McDonald's will save Russia

Victor vrosado at
Sat Feb 23 16:39:47 MST 2002

February 23, 2002

Arise, Ye Prisoners of Starvation



One way to measure Russia's slow recovery from the 70-year coma of Communism
is to count lobster tanks and sushi bars. Old Russia hands like me, who
remember when a banana was more wondrous than a Fabergé egg, swoon at the
profusion of delicacies available these days in the bright showcase cities
of Moscow and St. Petersburg.

My own crude index of the economic condition, however, is the brazen yellow
M that now seems to illuminate every other corner of this winter- gray city.
California rolls and foie gras are evidence of the great wealth enjoyed by
an industrious few, some of whom are even industrious at legitimate
businesses. McDonald's is a barometer of how the wealth has seeped out
beyond the elite. It tells you a bit about how Russia is doing at the
critical business of building a middle class. Drop into a McDonald's here,
and you find Russians who scarcely existed a dozen years ago ‹ Russians with
decent clothes and healthy teeth, Russians with jobs that give them spare
time and cash for a family splurge, Russians with, polls show, a flicker of
optimism. You find Russians who have more or less achieved their plaintive
ambition to be "normal people."

Whether this represents an improvement in culinary or nutritional standards
in Russia is another conversation, although those who want to argue the
evils of cholesterol should know you're talking about a country where a slab
of pork fat on buttered bread is considered the ideal accompaniment to a
jolt of vodka. There is also a fine term paper to be written comparing the
regimental good cheer of McDonald's cadres to Lenin's Young Pioneers, but
we'll leave that for another class.

As a business venture, McDonald's has been not just an indicator of economic
advance but a contributor to it. At this point, globophobes may want to
leave the room. I know that elsewhere in the world McDonald's is a swell
symbol of American cultural imperialism ‹ blockaded by French farmers,
bombed by Turkish protesters and most recently vandalized by Pakistanis
angry at American bombing raids in Afghanistan. In Russia, McDonald's is a
lesson in the salutary potential of globalization when a company comes to
stay rather than strip-mine.

The story begins in the Gorbachev era, when the abject failure of the Soviet
economy became clear to all but the most deluded. In farming towns you found
spoiled land, demoralized workers, broken-down equipment, wheat rotting in
the open. Agriculture occupied an astounding 19 percent of the work force
(in the U.S. the figure was 3 percent), yet even in a good year the country
imported millions of tons of grain.

Mr. Gorbachev, himself a farm boy, led a frantic hunt for ways to fix it,
and for a time the countryside was beset by reformers and rainmakers of all
kinds, devoted to saving Russia from starvation. There were idealistic young
administrators who tried to invigorate collective farms by turning
spiritually depleted farm workers into shareholders. There were family farms
and sharecropping schemes. I met a few solo farmers back then teaching
themselves agronomy out of library books. Dutch experts arrived bearing
"turnkey potato projects," little swatches of Holland planted in Moscow's
exurbs. Mr. Gorbachev and then Boris Yeltsin tried incentives, they tried
hectoring, they tried firing agriculture ministers by the bushel.

All these well-intentioned efforts ran up against a killing reality: There
was no marketplace in which to sell. The Soviet Union had one insatiable
customer, the state, which prescribed what farms could grow, established
quotas, set prices and monopolized distribution. No one wanted to dismantle
this creaky arrangement for fear of chaos, hunger and revolt. This meant
that a farmer who mustered the energy to grow more than his obligations to
the state had nowhere to sell the surplus except in neighborhood produce
bazaars, where the prices were more or less fixed.

Enter McDonald's. The company arrived late in the first wave of Western
companies that had come to cash in if Russia succeeded. Most were
opportunists looking to import Western products and skim the dollars of
foreign expatriates, tourists and the lucky Russian rich. But McDonald's
threw itself into the deep end. From the outset, it sold food to Russians ‹
for rubles. And since rubles were then next to worthless outside Russia, it
began looking for Russian suppliers.

McDonald's scouts trolled the countryside for ambitious young farm
directors, offering a premium price if they would provide beef and milk and
pickles to the company's rigid specifications. The reactions ranged from
suspicion to ridicule to slack-jawed amazement, as if these guys had come
not from McDonald's but Mars.

Viktor Semyonov, who runs a farm south of Moscow, told me the other day that
when McDonald's first showed up, offering to pay rubles if he would grow
some strange lettuce called "iceberg," a deputy rudely dismissed the
visitors. A silly idea, he insisted, and anyway an American company
(actually it was the Canadian branch of the company that opened the Russian
frontier) should pay dollars. Mr. Semyonov, who had a nose for an
opportunity, sent his man to grovel before the foreigners. His farm is now a
prosperous supplier of vegetables and herbs from acres of efficient,
computer-sprinkled greenhouses. Mr. Semyonov went on to serve a term as
minister of agriculture.

By the opening of the first store McDonald's had managed to obtain a fourth
of its ingredients from Russian sources. Now the company has 100 Russian
suppliers who provide 75 percent of what goes into the restaurants here. The
company's processing center outside Moscow (it goes by the cringe-inducing
name of McComplex) even exports fruit pies to Germany ‹ payback, perhaps,
for all the trainloads of charity food the Germans sent here during the
various famine scares of the Gorbachev era.

Thus did the McDonald's model provide a missing link between would- be
Russian farmers and would-be Russian consumers. McDonald's did not save
Russia. Russia, in fact, is still some distance from being saved, as insider
syndicates and provincial feudalism dominate much of the economy, including
the big farms. But the country no longer totally defies the laws of supply
and demand. 

Although there has always been in Russia a streak of messianic estrangement
from the West, the globalization backlash has not taken hold here, at least
not yet. In the early days, McDonald's was as much a spectacle as a place to
eat ‹ a heartbreaking reminder of how pathetically far behind this
superpower was. Visitors from distant cities flew home with hamburgers, as
if bearing relics of civilization. Once in those early days, after an
Aeroflot flight to Baku, in Azerbaijan, I hitched a ride in from the airport
with a family coming home from business in Moscow. As the driver raced along
the highway, one of my fellow passengers reached across the seat and proudly
offered me an eight-hour-old Big Mac from a bag of them brought home as

The novelty has diminished as a competitive abundance of decent, home-grown
cafes and fast-food outlets materialized in McDonald's wake, but today
Russians still greet the opening of a McDonald's as a vote of confidence in
the neighborhood, not to mention a clean, well-lit place to congregate and a
source of scarce jobs for local youngsters. The jobs, more than 9,000 of
them now, pay poorly, but a little less poorly than most other employers,
and they pay on time in a country where wages often lag many months behind.
The training includes heavy indoctrination in a work ethic that had been
smothered by Soviet complacency. Unlike companies that came for the easy
profits ‹ Pizza Hut comes to mind ‹ McDonald's weathered the economic storms
and devaluations of the late 1990's without layoffs. A company that started
under expatriate management is now run entirely by Russians.

"Yes, we think globally, but we act locally," says the president of the
Russian venture, Khamzat Khasbulatov, reciting a bit of company propaganda
that, here at least, is true. And if all this makes you feel less guilty
about the times you succumbed to your brainwashed child's demand for a Happy
Meal ‹ O.K. by me.

So how is Vladimir Putin's economy doing, on my highly scientific McDonald's
Index? It's on a slow climb out of a very deep hole.

>From the first hamburger emporium that opened on Pushkin Square in January
1990, still the busiest outlet in the world, McDonald's has grown to 74
restaurants. They have now begun to spread beyond the outskirts of Moscow to
a few provincial cities like Nizhny Novgorod, Rostov-on-Don, Yaroslavl and
Kazan. The plan is to keep expanding by 20 or 25 stores a year.

According to my calculations, judged by the number of McDonald's outlets per
capita, Russia will be Canada in ‹ hmm, about 70 years. 

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