Teaching Comparative Government and Politics

Tuesday, January 12, 2010

State "Capitalism"

As a student of capitalistic economics, I have trouble making sense of this story told by Ellen Barry in the New York Times. As a student of cultures, I feel like I'm being told about an exotic place with a strange frame of reference and mysterious values.

How well could your students point out the political and cultural pressures that create the attitudes and the policies described here?

In Russia, a Bankrupt Town Keeps Humming

For a few weeks this winter, this town wobbled on the edge of nonexistence.

Workers were showing up every morning at Baranchinsky’s lone factory, even though many had received their tiny salaries only once in the last 16 months. But then the local utilities cut off the factory’s electricity and heat over unpaid debts. Temperatures were dropping to 15 degrees below zero, and exterior pipes began to burst. A few more days and the factory would be damaged beyond repair.

Workers were showing up every morning at Baranchinsky’s lone factory, even though many had received their tiny salaries only once in the last 16 months. But then the local utilities cut off the factory’s electricity and heat over unpaid debts. Temperatures were dropping to 15 degrees below zero, and exterior pipes began to burst. A few more days and the factory would be damaged beyond repair...

For more than a year, the Kremlin has been scrambling to address the future of places like Baranchinsky, one of Russia’s 300 or so “monocities,” where a single plant supplies heat, income and social security. Many of these factories are hemorrhaging money, leaving leaders with an array of unpalatable choices: To allow factory towns to die gradually, as they did in the 1990s? To liquidate them? Save them?

What happened in Baranchinsky, population 11,000, says much about the consensus Russia reached in 2009. Business did not want to spend money; workers did not want to relocate; the government did not want the political instability that comes with unemployment and was able to pay huge sums to stave it off. This consensus has kept much of Russia in a state of suspension, just when the economy would seem to demand change, said Natalya V. Zubarevich, an analyst at the Moscow-based Independent Institute for Social Policy...

The new governor of Sverdlovsk Oblast [map above], Aleksandr S. Misharin, had been in office just four days, but it was no coincidence that his first trip was to Baranchinsky. The Kremlin had put him in charge of one of Russia’s biggest collections of monocities, and it was the small, isolated ones Moscow viewed as tinderboxes...

That day the demise of Baranchinsky’s factory was, if not averted, postponed for the foreseeable future. Its longtime general manager and commercial director, minority shareholders who had been locked in a bitter feud with the majority shareholder, were arrested on fraud charges; the utilities reluctantly agreed to overlook an estimated $14 million in debts and turn the heat and electricity back on...

And so the crisis passed, for the moment. The past year could have forced the closure of scores of small factories in the Urals — many of them outfitted with 19th-century technology — but the state has taken pains to prevent this... There was also a ban on layoffs, which could have allowed business to set aside money for improvements. The policies averted social unrest, she said, but they will slow Russia’s recovery and modernization...

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Labels: economics, political culture, politics, Russia