Crisis: lessons for Russia

"Polit.ru" begins publishing a series of articles by sociologist and doctoral student at the University of Michigan Ella Paneyakh , dedicated to the problem of the economic crisis in Russia. In Western practice, in a crisis situation, any actions to neutralize it are aimed at not only surviving this period with minimal losses, but also drawing lessons from it for further optimization of the work of political, social, and economic institutions. With the latter, according to the author, difficulties may arise in Russia. Article provided by the Cato Institute Russian Project.

See also: Ella Paneyakh "Economy and State: Approaches from the Social Sciences"

Supporters of the Russian government's anti-crisis measures like to emphasize the relative stability of the Russian economy compared to other countries. Allegedly, we will be less shaken than others by the global crisis. We can only hope that they are right in their optimism, but the question that occupies me here is somewhat different: how capable is the Russian economy of the positive transformation that usually results from a crisis? Will the foundations for future growth be laid, or will the recession turn into stagnation?

Nobody, of course, likes crises. However, a crisis is not just some kind of economic natural disaster that you need to try to wait out without losses. A crisis is a time when not only old organizations, connections, and rules of the game are destroyed, but also when it is determined what new ones will be. This is the time to pay for your mistakes, learn bitter lessons and come up with new, more successful schemes of activity. We all make mistakes. In fat years, the margin of safety is quite high, and life - that is, very specific people or circumstances - often forgives us, allowing us to continue to act in a less than optimal way. In a crisis, there is no such safety margin. In difficult times, they will not take your word for a second or third time, if you are prone to let down and make mistakes - no one can afford that. You will not be paid an inflated price for a prestigious product, which just yesterday was considered a market price - not worth the fat. You won't be forgiven for being ten late to work - there are enough people outside the gates eager to get your place. Those who learn from their mistakes faster than others survive. Strictly speaking, this is the constructive function of the crisis: it reveals inefficiency in a variety of elements of the economy, forces it to be eliminated, and new mechanisms to be invented where old ones do not work.

Companies are learning to cut costs, abandon overly ambitious or simply ineffective projects, invest in what gives the greatest profit, and serve, as one LJ user aptly put it, the needs, not the show-offs of http://lutra-lutra.livejournal clients. com/141245.html. Be wary of credit money, even if it is cheap. Choose your partners more carefully. Investors are learning not to invest in “sure schemes” with sky-high returns and/or “one hundred percent reliability.” They remember again that high profitability is an indicator of high risk, and one hundred percent reliability generally only happens in the morgue.

Employees learn - they find out how valuable their qualifications are in difficult times, make decisions to retrain or change their field of activity, are forced to try new professions, understand for themselves their value to the employer or the lack thereof.

Banks are learning to distinguish between reliable and unreliable debtors, not to give out loans to just anyone, and to keep sufficient reserves.

Governments are learning, by the way. It’s bad and difficult, because officials and politicians do not play this game with their own money, but they still learn. Because it is dangerous to take on excessive social obligations in good times, you will have to fulfill them in bad times. Because a regulated business is unstable to change and recovers from losses much more difficult than a relatively free one. The fact that by handing out state guarantees right and left to “socially important” companies, or even simply those close to the government, can ultimately leave you up to your ears in impossible obligations.

And finally, it’s just people who learn. Understand what is happening in the economy. Live within your means. Do not indiscriminately grab loans for future prosperity. Trust some political decisions and distrust others.

This educational, transformational role of the crisis is visible to the naked eye to a person living in a Western country. You just have to turn on the TV to discover that, along with heated debates about ways out of the recession, along with statements from politicians competing to find the best strategy, something amazing is happening: spontaneous and massive economic enlightenment. No one is organizing this - it’s just that, trying to convey to the average person the essence of “highbrow” economic disputes, the hosts of news programs are forced to explain in understandable words what they are actually talking about. Sometimes, turning on some CNN, you feel exactly like you were in tenth grade economics class. Schemes are shown on the screen, terms are deciphered, and the meaning of some “subprime derivative”, mysterious to a normal person, becomes generally clear to any idiot who can sit in front of the screen for four minutes.

The crisis reveals weaknesses in government, the political system, financial regulation, the strategy and practice of individual firms, and the personal strategies of citizens. Weak spots start to hurt. It becomes possible to name them, discuss them and try to cure them.

What happens in a normal, well-organized private company when a crisis is approaching? The company's management analyzes the products - which of the products they produce will always be bought, and what will buyers easily put off until better times? Shakes up the staffing table - which employees are absolutely irreplaceable, and who can be fired if necessary? Re-evaluates the banks with which they have worked so far - which one is sure to survive? Figures out which expenses can be waived relatively painlessly. Overestimates relationships with partners - who will resist, who will not fall for the temptation to “dump” or “push” you into obviously unfavorable conditions at a difficult moment? Even if bad times do not affect your company, all this is important and necessary work, which you are very reluctant to do at other times, when there seems to be enough money as it is. The crisis not only removes the worst participants from the market; what is more important is that it allows the average to improve and the best to rise higher. Crisis is almost inevitably followed by growth: we all become smarter, more economical and more careful, and the reward, as a rule, does not take too long to arrive. Typically, but not always.

And it is in this area that, it seems to me, the greatest risks for the Russian economy lie. Of course, it matters how deep the crisis in Russia will be. Of course, it is very important how painful the “lean” years are for people. It also makes sense to have long-running debates about the extent to which the emerging economic crisis in the country is simply the result of global changes, the American and world depression, and to what extent the irresponsible behavior of the Russian authorities in the economy is to blame for the rapid - much deeper than the world average - fall of the stock market , a war unleashed at an extremely unfortunate moment, corruption, the actual legalization of raiding and other purely local features. All this is important, but these are debates about yesterday and today. In the long term, our lives—not a year or two, but decades—will be influenced by how the Russian economy emerges from the crisis. Will it play its cleansing role, or will the citizens of the country, having suffered from the disasters associated with the crisis, not receive the benefits that it usually brings - no more careful government in its actions, no more effective, more consumer-oriented strategies of individual firms, no more successful labor market configurations, no innovation? This is more important than arguing about who is to blame. This is even more important than discussions about fire measures, hastily taken by the authorities in order to mitigate the very first - and therefore most frightening - stage of the collapse.

The problem is that while some Russian companies are doing the optimization work discussed in the paragraph above, others - those closer to the authorities - are doing something completely different. There they call the authorities, trying to get benefits and subsidies during difficult times. They lobby for interest-free distributions of money to close companies. They are drawing non-existent “investment plans” in order to grab a piece of the package allocated by the government to support investments affected by the withdrawal of Western creditors from the market. They are looking for insider information, trying to make money on a volatile—rapidly falling—stock market. They are aiming to buy competitors according to the scheme “strangle the hands of familiar government officials, borrow money from the state through connections, buy for pennies.” Of course, they aim not at carrion, but at the best that can be obtained - the best assets, that is, the assets of those very “best” companies that should have survived and grown fat in the wave of the crisis.

Thus, those companies that most effectively “cooperate” with officials receive an advantageous chance for survival and growth during a crisis. What is happening under the guise of a crisis is much more dangerous than just the attempts of some companies to get involved in the hasty distribution of government money. Now many individuals are making decisions that will determine the shape of the post-crisis Russian economy. And for the most part these are very bad decisions that are dangerous in the long term. Such unnatural selection.

The above in no way means that those companies that can give an adequate “market” response to the crisis will certainly lose, and those who rely on state support, on good relations with government officials, or simply on bribes and kickbacks will certainly win. But this means that, in addition to the resistance of the environment, in addition to the crisis of confidence, in addition to incomparably tougher budget restrictions than in the “fat” years, also a group of greedy, unprincipled and arrogant competitors. Competitors who have practically unlimited resources, for whom the crisis did not increase, but weakened the pressure of budget restrictions (during a crisis, getting money from the budget may turn out to be easier than taking out a loan from the West in good times). Competitors who do not hesitate to use violence - after all, for violence they use employees of state law enforcement agencies, who now practically have a license to use force with impunity both for “state” and personal purposes. Competitors who have, to a limited extent, the privilege of reneging on previously assumed obligations with impunity; simply because the courts are biased and the regulatory authorities are corrupt to the extreme. It is not easy to win in such competition. And such competition encourages many to change themselves in a similar direction.

What rules, customs, and practices in the economic life of Russia will prevent participants from successfully undergoing crisis transformation, and which ones will help? Let's try to figure it out in the next column. If a crisis is a time to learn from mistakes, it makes sense to start working on mistakes as early as possible.