i just wanted to address your following comment "corruption is no more of a problem than Eastern Europe of USA". i lived under both systems, in the US and over there and i can tell you that you have no clue what corruption is until you experience Russian corruption. the sad thing is that most Russians themselves do no realize how bad it is over there because the problem is so deeply rooted that they cannot percieve life in any other way. on top of that the whole society is so brainwashed that they beleive the whole world is against them. they would be deeply disappointed to find out how little the West truly cares about Russia and how little their country gets media attention in the main media outlets vs. Russian media that cherishes every chance to talk about "anti-Russian" West.
Economy of Clay
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Shareholders' rights are systematically ignored, as Russia's largest portfolio investor Bill Browder discovered a year and a half ago when he was banned from re-entering Russia after he complained about the management of Rosneft, a company in which he was a shareholder. Without shareholder rights, there's little hope of delivering shareholder value. High fuel and fertilizer costs and lack of investment have put many of Russia's farms out of business, and many of the country's factories have suffered from underinvestment, high fuel and raw material costs and a flight of labor to boom cities like Moscow.
Russian plans to join the World Trade Organization in 2008 or 2009 may ultimately do Russia's beleaguered agricultural and industrial sectors some good by opening them up to competition from abroad—by forcing them to reform. But that promises to be a painful process, with an uncertain result.
Small wonder, with so much stacked against the growth of small business—the most potent and flexible system of wealth creation in developing economies—that little of the oil boom has trickled down to the lowest rungs of Russian society. Nearly one fifth of Russians live below the World Bank's poverty line of $410 per month.
For sure, the Kremlin claims it's made social spending to improve the country's chronic housing problems and improve health care and make education a priority; indeed, last year's budget saw spending rise by 20 percent in real terms. But the state bureaucracy and law-enforcement agencies seem to be more of a priority: spending on them has doubled as a percentage of GDP over the last five years.
Dmitry Medvedev has made "improving the living standards of every Russian citizen" a key part of his political message as he takes over Russia's presidency this week. But redistributing oil money won't do the trick—the only real way to deliver stability and prosperity to most Russians is to get Russia's real economy working. That's won't happen until the state itself realizes it's the problem, not the solution.
© 2008
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