Russia under Medvedev for Moscow

The advent of the Medevedev presidency has brought into focus two opposite conjectures about Russia. The first may be called the geopolitical conjecture, the second the economic reform conjecture. They can be found equally in Russia and the West.

A hostile version of the first is represented by the title and content of a new book by Edward Lucas called The New Cold War and subtitled ‘How the Kremlin Menaces both Russia and the West’. This is admittedly an extreme position, but, in more moderate form, it represents the view of a sizeable part of the western policy-making establishment.

Lucas argues that Russia is trying to rewrite the last chapter of the Cold War in its favour. Under Putin it has been using its oil and gas resources and its strategic alliance with China to regain control over the old Soviet empire, play a game of ‘divide and rule’ in Europe, separate Europe from America, and shift the balance of world power in its favour. The replacement of Putin by Medvedev will make no difference. Russia’s course is structurally determined. To meet this threat the west should recover the collective solidarity which helped it win the Cold War. I need hardly say that parallel thinking can be found in the Russian policy-making elite.According to a thesis popular in Moscow-and indeed expressed by President Putin in his February 2007 Munich speech – Russia must conduct its internal and external policy so as to give it the power to resist the US claim to global dominance. [Thus the March 2007 ‘Survey of Russian Federation Foreign Policy’ argued that Russian-UK bilateral relations are impeded by the ‘avowedly messianic disposition of a considerable part of the British political elite…regarding the internal political process in Russia’. Russia sees Britain supporting the USA in upholding US global dominance.]

In turning to the second, or economic reform conjecture, consider the pamphlet ‘Russia’s Future under Medvedev’, edited by Igor Yurgens, and compiled by a group of experts said to be close to the President-elect. True enough, it insists on the need for Russia to preserve its territorial integrity, and restore Russia’s international status. But their goal is not to make Russia strong and feared in the world –only strong enough to protect its independence – but to improve the welfare of its people. This is discussed in terms which are entirely familiar to the west. Russian economic policy should seek to raise Russian per capita incomes to European levels by 2020.

And here is the nub of their argument: economic development requires political liberty. They reject, that is, the authoritarian model. This point is quite explicit: ‘The absence of genuine and honest competition within Russia’s political system and the method used to appoint the elite deprive Russian society of the opportunity to discuss its future development, and exclude the majority of the population from taking part in the country’s self-determination. The authors of the Yurgens pamphlet want the rule of law, an honest judiciary and civil service, secure property rights, a fre media, an incorruptible administration, and a vigorous civil society –in other words, the full panopoly liberal constitutionalism; because, they argue, without these things there can no broad coalition can be assembled in favour of the ‘deep modernization of the economy’.

There is no guarantee that this goal will be achieved. In fact, the authors are quite pessimistic about it. [They point out that over the last 150 years Russia has fallen victim to the same cycle. The pattern is as follows. First, liberal reforms lead to a rapid economic upturn. Then, different interest groups fight over the distribution of its economic benefits and are tempted to use the new wealth for geopolitical purposes. Social tension grows as military expenditure rises. The reforms are checked, and conflicts at hom and abroad lead to political and social crisis and collapse.

Is this cycle destined to recur? They portray four possible scenarios. The first they call the Rentier Economy . In this, the whole society lives off energy rents; the elites take the giant share but can distribute enough of them to keep most people happy. But such an economy is vulnerable to external shocks –such as a fall in the price of energy –which can trigger off a huge struggle over distribution. In the west this scenario is familiar as the ‘oil’ or ‘natural resources’ curse.

A second possibility is the Mobilization Economy. This is essentially a variation of the Soviet model. The state would concentrate resources on making Russia an energy and raw material ‘superpower’, develoiping its infrastructure, and building up the military. Such a strategy, they suggest, will eventually fall foul of the same problem that brought the Soviet state to grief –inefficiency of central planning.

The third scenario is the Inertia Economy. This really harks back to Chernomyrdin’s famous remark, ‘We tried to make everything better, but everything stayed the same’. There is no strategy, simply ad hoc interventions and tactical maneouvring within the elite, populist appeals, feeble attempts at market reform. There is an implicit criticism here of the last years of the Putin presidency.

Finally, there is the Modernization Economy. This is the mopst desirable, in the authors’ view, but also the least likely, because it would require a broad modernizing coalition which cannot be created from the present political system. Its implementation would involve the reform of public and market institutions, political competition, and a strengthening of civil society forces.

However, any strategy other than the broad self-sustaining growth envisaged by the fourth scenario leaves Russia dangerously exposed to shocks, and a repetition of the age-old cycle.

So the reform of the state is key to realizing strategic development. The Yurgens pamphlet points out quite rightly that an autocratic state, however strong it may seem, is not an appropriate vehicle for the ‘comprehensive development’ of society because it can’t mobilise the necessary support. At present Russia is fragmented into ‘micro-communities’ with little cohesion. It has experienced large increases in inequality between regions and occupations; the weakness of civil society alienates the citizens from the power and prevents feed back.

The authors rest their hopes for deep development on the expansion of the middle class which, in good bourgeois fashion, they consider to be the real carrier of progress.

Now for a couple of criticisms. Yurgens and co argue that deep political reform is needed for deep economic reform. Critics could point to China, where the Communist Party has been notably successful in leading the post-Communist economy onto a fantastic growth path, with double digit economic growth now in its 20th year. The question this raises is: is democracy necessary for sustained economic growth? I have no answer to the riddle, merely an observation. There is little doubt that the collective capacity of the party state in China is much greater than that of the personalised Kremlin-state in Russia. This is because the governing party has deep roots in the society, which it uses both for the purpose of control and as a feed-back mechanism. In Russia, I regret to say, the only genuine party of this kind is the Communist Party, and it has lost any right, ability, or support to play this modernizing role.

A second observation as the Chinese bureaucracy is much less corrupt than the Russian bureaucracy. This is probably due to a mixture of Confucianism and Communism.In Russia, corruption has become a way of life, and it can’t be altered by Presidential decree, only by political reforms.

It is also superficial, I believe, to rely on the inevitability of gradualness –such as the growth of the middle class –to bring about the required political reform. There is no reason why the middle class should favour democracy, provided the state provides them with rents and sufficient security to feel safe.

It is often pointed out that the 19th century United States was pretty wild, but as wealth spread, the ‘robber barons abandoned corruption and lawlessness. I think this picture is vastly overdrawn, and not a good guide to possible Russian developments. One must always remember that American capitalism was built on two immigrant imports lacking in Russia: the Protestant religion and free institutions.

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