Issue 6, November 2008
|Defenders of the Russian Economy|
There are those in Russia and in the West who downgrade the risks described above, preferring to see the Russian economy as one in healthy transition. In this view, Russia’s capitalism is not so different from US capitalism of the Gilded Age a century ago when America was at a similar developmental stage in its economy. Some experts here argue that excesses, inefficiencies, corruption, and disincentives are inevitable bumps in the road and will naturally correct as the system matures, as has happened along other capitalist countries’ journeys – journeys that have taken several centuries to complete.
All the more reason, many in the West argue, to engage with Russian businesses, despite the risks and unsavoriness. This contingent believes it is through business, not diplomacy, that the West has the greatest lever of influence on Russia, and that the more Russian companies interact with their Western counterparts and competition, the more Westernized they will become. In this view, Western norms, practices, and values can be spread through the dollar, euro, and ruble, and the very reforms the West seeks for Russia generally can perhaps stem from Russia’s integration into the global marketplace.
Others see Russia’s system of managed capitalism as the only viable option for the country’s economy, given its history and unique features. In this view, the strong hand of the state is a necessity; it could be no other way in Russia. They see the state’s unique relationship with the private sector as a growth accelerant, an improvement over traditional capitalism. Peter Levalle speaks for this contingent in saying, “most analysts fail to understand that, in Russia, just as in other emerging markets, the most solid and profitable business partner is the state,” and that this should encourage, not discourage domestic and foreign investment.
The fact remains that because of the potential created by Russia’s size and wealth, it is of great interest to investors from all over the globe.