Arthur Cordell:
>We have seen nations move from private ownership (markets, etc) to
>collective ownership of one sort or another. Is there any precedence for
>the reverse. Not counting the east bloc (who were private until WW2), what
>hope can there be to put in place the set of institutions, rule of law,
>respect for private property, contract between persons, etc., etc., that
are
>fundamental to the 'reforms' now sought for Russia.
>
>Aren't many of these institutional forms or creations an expression of the
>national culture and thus difficult to put in place from 'on high.'
>
Yes. The Russian problem is that, historically, it has always been held
together from on high. This did not change following the revolution. What
did change was that the Communists proceeded to educate the masses instead
of continuing to keep them in ignorance, as in Czarist times. However,
because everything was run from the top and the state owned everything, no
system of administrative laws and property rights was put in place. The
result is an educated, talented population with few reference points.
This population, even if educated and talented, has little tradition of
independent thought or of organizing itself for production. Western Europe
had a long tradition of competition, commerce, finance and entrepreneurship
prior to the industrial revolution. Russia remained largely agricultural
and feudal long after the west had entered the modern era. Serfs were not
freed until 1861 and then not really freed until 1909. There was no
commercial-industrial tradition. Such industry as existed prior to the
revolution was largely foreign owned. After the revolution, it was state
owned. Now it is both foreign owned and owned by Russians who were in a
position of power during the Communist regime and were thus able to seize
it.
Nevertheless, people have done some remarkable things against considerable
odds. My Russian notes contain the following case:
"Sergei (not his real name) is from St. Petersburg, and was in Moscow for
the day. He was invited to have supper with us, and a few of us met with
him. His business is writing computer software. He employs six people,
including his wife and an accountant, which seems a little strange for such
a small establishment (i.e., the accountant, not the wife). He is Jewish,
and some of the things he said suggested that he had undergone some
discrimination, but that he expected it and had learned to live with it. He
is well into his forties, and regards himself as middle class. He speaks
very good English - much more fluently than the "learned at school" variety
that you encounter here.
Being a small businessman in Russia is difficult and requires far more skill
and moxy than running a business in Canada. You want to avoid drawing the
attention of both the taxman and the Mafia, since both can crush the life
out of a small business. To avoid the Mafia, Sergei has kept his address
secret for the past few years, though now he has moved his office into what
he considers a completely secure facility and feels he can operate more
openly. To avoid the taxman, he has to figure out the income level to which
he wants to work for tax purposes, keep his books accordingly (hence the
accountant?), and then figure out various under the table means of getting
the rest of his income. There is perpetual frustration because petty rules
and regulations are forever being changed (also hence the accountant?).
Dealing with the bureaucracy is a full time job. For example, he can
deliver his product to a client by email, but this is not good enough for
the Russian tax man, who believes that a contract has not been fulfilled
until there is firm evidence that something tangible has been delivered. So
as well as sending the product by email, Sergei has to send the client
something tangible by mail and get a piece of paper that demonstrates that
he has in fact done so. Usually, he sends an empty diskette, but this costs
him $79, which he is not always sure that he can write off for tax purposes
(what you can write off seems to vary from year to year). As another
example, a client sends Sergei a check for services rendered and Sergei puts
the check in the bank. However, Sergei cannot draw on the check until he is
able to demonstrate to the satisfaction of the banker that he has indeed
rendered the service by presenting a piece of paper from the client stating
that the contract has been fulfilled. Getting this piece of paper has at
times taken weeks. Sergei as much as implied that he is in on a growing
underground business of counterfeiting the various forms needed by the
bureaucracy, which is necessary just to keep things moving.
A basic problem is that the laws and regulations which small businessmen
work under, and the bureaucracy which administers them, are inherited from
the Soviet era when there were very few entrepreneurs, or at least when
there were few out in the open. They are designed to catch and punish the
small businessman, not to help him. This may be one reason why the attitude
of small Russian business people, right down to the lady who operates the
ice cream cart, is basically defensive.
Another problem is property rights. Sergei works in the field of
intellectual property, but has virtually no protection for what he produces.
He claims to have seen more than a few instances of where something he has
produced has been pirated and incorporated into someone else's software.
And there is still a more general problem - getting Russians to enter the
computer age. Many of the officials he deals with really do not understand
what he is doing and that he is producing something - i.e., do not
understand value added except in a very tangible, physical sense, like
making a component for a machine. And of course behind all of this is the
corruption of the entire system, and the readiness to rip-off anyone who
might be making any money."
The foregoing was written three years ago. I have recently heard from a
friend who had received an email from Sergei. Despite the current turmoil,
he is still in business and doing reasonably well. If there were enough
people like him, there would be hope for Russia. Unfortunately, I don't
think there are.
Ed Weick
