Lessons From Russia and China

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By Warren Brown
Sunday, November 5, 2006

VIENNA I'm sitting in a Vienna airport waiting for a flight to Ekaterinburg, Russia. It has been a day-long layover, replete with temptations to slip away for an impromptu tour of the city, or to go to sleep.

But fear has been an effective jailer. I don't want to miss the once-a-day Austrian Airlines flight from Vienna to Ekaterinburg. I remain alert, awake and within easy walking distance of the departure gate.

Instead of obsessing over my connecting flight, I probably should worry more that we in America, so accustomed to having things our way, so puffed up with a sense of entitlement to the world's energy resources, are missing the boat.

Consider Russia.

In the bad old Soviet days of a command economy, one in which the state dictated product development and output, regardless of what consumers needed or wanted, Russia was the functional equivalent of a welfare state. Retail activity was minimal. Customer service was a Western concept best kept in the West. Product quality was equally bad.

Any capitalist company worthy of the name stayed away from Russia back then. Russia, in fact, habitually kept such companies at bay.

In the early 1990s, when it appeared that a new Russian day was dawning with the dissolution of the Soviet Union, there was hope that commercial and other economic matters would improve. Instead, they became measurably worse, with hyper-inflation, joblessness, and the disintegration of much of the Soviet-style safety net that at least kept most Russian citizens housed and fed.

Poverty still entraps much of the Russian population. But thanks to the world's relentless demand for crude oil and the wealth of crude still available within Russian-controlled borders, the Russian economy is now growing rapidly, creating a viable, consuming middle class.

Most of the world's major car companies are rolling into Russia, setting up plants, supplier networks and retail outlets. Sales of foreign cars, negligible under the Soviet system, grew 58 percent in Russia last year, accounting for 400,000 new-vehicle deliveries in that country in 2005, according to the Financial Times and industry sources.

Total foreign-car sales in Russia now outnumber those sold by Russia's government-controlled Avtovaz, maker of the slab-sided Lada cars.

The Hollywood movie industry, more inclined to feature Russian fat cats and mobsters than it is to portray the lives of the country's ordinary citizens, would have us believe most of the new cars being sold in Russia are from Mercedes-Benz, BMW, Lamborghini and other high-end manufacturers. Luxury cars are selling, of course. But a closer look at the auto sales picture shows that, in oil-rich Russia, small, fuel-efficient foreign automobiles rule.

Increasingly, even the luxury models sold in Russia are fuel-efficient, advanced diesel models, which is why the Mercedes-Benz luxury-car division of DaimlerChrysler has chosen Russia and China for an October-November presentation of its latest diesel products.

It makes me wonder: There is Russia, awash in so much oil and filled with so much natural gas that many countries in Asia and Europe, as well as the United States, are scampering about, trying to tap into its natural resources. But there also are Russian consumers hustling for economical automobiles and trucks.

Certainly, it can be argued that the Russians are buying little cars such as the Ford Focus and Ford Fiesta because they are all the nascent Russian middle class can afford at this time. But there is ample evidence, as indicated by Russia's move toward diesel and other more energy-efficient fuels, that the Russian government has somewhere in its psyche tucked away the thought that it isn't going to make the same energy-depleting, egregiously consumptive mistakes that we've made in the United States.

The Chinese, to cite another example, make no bones about their intentions in this regard. In its various 50-50 partnerships with Western automobile manufacturers and suppliers, China is learning what to do and, more important, what not to do. As shown by the increasingly sophisticated cars from Chery Automotive Co. in Wuhu and the Great Wall Motor Co. in Hebei, China has quickly mastered the art of making cars the traditional Western way.

But the Chinese government has served notice to automotive manufacturers and consumers that it isn't going to tolerate the hell-bent-for-torque-and-horsepower competition that has characterized so much of the Western approach to automobiles. Accordingly, the government of the People's Republic of China is putting financial and political muscle behind a push for cleaner, more fuel-efficient automobiles.

Meanwhile, the leaders of the U.S. government, mired in the madness and intellectual sadness of national midterm elections, go about their careless, cheery way promising an over-indulged and self-indulgent electorate that they are not going to raise taxes on gasoline; will not consider taxing things such as horsepower, engine displacement and vehicle size; and will do their darnedest to keep supplying them with the cheapest gasoline in the developed world.

The same politicians, the ones who decry the humongous quarterly profits of America's oil producers -- who would be better characterized as the nation's leading oil importers -- then quietly go about the business of giving those companies every conceivable tax break without any meaningful legislation demanding that Big Oil step up the exploration, development and distribution of alternative fuels.

Oil-fed economies are growing and taking off all around us, using up more of a globally diminishing resource, but at the same time passionately working to put in place alternative fuels and other energy-conservation programs in anticipation of an eventual turn away from oil. But we in the United States are still trying to figure out, without much enthusiasm, how to get to the departure gate.


© 2006 The Washington Post Company

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