One of our recent blogs discussed how the substance of the political and economic platform of President Putin’s United Russia party was conspicuously missing in the hype preceding the December 2 parliamentary elections. In fact, the party’s slogan “Putin’s plan is Russia’s victory” rang somewhat hollow in the light of survey results showing that only 6% of Russians could explain what that plan was.
As United Russia’s predicted landslide victory came to fruition, the continuation of President Putin’s leading role in the country seems assured for the years to come. His hand-picked likely successor Dmitry Medvedev suggested that Putin (barred by the constitution from the third consecutive term in office) become Prime Minister after the March presidential elections and linked his own nomination to “the need to guarantee the continuity of the policies that our country has been pursing over the past eight years.”
What policies might those be, then? Andres Åslund from the Peterson Institute for International Economics offers some interesting insights on what he calls “Putinomics.”
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In his first term, Putin appeared to be an authoritarian reformer, undertaking substantial market reforms, such as introducing a 13 percent flat income tax. But in his second term, Putin was simply authoritarian, undertaking no economic or social reforms worth mentioning. The expropriation of the oil company Yukos, valued at $100 billion, was the signal event and was followed by rising corruption. (…) Putin’s regime may be described as a group of clans, consisting of state-dominated corporations, such as Gazprom, Rosneft, Vneshtorgbank, Rosoboronexport, and the Russian Railways, together with the security agencies. Putin’s KGB cronies (…) control these institutions and tap them for huge kickbacks. (…)
In a sensational interview before the election in a Russian newspaper Kommersant, one of these previously unknown KGB managers [Oleg Shvartsman] explained how they use state extortion against private enterprises to accomplish their “velvet reprivatization” through state corporate raiding. (…) As renationalization gained momentum, the public economic rhetoric changed and become statist. Putin now favors protectionism, state intervention, and subsidies. In this climate, no progressive structural reforms are likely.
In this context, Åslund outlines some key elements of the current Russian economic policies that – if continued – do not bode well for sustained growth and development:
• Growing inflation (predicted to reach 15% next spring up from 7% the year before) driven by rising food prices, large current account surpluses, and capital inflows related to the oil and gas pricing boom,
• Loose monetary policy involving populist moves such as channeling large sums of money into pension and other social welfare transfers before the Duma election,
• Informal price controls on gasoline and food meant to mollify the population.
As checks and balances on the increasingly centralized power of the state are disappearing, Russia is sinking deeper and deeper into corruption-fraught statism. Is this the mysterious “Putin’s plan”? The President so far has not given many reasons to think otherwise…
Published Date: December 14, 2007