little different Russia really is from the USSR:

Ваш лифт не сдан: your elevator hasn’t been certified for service

In an old Soviet joke, a hare runs for his life in the forest. A bear asks him why he’s running, and the hare says that camels are being caught and shoed. Bewildered, the bear points out that the hare isn’t a camel. The hare replies: Поймают, подкуют, а потом доказывай, что ты не верблюд (They’ll catch you and put shoes on you, and then go and try to prove that you’re not a camel).

Today доказывай, что ты не верблюд (prove that you’re not a camel) is used any time you can’t prove something obvious to an obstinate bureaucracy.

For example — that you have an elevator.

EDITORIAL: Oops!!! Ouch!!!

EDITORIAL

Oops!!!  Ouch!!!

Oops!!!  Oops II!!!

Ouch!!! 

Nuff said.

Putin Fails, then Sticks Head in Sand

Pavel Baev, writing on the Jamestown Foundation website:

The volatile turbulence that battered the world economy last week should have passed Russia by, but it did not. Indeed, Russia is not burdened by a massive debt, is spared political feuds about budget cuts and is not even exposed to the looming Greek default; nevertheless, its stock exchange fell deeper than most. The Dow Jones index, for that matter, opens this Monday on about the same level where it was a week ago, while the RTS slipped from the plateau of about 11,600 to a low of 9,600 and barely bounced to 9,900 on Friday (Kommersant, August 13). Certainly, the speculative games are only a symptom, and not necessarily a reliable one, of the real economic trends, but statistics suggest that Russia’s economic growth slowed down in the second quarter, and experts argue that the country is entering into the new phase of turmoil, for which it is not any better prepared than it was in mid-2008 (www.newsru.com, August 10; Nezavisimaya Gazeta, August 12).

Russians: We are More Corrupt, and Hopelessly Sick, under Putin

Marc Bennetts, writing on RIA Novosti, points out that a majority of Russians now believe their country is more corrupt under Vladimir Putin than it was under Yeltsin, and one member of the Russian Duma believes the country is “seriously sick and may already be untreatable.”

The recent brutal slaying of a family of five – including three small children – in a provincial town near Moscow was enough to shock even Russia, a country with some of the highest murder rates in the world, and led a parliamentarian to suggest the killings were a sign that the country was “sick.” Perhaps incurably so.

The bodies of the 35-year-old woman, her three boys aged four, five and nine, and their grandmother were found stacked up in a bathroom in an apartment in Tula, some 200 kilometers from Moscow, late on August 1.

Russian Collapse in Carlsbad

Another one of those days for a hapless Russian #1.

Russia’s best female tennis player, world #3 Vera Zvonareva, made a little trip out to Carlsbad, California the first week of August to play in the WTA Mercury Insurance Open.  She had her little holiday planned out so nicely.

What made the tournament attractive for Zvonareva was that she would be seeded number 1 and the number 2 seed would be Andrea Petkovic  of Germany, ranked #11 in the world. In other words, no other top ten player besides the Russian even entered the tournament, so Zvonareva would have a cake walk to the title and a pile of virtually free rankings points.

But the best-laid plans of mice and Russians gang aft agley!  Despite her sweet little scheme, Zvonareva barely even made it to the finals and did not come close to taking the title.

Duma Deputy: Russia will not Last to 2020

Sergei Petrov, a Russian State Duma deputy from the Just Russia party and founder of Rolf Group, writing in the Moscow Times:

Strategy 2020 — the question of where Russia will be in 2020 — hangs in the air. There are a variety of scenarios being offered by leading economists, political scientists and other analysts, but one thing is clear: There will be no miracles in the next nine years. The prospects for a country mired in archaic institutions, an oil- and gas-dependent economy, systemic corruption, unprotected property rights, corrupt courts, fraudulent elections and an apathetic population can only be dim at best.

I’m almost certain that Russia will not be able to survive in its current borders through 2020. This is not an exaggerated, sensational prognosis taken from the blogs of radical liberals or anarchists, but a clear-headed, objective analysis based on the Kremlin’s flawed policies over the past decade.

Russia Cannot Innovate, Doomed to Fail

Vladimir Terletsky writing on Rus Business News:

Russia will be unable to become an innovation-driven country in the near term, as, despite its tremendous area, there is no demand for innovative developments. Large companies prefer to purchase off-the-shelf technologies in other countries; talented scientists, in their turn, leave Russia, finding no comfort in living and working at home. Experts see monopolists as the main hindrance to progress, as being the closest to government money. The “RusBusinessNews” columnist is sure that only transnational corporations can make them move; however, the authorities show no haste to allow them access to the Russian market.

EDITORIAL: Vladimir Putin, Exposed

EDITORIAL

Vladimir Putin, Exposed

On July 5th, Pravda was fuming.

It had just learned that the Netherlands had issued a blacklist against numerous Russian officials who were believed to be complicit in the torture and murder of attorney Sergei Magnitsky, who had leveled sweeping charges of corruption at the Kremlin and the been arrested.

But that was only the beginning of Vladimir Putin’s troubles.

The Bank of Moscow, Running Dry

Hero journalist Yulia Latynina, writing in the Moscow Times:

While watching the Bank of Moscow scandal unfold, two questions come to mind. First, the Bank of Moscow held the accounts of Moscow’s city budget, and the deficit of the bank is now $14 billion. In essence this means that the city’s funds have been stolen from the bank. How did this happen?

The second question is whether VTB will file a lawsuit in London courts against former Bank of Moscow president Andrei Borodin. It appears that the goal is not to extradite him back to Russia but to put him behind bars in Britain.

Borodin somehow received 20 percent of the shares of the bank, but it is difficult to say whether he was an actual or nominal shareholder.

SPECIAL EXTRA: Russia, Sinking

The Russian Volga cruise ship Bulgaria

EDITORIAL

Russia, Sinking

At 8:19 am EST on Sunday, July 10, 2011, the Washington Post published a wire story on its website from the Associated Press  about the sinking of the Bulgaria (shown above in happier times), a fifty-year-old tourist vessel plying the Volga River in Russia more than a mile off shore and near the village of Syukeyevo in the Kansko-Ustinovsky district of the Republic of Tatarstan.  Two minutes later the New York Times published a wire story from Reuters about the same event.  The reports followed the event by about three hours. Since then, the two papers have altered the reports substantially because the information they reported was totally false.

The AP story, relying on a male spokesperson for the Russian Emergencies Ministry, said that 61 of the 173 people who were on the vessel (140 passengers and 33 crew) were missing.  The Reuters story, relying on a female spokesperson for the same ministry, said the number missing was 96 of 173.

Various Kremlin spokespeople then began claiming that the vast majority of the passengers had been rescued.  Acting as if the Russian government were a responsible, intelligent organization that could be trusted, innumerable Western news outlets began reporting these claims.

Then all hell broke loose.

EDITORIAL: Saved from the Russian Meat Grinder

EDITORIAL

Saved from the Russian Meat Grinder

If you stare hard at the twin girls pictured above on the left, you’re immediately struck by now much they resemble their mother and father, at right.  But when you look at the background of the photo and learn more about them, you’re even more struck by the fact that these girls are Russian, their parents are American, and they were adopted at the age of two from one of Russia’s infamous hell-hole orphanages.

A quarter million children live in such awful places in Russia, and over three-quarters of them end up convicts, drug addicts or prostitutes.

EDITORIAL: Russia, Behind the Curtain

EDITORIAL

Russia, Behind the Curtain

Over the past year, the confidence of the Russian people in their government has plummeted. From a high of 56% in May 2010, the approval rate has fallen steadily until last month it dropped, stunningly, below a majority to 48%.

In July 2010, only 29% of Russians thought their government was moving in the “wrong direction.”  As of last month, that figure stands at 40% — a whopping increase of one-third in less than a year.  Back in July a majority of Russians thought the country was moving in the right direction; now, just 43% think so. Only 27% of Russians firmly believe the government will be able to change things for the better, while 37% are sure there is no chance that will happen.

Meanwhile, another poll revealed that 40% of Russians favor the installation of a constitutional monarch.

These are devastatingly bad poll results in a country where the state controls all major media outlets and public criticism of the regime is almost wholly absent. If the public had better information, the regime would no doubt be in single-digit approval.

In shockingly bizarre fashion, however, Russian approval of the country’s two leaders, Medvedev and Putin, is still stratospherically high.  Medvedev has 68% approval and Putin, who is in charge of the government, is even higher at 71%.  There is only one word for such results, and that word is:  irrational.  Or perhaps a better word would be:  psychotic.

EDITORIAL: Readin’ and Ritin’ and Roosskie Rithmatic

EDITORIAL

Readin’ and Writin’ and Roosskie Rithmatic

One of the most hilarious features (or it would be if it were not so tragic) about the Russian psyche is the nation’s continued insistence that it is well-educated, especially compared to Americans.  The actual facts tell a quite different story (not that Russians are ever over-interested in facts).

The United States spends 5.7% of its GDP on education, ranking #37 out of 132 countries surveyed by the United Nations Human Development Program.

Russia spends a woeful 3.8% of GDP, ranking a sad and sorry #88. Two-thirds of world nations spend more on education as a share of GDP than Russia does. The USA in particular spends over 65% more on education, as a share of its GDP, than Russia.

If you think about it in dollar terms, the picture is even more horrifying for Russia.

EDITORIAL: The Collapse of the Neo-Soviet Army

EDITORIAL

The Collapse of the Neo-Soviet Army

We cannot afford to create a fully professional army. If we save funds elsewhere, we will certainly go back to this idea, but well prepared.

— Russian Defense Minister Anatoly Serdyukov, October 2010

As shown in the chart at left, between 2006 and 2010 the number of young Russian men drafted into the army has nearly tripled, from just over 200,000 per year to nearly 600,000 per year.

There are two simple reasons for this shocking increase in conscription: First, the number of young men newly eligible to serve in the Russian army is plummeting along with the general population (from about 900,000 in 2004 to 500,000 in 2011); second, the horrors of dedovschina and other barbaric practices and hardships of the army have led many young men to reject the option of volunteering. The result is that nearly 100% of all newly-eligible Russians were drafted into the army in 2010.  If things go on as they are, even drafting every single eligible man won’t be enough to fill out Russia’s ranks — and the Russian army will start collapsing.

EDITORIAL: The Horror of Russian Cowardice and Lies

EDITORIAL

The Horror of Russian Cowardice and Lies

The nuclear reactor in Power Unit No. 4 at the Chernobyl Nuclear Power Station exploded at 1:23 am on Friday, April 25, 1986 — twenty five years ago this month.

It immediately generated a cloud of radioactive vapor ten times more toxic than the Hiroshima nuclear bombing.

But the 50,000 residents of the neighboring town of Pripyat, USSR, were not told to take protective measures, such as staying indoors with the windows shut, for a full twelve hours following the blast, when it was announced that they faced “an unfavorable radioactive atmosphere.”  Unfavorable indeed! They were not told they would be evacuated until late in the evening the next day, Saturday April 26, and they were not actually evacuated until 2 pm on Sunday, April 27. By that time, many had incurred lethal or life-altering doses of radioactivity.

Residents were not permitted to take their personal property with them. Patriotic Soviet citizens soon swarmed in and looted them to the bare walls.  Today, Pripyat is a ghost town.

EDITORIAL: Gagging on Russia

EDITORIAL

Gagging on Russia

Anatoly Komm in his Moscow restaurant, Varvary

Even when Russia gets something right, it’s still wrong. That’s Russia in a nutshell. And we do mean nut.

For the first time, Russia has placed a restaurant into the world’s top 50 as assayed by the San Pellegrino sparkling water company.  The place is called Varvary, and its chef is Anatoly Komm.  It even specializes in Russian cuisine! This ought to be a great day for Russia.

But here’s what Komm has to say about his eatery (which costs over $300 per person to explore):

Putin to People: Drop Dead!

Galina Stolyarova, writing in the St. Petersburg Times:

In an old Soviet joke, three elderly women go to the doctor. All have exactly the same health condition but they enjoy very different incomes. When the first woman — the wealthiest — tells her story, the doctor asks what her income is, and then suggests eating plenty of fruit and vitamins and recommends a trip to a seaside sanatorium. The next one, who has an average salary, is recommended to cut meat, sweets, and fatty foods from her diet. When the doctor examines the last one, who survives on a tiny pension, all he can prescribe is plenty of fresh air.

It is an open secret that the cynicism of the Russian authorities today is no less than that of the doctor in the joke. And a 17-year-old Yekaterinburg high school student, Vitaly Nikishin, embarked on a crusade last month to expose this cynicism to the entire world. He launched a popular blog in which he recounted his attempt to survive for a month on 2,632 rubles, or $88 — the sum calculated by his regional government as the cost of the monthly “minimum consumer basket.”

A Very Russian Story

Galina Stolyarova, writing on Transitions Online:

Toward the end of March, Nina Martynova, a 70-year-old retiree from Voronezh, paid for a loaf of bread and a carton of milk at her local grocery and then walked toward the door. She had taken only a few steps when she was stopped by security guards and ordered to follow them.

She was ushered into a small storeroom and searched. In Martynova’s pocket, the guards found two small chocolate bars. She hadn’t paid for them.

It seems the guards had ample evidence to detain her. A recording by the shop’s security cameras, part of which has been posted online, showed the elderly woman sneaking the bars into her pocket.

On the tape, Martynova seemed so shocked that she slowly fainted when the items from her pockets were laid on the table in front of her.

She at once went into cardiac arrest. An ambulance was called, but by the time it arrived she was dead.

The Doomed Russian Economy

Foreign investment in Russia fell a whopping 13% last year and is now half what it was four years ago.  Vladislav Inozemtsev, professor of economics, director of the Moscow-based Center for Post-Industrial Studies and editor-in-chief of Svobodnaya Mysl, writing in the Moscow Times, explains why:

President Dmitry Medvedev publicly acknowledged last week what everyone has known for two decades: The investment climate in Russia is bad. While the measures Medvedev proposed to improve the investment climate are generally sound, there are several reasons why they won’t work.

In 2010, fixed capital investment in Russia totaled 8.35 trillion rubles in constant 2008 prices ($310 billion), the same as it was in 2007. In China, however, investment in 2010 was 14.4 trillion yuan ($2.16 trillion). One of the main reasons China’s investment level is so high is its high domestic savings. But the higher the level of savings, the lower the level of consumption.

Under Putin, Russia Culture Perishes

The Associated Press reports:

A squirrel tail. Wolf teeth. Sheets of gold. Flax oil.

These are the things Vladimir Buldakov uses to work a feat of modern-day alchemy: transforming an ordinary papier-mache box into a gilded miniature masterpiece that will tell the story of saints or heroes, fairies or dragons.

Buldakov comes from Palekh, a 700-year-old Russian village where a church’s lavender onion-domes overlook snow-clad houses, a frozen river and a distant birch forest. The town is famous for its beauty, but the rare outsiders who visit come for the varnished boxes that bear its name.

Now, the unique art form, which emerged in the 1920s after the atheist Bolsheviks approved a new medium in which masters of religious icon paintings could use their talents, is struggling to find a reason to exist in capitalist society.

If it disappears entirely, its stunted lifespan will bear vivid testament to the twists of Russia’s turbulent recent history. And Russia will lose one if its hallmark trinkets, the product of an astonishingly high-skilled process.

English in Russian “Translation”

Linguistics expert Michele Berdy, writing in the Moscow Times, exposes the hilarious ignorance of Russians attempting to translate from English.  Russians are often outraged by statements made in English that they don’t begin to understand.

It’s late Saturday afternoon, and having finally accepted that spring has been canceled this year, the downcast expat trudges to the local shopping mall. Loaded down with booze and bags of high-calorie food (why not, if you’re never going to take off your parka?), you (downcast expat) trudge to the video store. You stand in front of racks of DVDs, conveniently — for the non-native speaker of Russian — divided into genres like комедия (comedy), мелодрама (melodrama) and триллер (thriller).

EDITORIAL: Russia, Land of Failure

EDITORIAL

Russia, Land of Failure

Today we offer a special issue devoted to an extensive analysis of the myriad of ways in which Vladimir Putin’s Russia is failing and collapsing.

A good jumping-off point for this discussion would be to click the “rating Russia” category in our sidebar. There, a reader will find more than 150 posts dedicated to reporting on international scientific studies of Russian performance, each one revealing more shocking and horrifying failure than the last. Over and over and over again in the studies, conducted by respected international organizations and think-tanks of every hue, Russia ranks in the bottom quartile of the globe or worse when tested for basic criteria of civilized government and progressive business climate.

The drumbeat of failure continued last week, loud and clear.  Inflation was soaring, capital flight was roaring, and the world was reminded once again that those who govern Russia are unqualified, lacking in experience, and totally ill-equipped to manage a complex market economy.