Prepare for a Bumpy Ride
- By Boris Kagarlitsky
- Oct. 02 2008 00:00
|To Our Readers|
The Moscow Times welcomes letters to the editor. Letters for publication should be signed and bear the signatory's address and telephone number.
The problem goes much beyond the real estate market. At first glance, however, it would seem that the economy is keeping its head above water, particularly if you consider how other countries have suffered much worse in the global economic crisis. But, in reality, the country's "stability" is quite shaky, and the sharp stock market drops in recent weeks are a vivid testament to this. True, the number of Russians who own stocks is quite small, but a major downturn in the real estate market could be the trigger that sets off a widespread economic collapse, and this will be felt by every Russian.
The Kremlin's self-confidence stems from the country's stable economic growth for seven straight years, the building of a huge currency reserve -- the third-largest in the world -- and a rise in real wages. But it is one thing to captain a ship during fair weather -- that is, during a period of high oil prices -- and quite another to bring it through a storm.
In March, politicians celebrated the successful transfer of Kremlin authority, and they did it all without violating the Constitution. Unfortunately, holding a position of authority in Russia is like being the head of an explosives factory. The financial rewards are high, but they are countered by the high risk that the whole place could be blown up in smoke with only one match.
To be sure, Prime Minister Vladimir Putin and President Dmitry Medvedev have a strong grip on authority because they enjoy popular support. The question is whether that support will continue during a severe economic crisis and whether the Kremlin has the financial tools and know-how to weather the storm.
Recent experience in the United States has shown that when the economy gets bad enough, the only way out is though government intervention and bailouts. But state aid is a double-edged sword. The government cannot save everybody. What will be the reaction of those who weren't lucky enough to find a place on the lifeboat? Will they quietly go down with the ship or will they mutiny?
To get through the crisis, the Kremlin needs to have a thorough strategy that offers concrete measures to rescue the economy, but this is woefully lacking. This means that we will have to drive over every pothole and deal with each unpleasant surprise in a chaotic, ad hoc fashion.
Those who only yesterday appeared to be the victors could easily and quickly become the hapless victims of uncontrollable circumstances. But they were the ones who were so hungry for power and glory. The higher they stood, the harder they will fall. And this fall will be particularly painful.
Boris Kagarlitsky is the director of the Institute of Globalization Studies.