FIFTH COLUMN:Middle Class's Death Greatly Exaggerated
- By Leonid Bershidsky
- Aug. 17 1999 00:00
A year ago to the day, the Russian middle class reportedly died. Well, those reports were clearly nonsense.
Western reporters who had failed to predict the Aug. 17 financial collapse then jumped belatedly on the bandwagon and proceeded to "kill" the Westernized Russian with his plastic cards, his Skoda, his Friday night clubbing and his job at a Western investment bank.
The cards were no longer accepted anywhere. Oh, those lines at the surviving ATMs! Oh, the disappointment at Ramstore! The Skoda, of course, would have to go because the job at the investment bank was gone. All those poor bond and equity analysts were getting what they deserved.
And the club was closed or empty and expecting to go out of business once expats stopped booking their farewell parties.
Only a year has passed, and the clubs are full again. It's the same old crowd in there, maybe with fewer foreigners. There is Russian beer on tap, but then in the past year formerly unknown breweries have started putting out stuff that compares favorably to established Western brands. There is a band every night - playing for kopeks, sure, but when have true musicians ever done it for money?
Skoda is hardly selling any new cars in Russia anymore. But used imports and Ladas are dirt cheap and I know more people who bought cars in the past year than those who sold theirs.
Investment banks have started hiring analysts again. The Russian equity market, though very small, is performing better than other markets. It is purely speculative, sure, but then it should always have been.
Internal emigration has not really turned into real emigration en masse. Even Sergei Kiriyenko, who devalued, defaulted and then left for Australia, came back and is running for mayor of Moscow. Of course, there are rumors that he got a new passport down under, but at least he kept his Russian one, or the election commission would have raised hell.
Plastic is accepted everywhere again. Moreover, foreign banks are opening retail branches - an unattainable dream before the August crisis. Turkey's Bank Garanti has taken over the exchange office at Ramstore from bankrupt Inkombank.
The three major Russian firms that were writing software for banks have moved from their downtown offices to modest quarters on the outskirts of Moscow. But the representatives of the middle class who work there say the market is picking up: Reasonable banks that did not play the government bond roulette are now expanding into the provinces and looking for new, heavy-duty software.
Which just shows that Russia, even though it did without real banks for 70 years, could not survive without them for 12 months this time around.
Westernized Russians are infrastructure fanatics. And, as the year since "black" Aug. 17 has shown, infrastructure does not die from natural causes. It takes a Communist revolution to kill it off. And revolutions are much more rare than financial crises.
It took just two or three years to get used to the idea of having a nice car to drive, a bank to keep your money in, a card to pay for purchases, a club at which to have a beer on Friday. Now the habits just will not go away, and neither will the infrastructure.
As a member of that materialistic, pro-Western, anti-Communist middle class, one has to ask oneself the question, "Why leave when it's all still here?"