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Saturday, July 22, 2006

Employment and Small Business Drowning, Economy Doomed

RosBusinessConsulting reports:

The total rate of the unemployed in Russia grew by 3.1 percent to 5.6m people, or 7.5 percent of the economically active population, in June 2006 compared to June 2005, Russia's Federal Statistics Service reported today. In the first half of 2006 the number of the unemployed edged down by 0.3 percent. The state employment service registered 1.7m unemployed as of late June 2006, including 322,300 in the Chechen republic. The economically active population was 74.7m people, or 51 percent of the country's population. The majority of the employed work in large or medium-sized businesses. They totaled 38.2m people or 55.8 percent of the population in May 2006. Also, large and medium-sized companies attracted 1.9m part time or contract workers (equivalent to full-time employment).

Yet another sign of the coming economic apocalypse in Russia. Despite booming oil revenues Russia's giant population and the Kremlin's greed, together with the total absence of any meaningful reform, pandemic corruption and the absence of a cultural work ethic, mean that Russia continues to spiral into oblivion, unable to create new jobs.

In related news, Interfax reports comments by "President" Putin that succinctly illustrate Russia's Catch-22 situation on oil. Russia may be reaping significant profits by selling oil abroad, but this is diverting energy revenues away from domestic industry and capping potential economic growth. Hence, we see GDP stutter and unemployment rise. Were Russia to attempt to divert oil resources to the development of domestic industry, which can't pay fair market rates for it, this would deprive the Kremlin of its cashflow and potentially place it on the verge of bankruptcy.


copydude said...

But Russia has a huge and highly developed black economy and one wonders how many of the 'unemployed' are merely unemployed 'on paper'. Italy has probably the largest black economy in Western Europe and it's what kept the country going in leaner years. So don't slit your wrists just yet.

La Russophobe said...

COPYDUDE: Actually, now that you've reminded me of an additional fact that makes things even worse, I think I'll grab a gas pipe.

You see, most people in the world outside of Russia realized long ago that a black economy is kind of bad, and a huge black econmy is kind of really bad. It deprives the government of tax revenues and contributes to a general lack of morality from which Russia already suffers greatly.

I mean, why does Russia need a BLACK economy if its prospects are good? The USSR had a big black economy, and pretty soon the whole darned country ceased to exist.

copydude said...

Quote: You see, most people in the world outside of Russia realized long ago that a black economy is kind of bad

Not at all. Many governments turn a deliberate blind eye to the black economy and you are naive if you believe they would have it any other way. The black economy keeps a large number of people in work - people who might otherwise come out of the shadows for unemployment benefit, social benefits, voting rights, claims to asylum and so on. The 'deprivation' in direct tax revenues is a small price to pay - in fact it can be written off against the indirect taxes it would not otherwise receive from goods and services.

Besides, Governments largely fritter away taxes on such trivia as defence spending and Presidential motorcades. Far better that money is circulated locally and invested in cottage industries at the dacha, such as jam making or curling and painting the neighbour's hair.

There is nothing in your quoted article to suggest that small business is drowning. Small business swims - in most of Europe - simply because it stays under the radar.

La Russophobe said...

COPYDUDE: I don't know which countries you are referring to, but certainly here in the U.S. there is a bright spotlight focussed on the problem of illegal immigration and black economics.

What's more, Russia isn't most countries. It's universally acknowledged to be one of the most corrupt economies in human history, and one of the least efficient. Therefore, anything black in Russia is very, very bad indeed.

Small business cannot exist in Russia because of this very corruption. There is no credit and hence no ability to finance startup. There is no education and hence no training. And most importantly the government simply will not allow independent centers of power to arise. This more than anything else explains why Russia continues to languish in the backwaters of the world economy. Name a single consumer product developed in Russia and placed into the world stream of commerce. You can't.