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#8 - JRL 7065
The Russia Journal
February 14-20, 2003
Can the 'Soviet Sandwich' really be edible?
Peter Lavelle

Over the past few weeks, economists, members of the Moscow brokerage community and even the highly respected magazine The Economist have been describing Russias current economic situation as a "Soviet Sandwich." This is not inappropriate. The concept refers to the following: Two bread slices the mighty natural-resources sector and the vigorous new startups surround a muddled, unhealthy filling of unreconstructed Soviet industries that are, for the most part, idle and slowly turning rotten.

The top half of the sandwich the natural-resources sector has done its best to create a stand-alone existence. The domestic market is not an attractive consumer base, and, so, exporting is the best way to generate wealth. As a matter of fact, this slice of bread could be considered a meal all by itself. Not only are the best ingredients made available to make this part of the sandwich as tasty as possible, but it is also aesthetically pleasing: It can afford to present itself adorned with the very best of Western trappings. And it is legitimate as well. Just ask foreign and minority shareholders of natural-resources giants.

Usually, the best thing about a sandwich is what lies between the slices of bread. In Russias case, this is not true. The filling of the Soviet sandwich is something resembling aged Spam, with a lot more lard in it. After a decade of restructuring, this is a part of the economy few have taken an interest in. The financial health of this part of the economy made up of neglected industrial complexes from the Soviet period has been all but written off. The Soviet Sandwichs filling almost encourages one to become a vegetarian or simply to consume more bread.

The bottom half of the sandwich has its qualities. Start-ups are the current craze, and the populations best and brightest appear to understand the virtues of entrepreneurship. Entrepreneurship, for this part of the sandwich, means meeting consumer demand while keeping the menacing state bureaucracy at arms length (or, even better, avoiding having to grease the inspectors palm altogether). It is unclear if this part of the sandwich will eventually become a Russian middle class on par with its Western peers. In any case, it is making progress toward matching the quality performance of the top part of the sandwich.

While the Soviet Sandwich image explicates Russias economy well, it also has its uses in understanding the political economy of the countrys current reform project. One only has to tinker with the terminology to get the picture a picture that is more comprehensive than that purveyed by the myopic materialistic concerns and interests of economists and bean counters.

As with the original analogy, the wealthiest stratum of society derives its vast income from the natural-resources sector. It does not need the rest of society very much. Certainly, domestic consumers and, as a result, most of society does not come onto its radar screen. This slice of breads primary concern is manipulation of the state to get on with its business and, even, political concerns. It can stand on its own and is quite content with the status quo. This slice of bread genuflects at the rest of the sandwich out of politeness, while being fully aware of its own nutritional value.

The bottom third of the sandwich is not just the "middle class." It is also civil society, and the two overlap to some extent. This is the stratum of society that hopes either to change Russias current socioeconomic arrangement, or is simply content with the trickle-down effect created by excess resource wealth invested in the economy. This is, of course, a contradiction. At present, civic values and the worship of disposal income reside in awkward coexistence. The course this dual and seemingly irreconcilable cohabitation represents is beyond the particular item of Russian cuisine we are dealing with. Working out the identity and interests of this part of the sandwich will await, hopefully, the next stage of Russias tumultuous transformation.

In this alternative interpretation of the Soviet Sandwich, the filling is the state and most of the politically homeless electorate from the Soviet period. The government, and those who vote for the Communist Party and other backwards-looking organizations, have something in common: Both are stuck in the past and are apprehensive of the future. The government of Prime Minister Mikhail Kasyanov is like some fancy French mustard covering up a foul taste. At the end of the day, this is a less-than-convincing strategy for a government that needs to start the hard work of real reform. Reexamining its industrial policy would be a good start.

The popular interpretation of the Soviet Sandwich is close to the mark. However, the sandwich this writer has described, and the sandwich proposed by our friends who represent the "dismal science," are equally distasteful. It would seem the Soviet Sandwich, as a whole, will remain unpalatable for some time to come. Russia, as an important contributor to world culture, surely has more to contribute than a sandwich that no one wants to consume. It is up to the government to change the menu.

Peter Lavelle is a Moscow-based analyst and author of "Peter Lavelles Weekly Russia Report," found at www.russiareport.ru, and editor of the "Russia Business Report," www.business.russiareport.ru.

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