Russia at Five Years: McDonald's Serving 50,000 per Day

At what was once the Disneyland of Soviet communism, the Exposition of Achievements of the People's Economy, the temples to atomic energy and agro-industry are now teeming with the achievements of other peoples' economies.

A maze of shops, kiosks, and booths jams the cavernous interiors. The grounds are crowded with VCRs, compact discs, leather jackets, clothes, furniture, and appliances - virtually all of it imported. Market scenes even more chaotic fill many of Moscow's stadiums as shuttle traders empty the duffel bags they have hand-carried on flights from Turkey, Greece, or Italy.

This is Russia at five years - a country whose old, heavily industrial economy has largely collapsed and whose new economy still has the makeshift character of duffel bags and car trunks. Five years ago on Christmas Day, Mikhail Gorbachev resigned as the last premier of the Soviet Union, and 15 independent countries were born.

Since Dec. 25, 1991, the final day of the Soviet Union, Russian life has been a quiet storm of collapse and construction in one area of life after another. Now, more than ever, what you see in Russia depends on where you look.

Russia's largest automakers, for example, are either closed down or on the brink of bankruptcy.

But look again. In a countersign of spreading prosperity, each year police are registering nearly half a million more cars - about a 20 percent increase - to Moscow residents. Most of these cars are inexpensive domestic models.

Or look at Russian law, now designed to protect individual rights with jury trials. Judges are also more independent, acting no more as mere servants of the prosecution, as was the case in the former Soviet Union.

But at second glance, the courts are so short of money that judges are keeping lights off, delaying wages, and finding that they can't afford the postage on summonses.

More reform ... or stagnation?

Russia has reached a point of stability where it has probably established the most basic foundations of the "normal society" that Russians yearn for. But Russian life is far from normal, and the fragile foundations of democracy and capitalism risk stagnating in a swamp of cynicism and corruption.

Some observers, such as Yitzhak Brudny, a political scientist at Yale University in New Haven, Conn., compare Russia to a Latin American democracy, with weak government institutions buffeted by strong interest groups.

"This society is semi-reformed," says Alexander Bevz, founder and head of the Civil Society Foundation, who on occasion advises the Yeltsin administration. "With all its imperfections, it's much better than five years ago. The basic problem we face now is that we could be frozen in this semi-reformed state."

Alexei Podberyozkin, who was a key strategist to the nationalist-Communist presidential candidate this year, sees a country that has been in freefall for five years by nearly every index. The country is now in a period of stagnation, he says. "We have not yet changed course."

The five years since 1991, in Mr. Podberyozkin's view, have been a human catastrophe. In the past five years, he says, living standards are less than one-third 1990 levels, Russia produces only 5 percent as many scientific books, artists and writers produce only 5 percent as many cultural works, and the central newspapers have only 6 percent of their 1990 circulation.

In terms of democracy and human rights, he acknowledges, state control has loosened and people have new freedoms, "but the price has been too high."

Yet Russia has been building something new amid the collapse of Soviet economy. The largest privatization of state property in world history is now mostly accomplished. More than 70 percent of Russia's former state enterprises are now in the hands of private owners. Inflation has been brought down from over 1,000 percent per year to around 20 percent per year - and stabilized. And Russians did it without price controls.

The Russians have created a $20 billion stock market. Shares of a few large companies are now selling on foreign stock exchanges, forcing the accounting discipline and openness that is still strange to Russian business. Within a week or so, Russia will have five operating mutual funds.

Western ways are arriving. Last week, the first Chevy Blazer rolled off the assembly line of a GM plant in the Russian republic of Tatarstan. Within days, Moscow will have 10 McDonald's restaurants, including the busiest McDonald's franchise in the world, which serves more than 50,000 people a day. Within a year, 10 more McDonald's will open, bringing tens of thousands more Russians into daily contact with Western efficiency and customer service.

Russia now has a free and lively press, marred only by the strong government influence on the three major television news channels. Cultural and religious activity is now generally free. Young people who have never seen church weddings before are getting married in churches. Constitutional democracy is taking firmer root with each passing election.

"We are not yet a nation of laws," says Sergei Parshin, a Moscow city judge and the expert who drafted laws designing much of Russia's court system. "The changes are really happening, but not as fast as necessary," he says. The risk is that frustration with Russia's crime will lead back to authoritarianism.

The greatest threat to progress in Russia now, says Mr. Bevz, is the corrupt and entrenched bureaucracy, which has a vested interest in keeping Russia only semi-reformed.

In addition, the people running the former state enterprises are the same people that ran them as government bureaucrats, the so-called red directors. They inherited a large share of their enterprises in privatization and took control of the shares that went to employees.

"Probably a thousand people control the whole economy," says Bevz.

The good news: bankruptcies

The good news, however, is the rise of bankruptcies. This is the beginning of the second wave of distribution of wealth in Russia, he says. The red directors have often raided the assets of their companies but have not invested in them and thus cannot make profits.

Now, through bankruptcies and other means, new owners are moving in with economic efficiency in mind. This second wave, says Bevz, "means a broader middle class and a broader capitalist class."