Who is to decide where Russia’s democracy and economy are heading? Certainly not the foreigners, according to Russian public officials and political experts, reports the Moscow Times:
Russians now expect the West not to meddle in their internal politics and in their relations with former Soviet republics, and they demand that the West acknowledge that Russia’s oil and gas reserves are a legitimate foreign-policy tool…
President Putin and members of his administration have repeatedly stated that Russia has its own vision as to what democracy is and how it should function. Similarly, Russia holds its own view as to the fundamentals of a free market economy. In the eyes of many citizens, the fallacy of outside critics of the Russian model is that they view the country through a prism of Western values and practices, not taking into the account the realities of the local environment.
The polls suggest that criticisms of Russia’s democratic and economic practices are not striking the positive cord with the public:
A poll released this month by the independent Levada Center showed Russians steadily losing confidence in the West: As of April, 8 percent of Russians favored closer ties with the United States, compared to 13 percent three years earlier. Analogously, 24 percent favored stronger relations with Western Europe as of last month, while 32 percent felt that way in April 2003.
Further,
Russia’s intellectual elite have also grown weary of the Western media’s portrayal of the country as backward, said Ella Pamfilova, head of the Council for Fostering the Development of Civil Society.
As Russia is riding the wave of high oil prices, it not only easily dismisses any criticism of anti-free market and anti-democratic moves — the country also flexes its muscles, using natural resources and market access as tools to promote its own agenda.
While economists generally tend to take a long-term look at the economy and project the outcome of political and economic actions beyond their immediate short-term impact, the public often is much less interested in going through such an exercise. Russia’s poor record in terms of anti-corruption, property rights protection, and judicial fairness may be pointed out by the experts, both domestic and foreign, as a barrier to economic growth, but high oil and gas prices plug-in budgetary shortfalls and have their spillover effect on other industries, keeping many satisfied with the status quo.
The bottom line is that in macro terms the Russian economy is doing relatively well — GDP is growing; inflation, although higher than some would like it to see, is at the manageable and generally predictable levels; since the 1998 the stock market experienced impressive growth (despite a recent ‘correctional’ slide); the country is paying off its debt; consumer demand is rising; real incomes are increasing; and investments are picking up as well. Growth is expected to continue — as the Chairman of the Russian Chamber of Commerce and Industry recently noted, the economy is beyond stabilization (following the collapse in 1998) and is now moving into the development stages.
There are of course a lot micro issues which make the economic picture a lot less rosy, but I am not going to dive into them in this post. If you are interested, you can get the gist of it from recent presentation by Andrei Illarionov at Cato, where he did a good job describing the state of economic and political freedoms that underlie the macro-economic figures tossed around by government officials in Russia. The issue at hand is whether an outside criticism of Russia is going to spark any changes in the country given its solid macro-economic performance. If it is not going to have an effect, is it worth it? Clearly, unlike in the turbulent 1990s, outside opinions on the path the country is taking are increasingly dismissed by Russians as bogus, hypocritical, or detached from reality. This means that there is indeed a need for a new strategy towards Russia.
So, what should that strategy be?
In my view, it has two components. The first component is to work with civil society to build up Russian institutions and address the problems that ordinary Russian citizens recognize as the ones of utmost importance, such as widespread corruption or overregulation of small business. The key here is local ownership and legitimacy – if reforms are designed and driven by the Russians they are more likely to be viewed as reforms intended to benefit the country, rather than a foreign plot to impose Western business practices or value systems. Its time to realize that “parachuting in the experts,” which was the strategy towards Russia in the 1990s, is not going to work. There is a lot to be said, however, for working with the Russians to help them develop and implement effective reforms.
The second component is to take a step back and let markets expose the problems. The fundamental wisdom of economics is that markets reward positive behavior and they punish careless actions. The financial collapse of the 1998 exposed some inherent problems in the Russian economy and there have been dramatic changes in the way some things are done. For example, the country has made tremendous improvements in the area of corporate governance and the financial collapse was simply an incentive to move the reform process forward. Why not take advantage of the incentives concept? We may point out that fairness of the judicial system is crucial for the long-term stability and predictability of the socio-economic environment, but the point really hits home when people face the costs and the negative impact of the weak judicial system. Until then, it may just remain an abstract term with little relevance to the day to day activities.
This is not to say we should ignore the problems and wait for economic collapses to expose the inefficiencies. Rather, the point is that we have to take into the account the incentives which guide views and opinions of the Russian people, and understand what exactly do citizens view as the major problem. In that regard, we should not point fingers and say that “you need to fix this and you have to fix that,” but rather ask – “what do you view as the problem and what do you need to fix it?” Of course, it matters who you ask. The good thing is that despite the brain-drain of the 1990s, there are still a lot of bright people in Russia who are committed to ideals of liberty, free markets, and democratic participation. Utilizing their knowledge is of utmost importance. Marginalizing their expertise is a strategy that will bring little benefit.
Published Date: May 31, 2006