Social Risks of Small Business in Russia

The article touches upon the issues of small business development in modern Russia. We prove that government support is necessary to overcome the risks that prevent small businesses from becoming the cornerstone of the national economy. Small businesses were the pioneers of the post-Soviet market, but, contrary to the sociologists’ expectations, they failed to become the backbone of the middle class, instead turning into yet another source of social pariahs. Academics, engineers, teachers, and other members of the Soviet intelligentsia were first swept up by the market whirlwind, and then, in their vast majority, left behind below the poverty threshold, turning into outcasts. The reasons behind this apparently lie in the nature and conditions of Russia’s shift to a market economy. Control over the profitable branches of production, finances, and trade soon fell into the hands of gigantic monopolies with close ties to the political elites. Small businesses were left on the very margins of privatization. It is commonly believed that small innovative enterprises contribute more effectively to the development and sales of new products and technologies than big firms. In Russia, however, innovative products account for a barely significant share of small business output. The economic depression and lack of proper small business development may largely be attributed to an unstable macroeconomy, particularly the high level of inflation and budget deficit. Lack of political stability has also had its negative impact. Russia continues to create unfavorable conditions for small business. Oppressing small businesses is easy, as the Russian realia make it far from transparent, and every entrepreneur has skeletons in their closet if you look hard enough. Pushed into a corner, such entrepreneurs often delve into gray areas and start doing business illegally. Small business funding remains to be highly limited, usually not going beyond developing business support programs. But even amid all these hardships, Russian small businesses keep growing. That said, the process is not as successful as it might have been expected if the state and the government had paid enough attention. It is obvious that government support is essential for small enterprises.

market economy, small business, risks, state support, privatization, entrepreneurship