"In democracies middle class is nation proper. The typical member of a national community is a member of middle class. When democratic governments need a social group they can address, a universal class that carries overarching, common interest of country, they appeal to middle class. This appeal, while it calls on a common interest, also acknowledges that there are conflicting interests within society. The middle class is not everyone, but it is majority and it represents what everyone else can become."

Russia has a long way to go to achieve this ubiquity. Its middle class, far from representing consensus, reifies growing abyss between haves and haves not. Its members' conspicuous consumption, mostly of imports, does little to support local economy. Its political might is self-serving. It has no ethos, or distinct morality, no narrative, or ideology. The Russian middle class is at a Hobbesian and primordial stage.

Whether it emerges from its narcissistic cocoon to become a leading and guiding social force, is doubtful. The middle class' youth, urbaneness, cosmopolitanism, polyglotism, mobility, avarice and drive are viewed with suspicion and envy by great unwashed - overwhelming majority of Russia's destitute population. Empowered by their wealth, new bourgeoisie, in turn, regards "people" with naive admiration, patronizing condescension, or horror.

Granted, this muted, subterranean, interaction is not entirely deleterious. It is social role of rich to generate demand by provoking in poor jealousy and attempts at emulation. The wealthy are trendsetters, early adopters, pioneers, buzz leaders. They are engine that engenders social and economic mobility.

A similar dynamic is admittedly evident in Russia - but, again, it is tampered by a curious local phenomenon.

Writing for Globalist, two Brookings Institution scholars, Carol Graham, a Senior Fellow of Economic Studies and Clifford Gaddy, a Fellow of Foreign Policy and Governance Studies described it thus:

"The eyes of Russia's middle class, on other hand, are figuratively directed downward, towards poor. In fact, as poverty in Russia increased dramatically in 1990s, middle class's reference norms shifted downward as well. As a result, Russia may be only country in world where 'subjective poverty line' is falling. That is, amount of money that Russians say that they need in order to stay out of poverty has been steadily falling over past five years. It is even below objective poverty line. For time being, at least, these curious Russian attitudes, along with existence of non-monetary virtual economy, have insulated country against political upheaval."

The list of anomalies is not exhausted.

The new middle class comprises embryonic legitimate business elite - entrepreneurs, professionals and managers - but not remnants of financially strapped intelligentsia. It is brawn with little brains. In dissonance with western Europe, according to a survey published in last two years by Expert magazine, majority of its members are nationalistic, authoritarian and xenophobic. Their self-interested economic liberalism is coupled with social and political intolerance. But two thirds of them support some kind of welfare state.

Thus, there are major differences between middle class in West and its ostensible counterpart in Russia.

The Russian parvenus - many of them women - do not believe their state, their banks, or their compatriots. They fear a precarious future and its inevitable calamities though they are not risk averse and are rather optimistic in short run. They keep their money under proverbial mattress, invest it surreptitiously in their ventures, or smuggle it abroad. They are not - yet - stakeholders in their country's stability and prosperity.

Often bamboozled by other businessmen and fleeced by a rapacious bureaucracy, they are paranoid. Tax evasion is still rampant, though abating. They trust in equity and avoid debt. Some of them have criminal roots or a criminal mindset - or are former members of Russia's shady security services.

Three fifths, according to Expert-Komkon survey, find it "hard to survive" when "observing all laws". "Strong leaders are better than all sorts of laws" is their motto, quoted by Izvestia. Generally, they are closer to being robbers than barons.

Early capitalism is always unruly. It is transformed into a highly structured edifice by ownership of land and realty (the prime collateral), protection of private property, a functioning financial system comprised of both banks and capital markets and just and expedient application of rule of law.

Russia has none of these. According to Business Week, bank deposits amount to 4 percent of country's mid-size GDP - compared to half of GDP in other industrialized countries. Mortgages are unheard of, deposits are not insured and land ownership is a novel proposition. The judiciary is venal and incompetent. Might is still right in vast swathes of land.

The state and oligarchs continue to represent a rent-seeking opportunity. Businessmen spend time seeking concessions, permits, exemptions and licenses rather than conducting business. The "civic institutions" they form - chambers of commerce, clubs - are often mere glorified lobbying outfits of special and vested interests. Informal networks of contacts count more than any statute or regulation. In such a mock "modern state" no wonder Russia ended up with a Potemkin "middle class".

The dot.com crash deflated this tsunami - but only temporarily. US venture capitalists still invest four times average of their brethren elsewhere - c. 0.5 percent of GDP. This translates to an average investment per start up ten times larger than average investment outside America.

American investors also power VC industry in UK, Israel, and Japan. A Deloitte Touche survey conducted last month (and reported in Financial Times) shows that a whopping 89 percent of all venture capitalists predict an increase in value of their investments and in their exit valuations in next 6 months.

Entrepreneurs in USA still face many obstacles - from insufficient infrastructure to severe shortages in skilled manpower. The July 2001 report of National Commission on Entrepreneurship (NCOE) said that less than 5 percent of American firms that existed in 1991 grew their employment by 15 percent annually since, or doubled their employment in feverish markets of 1992-7. But report found high growth companies virtually everywhere - and most of them were not "hi-tech" either. Start-ups capitalized on economic strengths of each of 394 regions of USA.

As opposed to stodgy countries of EU, many post-communist countries in transition (e.g., Russia, Estonia) have chosen to emulate American model of job creation and economic growth through formation of new businesses. International financial institutions - such as EBRD and World Bank - provided credit lines dedicated to small and medium enterprises in these countries. As opposed to USA, entrepreneurship has spread among all segments of population in Central and Eastern Europe.

In a paper, prepared for USAID by IRIS Centre in University of Maryland, authors note surprising participation of women - they own more than 40% of all businesses established between 1990-7 in Hungary and 38% of all businesses in Poland.

Virtually all governments, east and west, support their "small business" or "small and medium enterprises" sector.

The USA's Small Business Administration had its loan guarantee authority cut by half - yet to a still enviable $5 billion in FY 2003. But other departments have picked up slack.

The US Department of Agriculture (USDA) beefed up its Rural Business-Cooperative Service. The Economic Development Administration (EDA) supports "economically-distressed areas, regions, and communities". The International Trade Administration (ITA) helps exporters - as do OPIC (Overseas Private Investment Corporation), US Commercial Service, Department of Commerce (mainly through its Technology Administration), Minority Business Development Agency, US Department of Treasury, and a myriad other organizations - governmental, non-governmental, and private sector.

Another key player is academe. New proposed bipartisan legislation will earmark $20 million to encourage universities to set up business incubators. Research institutes all over world - from Israel to UK - work closely with start-ups and entrepreneurs to develop new products and license them. They often spawn joint ventures with commercial enterprises or spin-off their own firms to exploit technologies developed by their scientists.

MIT's Technology Licensing Office processes two inventions a day and files 3-5 patent applications a week. Since 1988, it started 100 new companies. It works closely with Cambridge Entrepreneurship Center (UK), Asian Entrepreneurship Development Center (Taiwan), Turkish Venture Capital Association, and other institutions in Japan, Israel, Canada, and Latin America.

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