Summary:Russia remains the developed world's biggest economic headache as it struggles with massive structural and cultural problems, panelists said. But a closer look at the nation reveals some small reasons to be hopeful for the future, more optimistic panel members suggested.
"You can be hopeful or disgusted or depressed, depending on how you want to look at the picture," said Stephen Kotkin.
While the hopeful part may take some searching, the disgusting and depressing evidence is easier to find. Russia's GDP has shrunk by a staggering 50 percent since 1992 and unemployment is rampant. Much of the industrial base is hopelessly outdated and foreign investment has virtually dried up.
High on the list of business complaints is a lack of contract enforcement which makes doing business there perilous. The tax system is opaque and accounting standards are lacking. But the biggest problem, according to Kotkin, is a corrupt state bureaucracy. "The Russian state bureaucracy is the biggest parasite," he said. "It's a Mafia — a bribe-collecting apparatus. The Russian State, which is supposed to be a solution, is the problem."
While no one disputed Kotkin's assessment, said Boris Berezovsky, Russian people are finally starting to adapt to the rigors of a market-based economy even if it is steeped in problems. After decades of counting on the Communist State for jobs, education, housing and virtually everything else, a new spirit of self-reliance can be found among younger Russians, Berezovsky said. "Now, young people realize that they must take care of themselves," he said. "This new mentality is the biggest hope for Russia."
As the owner of a 9 year old telecommunications company in Moscow, American Frederick Andresen has seen that spirit among his own employees.
"We employ 70 people in Moscow and I've never seen a more dedicated, resourceful and loyal group of people in my life," he said. "Russia's greatest asset is not oil or gas. It's the people."
Given the opportunity, many Russian businesses could flourish, Andresen suggested. "The small business sector is yearning to be free," he said. But some basics must change before that can happen, he added, mentioning a transparent legal system and a banking system to provide badly needed credit.
These microeconomic problems are being played out against larger changes in Russia, some of which offer hope, said Ian Bremmer. After a decade, Russians are committed to democratic elections and the Communists are literally dying off, Bremmer said. But elections alone won't solve Russia's structural economic problems that date back decades, Kotkin said. Dated state enterprise frequently relies on 1930s technology. "They have a time warp economy from a different era," he said.
This "Rust Belt" industry needs triage, he said. Hopelessly outdated factories should be shuttered and the remainder should be updated, he said. So far, less than 35 percent of the "old dinosaurs of the old economy" have been restructured, he continued. Looking forward to upcoming elections, the expected re-election of President Putin is unlikely to radically alter the landscape. Whoever emerges as leader faces virtually unsolvable challenges, Kotkin said.
But Berezovsky urged the United States to provide assistance during Russia's transformation. "Russia by itself can't overcome centuries [of problems] to become like a Western country. It needs help."
Andresen also supported an active American role in Russia, in part due to geographical concerns.
"It's very important to work closely with Russia," he said. "Remember, after Mexico and Canada, they are our closest neighbor."
