Friday, March 2, 2012
Small Business in Vytegra
While on this amazing trip, I am conducting a research project on the development of small business in Vytegra and I wanted to share some of what I have learned. Among the things I am curious about are various political, economic, and cultural barriers to development.
Thus far, I have had three great interviews with local businesses that lead me to believe that the biggest obstacle to the development of small business in Vytegra is the local administration. This was a surprise to me, as I came here expecting that any political problems would come from the federal government. Power in Russia is extremely centralized and vertical, meaning that the top authorities in Moscow make all the decisions. From there, policy slowly trickles down through the various complex levels of administration. The town of Vytegra is at one of the lowest levels of this hierarchy of power, so I assumed that the local administration in Vytegra would not have the ability to create and execute policy that was against policy on a higher level. However, the problem in Vytegra is opposite of what I expected. The problem is not that the federal government is creating laws that are counterproductive to the development of small business in Vytegra, but that the local administration is.
According to the first person I interviewed, the federal government has created many policies that are great for the development of small business, but the local government does not understand them and instead implements policies that impede the development of small business. I was informed that two of the officials in the local administration who work with small business have absolutely no understanding of economics and what small businesses need, as one is a Veterinarian and another is a former police officer. One way in which the local administration demonstrates that it does not understand economic development with respect to small business is that property taxes for the type of business that the first interviewee hopes to get involved in increased 106 times what they were in 2010 by 2011. The drastic increase in property taxes has frightened formerly eager investors. In my opinion, another thing that might be the cause of bad policy is that the local administration has its own short-term objectives in mind.
The second person that I talked to has owned a business for a while and has never encountered any economic or political problems, as the business was personally financed by the owner due to former business endeavors. The only concern this person has is future competition from two businesses of the same kind that are currently being created.
The third person that I interviewed told me about how her business property was seized by the local administration because of, as she thinks, is her decision to get involved with local politics. She said that she never had financial problems or issues with the local government until property taxes were increased. In response to the increase, she voiced her opposition and expressed interest in running for the local administration in a business-related department. When she did, the government used shady measures to "legally" seize her salon and give it away to a local organization. As for now, before she runs for office, she is running an ad-hoc business in which she travels through Vytegra and the surrounding area and has taught in one of the local schools.
In contrast to what I hear from local businesses, the administration unsurprisingly says that it does everything it can to promote the development of small business, such as subsidizing new start-ups. One woman in the administration said that she is going to try to get me an interview with a person who runs a business that received subsidies. I hope that this happens because I have been told that the subsidies are a hoax or go to people who do not spend it on a business. The administration is also willing to answer any questions I may have, so today in my research time, I am going to draft up an email. I am quite excited for the response I receive.
Although I am not quite ready to return home, I am looking forward to spending time reflecting upon all the information I have received. I have collected a lot of great information and I hope that I can use it to help the small business owners in Vytegra. Drawing from my experiences here, the stereotype that Russian businessmen are corrupt could not be further from the truth (at least in the Russian provinces). The people that I have talked to are just people trying to make a living despite policies of the local government. The three business owners that I talked with were extremely nice and open to my questions; it seems that they want me to learn all about their situation. One person even brought me a huge stack of papers that include different federal and local decrees, statistics about local tax rates, a speech by the new Governor of the Oblast, as well as relevant news articles.
I decided to do a research project in Vytegra for relatively superficial reasons. My main objective was to gain some research experience and I picked the topic of small business because I am interested in development economics. However, after being here and conversing with the local business people, the children, and just walking around, I realize how much I have grown to love this little provincial town and the people who live here. Although I am around the world in a Russian town that many Russians themselves have never heard of, the people who live here are just people like anywhere else in the world. Sure, they face some problems that we--fortunately--may never have to deal with, but just like everyone else, they do what they can with what they have and try to make the best of their situation. The people of Vytegra are my friends, and I want to express how much I value their friendship by executing a good research paper. I would be extremely happy if my work makes its way back to Vytegra and helps the business people in their endeavors.