Publication: Monitor Volume: 4 Issue: 190

The economic crisis has hit Russia’s already-fragile small-business sector especially hard, with more and more small businesses being driven into the underground economy. Ivan Grachev, leader of the “Development of Entrepreneurship” social-political movement, told Moskovskie novosti that around 15 percent of legally registered small businesses in Moscow had folded since the crisis broke. Grachev said the financial-banking crisis had completely destroyed the faith of entrepreneurs in the state. He told the weekly newspaper that, whereas five years ago businessmen would tell him they kept some 50 percent of their finances off the books, today the figure is some 90 percent. Many businessmen, he added, have decided to go completely into the shadows after having lost money in banks.

Grachev said the current state of affairs fills the coffers of organized crime at the expense of the state treasury. At the same time, entrepreneurs have told him that if the government would provide their businesses with “minimum protection,” they would gladly pay twice in taxes what they pay to “kryshas” (protection rackets) in order to avoid dealing with criminals and spending time, money and effort in maintaining “triple bookkeeping” (Moskovskie novosti, October 11-18).

Grachev said the number of legally registered small businesses in Russia has been falling by 100,000-150,000 per year since 1995. Today, there some 700,000. Poland, a country with a third of Russia’s population, has over twice that number.