Putin generation: Opportunity – and corruption – test a young entrepreneur

Yulia Barabasheva never wanted to have her own beauty salon. She's not even that passionate about nail design, despite having coached her mother to a Russian championship this year. But with a dream of securing a steadier income and starting a family, she opened her unmarked brown metal door to the public in April last year.

It took the help of her husband, Igor Barabashev, a businessman, to get $180,000 in start-up loans and complete a six-month slog through Russia's formidable bureaucracy to obtain a license. Now, she and her staff of 14 take clients up to 12 hours a day, seven days a week, giving them thinner eyebrows or 5-inch nails.

At 25, Barabasheva is politically unengaged, like many of her "Putin generation." But she enjoys a rising prosperity, which Russians typically chalk up to President Vladimir Putin. Serving that new wealth has opened the door to opportunities that would have been unheard of for average Russians just a decade ago. But even as Mr. Putin's Russia allows ever greater numbers of people, like Barabasheva, to move up the economic ladder, it demands a scrappy persistence to battle red tape and corruption while trying to get ahead.

"Moscow is a city that eats people up and doesn't leave any time for life," says Barabasheva, who has worked since she left home at age 14. "We have a kind of family atmosphere here [at the salon] and I don't want to destroy it for the world."

A reluctant entrepreneur in many ways, Barabasheva finds herself caught up in a life she didn't expect. Her hopes for a family of her own were shaken six months ago when she and Igor decided to separate, their relationship strained by the new business. But despite having lost the impetus for undertaking such a challenging venture, she remains resolutely committed to her middle-aged employees, many of whom would have difficulty finding new work in a society that prizes youth and glamour.

"I feel responsibility to them and I know none of them will ever fail me," she says, sitting in her office crammed with boxes and beauty supplies. "I can't just simply line them up and say, 'Thank you girls, you're free to go, I've decided to change my life.' "

Dramatic boost in wealth

Barabasheva and her employees are reaping the benefits of an economy tamed since the 1990s, when a few well-connected businessmen accumulated huge wealth while 40 percent of Russians lived in poverty. Her clients, shimmering in fur coats as they arrive, easily slot in $80 monthly manicures between Mediterranean vacations and children's English tutoring sessions.

That shift toward broader prosperity, especially in Moscow, has been dramatic. In his first five years in office, Putin brought the poverty rate of his countrymen down to about 16 percent, according to the World Bank. Today, he said in a recent speech, it's less than 14 percent. Official figures put the middle class at about 20 percent of the population.

Barabasheva doesn't see herself as middle class, even though she runs her own business. In costly Moscow, she argues, people need to earn at least $15,000 a month to qualify, and she doesn't. She is evasive about her earnings, saying only that she earns as much as she can and shares a percentage of profits with her employers. "I stand on my own two feet," she says firmly.

Barabasheva has proved her mettle before. Born to teenage parents on the outskirts of Moscow and in her own apartment by 16, she passed high school by showing up just for exams, and worked in construction and a liquor factory before turning to nail design to make a better living. As she describes the pressures she has faced during a rare break from work, a radiant smile and animated demeanor suggest that her persistence and love for those around her have, if anything, been fortified.

"In order to live, I've got to believe in something," says Barabasheva, who keeps a photo on her desktop of her celebrating her parents' 25th anniversary with them. "And I really believe I can give a lot."

Working painstakingly under a fluorescent lamp, her arms covered in fine nail dust, she passes long hours trying to make her 100 regular clients – some 90 of whom are single women – "feel well inside." Her clients – doctors, entrepreneurs, and even top figure skater Elena Sokolova – leave happier, and not just because their hands are more beautiful, she says. They nourish her as well, she adds – enriching her mind with their experiences and expertise until she has a chance, someday, to finish her college degree.

Barriers of corruption

But the backstage of business in Putin's Russia is much messier, according to Barabasheva and other entrepreneurs. "The state structure is quite complicated, quite corrupted, and it requires a lot of financial investment and emotional investment," she says.

In a recent speech, Putin acknowledged such challenges. "To this day, it's impossible to start a business within months," he said, laying out his vision for Russia through 2020. "You have to go to every office with a bribe: firefighters, hospital orderlies, gynecologists, you name it. It's just a nightmare."

According to Transparency International, a watchdog group based in Berlin, corruption has increased slightly in Russia since 1999 and the country is now ranked 143rd among 179 countries profiled. Its national business environment ranking – compiled by the World Economic Forum's Global Competitiveness Report – has also fallen since 2001, from 56th to 70th, though most of that is due to the addition of new countries. In addition to corruption, the report cites tax regulations, bureaucracy, and inflation as some top concerns.

So despite a flourishing economy, Barabasheva and others say starting a business is still tough – even once it's up and running. And according to the liberal Levada Center, young people believe it's connections (49 percent) – more than talent (38 percent) – that enable one to succeed in Russia today. There has also been a marked drop in the percentage of young people who see hard work as integral to success, falling from 60 percent in 2002 to 48 percent in 2006.

Misha Sagiryan, the young owner of two fitness clubs in Moscow, says he used his partner's connections to resolve things when police took his computer to check if everything was "correct." He took the same tack when the antiterrorist unit visited to ask about reinforcing the windows.

"There are always things like that," he says. "In my business plan, I have the line 'solving problems' " – keeping officials happy with gifts and perks.

Igor, the director of a legal-consulting firm and a former government employee, writes that into his budget, too. "Everyone has it," he says, laughing. Still, local authorities can't meddle the way they used to, he says, citing his firm's successful resolution of a bankruptcy case in which local officials had tried to personally benefit from the company's demise.

"It's a very good example; it answers the question, 'Are authorities interested in promoting business?' " he says. "My point of view is there is more order, especially at the federal level."

But Barabasheva doesn't feel protected from the law. She plucked her staff primarily from the salon where she used to work, an outfit owned by three ex-criminals who failed to inspire loyalty.

"That salon is 20 years old and people have connections, possibly at the level of local administration. The consequences could be quite great," worries Barabasheva, who says she didn't lose a single client in the transition. "I consider myself lucky enough already, but as I know these kinds of people, I think they might just be waiting."

Risking their wrath is a bold step to take for employees who don't have, Barabasheva says, her penchant for perfection. "In the old times, [hairdressers] taught their profession much better – I can't even compare to now. Not so many people realize how bad they are at their profession," says Barabasheva, who adds that she can size up a hairdresser by the manner in which she picks up a pair of scissors.

Looking beyond appearances

But for Barabasheva, her employees are more than professionals. The family atmosphere she has tried to cultivate has borne fruit: they're a crucial support to her as she goes through her second divorce at age 25.

"For the first time, I felt I was quite empty and couldn't give anything to anyone," she says. "But my clients and all my staff helped."

Her staff are all women, since she has been underwhelmed by former male colleagues. "They have almost nothing left of a man in them," she says despairingly. And it's not just colleagues: In general, she yearns to see men show more responsibility and devotion to their families – though she doesn't criticize Igor, with whom she says she is still friendly.

"There is something wrong in the society. Nobody looks inside, into your soul, but everyone is looking at your face and your figure – appearance is everything," says Barabasheva, who sees her salon as countering that through female camaraderie. "I think it is the women who are to blame for that. Everything is on sale. We sold ourselves.... I always thought that being rich leads to degradation, but being poor also leads to a degradation."

But, coming from "the wonderful city" of Pushkin whose residents are "hospitable, kind, open," she admits that she often judges people too harshly.

"I still can't accept people as they are," says Barabasheva apologetically, describing the sad, angry faces she sees on the street. "As soon as we learn ... to take them as they are, to forgive them, then we will live much better here."