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It’s the Economy, Mr. President

Published: May 23, 2014 (Issue # 1812)




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Former U.S. President Bill Clinton famously won the first of his two terms in the White House with the slogan: “It’s the economy, stupid.” At the start of the 1992 election campaign, his victory was unexpected. That was because George W. Bush had just presided over what was deemed a successful war against Iraq and the boost to national pride was expected to carry him safely into a second term. But the incumbent president discovered that national pride only went so far. In the end, what people really cared about is whether their lives were improving or not. They cared mostly about the price of food and other goods and how secure their jobs are and prospects for the future were.

The lesson that Bush learned in November 1992 is one that other leaders have paid close heed to since. It is also one of the important reasons why over the past two weeks there have been conciliatory statements from the Kremlin concerning the crisis in eastern Ukraine and the relatively soft line approach. The lesson of November 1992 is also one of the reasons why the leading candidate for the Ukrainian presidential election on Sunday is Petro Poroshenko, who favors a strategy of engagement rather than confrontation with Moscow. The economic impact of a deeper confrontation with Russia is also one of the reasons why core European Union countries are more intent on de-escalating tensions with Russia than in extending sanctions.

Political jingoism and short, successful military excursions can drive the “feel-good” factor for some time, but only a healthy economy sustains a high popular rating for incumbent leaders and gets them safely re-elected.

It is far too early, of course, for any sense of complacency over the Ukrainian crisis, or to expect investment flows to Russia to pick up. Investors and business leaders will likely stick to a strategy of prudent observance for many months ahead to make sure there is no further spark for political or sanctions risk. It will take a couple of quarters to accurately assess the damage already inflicted on the economy, and the government faces extremely difficult challenges in such areas as inflation control and how to reverse the high volume of capital flight reported so far this year.

But it is the pragmatism of Poroshenko which offers a lot of hope that political risks will be lowered between Moscow and Kiev and between Russia and the EU. Otherwise, continued belligerency between Russia and Ukraine would make it difficult to repair relations with Brussels and to restore investor and business confidence. The next president of Ukraine will certainly inherit a huge array of problems and the most difficult challenge is expected to be restoring domestic political unity. The self-empowered protesters on Maidan Square are unlikely to leave just because there is a newly elected president, and the separatists in the eastern regions of Ukraine will expect negotiations to bring some measure of autonomy to the region.

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ALL ABOUT TOWN

Sunday, Nov. 23


Get in the holiday spirit at today’s Winter Bazzar at the Astoria Hotel. Featuring gifts from around the world such as French eclairs, Dutch cheeses and Indian jewelry, the annual event organized by the International Women’s Club will feature 18 international stands and raise money for charity through the sales of a diversity of products that further illustrate the city’s international connections.



Monday, Nov. 24


Dr. Axel Schulte, Department Head at Fraunhofer Institute for Material Flow and Logistics in Dortmund, Germany, is the featured speaker at the SPIBA Industrial Committee lecture on “The Fourth Industrial Revolution: Digitalization of the Supply Chain.” The event begins at 4 p.m. at the Graduate School of Management at 3 Volkohvsky Pereulok and registration is required by Nov. 21 either by emailing office@spiba.ru or calling 325 9091.



Tuesday, Nov. 25


Tag along with AmCham during their “Industrial St. Petersburg” Tour program today. This incarnation of the ongoing series will visit Philip Morris Izhora and include an Environmental Health and Safety Committee meeting.


Find out how to expand your business east during the “Business With China” forum beginning today and concluding tomorrow at the Lenexpo convention center. The largest Russian forum dedicated to business with the Asian giant, topics that will be discussed include logistics, customs clearance, trade financing and many more.



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