New Year, New Rouble

The Russian Prime Minister, Viktor Chernomyrdin, has described 1997 as "extremely difficult". But he pointed out that the Russian economy was now showing all the positive signs needed for growth, and held out the promise of a better year in 1998. Stephen Mulvey tries to guess what 1998 will bring for the Russian public.

Russia begins the year with a newly redenominated currency, each new rouble worth 1,000 of the old. While pessimists remain afraid that the changes will make them poorer, for optimists the new notes symbolise a fresh start -- summed up in the seasonal greetings from the central bank governor Sergei Dubinin: "Happy New Year, Happy New Money!"

Another development contributing to a potential "feelgood factor" is the government's claim to have cleared its debt of unpaid wages to public sector workers. Those still owed money should begin to receive it on Monday the fifth of January. The new roubles will appear on the streets at roughly the same time.

And with them, for the first time for several years, the kopek, one hundredth of a rouble. The kopek lost its value in the hyperinflation of the early 1990s, but will now regain it, 50 kopeks will be roughly ten US cents. The Russian president, Boris Yeltsin, in his New Year address, asked people to think of the country as a seven-year-old child just starting school, but destined for greatness. This leap of imagination may be easier for people who once again have coins jingling in their pockets.

However, this is the third year running that Western and Russian economists have predicted economic growth in Russia. In reality recorded output plummeted 5% or more in 1996. In 1997 it edged up, but only slightly. President Yeltsin said this week that he was waiting for the government to come up with special new measures to stimulate growth. But the fact is that no-one knows precisely what it takes to make an economy expand. A stable currency and low inflation are necessary conditions, but many other factors play a role, including psychological ones.

The latest evidence about the psychological condition of the Russian people is, on the face of it, rather gloomy. In a competition called "Symbol of Russia", experts were asked what products best summed up the country, such as the cuckoo clock in Switzerland. First prize went to the Kalashnikov automatic rifle, and second went to the famous Kristall vodka distillery in Moscow. The Izvestiya newspaper commented grimly: "Perhaps it is time to replace the old hammer and sickle with the gun and vodka bottle, symbols of murder and drunkenness."

But perhaps the results of the Symbol of Russia competition are more indicative of a dark sense of humour, than of real pessimism. They also suggest that the experts who took part realise that the most important question for the Russian economy in 1998 is not whether it grows or not, but who ends up in control. In other words, whether Russian capitalism will bring benefits just to a small clan of super-rich businessmen, or to the population as a whole.