In recent years a there has developed in Russia an undisguised racist contempt and suspicion toward ethnic minorities, especially Caucasians. When moving to other parts of the Russian Federation, people from the Caucasus face discrimination in the workplace and harassment from police. The roots of this new xenophobia are beyond the scope of this paper, but it has contributed to certain trends among non-Russian minorities: to remain as much as possible within their own ethnic territory; to try to increase ethnic power and autonomy within those territories; to consolidate their economic and social position at the expense of the neighboring Russian population; and to resuscitate their traditional culture, native language and, in this case, the Islamic faith. All of this has contributed to dramatic social and economic changes in the northern Caucasus.
With the exception of the oil-based industrial infrastructure of Chechnya, much of which was damaged in the war, the economic base of the Caucasus is agricultural, particularly specialty products (tobacco, coriander, grapes for wine production, etc.). There is some small-scale industry, and tourism – which was heavily subsidized by the state – played a significant part during the Soviet era. All of these industries were manned mainly by Russian rather than native workers. Besides agriculture, all other industries are now in crisis. The general cash income of the region has markedly decreased, and stands at only around 50-60% of the Moscow average. The buying capacity of Russians has been particularly damaged, especially since, as urban dwellers primarily, their standard of living is not compensated by the home production of various foodstuffs.
The pace of social and economic change has varied from place to place and across ethnic groups. In Karachai-Cherkessia, Russians and Cherkessians tend to live in cities and in the lowlands, terrain of which is perfect for the development of orchards. Yet this requires extensive capital investment, which is lacking. As a result, the pace of privatization has been slow, Soviet-era modes of organization persist, and the revitalization of traditional cultures has not gained momentum. In contrast, Karachais reside in the highlands, terrain suitable for root vegetables and herding. Karachais have undertaken "wild privatization", staking out claims by fencing in particular parcels of land, without any firm legal basis. Since these lands often were ancestral plots swallowed by collectivization, it has provoked minimal conflict. It has also led to the revitalization of traditional social life built around clan gatherings and Islam. There has also been the development of some small-scale industry, notably beer brewing and trout farming, but this has been hindered by bureaucratic red tape, corruption and criminal syndicates. Success thus depends on formations of "protection rackets," both through criminal and (corrupt) official sources. This may lead to inter-ethnic or inter-strata enmity when the owners and racketeers (or bureaucrats) belong to different ethnic groups or different estates.