In which economic sectors can Russia and Switzerland reinforce their relations? Mainly in the areas of pharmaceuticals and technology based companies.
Companies like Nestlé and ABB already have significant business interests in Russia. Furthermore, Russian tourists have become essential to the Swiss tourism industry as they flock to Switzerland, especially in the winter.
Numerous ski resorts like Zermatt, Gstaad and St. Moritz would be hit hard if they lost their Russian clients. This tourism is invariably linked with the attraction of the Swiss jewellery and watch making industries. It would be helpful if the Swiss press were more circumspect in their portrayals of Russia, which are often imprecise and not very flattering. It is difficult for me to recognise the Russia they describe in their articles.
Should Russia make a greater effort to improve its image? It’s true that Russia doesn’t know how to market itself! It is generally assumed that people understand Russians already - as opposed to the United States who is the master of spin.
America’s strength lies not in the product itself, but in its marketing! The Russians, however, aren’t naturally inclined to discuss their strengths – it may be a matter of pride as well.
The difficulty is that many dishonest businessmen tarnish their country’s image. As a result, oligarchic Russia gets the lion’s share of the Western media’s attention. For example, someone as selfishly motivated as Boris Berezovski (indicted for fraud and tax evasion in Russia: Editorial note) causes a lot of damage. Yet there’s a lot of talent and potential in Russia; one only need consider the number of Nobel Prizes discerned to its citizens. But these aspects aren’t given enough press and considering the power of propaganda under the Communist regime, it is surprising that a country like Russia doesn’t have a way of improving its image. It is clearly an area which needs major work.
How do you view the current crisis? Should the rules of the financial marketplace be better defined? Firstly, it is important to note that the financial market has been based on a set of rules that were developed over many centuries. The role of banks in a capitalist system is fundamental; the system can not run itself without regulations.
That said, in the 70s and 80s, the financial market’s regulations were far too restrictive. The liberalisation process begun by Ronald Reagan and Margaret Thatcher initially had a positive effect, but in time, more and more people took advantage of the greatly liberalised system, which caused it to implode. The recession has nothing to do with sub primes, which were just a symptom of a much greater ill, not unlike eczema which can be an external sign indicating a more serious internal illness.
Does the responsibility lie with the major financial players or with the regulators? Regulators have been assigned the responsibility of controlling, investigating and checking that the rules are followed.
We as individuals have a tendency to follow our instincts and push the limits.
Regulators have to be conscious of this and ensure that the limits are respected by taking appropriate measures, and never believe in the players’ personal responsibility.
The real private bankers, those who have the fiduciary responsibility for their clients’ funds, managed their affairs in a much more responsible and conservative manner. They knew that if problems were to arise, they would be held responsible and would have to make up for the losses, which is not the case for the directors of big banks who only risk being fired.
So you don’t believe in Adam Smith’s invisible hand? Try organising a football match without a referee…even if the players know all the rules, after 10 minutes the pitch will be in chaos. There is no invisible hand! The theory is nonsense. In 1990, when the USSR crumbled, a wild black market system took over. Mafia types blocked the clients’ entry to the first McDonald’s in Moscow and obliged others to pay double price for a hamburger. Academics and all kinds of consultants from the West came to Russia with good intentions but no hard concepts. They virtually treated the country like a huge laboratory and forgot that an economy deals with people and not lab mice. No wonder the Russian public’s perception in of the free market economy is suspicious at best.
A free market cannot function without a strict governing framework.
What should we think of Russia’s current economic policies? Faced with the recession, Russia chose to follow one of the world’s most conservative strategies. The country had been self-insured through the accumulation of very high currency reserves.
The reserves were used reasonably and rationally and therefore Russia maintained macroeconomic stability and especially withstood the temptation to introduce protectionist measures and capital flow restrictions. Russia’s leaders, led by Putin, are reasonable, competent and rational and have so far avoided any exaggeration in their policy choices. Under extreme stress, Russia has proved to be a stable and reliable partner and has helped to restore general stability in the world. There are still major problems in the private sector and Russia’s infrastructure remains weak and needs massive investments.
So the question is, how should one invest? As usual this is not a question which can be answered simply, We all know that just like in our own countries, investors have to distinguish between entrepreneurs who invest and look to the future and others who only consider the present and take every single penny out of their companies. Easier said than done, but now there is enough analytical capability to make the necessary distinctions.
Are you concerned about a return to a command economy and isolation from the global economic and financial system? I think that it is totally inconceivable that Russia would return to a system which failed. The memories of that failure linger and are omnipresent in the public’s minds. A return to exaggerated nationalism is a possibility in all countries and will largely depend on the behaviour of other nations. As long as we all decide to include and to engage each other in constructive exchanges, these risks don’t exist. Russia’s leaders have time and time again stated that they want to interconnect economies and be part of the global economy and financial world, but at the same time, they want to ensure that their legitimate rights, borders and interests are respected like in all other areas of the world.
Russia’s future seems so unpredictable… Russia’s future will depend on its leaders’ ability to guarantee long-term security.
I believe the current government is moving in the right direction, focusing primarily on political stability and civilian law and order. One can reproach the nation for its lack of democratic institutions, but each citizen has rights to individual freedom and property ownership.
Russian citizens still have difficult lives and very often suffer from harsh conditions and a lack of social protection.
They therefore have, by definition, different priorities and concentrate on the essentials, namely on improving their economic conditions. It is sometimes forgotten that it took us more than 100 years to reach today's levels of economic comfort, which allow for an intense social and political dialogue.
Russia still isn’t a member of the WTO, does that work against the country? Not at this point. There was a time when Russia desperately wanted to join, but in these difficult economic times the fact that Russia is not under any obligations constitutes an advantage. In the long term, it would be logical for Russia to join the WTO, given its status as a major player in the world economy.
LUDOVIC CHAPPEX
