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Russians trudge ahead as economy tanks once again

With oil wealth evaporating and international investments fleeing following the war with Georgia, Russia braces for more hard times.

By Correspondent of The Christian Science Monitor / December 10, 2008

Coping: With oil wealth evaporating, the country braces for another economic crisis.

Melanie stetson freeman/staff/file

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Moscow

As financial turmoil spreads and storm clouds gather over the entire world, many middle-aged Russians are feeling a familiar chill. Unlike most Americans, any Russian over 40 has vivid memories of two previous national economic crashes that brought personal ruin to millions of people.

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Recent conversations with Russians offer glimpses of a middle class that's worried, but not yet afraid. They say their past brushes with disaster put iron into their souls and changed their values.

"I think I can overcome anything; I've already been through every stage of hell," says Mikhail Sadskykh, a successful Moscow massage therapist who, like many of his compatriots, has been through three different professions in as many decades. "I'm not going to be stressed anymore over anything. I've changed. The most important thing for me now is my family, who stood by me through the hardest times. We'll get through whatever may be coming."

As the US was pulling out of a mild recession in the early '90s, post-Soviet Russia was plunging into a decade-long depression that saw the country's gross domestic product slump by over half.

It began in 1992 with a hurricane of hyperinflation – in the course of a year 1,000 rubles went from paying for a two-week vacation on the Black Sea to barely covering the cost of a candy bar. The aftermath of the breakup of the USSR also brought widespread industrial closures, and a nearly total collapse of the social safety net.

As Russia's fledgling middle class was just starting to find its feet, the financial system crashed in 1998, vaporizing the savings of millions – including Sadskykh – and sent the ruble into another free-fall.

A decade on, most Russians have recovered from the crisis of '98. They've acquired new careers, purchased cars, and built family homes. Some experts have even suggested that the first stable Western-style middle class in all of Russian history has arrived.

Despite stringent official media filters on economic news, many people say they are now noticing signs of downturn, including a freeze in urban construction, tightening credit, widespread layoffs, and a steady slide in the value of the ruble.

Economists say Russia is indeed slowing – oil prices are in the basement and nearly $200 billion in foreign investment has left the country following the recent war with Georgia. This week, for the first time since the 1998 crisis, Russia's long-term debt rating was lowered. For Russians, it's all more of the same.

"As a society, Russians have been traumatized repeatedly," says Martin Gilman, a former Russia-based official of the International Monetary Fund who now teaches at Moscow's Higher School of Economics. "There's a psychological component here, unlike with most people in the West, which has inured them to what's happening now. But there certainly is a lot of confusion out there."

Sadskykh, a sturdily built construction worker with steel-blue eyes, was among the first Russians to start a private business when former Soviet leader Mikhail Gorbachev created the possibility in the late '80s. At the time of the USSR's collapse he had 30 employees in his small firm, which produced cinder blocks and was expanding rapidly. As the economy suddenly contracted and orders for cinder blocks plunged, he desperately borrowed large sums of money – in dollars, because the ruble had become worthless.

"In 1993 we finally went bankrupt, and I lost everything," he says. "It wasn't just me. Everyone around was going under; those were awfully hard times for most people. A few people managed to get rich, but not many of them were honest workers, if you know what I mean. I found myself owing a lot of money to people like that, with no way of paying it back."

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