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SUMMARY
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1. CONTRARY TO THE VIEW OF MANY HERE AND IN THE WEST, RUSSIA'S GROWING BUSINESS CLASS IS NEITHER PREDOMINANTLY CORRUPT, NOR OVERWHELMINGLY WEALTHY. IT IS COMPOSED OF SELF-EMPLOYED ENTREPRENEURS AMD ALSO INCLUDES WELL-PAID PROFESSIONALS WORKING FOR FOREIGN AND LARGE RUSSIAN COMPANIES. THIS UPWARDLY-MOBILE GROUP IS CONSIDERABLY MORE INCLUSIVE THAN INDICATED BY THE POPULAR TERM "NEW RUSSIANS," WHICH HAS BECOME MUDDLED WITH OVER- AND MISUSE. THE ENTREPRENEURIAL COMMUNITY IS ENGAGED NOT ONLY IN TRADE, FINANCE (AND ASSOCIATED CRIMINAL ACTIVITY), BUT ALSO IN MANUFACTURING, AGRICULTURE AND FOOD-PROCESSING. WHILE FAR FROM REPRESENTING A MAJORITY OF RUSSIANS, THIS GROUP IS CONSIDERABLY LARGER THAN GENERALLY UNDERSTOOD IN THE WEST.
2. THE NEGATIVE IMAGE OF "NEW RUSSIANS," IN CONTRAST, IS DRAWN FROM THE (FAR FEWER) VERY RICH BUSINESSPEOPLE WHO MADE LARGE ILLEGAL OR SEMI-LEGAL FORTUNES IN THE EARLY 1990S. USING INSIDER CONNECTIONS, THESE INDIVIDUALS WERE ABLE TAKE ADVANTAGE OF THE UNRAVELLING OF THE SOVIET PLANNED ECONOMY TO PROFIT FROM ILLICIT OR SPECULATIVE TRADE OR ARBITRAGE COMMODITIES OR TO GAIN CONTROL OF INDUSTRIAL CONCERNS. "NEW RUSSIANS" ARE ALSO CRITICIZED FOR BEING A GROUP WHICH MANIPULATED THE VOUCHER PRIVATIZATION PROCESS FOR ITS OWN BENEFIT. THE RISING BUSINESS COMMUNITY TO WHICH WE REFER IS FAR LARGER, LESS WELL CONNECTED AND MUCH LESS FLAMBOYANT.
3. BASED ON OUR TRAVELS AND CONTACTS OVER SEVERAL YEARS, WE SEE THE EMERGING BUSINESS CLASS -- IN MANY REGARDS ESSENTIALLY A MIDDLE CLASS -- AS BEING RELATIVELY YOUNG: MOST MEMBERS ARE BELOW 40, MANY OF THE BRIGHTEST STARS ARE UNDER 35. ITS MEMBERS' BACKGROUNDS TEND TO BE TECHNICAL (MATH, SCIENCE, ENGINEERING), REFLECTING BOTH THE EMPHASIS OF THE SOVIET EDUCATIONAL SYSTEM AND THE UTILITY OF THOSE SKILLS. A SIGNIFICANT NUMBER WERE SHAPED BY THE SOVIET COMMUNIST PARTY OR RELATED INSTITUTIONS. WITH SOME NOTABLE EXCEPTIONS, THE GROUP IS NEITHER FLASHY NOR FLUSH. THIS NASCENT COMMERCIAL MIDDLE CLASS HAS FORMED (AND BECOME UPWARDLY-MOBILE) BECAUSE IT OFFERS NEEDED SKILLS AND ITS MEMBERS HAVE BEEN AMONG THE FIRST RUSSIANS TO FIND NICHES IN THE POST-SOVIET ECONOMY. ENTREPRENEURIAL EFFORTS HAVE ALREADY CONTRIBUTED SIGNIFICANTLY TO RUSSIA, ALLOWING REAL INCOMES AND CONSUMPTION TO RISE IN 1993 AND 1994, AT A TIME WHEN REAL WAGES WERE DECLINING SHARPLY. OVER TIME THE NEW BUSINESS CLASS WILL PROVIDE THE FOUNDATION OF THE COMMERCIAL ELITE ESSENTIAL TO BUILDING A MODERN RUSSIAM ECONOMY. END SUMMARY.
-------------------------------------------- ENTREPRENEURIAL MIDDLE (OR BUSINESS) CLASS, MORE USEFUL CONCEPT THAN "NEW RUSSIANS"... --------------------------------------------
4. THE EMERGING RUSSIAN COMMERCIAL CLASS (AS WE DEFINE IT) INCLUDES A VARIETY OF BUSINESS PEOPLE, PROM KIOSK OPERATORS TO EXECUTIVES OF SIZEABLE CORPORATIONS, BUT EXCLUDES LONG-SERVING MANAGERS OF FORMER STATE ENTERPRISE. FURTHER, THE CONCEPT INCLUDES YOUNG, HIGHLY-PAID PROFESSIONAL EMPLOYEES OF RUSSIAN COMPANIES (USUALLY IN THE FINANCIAL SECTOR) OR FOREIGN FIRMS. THESE EMPLOYEES VERY OFTEN OPERATE THEIR OWN BUSINESSES IN ADDITION TO WORKING DAY JOBS. THE GROUP ALSO INCLUDES RUSSIANS WHO RECEIVED ASSETS, MOST OFTEN REAL ESTATE, AS A BY-PRODUCT OF DISMANTLING THE SOVIET ECONOMY AND HAVE PUT THESE TO USE AS RENT-EARNING PROPERTY.
5. EXAMPLES OF THE ABOVE INCLUDE:
-- A FORMER STATE MANAGER WHO HAS TAKEN OVER A START-
UP ENTERPRISE OR FORMED A LEGITIMATE "DAUGHTER" ENTERPRISE OF A LARGE FIRM;
OR AN OUTSIDE MANAGER BROUGHT IN TO RESTRUCTURE A FORMER STATE FIRM. THE MANAGER
OF A SOVIET-ERA ENTERPRISE, WHO HAS RETAINED HIS POSITION BY CONTROLLING THE
PRIVATIZATION PROCESS, IS NOT PART OF OUR GROUP AS WE DEFINE IT NO MATTER
HOW YOUNG, INNOVATIVE, OR ADAPTABLE S/HE MAY BE.
-- LARGE-SCALE WHOLESALE TRADERS, OWNERS OF KIOSKS
(OR CHAINS OF THEM), OR MERCHANTS RUNNING SMALL OUTLETS SELLING THE OUTPUT
OF A LOCAL FACTORY ARE ALL MEMBERS OF THIS ENTREPRENEURIAL GROUP. THE MEMBERS
OF A WORKERS' COLLECTIVE WHO HAVE BECOME THE OWNER-OPERATORS OF AN ESSENTIALLY
UNCHANGED EX-STATE STORE ARE NOT, BY OUR DEFINITION, ENTREPRENEURS.
-- AN ACCOUNTANT OR ECONOMIST WORKING FOR A LARGE
REGIONAL BANK, WITH SUFFICIENT INCOME TO BUILD A HOUSE IN THE SUBURBS, IS
PART OF THE NEW COMMERCIAL CLASS (PARTICULARLY IF PART OF THE NEW CONSTRUCTION
IS TO BE RENTAL PROPERTY).
-- A SCIENTIST OR BUREAUCRAT WHO HAS INHERITED AN
APARTMENT IN A GOOD LOCATION AND IS USING IT AS A RENTAL PROPERTY (OR WHO
RUNS A SIDE-BUSINESS) IS ALSO A MEMBER OF THE EMERGING CLASS.
-- AND, MOST TYPICALLY, A YOUNG PERSON WHO OWNS A
KIOSK, RESTAURANT, SHOP, OR SMALL START-UP SERVICE OR MANUFACTURING COMPANY.
6. WE REALIZE THAT THIS DEFINITION IS ARBITRARY AND, IN PLACES, IMPRECISE. FOR EXAMPLE, SOME MANAGERS OF PRIVATIZED STATE FIRMS ACT IN AN "ENTREPRENEURIAL" MANNER, WHILE "DAUGHTER" COMPANIES ARE SOMETIMES USED TO SIPHON AWAY THE ORIGINAL ENTERPRISE'S MOST VALUABLE RESOURCES. INSTEAD OF PROVIDING A RIGOROUS DEFINITION, WE HAVE ATTEMPTED TO BE SUGGESTIVE OF THE GROUP'S DIVERSITY AND TO HIGHLIGHT THE DISTINCTION BETWEEN "NEW" BUSINESS AND THE "OLD" STATE SECTOR.
----------------------------------------------------- ...BECAUSE "NEW RUSSIAN" IS NOW A SYNONYM FOR "MAFIA" -----------------------------------------------------
7. IN CONTRAST WITH OUR DEFINITION OF A BUSINESS CLASS, "NEW RUSSIAN" (NOVIY RUSSKIY) IS A LOADED EXPRESSION WHICH HAS BECOME UNAMBIGUOUSLY PBJORATIVE HERE. THE TERM INCORPORATES RUSSIAN CULTURAL PERCEPTIONS REGARDING THE CONCEPTS OF EARNED AND UNEARNED WEALTH, INVESTMENT AND "SPECULATION," AND WHICH REFLECT CONTINUED LOW POPULAR ESTEEM FOR BUSINESS AS AN OCCUPATION (PARTICULARLY AMONG OLDER GENERATIONS AND IN THE CULTURAL ELITE). IN SHORT, THESE GROUPS REGARD THE BUSINESS CLASS AS "NEKULTURNIY" (UNCULTURED).
8. PREJUDICE AGAINST THE UPWARDLY-MOBILE ALSO REFLECTS AN EVEN OLDER PRE-SOVIET RESENTMENT OF ANYONE WHO IS RISING ABOVE HIS NEIGHBORS. THE TENDENCY IS TO SEE LIFE AS A ZERO-SUM GAME -- IF YOU ARE WINNING, I MUST BE LOSING. FOR EXAMPLE, THE GENERAL AWARENESS IN DEVELOPED MARKETS THAT BOTH PARTIES CAN AND SHOULD COME OUT AHEAD IN A CONTRACT IS NOT WIDELY SHARED HERE. TO THE CONTRARY, SUCH A VIEW OFTEN WOULD BE CONSIDERED NAIVE AT BEST AND DUPLICITOUS AT WORST.
9. IN MANY REGARDS THE DEEP RESENTMENT AGAINST THE BUSINESS CLASS IS REMINISCENT OF THE RESENTMENT AND SOCIAL TENSIONS CREATED BY THE RISE OF THE BOURGEOISIE IN 19TH CENTURY WESTERN EUROPE. IN THE SAME WAY THAT THE BOURGEOISIE WAS A "MIDDLE" CLASS BETWEEN PEASANTS/WORKERS AND THE OLD NOBILITY, SO TOO IS THIS NEW CLASS "MIDDLE." JUST AS THE EUROPEAN NOBILITY LOOKED DOWN AT THE RISING INDUSTRIAL BOURGEQISIE, REMNANTS OF THE "SOVIET NOBILITY" (OR NOMENKLATURA, I.E., THE OLDER TECHNICAL AND ARTISTIC INTELLIGENTSIA, LABELED "THE NEW CLASS" IN DJILAS' FAMOUS BOOK OF THE SAME NAME) DESPISE THE NEW CLASS'S CRASSNESS AND ENVY ITS SUCCESS. MEANWHILE, MANY WORKING CLASS WAGE EARNERS RESENT INCREASING SOCIAL INEQUALITY IN GENERAL AND THOSE WHO ARE GETTING AHEAD IN PARTICULAR.
10. BECAUSE OF THIS CULTURAL LEGACY, MANY RUSSIANS ATTACK ENTREPRENEURS WHO HAVE MADE MONEY IN WHOLESALE OR RETAIL TRADE AS "SPECULATORS," REFLECTING THE STRONG BIAS AGAINST NON-MANUFACTURING ACTIVITY. FROM THIS PERSPECTIVE, BANKING, FINANCE AND ENTERTAINMENT (OTHER STRONGHOLDS OF THE ENTREPRENEURIAL CLASS) ARE ALMOST AS SUSPECT AS TRADE AND CRIME. FOR EXAMPLE, THE MAYOR OF A LARGE REGIONAL CITY TOLD EMBOFFS THAT NEW BUSINESSES HAD NOT CREATED EMPLOYMENT TO REPLACE JOBS AT AILING STATE INDUSTRIES. HE ADDED, "OF COURSE, WE HAVE SOME NEW MERCHANTS, BUT I WON'T WASTE MY TIME TALKING ABOUT THEM." LATER IN THE CONVERSATION, HE ASSERTED THAT "BRAIN DRAIN" OF TECHNICAL STAFF FROM AILING INDUSTRIAL ENTERPRISES TO TRADE WAS ONE OF HIS CITY'S LARGEST PROBLEMS. THE VIEW THAT A SERVICE POSITION CAN NEVER BE AN ADEQUATE SUBSTITUTE FOR A MANUFACTURING JOB IS WIDESPREAD.
------------------------------------------------------- TRADE AND FINANCE - MAINSTAYS OF THE NEW BUSINESS CLASS -------------------------------------------------------
11. THE MOST UBIQUITOUS REPRESENTATIVE OF THE BUSINESS CLASS IS A YOUNG PERSON (I.E., UNDER 35) WHO OWNS OR OPERATES A KIOSK, SMALL PRIVATE RESTAURANT, CLOTHING STORE OR OTHER RETAIL OR SMALL WHOLESALE OPERATION. MOSCOW AND ST PETERSBURG ARE FULL OF SUCH ENTERPRISES, BUT THEY ARE ALSO COMMON IN MANY LARGE REGIONAL CENTERS (WITH POPULATIONS FROM 300,000 TO 1.5 MILLION). EVEN RUSSIA'S MOST DEPRESSED CITIES, SUCH AS TEXTILE- DEPENDENT IVANOVO, HAVE A FEW OF THEM, RUNNING THEIR OWN KIOSKS, RESTAURANTS AND STORES. THESE BUSINESSES, AND THE CULTURE OF BUSINESS, HAVE NOT, IN OUR EXPERIENCE, FREQUENTLY PENETRATED SECONDARY REGIONAL CITIES AWAY FROM MAIN TRANSPORTATION ROUTES. THE NUMBER OF SUCH BUSINESSES IN A COMMUNITY PROVIDES A FAIRLY GOOD MEASURE OF ITS CURRENT BUSINESS CLIMATE AND FUTURE PROSPECTS.
12. LARGE RETAIL AND WHOLESALE TRADE IS DOMINATED BY MORE EXPERIENCED ENTREPRENEURS. IN SOME CASES, THESE OPERATIONS ARE THE PROGENY OF THE MORE SUCCESSFUL SMALL BUSINESSES DESCRIBED ABOVE. HOWEVER, MANY OF THESE ENTITIES HAVE OPERATED IN THE BLACK AND GREY MARKET SINCE THE BREZHNEV ERA, WHEN THEY PROVIDED GOODS AND SERVICES NOT READILY AVAILABLE ELSEWHERE IN THE SOVIET ECONOMY. SOME OPERATE IN THE SHADOWS OF LARGE SOVIET- BUILT SUPER FACTORIES. IN MANY INSTANCES, THESE BUSINESSES PROCURE DIFFICULT-TO-FIND INPUTS OR ACT AS DISTRIBUTORS OF SCARCER PRODUCTS. AS SUCH, THEY ARE THE SUCCESSORS TO THE "TOLKACHI," GREY MARKET OPERATORS WHO WERE EMPLOYED BY MANY SOVIET ENTERPRISES TO PROCURE INPUTS THAT THE GOSPLAN SYSTEM WAS UNABLE TO SUPPLY. LARGE TRADING OPERATIONS ARE ALSO COMMON IN BORDER REGIONS, LIKE SMOLENSK, ADJACENT TO BELARUS, WHERE THEIR FLEXIBILITY IS USEFUL IN DEALING WITH CUSTOMS AND OVERCOMING OTHER TRADE COMPLICATIONS.
--------------------------------------------- ...BUT AN INCREASING NUMBER ARE MOVING INTO MANUFACTURING, AGRICULTURE, AND OTHER SECTORS ---------------------------------------------
13. THE EMERGING BUSINESS CLASS IS INCREASINGLY MOVING INTO MANUFACTURING, AGRICULTURE, AND AGRI-INDUSTRY. IN MANY CASES, THESE NEW ACTIVITIES ARE A NATURAL EXTENSION OF EARLIER PROJECTS IN FINAMCE, TRADE OR SERVICES. FOR EXAMPLE, THE DIRECTOR OF ONE OF RUSSIA'S PIONEERING INVESTMENT FUNDS GAINED MAJORITY CONTROL OVER A FORMER DEFENSE ENTERPRISE IN A MAJOR CITY IN CENTRAL RUSSIA. IN AN ATTEMPT TO FUNDAMENTALLY RESTRUCTURE THE MANUFACTURER, HE INSTALLED AN OUTSIDE MAMAGER OF HIS CHOOSING AS THE ENTERPRISE'S DIRECTOR. ANOTHER EXAMPLE: A COLLECTIVE FARM IN AN IMPORTANT AGRICULTURAL REGION WENT BANKRUPT. THE RECEIVER, A LOCAL BANK, APPOINTED AS DIRECTOR A FORMER KOMSOMOL LEADER WHO SUBSEQUENTLY REORGANIZED THE FARM AS A GROUP OF INDEPENDENT SMALL FARMING AND FOOD PROCESSING ENTERPRISES.
14. IT IS ALSO POSSIBLE TO NAME START-UP MANUFACTURING ENTERPRISES FOUNDED AND OPERATED BY MEMBERS OF THE ENTREPRENEURIAL CLASS. WHILE STILL RELATIVELY UNUSUAL, SUCH BUSINESSES ARE INCREASING IN NUMBER. FOR EXAMPLE, WE HAVE MET WITH AN ENTREPRENEUR WHOSE COMPANY LOCATED IN THE CENTRAL VOLGA MANUFACTURES APPLIAWCES FOR SMALL CAFES. THIS BUSINESS HAS BEEN SO SUCCESSFUL THAT THE INDIVIDUAL HAS SUBSTANTIALLY DIVERSIFIED HIS HOLDINGS. IN CENTRAL SIBERIA, WE VISITED A MANUFACTURER OF DOORS AND WINDOWS FOR PRIVATE HOUSES, FOUNDED BY A YOUNG ENGINEER WHO LEASED AND CONVERTED SPACE IN A STATE ENTERPRISE FOR HIS OPERATION. LIKEWISE, A SIBERIAN DOCTOR FOUNDED A PHARMACEUTICAL COMPANY, WHICH MANUFACTURES AND MARKETS MEDICAL SOLUTIONS. FURTHER EXAMPLES WE HAVE SEEN RANGE FROM A FORMER DIPLOMAT IN PHARMACEUTICAL MANUFACTURING AND AN EXPERIENCED TRADER WHO HAS BRANCHED OUT INTO TEXTILE MANUFACTURING, BOTH LOCATED IN MOSCOW, TO A GROUP OF YOUNG ENGINEERS IN SOFTWARE PRODUCTION IN SIBERIA.
---------------------------------------------- WEALTHY COMPARED TO THE AVERAGE RUSSIAM, BUT NOT FREQUENTING "MAXIM'S OF PARIS" EITHER ----------------------------------------------
15. ONE OF THE MOST IMPORTANT DISTINCTIONS BETWEEN THE BROADER ENTREPRENEURIAL MIDDLE CLASS AND THE POPULAR (MIS)PERCEPTION OF NEW RUSSIANS IS DEGREE OF WEALTH. (continued)