Tourists snap photos of St. Basil's Cathedral in Moscow, Russia. Photo: Fenst (flickr)

A major objective of Global Envision is to explore the relationships between market economies and poverty alleviation. I founded Global Envision because of my own experiences in developing countries where I saw economic development working to create wealth and benefit the people in both Latvia and Poland. These countries had previously been behind the iron curtain and part of the communist world. I have a strong belief that the failure of communism as an economic strategy is testimony to the superiority of a market oriented approach. Consequently, it was with great anticipation that I set out on a trip to visit Russia two weeks ago. I wanted to see what Russia looks and feels like today. What I learned was different from what I expected.

Starting in late July 2009, my wife and I embarked on our first visit to Russia. We were to spend four days in St. Petersburg, five days on the waterways towards Moscow, and three more in Moscow. All of it was on a ship which gave us a single base for the experience. We saw not only the two major cities of Russia but some smaller cities and a couple of villages.

This will not be a travel log, but rather a summary of what I learned about the economic and social changes that have taken place in Russia over the last twenty years. This is based on what I observed and what I heard from the several guides and lecturers that spent the two weeks with us.

It seems that the majority of people in Russia today favor what they had before to what they have today. While a recent poll indicated that 77 percent of Russians acknowledge that the freedom that they have today is a great improvement and to be cherished, they focus more on the lack of a significant safety net. They point to the great disparity between the rich and the poor and the fact that the poor were taken better care of in the past. Until we heard this expressed many times we would not have anticipated it, because what we saw in the streets, particularly in St. Petersburg and Moscow, appears to indicate significant prosperity. There are lots of products on the store shelves, both necessities and very extravagant things. BMW, Lexus, Tiffany and other luxury brands, are prevalent in Moscow. There is a fair amount of new construction of homes, businesses and offices. There appeared to be a great disparity between what we were being told and what we observed. Is a more market based economy helping the Russian people to prosper or is it hurting them?

The answer appears to be that it has benefited a small group immensely but not done much for the majority. Why hasn’t the movement towards a market economy been more generally effective? How they got from where they were twenty or so years ago with virtually no private ownership and an economy run by the government, to one where private ownership prevails was very poorly navigated. They distributed vouchers, worth 10,000 Rubles to the citizens, which they could use however they chose. But there was no education about what the options might be. One of our lecturers, who seemed to be a rational man, said that he ended up selling his voucher to a man for a single U.S. dollar. In the end, the vouchers ended up in the hands of a limited number of folks, who, along with the managers of the state owned businesses, and others in places of power in the bureaucracy, created an oligarchy that controls the government and the economy to this day.

Theoretically, they have a market economy and some small businesses can be started up. But bureaucracy and corruption are so prevalent that I don’t think that people have the sense that they can really participate in the economy. The few in power make it so difficult for others to become entrepreneurs that it isn’t even something that they think about. Opportunities are so limited that they are forgotten.

What they do see and seem to focus on is the impact of all this on the poor, especially older people. There is not much of a social safety net, and those who would have been taken care of under the prior system are struggling under the present one.

Another factor that seems to have a significant impact on why the majority favors the old system over the new one is the disintegration of the Soviet Union. When the cold war was going on the Soviet Union was clearly one of the two super powers in the world. When that all fell apart, starting with the declarations of independence by the Ukraine and Belarus, the position of Russia in the world is not nearly as important. Russians are a proud people and this loss of respect is deeply felt. While this major change in their world is not directly related to the change in their economic system it does seem to impact the majority’s preference for the old over the new.

It was a disappointment to me to learn that the potential for a free market to benefit their country and all of their people does not appear to be seen by most people in Russia today. As is true for all countries, what the situation is today is not fixed. It is obvious to me that Russia is still in a period of major flux and it could move towards more favorable opportunities for their people in the future. However, from all that I have learned, I am not very optimistic.