Regional governments all over Russia are looking to repossess the manufacturing in their neighbourhood, under the banner of saving jobs and staving off rapacious speculators. In the east Siberian province of Krasnoyarsk, the governor’s office fights Unexim Bank for control of a big metals smelter. The government of Tatarstan recently swapped tax debt for a controlling stake in Russia’s largest truck maker, KamAZ.
But by far the most ambitious and influential state industrialist is Moscow mayor Yuri Luzhkov. Besides governing a raucous, crumbling capital of about 9 million people, Luzhkov actively manages two automotive companies, an oil refinery and a cluster of banks. He has commanded the currently moribund Moscow Stock Exchange (everyone trades over the counter) with the intention of transforming it in to the pre-eminent bourse between Tokyo and Frankfurt. To help it along, his Bank of Moscow recently bought 20% of the American-founded investment bank Troika Dialog.
During his five years in office, Luzhkov has proved himself a superior city manager. Granted that Moscow is one of the richest cities in Russia – with two-and-a-half times the tax-take per head of rival St Petersburg – improvements in municipal services are nonetheless startling. Gone are the potholes left by communist road maintenance. Moscow police and ambulance crews react more quickly than New York’s. Yards are swept and hallways painted. Little wonder 91% of voters last year supported Luzhkov for a second term in office.
Yet success in service provision has inspired the mayor to move into dubious ventures elsewhere. His numerous big capital projects have a way of hitting snags in midstream. Moscow City, a planned Canary Wharf-style riverside business park, is in danger of being abandoned by the lead developer, Canada’s Reichmann brothers. An underground shopping mall next to the Kremlin is stalled in mid-dig as nobody wants to pay the rents it would need to break even. Luzhkov’s iron fist and dense apparat, meanwhile, stymie private developers who might ease Moscow’s commercial space shortage more realistically.
But Luzhkov Inc’s boldest experiments are being conducted at Moscow’s largest industrial employers, car-makers Moskvich and Zil. Both enterprises were weak, even by Soviet standards.
A Moskvich compact was a last resort for those left off the ration line for a Lada. Zil was surpassed in trucks by the more modern KamAZ, now itself bankrupt. Nonetheless, both would be attractive to foreign acquirers looking to feed car-hungry Russia, if only the mayor did not insist on doing things his way.
Chasing off the federal government and outside investors, Luzhkov bought back the auto works’ stock and implemented dubious business strategies. Salvation for Moskvich logically lay in keeping its prices cheaper than Lada’s, while improving its lamentable quality.
Instead, Luzhkov produced the Prince Vladimir sedan, priced at $17,000. Moscow bureaucrats have been ordered to ride in this rolling folly, but no-one else will. Zil’s new banner project, the “little bull” light truck, seems more attuned to reality. But it is hard to believe Moscow’s war chest would not be better spent on legitimate public sector aims such as teachers’ salaries.
Russians were raised, however, on paternalism and fear of the clever foreigner – moral traditions which have outlived communism. They like Luzhkov’s approach, and it will spread to other administrators who are neither as rich nor as talented. On the other hand, it was only last year that old-style communists made a serious bid for national power. Compared to Gennady Zyuganov’s ideas, Luzhkov-onomics is enormous progress.
