American Business Outlook in Russia and the "Z" Factor

[Deb Palmieri on Russia Table of Contents]

The following article was published in the Russian Commerce News, January-February 1994. The Russian Commerce News is the official publication of The Russian-American Chamber of Commerce®.

American Business Outlook in Russia and the "Z" Factor

Zhirinovsky. Vladimir Zhirinovsky. Following the December 12 parliamentary elections in Russia, he enjoys a degree of international name recognition on par with people and products like Bill Clinton, Boris Yeltsin and Coca-Cola. The international media and political pundits instantaneously elevated the influence and authority of the "Z" factor in Russian politics more than Zhirinovsky himself anticipated in his wildest dreams.

What does this extreme nationalist who advocates the restoration of the Russian empire, anti-Semite leader of the Liberal Democratic Party with a rightist fascist political outlook who captured 24% of the vote and commands a sizable bloc of deputies on the new parliament mean to the American business community?

An analysis of this question requires an appreciation of the complexity of the Russian political landscape. Simplistic responses, tinged with fearful hysteria or knee-jerk reactions contribute only to American miscalculations on how to best interpret and strategize on containing and eradicating the "Z" factor.

What catapulted Zhirinovsky into the national limelight was the fact that Yeltsin's economic reforms have caused serious economic and social dislocation in the form of hyperinflationary prices, unemployment, disintegration of the medical care system, impoverishment of large segments of the population, and uncontrolled criminal infiltration of business and society, to name only a few of the negative effects which have caused suffering, deprivation and loss of morale. If this is what market and democracy are all about, figured the Russians, who needs it? Thus, an electoral response cool on reformist parties, and hot on extremist opposition not only from the right, but from the communist left, like Gennady Zyuganov.

What can force Zhirinovsky into extinction and political oblivion is for the West to bring to bear in Russia the best of what market society can offer: a comfortable and advanced standard of living distributed to the broadest number of people. This is the genius and appeal of our system. This is what the Russians do not have, but need desperately.

Russians must feel direct benefits to garnish the patience and tolerence requried to see the reform process through. Americans must continue and accelerate the process they have begun: do more and not less business with Russia. Do more trade and joint venturing. Continue to draw Russia into the international business community through measures we are taking like GSP status, World Bank financing and entry into the IMF. Reduce all trade and economic barriers to normal business relations. There are some assumptions here that are critical to understand. The more Americans and the West get involved in business with Russia, the greater the trickle down effect to enhancing the growth of Russia's economy. The greater the availability of commodities introduced through Western trade; the greater the prospect of employment created through successfully privatized industries; the greater the availability of basic medicine and modern health care systems and so on -- the greater the likelihood of a satisfied Russian people who find no need to seek solace in political demogagery, impossible promises and dangerous nationalistic tendencies from the extreme right or left.

Business and market forces can garner only one response to the "Z" threat: fight back. Fight back with the courage to tackle business risk factors, which should be mitigated with more government backing and investment guarantees. Fight back by introducing superior Western technology and know-how to improve Russia's standard of living and modernize its economy. Expanded foreign trade, investment and project financing can provide a powerful economic locomotive to stimulate Russian economic development. If there is one lesson that history has taught us it is that economic deprivation and suffering fuel fascist rightist and totalitarian regimes; while economic prosperity encourages freedom, democracy and social stability.

While American business cannot directly control political outcomes in tumultuous Russia, we can control our responses to these events and take responsible actions geared to thwart the right and support democratically-minded reformists. The worst thing we can do is to create a self-fulfilling prophecy resigning ourselves to President Zhirinovsky in 1996, and sour on or pull out of the Russian marketplace. The best thing we can do is move forward American-Russian business relations with strength and conviction about the ability of market forces and economic intervention to create Russian prosperity. This is how we best respond to the "Z" factor and insure its defeat and demise.

Deborah Anne Palmieri
Russian Commerce News, Winter 1994