Exploiting Children and Tempting Fate at Russia's Davos

A bizarre sight greeted selected guests at this year's St. Petersburg Economic Forum, Russia's version of Davos: four little girls in silver face paint and metallic headdresses, confined from their necks down in the walls of a chrome-plated bath, blowing at paper boats under a hot sun.

The "Four Winds" art installation, featured at a lavish reception hosted by St. Petersburg Governor Grigory Poltavchenko, added to an overarching impression of feast amid the plague. With a second wave of the global economic crisis looming, the Russian government sought to display its imperial greatness at its premier international showcase event. As usual, the president made a major speech, and state-owned companies put off the signings of big contracts so they could take place during the forum.

The sight of children being burned in the sun was too much for some of Poltavchenko's guests. Three of the invitees, including multimillionaire Ruben Vardanyan, who recently sold his prosperous investment bank to state-owned behemoth Sberbank, tore off the collars that held the girls in place and freed them from their boxes.

Photos of the exhibit attracted indignation in the blogosphere. “This is how they mistreat children in St. Petersburg," tweeted Nikita Belykh, governor of the Kirov region. Media analyst Vasily Gatov wrote on Facebook: “This is not even Rome in decline, not even a Byzantium of triumphant eunuchs. This is our native land.”

The girls and their parents vehemently denied that the children had been mistreated. To them, it was just a pretty show.

President Vladimir Putin, as has become his fashion, appeared 40 minutes late as foreign dignitaries waited patiently. In his speech, he sought to make the case that Russia is prepared for a resurgent global crisis. The central bank's foreign currency reserves stand at $512 billion, and the government has another $145.5 billion stashed away in reserve funds.

Other official speakers expressed greater concern. Finance Minister Anton Siluanov said that Russia's 2012 budget was based on an “almost unrealistic” oil price forecast, $115 per barrel. Former finance minister Alexei Kudrin warned that the price could fall as low as $60 per barrel because of the European debt crisis. An oil price of $60 could give Russia a budget deficit of about 50 percent of the planned expenditure. “We cannot count on favorable capital markets and we have not created the necessary basis for solving our structural problems,” said Kudrin.

Putin did acknowledge Russia's pervasive corruption, and offered a plan to address it: the appointment of a special business ombudsman who would have the power to intervene on behalf of private business when he felt it was unfairly treated by government officials. The ombudsman, Boris Titov, who owns a wine business in the south of Russia, will have the power to suspend government directives if they threaten business.

Even Putin's close advisers understand that such moves are too little, too late for an educated class sick and tired of obsolete, autocratic government. If a low oil price forces the government to cut spending, the recent political protests with their demands for more democracy could easily turn into much more broad-based social and economic upheavals.

Elvira Nabiullina, until recently economics minister and now Putin's economic aide in the Kremlin, said at the forum: “We need to change the current government model... People are no longer willing to compare the present to 20 years ago or 10 years ago. They compare their way of life with the best international models. They have a totally different level of expectations.”

The problem with calls for political reform is that they do not end in specific proposals, let alone actions. In theory, Putin loyalists are willing to talk about a more modern government and more freedom for the people. In practice, they are hesitant to follow through because they do not really believe that people should have a hand in running the country.

German Gref, former economics minister and now head of Russia's biggest bank, Sberbank, spoke about it openly in St. Petersburg. “If every person gets a chance to take part in governing, how will we be able to govern?" he said. "Any government contains an element of manipulation. How does one manage a society where everyone has access to knowledge and direct access to information not processed by government analysts and a huge, supposedly independent media machine?”

The shiny installation at the governor's reception contrasts well with Gref's sentiment. When leaders abuse their power and lose touch with reality, people tend to take matters into their own hands. It's a phenomenon we could see a lot more if the government's oil-price forecast proves wrong.

(Leonid Bershidsky, an editor and novelist, is Moscow and Kiev correspondent for World View. Opinions expressed are his own.)

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