"Russian Newsweek": “Lessons without a Break”
In 2011, everything will be almost as before. However those who were hit by the crisis will emerge from it both wiser and more moderate.
Participants in the last Davos forum describe how a top manager at a Russian government bank visualized the future of the global financial system. According to him, the financial system will not change. A crisis like this one takes place once in 60 years. Nobody will live to see the next one, so why change anything at all?
The economy has not been this dysfunctional since the end of WWII. The world is undergoing global recession for the first time in 60 years. Last week's IMF forecast predicts that advanced economies will drop into deep recessions. The situation in Eastern Europe and the CIS will be the worst.
However, there is some good news. To believe the same IMF forecast, this is the bottom of the crisis, and in 2010 recovery growth will start in all countries, save Japan. The head of the U.S. Federal Reserve, Ben Bernanke, reasons much in the same vein. He believes that if the U.S. government displays political will and continues fighting the crisis, things will be on the mend in America by 2010.
Russian officials (among other things, were encouraged by growing oil prices last week) also feel better. First Deputy Prime Minister Igor Shuvalov said on Friday that the Government was in "a positive mood." There is at least something to hope for - there are enough reserves for a year-and-a-half or two years, and then, hopefully, the economic engine will again work at full capacity. In any case, the Government has no alternative game plan.
Putin will not be hurt
What will Russia be like after the crisis? How much will life and morals change? Experts are unanimous that everything depends on when it ends. If this happens soon (and this is the prevailing opinion), the answer is simple - everything will be like before, primarily because the bulk of the Russian population will not have had the time to feel any long term consequences. Head of the Levada Center, Lev Gudkov, recalled that two thirds of Russian citizens live in depressed cities and villages. Sociologist Vadim Treskin from Arkhangelsk added that "there will be no deep recession where there was no growth in the first place."
If the crisis does not last long, Vladimir Putin will emerge from it a winner. It will appear that he assumed responsibility at a time of trial and led the country through the storm. Political scientist Dmitry Badovsky believes that the government will have been reshuffled by that time and Putin will show by demoting officials that conclusions have been reached and the guilty punished.
Sociologists have registered a decline in Putin's approval ratings. There is a trend towards a decline, but if growth starts quickly, Putin will not be hurt. Dmitry Medvedev will also receive political dividends. Then they will have to decide who will go for a six year-term in 2012.
Some experts believe that the political picture will change if the crisis ends in a year or a year and a half. Nikolai Petrov of the Carnegie Center maintains: "United Russia is coming back to life. In the regions, leaders increasingly disagree with the center."
As long as the crisis lasts, conflicts like those in Murmansk, where the governor backed the opposition candidate, will continue. Badovsky predicts that the 2010 spring elections in the regions will be most interesting. It will show what is going on.
However, local sociologists and experts doubt that the elections will be stormy. They are unanimous that confidence in United Russia will be falling, but people do not demand, and are not likely to demand political change. Igor Averkiyev from the Perm Public Chamber believes that the "crisis only separates. The principle of family survival will prevail."
Everyone is choosing one and the same tactic - reduce requirements and adopt a wait-and-see attitude. This is called passive adaptation. "Treskin from Arkhangelsk comments: "In our restaurants the average bill has remained the same, but the food-alcohol ratio has changed in favour of alcohol."
Experts in the Far East see a different picture. A political scientist from Vladivostok said: "I'm sorry but next time, people will prepare to beat the Moscow OMON (Special Police Force) on the city's approaches."
Saving for the rainy day
Almost everyone is adapting themselves, or waiting for the crisis to end, but some will learn a lesson, primarily the middle class, those who have benefited from the economic growth of the last few years. Gudkov said that they account for 15%-20%. They will emerge from the crisis with a better knowledge of finances.
Karina Ulayeva, a 32 year-old graduate from the French INSEAD business school was on career path to become a leading economist in a bank but in December she was laid off. Now she has decided that when she is hired again, she will save 20% from each salary. Increased savings are one of the main consequences of the crisis. This investment will be more conservative but will produce a guaranteed income. A deposit will become the most attractive financial instrument.
It will be like this everywhere. Saxo Bank Chief Investment Officer Steen Jakobsen said that after the crisis, European banks will return to the 3-6-3 formula. They will accept deposits at an annual interest of three percent, issue loans at six percent, and play golf with VIP clients at 3 p.m. In Russia, the rates will be higher.
On the whole, a moderate attitude will prevail. Treskin from Arkhangelsk is convinced that now everyone will switch from foreign-made notebooks with coloured covers to domestically-produced green ones. He said that the regional authorities have already launched a campaign to promote home-made products, and that in some places retailers are simply directed to market domestic goods.
Hunger breaks stonewalls
A calculated and moderate attitude will prevail over initiative. Natalia Zubarevich from the Independent Institute of Social Policy maintains that nobody is going to become a suitcase trader or a small businessman: "People have been put off from the notion of starting their own business." Hunger breaks stonewalls. Zubarevich is convinced that the growth will start in big cities, and people from the provinces will begin moving there. Zubarevich maintains that a sign that the crisis has ended is when this flow becomes visible.
Many of those who have lost their jobs and failed to find new ones will have to start a business willy-nilly. Head of the VTB Asset Management, Natalia Plugar said: "In history, crises have often led to breakthroughs." Since there will be problems with loans today and in the near future, venture funds ready to invest into what seems a most dubious idea will start flourishing.
Adobe Systems Director in Russia and other CIS countries Pavel Cherkashin is closely following venture funds all over the world. "Now, during the crisis, I expect a breakthrough at least in two fields," he said. First of all, this applies to management systems. Roughly speaking, the head of a company is sitting in his chair, and the system will tell him: here the effectiveness is below the market average, and here the costs are growing, etc... There will also be systems for image processing: search, comparison and identification. Ten projects have emerged in the United States in this sphere during the crisis.
New niches for business will appear. For instance, people will start saving money, while mobile operators with billion dollar debts will not be able to lower tariffs. Russia will be flooded by discount operators. In the estimate of iKS-Consulting, by 2012 at least a million people will use their services. Discounters will buy time wholesale from mobile operators with a good discount, and then retail it by minutes. This will be several times cheaper.
Go for self-treatment
"Save!" will be all but the number one slogan. Everyone will save - both businessmen and other well-to-do people. Corporate strategies will be targeted against over-employment, and will cut social benefits. Unable to discard employee insurance, many firms will buy cheap anti-crisis insurance covering only serious diseases but not the flu. Employees can deal with the flu on their own. This will cut insurance costs in half.
Comprehensive and collision insurance - CASCO - will also become cheaper. Direct insurance - without mediators - will flourish. Today, mediators receive 30% of the service's cost. Selling an insurance policy via a website or by phone, insurance companies will be able to give substantial discounts to customers. Some already do business this way, but insurance companies maintain that by 2012 direct insurance will prevail.
Those 15%-20% of Russian citizens who have been used to Western or pro-Western prosperity standards will start borrowing Western customer habits. In other words, they will focus on saving - thoroughly plan their budgets and restrain themselves from purchases. Doctor of Sociology Irina Okuneva says: "This does not mean that people will not buy expensive things - they will simply start counting money."
Okuneva observed that boasting about money is not so much in fashion anymore, even among the wealthy. Rich people will abruptly change their lifestyle. They will have to do this in any event - the longer the crisis lasts, the deeper the change.
Darya Guseva, Igor Ryklin
