Anti-crisis Public Initiatives in the Russian Federation

"The international financial crisis has not impacted Russia very much," posited Alexander Lebedev, President, International Institute of Global Development, and Chairman, National Reserve Corporation, National Reserve Bank of Russia, at a March 20, 2009 talk at the Kennan Institute. "The reason is very simple," Lebedev continued, "only 0.5 percent of the Russian population owns stock, which is what chiefly took the first hit of the financial crisis." Since stock ownership is not widespread in Russia, he explained, it was primarily Russian billionaires that lost their assets, "which hardly poses a threat to the Russian federal economy."

Lebedev attributed the current economic crisis in Russia to causes other than global financial failure. In the construction sector, Lebedev blamed stalled projects on an "economically unhealthy, monopolistic" price-setting mechanism. He also put forth that it was the approximately 50 percent devaluation of the Ruble which largely added to the growth of input prices, increasing the cost of most daily products, such as food, clothes, and medication. These, and other factors, are what prompted Lebedev to call the current Russian situation "not a local, temporary crisis, but a permanent crisis of the Russian economy, which is too primitive, too based on raw materials, and possessing an outmoded infrastructure built in the times of Stalin and Khrushchev."

According to Lebedev, however, the need for modernization and profound structural reform in Russia "is not widely discussed in the state-controlled media." Lebedev made note of only one anti-crisis public initiative, which was announced in the newspaper Vedomosti. First and foremost, this anti-crisis public initiative attempted to provide a comprehensive analysis of the Russian economy, for as Lebedev held, "not much is actually known about it." According to the article, consumers are prevented from securing affordable housing not because of a lack of availability of loans—as generally believed—but because of low purchasing power. The anti-crisis public initiative, therefore, would suggest that Prime Minister Putin make affordable housing a cornerstone in his economic plan by re-launching the currently stalled mortgage system, subsidizing interest rates, and implementing a European-style "Building Society Loan System," where the government matches the bank savings of potential homebuyers with a prolonged loan grace-period. Lebedev suggested that Russian state reserves—which he claims were significantly mishandled in the first five months of the crisis, with a total of $70 billion in bailouts dispensed to a few businessmen, state banks, and certain companies—be used for such housing subsidies, ultimately costing less than the above-mentioned bailouts.

Lebedev further called for reforms in the political system, such as reintroducing direct gubernatorial elections, creating new political parties from the bottom-up, establishing an independent legislature with a conduct of parliamentary investigations, and releasing television channels and independent online media from state control or censorship. Finally, Lebedev suggested that Russia "honestly look at the problems it is facing, and open the country to more foreign investment, join the WTO, and become subject to new accounting and corporate governance standards."

Written by Lidiya Zubytska for Blair A. Ruble, Kennan Institute