Russian Economics and Group Mentalities

by emory989

The juxtaposition of these two articles on my favorite Russian news website (snob.ru) caught my attention.

Russians have begun stocking up on Lexus and Porsche

Lexus dealerships in Russia have called in additional staff in order to handle the increased demand for their cars. Porsche has also noted a significant sales growth, according to a Bloomberg report from Monday, December 8th.

The sale of Lexus SUVs in Russia grew 63 percent during November 2015, and Porsche’s sports cars sales grew 55 percent. Lexus representatives say that the number of buyers increased by a third this month. “Our vehicles are going like hot cakes right now, regardless of whether they’re the more affordable models or premium class,” says Tatyana Lukovetskaya, the executive director of Rolf Group, one of the largest dealerships in Russia. According to her, this is the first time the Russian auto market has seen such a boom in decades.

Bloomberg attributes the the sales growth to rising inflation in Russia and the significant drop in the ruble. Russians have taken to buying cars as a type of investment, says Andrei Rodinov, head of the Corporate Relations Department in the Russian branch of Mercedes-Benz.

The growth will continue in December, say surveyed analysts. Automakers are in no rush to raise prices, but according to Lukovetskaya, the prices will “inevitably” soar in 2015, as no one wants to take a loss.

Governor of St. Petersburg cancels New Year’s reception “in the interests of frugality”

The Governor of St. Petersburg has refused to host the traditional New Year’s reception, his press-secretary Andrei Kibitov reports on Twitter.

The governor has decided, in the interests of frugality, to cancel the New Year’s reception, wrote Press-Secretary Poltavchenko.

By canceling the reception, the governor saved around three million rubles allocated to the event from the city budget. The city cultural committee had begun searching for an organizer for the event in September, with the announcement of bidding for New Year’s events. The governor’s bid for the MC duties was one of many. Nothing has yet been said about the cancellation of other ceremonial events planned in St. Petersburg for the new year.

Georgiy Poltavchenko has cancelled the New Year’s Reception for the second year in a row. In 2013, it was cancelled due to the terrorist acts in Volgograd on the 29th and 30th of December. The governor forbid that year’s New Year’s fireworks show.

The last New Year’s reception which the governor hosted was in 2012. The guests were the chiefs of the various embassies in the city.

Russian organizations from the government to the average family, are going to have budget problems this year, and in that sense it’s reasonable that they would cancel some government-financed public events. But what can we make of the fact that they’re buying luxury cars? Until last year, I thought it was part of common adult knowledge that cars were not only a bad investment, but that they began losing value as soon as they were driven off the lot. Then a friend here from Moscow picked me up from the train station in a car which was not the one he had left Ulyanovsk in; I congratulated him on the new car, and he gave me a strange look and said that it was just an investment that he’d had for several years. My friend is a relatively successful businessman who seems relatively well-versed in management and all things money. Money, in his own words, is exciting to him. So why was he buying a car as an investment? Russians seem to have a different understanding of economics than we do.

In the West’s supersaturated market, no product has much value beyond the sale price; one can always acquire a new one when the old one breaks down, and there’s not really even any point in fixing many products. In Russia, however, the value of many goods is multifaceted. Consider this cultural gem from the same website:

Можно было купить на черном рынке новую пластинку Pink Floyd, а потом каждый день в течение месяца на этот альбом заманивать к себе домой новую девушку.
(In the Soviet Union), it was possible to buy a new Pink Floyd album on the black market [for more than half your monthly salary], and then on the strength of that album, lure home a new girl every day for a month.

Similarly, in a Russia deprived of access to certain Western goods, either by price or policy, the resale value of certain Western products must remain rather high simply due to scarcity and either A) the perceived superior quality, or B) status symbol value. My friend should be able to resell his car for a significant price simply because factors A and B aren’t likely to change, and as his own currency devalues, he’ll have a material investment, the A and B value of which isn’t likely to change as quickly as the price of the ruble.

However, there are some other questions that may come in to play: purchasing a good can at times be considered a political act – see the “Buy American” campaigns in response to NAFTA. Russians certainly connect economics and nationalism to a certain degree; I’ve heard countless times that Putin’s sanctions against Western foods are going to have positive effects on Russian agriculture. Whether this is true, I have no idea. The question is, are Russians ready to forego Western products in favor of their own? Moreover, although I have heard of some cases of Russian extended families having bitterly divisive arguments over situation surrounding the Ukraine, I see a great deal more of the jingoistic fervor (квасной патриотизм) reminiscent of America, 2003, especially among younger teens. That is, a mob mindset that may well become part of their socialization. The second question is therefore, what will the repercussions of the current conflict be on future Russian attitudes towards the West?

How many times in your life have you been taken in by your government’s false portrayal of events requiring foreign policy action? Why do we tend to think alike in times of crisis? Does our operational trust in the media and government change at all after being deceived?

(All translations are my own, unless otherwise noted)