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 BUSINESS HISTORY         Russian business has always had its roots in strengths and  weaknesses.  The best example of a long term weakness has been  textiles,  because fabric had to be imported.  The obvious strength  from the beginning has been exportable natural resources.  Early  on, these were slaves, salt, and furs.  Finally they have become oil,  gas, coal, timber, diamonds/precious metals, and raw elements for  industry (zinc, nickel, etc.).  The first real agricultural/mechanical  factory production began with beet sugar in the 1820’s.  In the  beginning, all enterprise was with the Tsar’s favor and with the  Crown retaining a percentage interest.  The first good-sized firms  were those provisioning the Moscow-St. Petersberg railway and the  Crimean War.  Weapons were an import business, with most coming from America until 1900 or so.  With the beginning of Russia’s  industrial Revolution in the 1860’s, urban growth meant big surges  in textiles, tobacco, and imported manufacturing equipment.  The  1870’s saw, after a 15+ year hiatus, the resumption of railroad  construction with all of its trailers.  (*KEY*) The 1880’s saw an  attempted link being made between railroads and agricultural  production AND the introduction of some mechanization/silage, but  this was all for naught because of conflicts with military planning  combined with a lack of long-term capital and real interest.   The  1890’s saw major advances in mechanizing and mobilizing an ever-  growing  armed  force to coincide with railroad growth, as well as  even larger ripple effects from urban growth.  (*KEY*)  ALL major  railroad components, from rails to locomotives, were imported.   Bridge structures, regardless of size, were wood choc-o-block  except for when spanning rivers.  The last 2 decades of the 19th   century also saw the emergence of 2 new kinds of businessmen  who gradually took over the majority of gross business:  Jews and  serfs/serf descendents.  Growth continued unabated until  the  Russo-Japanese War of 1904-5, during which it was decided (due  to many transport problems) to add a second track to much of the  nation’s railroad system AND to complete a railroad link outside of  China between the Chita region and Khabarovsk.  This was  completed by 1918, and during this time Russia became the #1  agricultural exporter in the world.  The end of the Tsarist business  era closes with those getting rich by provisioning for WW-1.            During the USSR, the only relatively independent business  was small farming between 1922-29 and 1957-1991 (here, about  1/5 acre per family, like Cuba is experimenting with now).  In the  20’s and 30’s, foreign businesses lent their expertise to projects like dam-building and the Ford Motor Company built a tractor factory in  Leningrad (St. Petersberg).  The American industrialist Armand  Hammer built a pencil factory, a feat of no small significance.  After  
WW-2, a great deal of German plant and equipment was moved to the USSR to  facilitate reconstruction.   In the 50’s, the Italian car company FIAT sent auto-  manufacturing technology  and  that same Armand Hammer began the first major  exporting of raw materials with great success.  Towards the end of the USSR, a few  firms like PepsiCo  were importing soft drinks and exporting vodka but were  insignificant.         1991-1998 saw lots of short-term business development in :  1.  Banking  (over  1500 in 1995)  2. Small Business (Rotary-club mom-and-pop, under 25k start-up).     3.  Cheap consumer goods either from existing manufacturing sources or new ones  (Gillette, P&G) like gum/candy, cleaning/personal care products, and beverages  (especially beer)   4.  Clothing importing via shuttle-trading.   This means individual  citizens going abroad, for example to Turkey, and buying/shipping home for re-sale.    5.  Electrical goods importing.   6.  Small-scale manufacturing importing (usually  under license): packaging, food processing, retrofit machinery for large existing  factories being re-tooled.   By 1998, after 2 currency devaluations, 1. (only 10 main  banks left) and 2. practically disappeared.   Numbers 4 through 6  reduced in scope  as Asian manufacturers  assumed control over them.  Throughout the 2000’s,  investment in automobile production has grown in anticipation of an emerging  middle class.  The world’s large natural resource harvesters and the international  business community  have by this time cut their teeth on huge losses from dealing  with Russian bureaucrats,  businessmen, and criminals and though investment  continues, it is with excessive reserve and caution.          Here in the business section is the place to introduce a model for Russian  consumers, as compared to a typical western one.   The western one is the profile  of an American football with stripes near the ends.  The areas between each stripe  and the nearest point on each end represent the 10% rich and 10% poor.  Between  the stripes is the middle class, roughly 80%.    The shape is dynamic and flexible.   To make the Russian shape, one must  envision a profile of a very tall, thin wall that  tapers to zero thickness at the top; the wall is supported by an immense thick  foundation.  At the very top of the wall are Russia’s (total population about  130,000,000) rich:  60 billionaires, 200,000 millionaires, and maybe a million with a  $500,000 or more.  That’s about 10 times fewer than in the west %-wise.  The rest  of the thin, tapered wall, all the way to the foundation, is the emerging middle class,  with assets between $80,000-500,000, mostly in real estate.  The total here is about  7% of the population, or about 9 million.  That’s at least 10 times fewer than in the  west, %-wise.  The remaining 92 percent are poor and, as well they, like the  immoveable wide and thick foundation of the symbolic wall, completely support the  rich/middle classes.  This Russian model hasn’t changed, ever.  It is static and rigid.  During Tsarist times, rich=monarchy, aristocracy, landowners, and church.  Middle  class=bureaucracy   During the USSR, rich = the Party elite, then called the  nomenclatura.  Middle class: everyday working Party members. Poverty is  engrained  into the Russian mindset, as is wealth for very few.  This profile of  Russian consumers means that purchasing power for them is very limited: cheap  consumer goods and not much else….In the West, there is a 50-50 balance of  constitutionally-facilitated order and organized chaos; in Russia it’s more like 95%  order and 5% chaos.  To see visual models of American and Russian consumers, see this page.