Russia's Bear Economy Goes Bullish as Reforms Kick In
AFTER years of difficult reforms, the Russian economy appears to be on the brink of actual growth for the first time in post-Soviet history.
Dynamic market-oriented companies, and the new vitality of many privatized old enterprises, are moving into a rough equilibrium with the old rusting economic behemoths of the Soviet era, whose production continues to plummet.
Since the end of official communism in 1991, Russians have seen their incomes shrink, their savings vanish, and the economy contract on a scale that Americans have not experienced since the Great Depression.
But a study released last week by the Organization for Economic Cooperation and Development is forecasting a probable growth of 2 percent in Russia's gross domestic product (GDP) next year. And it added that Russia could be nearing a boom that would mean 10 percent growth.
A Western economist in Moscow says that Russia's productivity growth is probably passing zero - that is, moving from decline into expansion - right about now, in the fourth quarter of 1995.
Industrial production, wages, and the standard of living have plunged deeply in Russia since the end of the Soviet Union. In 1994, GDP shrunk by 15 percent. In 1995, it is projected to shrink another 5 percent.
But 1996 is increasingly predicted to be the year that post-Soviet Russia begins to show overall growth as an increasingly market-based economy.
All these predictions are hung with warning signs, however. Just as Russia's economy appears ready to reap the benefits of market reforms, the political climate is leaning back toward stronger state control. Some of the least-popular politicians in the country, in fact, are those most closely linked to the reforms. Chief among them is Yegor Gaidar, whose party is having trouble finding any coalition partners in the upcoming elections.
Polls, early signature-gathering, and other signs indicate that Communists will make the strongest gains in parliamentary elections this December. In an early local election in Volgograd last week, Communists swept 22 of 24 seats.
Nonetheless, a radical change in the direction of economic policy is unlikely. Even Russia's Communists are not actually Marxists anymore. But at the same time, some Russian analysts see a leveling-off of privatization for a time as the public registers its desire for stronger state control of the economy.
Russian sentiment is not hard to understand. Average wages, after calculating the effects of inflation, are only 57 percent of what they were in 1985, according to Vladimir Kosmarsky of the Economic Analysis Institute in Moscow. In the first six months of this year, official figures showed a 30 percent drop in average wages, although Western economists say the actual figure is closer to 10 percent.
In dollars, the average Russian wage is roughly $120 per month.
The value of the ruble has fallen catastrophically to the point where a significant retirement nest egg would barely complete a grocery shopping trip, and the value of pensions was shrunk to a small fraction of what they were worth when they were being earned. Russians are no longer able to live on them.
Inflation has dropped now to between 4 and 5 percent a month, but it will still be well over 100 percent for the year. Current levels are deemed livable, but still dangerous, by economists here.
Industrial production stands at about 98 percent of what it was a year ago. That is good news: The shrinkage is stopping. Last year at this time, production was only 86 percent of what it was the year before.
But the overall picture disguises sharp and growing variations in the Russian economy. The fastest growth today is in the export sectors. Swedish economist Anders Aslund says that overall production has grown since May of this year, and that exports have grown by 28 percent over the first half of this year, with oil and gas and other raw materials assuming a declining share.
Some traditional Soviet industries still show sharp declines. Machine building has dropped 5 percent from a year ago, the food industry 9 percent, and light industry by 32 percent.
The divided fortunes of the Russian economy are plainly visible. New, market-oriented companies are rapidly changing the Moscow cityscape with flashy advertising and attractive storefronts. At construction sites welders work through the night, and cranes are seen moving early in the morning. Meanwhile, industries representing the old economy seems to barely inhabit their massive, decrepit buildings.
The difference between the fortunes of the market-oriented and state-oriented enterprises will grow even sharper in the coming year, says one Western economist here.
''Part of the economy is still stuck in the Soviet days,'' the economist says. ''Those folks are really going to have it tough.''