Russia and Development

The first thing Charles Buxton says is that post-Soviet Russia’s businessmen worked entirely through bribes. The second thing he says is that certain organizations, like Afghan war veterans, got tax breaks, which they abused. Nothing here surprises me, because every book I ever read about Russia says that everything was based on bribing someone. However, in this book, the author notes many positive things about Russia, which according to him the Soviet system ruined. Whatever negative traits there were, the Soviets increased.

Russia’s economy was poor and backward in the days of the Tsars, but it did work in many ways. In the days after the serfs were freed, some peasants succeeded in prospering from their farms. Those that could grow crops and raise animals did just that, and those that could do business did business. Buxton argues that Stalin destroyed this prosperity, with his crazy schemes in 1930’s. For starters, he forcibly collectivized the farms, resulting in starvation. You don’t need firsthand proof to know that collectivization can’t work, and the only proof you need is in numbers. If you take every independent farmer in the region, and force all their livestock into one pen, then whatever diseases there are will instantly spread to every cow, pig, and chicken. Now take economics into account; if you have twenty pig farmers, and three of them can’t afford to feed the pigs, then they’ll probably be forced to sell to the ones who can. That, in a nutshell, is how business works. Now force them to share resources; you’re going to force the 17 that succeed to subsidize the three that do not. That means the ones who produce will lose money, and the one who can’t (and should be allowed to die out) will be sustained, and become dead weight for everyone else.

In the Asiatic provinces, there are shortage of central heating and electricity, which are killers in the harsh winters. The weather is comparatively warmer in some parts, but the winters are still freezing cold. Since the areas were “civilized” under the Soviets, the people have ended up living in apartment houses, and for some reason modern buildings are colder in the winter than being outdoors (I know because my NYC apartment can freeze in some winters, even with central heat.

I guess the main gist of the book is that the only people who succeed in Russia are the ones who have too little to steal or the ones with enough muscle to keep thieves away. It funny in some ways, because in “poor” countries like Senegal and Nigeria, there’s a lot of respect for businessmen and traders, while in a “civilized” country like Russia, a business is just another place to steal from. Terry Allen, in his book No Cash No Fear, discusses his attempt to open a pizza place in Moscow, and he found that it was just a big labyrinth of bribing everyone. Keep in mind that Hong Kong, a tiny state with few resources, became powerful through business, and has very little corruption. Russia, on the other hand, is notorious for corruption.

Despite Russia’s resources, talent pool, and cheap labor, it seems hopeless.