Local Economy

The phrase “The depleted lawn of formal local economy and the wild field of informal economy” can serve as the subtitle of this chapter, since the Russian provincial economy exists in two forms—different by nature and origin but deeply interpenetrating. The first one is the formal economy, where individual business depends more on government control or support than on private initiative. The second one is the wild field of informal economy, legitimate in its scope but far from legal. It largely consists of shadow and criminal economic activity. I consider the balance between formal and informal provincial economies, focusing here on the first component. The Russian province has distinctive features not only in informal economy but also in the structure of its formal part. The public sector of the formal economy is of particular significance to provincial society. Against its background, the other components of the local economy—material production and services—appear substantially less developed. Small business, particularly sole proprietorship, plays an important role in the province. Its position is specific and its dynamics are peculiar, as it constantly and continuously switches between formal and informal economy. Sole proprietors are the most vibrant, essential segment of the local economy, a significant part of which is constantly in the economic “shadow.”