Russia and its “Wealth”
According to the Wealth-X website, Russia has one-quarter the ultra high net worth (UHNW) citizens that Brazil has and close to one-tenth the number held by India and China. But Russia goes toe-to-toe with the other BRIC nations when it comes to billionaires, and those billionaires control a shocking 85% of all the wealth held by Russia’s ultra-rich. In Brazil and India (and for that matter the United States), billionaires do not even control a third of the ultra-rich asset base. Russia’s billionaires control a third of Russia’s GDP, whereas in the USA billionaires control just a tenth.
What this data shows beyond any question is that Russia is a disastrous failure when it comes to spreading the wealth. Russia is an oligarchy even within its oligarchy, as billionaires greedily refuse to allow millionaires to have a fair share of the investment pot. And Russia’s ultra-rich control an unspeakably vast segment of Russia’s total wealth, meaning that only a very narrow group of decision-makers controls the lion’s share of all important financial decisions. With such limited information and viewpoints, it’s inevitable that Russian innovation and entrepreneurship will suffer.
Russia Crashes another Party
In another editorial in today’s issue, we highlight the fact that Russia has just been revealed by Transparency International to be the very most corrupt nation in the G-20 organization.
Now it turns out that both Brazil and India, fellow members of the so-called “BRIC” group that includes Russia as well as the G-20, are already disgusted with the organization and are spurning it. This was, of course, supposed to be Russia’s great coming-out party, a new group of independent countries looking to Russia for leadership and acting as a bulwark against a unipolar world dominated by the United States. It is turning out to be another classic Russian boondoggle, an illusion rather than a reality.
Once again, in other words, we see Russia being revealed as a totally isolated country, unsuitable and unqualified for membership in any civilized group of countries and unable to establish a leadership role in any organization. Russia imagines itself a leader, but in fact it is not even a follower.
The Russia Monitor reports:
Earlier this year I wrote about IKEA’s corruption problems in Russia. Two senior managers were fired after Swedish media reported that the managers had approved a bribe payment by their general contractor in order to obtain electricity service for a St. Petersburg Mega-Mall. IKEA had been powering the mall with rented generators, but changed its approach once it found that an employee allegedly received kickbacks from the generator company in exchange for paying inflated rental rates. As we now know, Plan B did not work out so well.
This week IKEA Russia’s new chief Per Wendschlag announced that IKEA would “focus on existing stores” and that it the Swedish company was halting constructionof a $1 billion mall near Moscow (Europe’s would-be largest shopping mall), which was just announced in April 2010 (right after the corruption scandal in February). At first glance, this seems like a prudent strategy – some of IKEA’s problems have arisen from its previous balls out expansion strategy. The resulting construction has at times been shoddy and has caused accidents.
Investment U reports (hat tip: Robert Amsterdam):
These days, you don’t have to look far to read about success stories within the “BRIC” nations. However, while Brazil, India and China enjoy solid growth, the remaining member – Russia – has fallen to the bottom of the pack.
And with good reason.
Anders Aslund, writing in the Moscow Times:
First-half results are arriving, presenting many countries with shocking declines, but the record is quite varied. Whatever standard we choose, Russia is underperforming.
The country’s natural comparison is with the BRIC countries — Brazil, Russia, India and China. According to JP Morgan’s current forecast, this year the gross domestic product of China is expected to grow by 8.4 percent, India — 6.2 percent, while that of Brazil is expected to shrink by 1.0 percent, and Russia — 8.5 percent. During the first half of 2009, China and India have been forging ahead, while Russia’s GDP plunged by 10 percent.
Russia Exposed as the Black Sheep of BRIC
Russia as Black Sheep
A devastating new study by the Frontier Strategy Group reveals that a large cross section of international investors has rejected Russia when comparing it with the other members of the so-called “BRIC” group. Nearly twice as many investors in the group thought Brazil would be a “top-3” investing opportunity in the next three years as thought Russia would be, and China and India were right behind Brazil. Russia’s level of support as a top-3 candidate was rivaled by the likes of Columbia and Thailand and bested by tiny, backward Vietnam. Russia was also soundly thrashed by Mexico. “It was incredibly surprising to us how quickly people had abandoned Russia,” said Alex Turkeltaub, Frontier Strategy Group’s chairman, to the Wall Street Journal.
This was hardly the kind of news Russian “president” Dima Medvedev was looking for when he attended the BRIC summit last week.