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. Last Updated: 07/27/2016

No Winners In Russia's Blame Game

Who is to blame? More and more, that is the insidious question being asked in Russian politics and all too often the answer is: "Foreigners."

The foreigners who bear the worst brunt of this attack -- which is as old as the human tribe -- are citizens of the Caucasus nations, often referred to here as "blacks." They get the blame for rising crime levels, whether organized or other, as well as for a host of other ills. But increasingly, foreigners from the more distant abroad are being fingered with the blame for Russia's economic woes. Sergei Glazyev, who occupies the middle of the road in the spectrum of Russia's economic ideologies, gave a perfect example of this Tuesday.

Glazyev accused foreigners of exploiting Russia and suppressing the growth of its domestic industries. Russian manufacturing, he said, is not in such a terrible state because it is inept, but because foreigners enjoy economic privileges and are competing unfairly. Similarly, the foreign money that is now flooding into the stock market does not help Russia, it merely puts Russian assets under foreign control.

Against this kind of invective, Yeltsin's appeals to U.S. businessmen in New York to gather up their courage and invest in Russia could not be more welcome. True, the conditions for investment would be a lot better if government policy were more clear-sighted, but at least Yeltsin still wants his country to play in the international league, and not in some fantasy league of its own.

The answer to Glazyev's charges is simple. Yes, Russian manufacturing is in a perilous state and yes, the hundreds of millions of foreign dollars pouring into the Russian stock market each month do not amount to the kind of direct investment that industry so desperately needs. But no, this is not the fault of foreign malice. Russian manufacturers are themselves investing in stocks and short-term speculation rather than in their own plants, because at the moment that is what makes money.Why, after all, should investors of any nationality flock to sink their money long-term in a country where every few weeks the ground rules change and where the imposition or threat of punitive levies such as the 38 percent excess wage tax erase Russia's relative cost benefits, often retroactively?

For the first time, significant sums of private Western capital, rather than foreign aid, are now flowing into Russia. Yeltsin deserves applause for encouraging and welcoming this. His government too deserves appreciation for maintaining a relatively stable currency and inflation rate so far this year.

But there is a great deal to do before Russian industry becomes attractive, either for Russian or foreign investors. Blaming outsiders for what remains undone will achieve nothing at all.