There's some truth in what you wrote, but most of it is pretty far from reality.
In Russia's major cities, capitalism is alive and well. SMEs (small and medium enterprises) aren't as widespread as in the USA or Europe, but they are gaining ground. Wait another 20 years and they'll be everywhere. And the younger generation is quite ready to take any steps needed to support the economy.
You can buy everything in Russia that you can find in any American department store (except Slim Jims - for God's sake, they still don't sell Slim Jims). Prices are higher here, however, due to import tariffs on some goods, lower competition, and a relatively smaller market.
The import tariffs are partly a result of bureacracy (which I believe will disappear over the years) and partly to help support strategic domestic industries. For example, as an anti-crisis measure, the Russian government just increased its import tariff on consumer automobiles from 25% to 30% in a move to support the struggling domestic automotive sector. As a result, if I want to buy a quality-built car here, I can expect to spend 30-40% more for it than I would in the USA. Importantly, note that the import tariff has prompted many foreign manufacturers to set up factories inside Russia (Ford, Toyota, Honda, and others all have domestic manufacturing capacity). Given time, the price for new vehicles in Russia will come down as competition increases and the market grows, but it's gonna take another 15 years.
Economic development will help with the last two issues (the relatively lower competition and the relatively smaller size of the consumer market). Russian disposable incomes are advancing rapidly. In 2008, real incomes increased about 15%. That growth is going to be closer to 5% in 2009, but by 2010 the country should be back up to 10% annual real income growth.
The crisis is definitely going to crimp growth in 2009, of course. The government is facing its first budget deficit since 2000, and the RUB has already lost about 20% of its value against the USD and looks destined to drop another 10% by summer. However, with some USD 400 bn in foreign currency reserves on hand, the government can easily weather 2 years of low commodities prices without breaking a sweat. And commodity prices will start recovering by the end of 2009 - even in the midst of the crisis, there's simply too much demand out there (from China, Russia, India, the USA, etc.), while at the same time there's too little capex being spent on new capacity.
Don't get me wrong...there's still a lot that's wrong in Russia. The legal system needs a major overhaul. The country's still too dependent on foreign capital. The financial system is very immature, and needs a much strong legal framework that protects the rights of investors, especially bondholders. The RUB bond market is in tatters right now. The banking system is hurting in many many many ways right now (and I personally have no idea what the RIGHT way to heal it is).
And there are a LOT of people in Russia who still live below, at, or just marginally above the poverty line. In the major cities wages are doing quite well. In Moscow, educated young adults can easily make USD 2000-3000 per month. Many make MUCH more than this. But there are also a lot of people who make just barely enough to get by (I think the median monthly salary in Moscow is about USD 800 right now). In Russia's provincial regions salaries are much lower. I know doctors, teachers, policemen, and accountants who make USD 100 a month.
It's going to take a generation to bring Russia up to European levels. There's still a lot of work to be done. But the country as a whole is advancing very quickly. The stereotype of "a country with plenty of goods, but no one can afford to buy them" no longer applies. Wealth is starting to filter out of the major cities into the provincial regions. Salaries are gaining rapidly. And most importantly, the government is working hard to safeguard and support the lifestyles of the common people.
FACT: Despite the utter bullshit that is constantly written in the western press (the New York Times is pretty bad on this point, but Fox News is utterly deplorable), the Russian government is doing a VERY good job at handling the current crisis. Unlike their American counterparts, Russian politicians are acting quickly and decisively, and so far have done a hell of a good job at safeguarding the domestic economy.
