restricted access Preface: The Strongman Economy?

From: Putinomics

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PREFACE/THESTRONGMANECONOMY? “There are two absolutely very well-known historical experiments in the world—East Germany and West Germany, and North Korea and South Korea.Nowthesearecasesthateveryonecansee!”1SospokeVladimirPutin, president of the Russian Federation, in an address to the Duma in 2012. As a former KGB operative in communist East Germany, Putin knew of what he spoke.Communism,helaterexplained,wasa“historicfutility.Communism and the power of the Soviets did not make Russia a prosperous country.” Its main legacy was “dooming our country to lagging steadily behind economically advanced countries. It was a blind alley, far away from the mainstream of world civilizations.”2 Putin is not widely known as a critic of communist economics.ThecollapseoftheSovietUnion,hefamouslydeclared,was“the greatest geopolitical catastrophe of the century.”3 “Whoever does not miss the Soviet Union has no heart,” Putin said on a different occasion. Less well known, he also warned: “Whoever wants it back has no brain.”4 The Kremlin’s wars in Ukraine and Syria and its attempt to reconstruct the “sphere of privileged interests” that Russia lost when the Soviet Union collapsedhaveonlyheightenedthepopularsensethatVladimirPutinandthe Russian elite are dead set on building the Soviet empire anew. In economic terms,manypeoplethink,Russia’sfailingssincePutincametopowerin1999 mirror the dysfunctions of the Soviet economy. Ask a typical person their impressions of Russia’s economy and words such as corruption, kleptocracy, and petrostate come to mind. These descriptions get much right. The policy failures and missed opportunities of the past two decades are plentiful. Whole books are devoted to exposing the corruption of Russia’s rulers—and indeed they are corrupt.5 One U.S. senator has described Russia as “a gas station masquerading as a country”—and indeed, oil and gas play as large a role as ever.6 Other analysts xii | Preface call Russia a “neo-KGB state”—and indeed, former spies and secret agents dominate not only the government but business, too.7 These critiques of contemporary Russia’s political economy are levied by foreigners and Russians alike, and not only by those Russians who support the opposition. The economic problems Russia faces are real, and many are self-inflicted. Yet neo-Soviet it is not. Today, Russia’s state plays a large role in the economy , but unlike in the Soviet period, the Kremlin only dominates certain sectors, leaving others alone. Nor is the story solely of mistakes and failures: things could well have been worse. Indeed, from the perspective of 1999, whenPutincametopowerandbeganforgingthecentrallymanagedpolitical system that governs the country today, Russia’s economic performance has exceeded most expectations. There was some optimism about the independent Russia that emerged from the wreckage of the USSR in 1991, but during the subsequent decade everything seemed to go wrong. The country’s agricultural sector sank into depression. Much of the consumer goods industry wentbankrupt.Industrydidrelativelybetteronlybecauseitwassustainedby government subsidies that fueled inflation, wiping out many Russians’ savings . By the end of the 1990s, the optimistic expectations that Russia would develop a new, capitalist middle class seemed, to most observers, naive. The mostvisiblenewclasswasthatoftheoligarchs,whosecorruptbusinessdealings were the main news story of the 1990s. By the time of the 1998 financial crash, when Russia defaulted on its debt and the ruble collapsed, foreign and domestic observers alike had downgradedtheirexpectationsofwhatRussiacouldachieve .In1991,someanalysts hoped Russia could become a normal European country. In 1999, the most optimistic interpretation was that Russia had become a normal emerging market.8 That was not a compliment. The news in 1999—the year that Putin took power—was depressing. “In general, the Russian economy is a mess,” beganonestoryintheWashingtonPost.9“DoubtsRiddleOptimismof Young Russians,” reported USA Today.10 Looking on the bright side, a headline in Britain’s Independent noted, “Russia is down but not out; her economy has shriveledbutRussiastillhasamountainofhorrendousweapons.”11Andthat was the good news! Perhaps the post-1998 gloom was unduly negative, unrepresentative of what realistically should have been expected from Russia? Perhaps a better metric would be to find a country that looked like Russia in 1999 and compare its development. A middle-income country. A country in which oil rents constituted at least 10–15 percent of GDP and all natural resource rents constituted around 20 percent of total output.12 A country in which a young Preface | xiii lieutenant colonel took power in 1999, committed to using the security servicestobolsterhispower .Apresidentwhoclaimedthemantleofdemocratic legitimacy in part based on his ability to force big business and oligarchs to follow his rules, whether by means fair or foul. Oneneednotinventacountrythatin1999lookedsolikeRussia.Itexistsin ChavistaVenezuela:stillgovernedbyanautocraticregime,stilldependenton declining oil revenues, still failing to build an economy based on rules rather...


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Subject Headings

  • Russia (Federation) -- Economic policy -- 1991-.
  • Russia (Federation) -- Economic conditions -- 1991-.
  • Russia (Federation) -- Politics and government -- 1991-.
  • Elite (Social sciences) -- Russia (Federation).
  • Putin, Vladimir Vladimirovich, 1952-.
  • Presidents -- Russia (Federation).
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