Putinism in crisis

[Neo]

Putinism in crisis ​

By Irina Yasina

Vladimir Putin had already put in place a treaty between Russia’s government and the country’s richest men, who agreed not to comment on the actions of the state in exchange for the freedom to earn as much money as possible in any way they

“Owing to the harsh economic situation, it was decided to cut off the light at the end of the tunnel as a temporary measure.” That is but one of the jokes making the rounds in Russia these days, as the country faces its most severe crisis in a decade.

Having been born in the early 1960s, my generation remembers two crises. The first, following the collapse of the USSR, was almost cataclysmic — nothing in the shops, the country in bankruptcy, all savings lost. The other affected everyone but was less severe — Russia’s 1998 default, which saw a fourfold devaluation of the ruble. Today’s crisis is acute, but there is no sense of an approaching apocalypse.

Yet the crisis will be severe, not only because prices for the major Russian export commodities — oil, gas, and metal — have plummeted, but also because the government, which believed in its boundless force and wisdom, now seems inadequate to the challenges that Russia faces. Yes, Russia has enormous gold and currency reserves, but they are being depleted fast. They will not last for long while being spent — mostly in defence of the ruble — at the current pace.

Most importantly, there is no one in power who can change the country’s economic policies. Instead, Russia is ruled by “yes men” who are only able to agree and echo: “As you say, Mr Prime Minister”; “As you wish, Mr. President”. One reason is that the country’s leadership now appears to be digesting the same garbage information it feeds to the public.

Whole regions — the Urals and Mordovia, for example — are stagnant. Moscow, which used to rain gold on the economy, is also suffering, because it, too, depends on natural resources, and its biggest taxpayers — Gazprom, Lukoil, Transneft — are now in bad shape. Indeed, Moscow’s budget has lost about a quarter of its revenues. But, given the tastes and appetites of Moscow’s mayor, you can assume that he will continue to pour what money remains into the city’s building boom. What does not bring in money — roads, schools, hospitals, and kindergartens — will suffer.

As in the early 1990s, everyone is again afraid of unemployment. But back then, there was almost no unemployment, peaking at 12 percent, because Russia’s Labour Code makes firing employees hard and very costly. Moreover, most Russians do not object strenuously to wage cuts, reductions in working hours, and unpaid leaves.

There is a good reason for this docility. Moving and buying a new apartment in a different place is almost impossible, which makes Russian workers highly immobile. In Soviet times, people were proud of the fact that they had only one or two jobs during their lifetime. Those who acted differently were referred to pejoratively as “job-hoppers”.

So, today, people stay near idle factories — kind of employed, but having nothing to do and earning virtually no money. Occasionally the factory pays them something, but people mainly live off their own vegetable gardens. The outcome is widespread alcoholism, poverty, and lack of prospects.

Yet real signs of crisis are emerging. Electricity consumption fell 6 percent in November from a year ago, and freight traffic has decreased by 20 percent. Even the Ministry of Economics recognises that Russia has entered a recession that will last at least six months.

The strange thing about today’s crisis is that Russia’s billionaires have been hit harder than others. Don’t worry, Russia’s oligarchs are not starving, but the fortunes of many of them have collapsed. In another joke making the rounds in Moscow, a billionaire borrows 300 rubles (just over $10) from another to buy Forbes to check his place in the latest rankings of Russia’s richest people.

Indifferent to the poor, Russia’s government is actively supporting its fallen oligarchs, especially those who are close to the Kremlin. For example, the state has granted a $4.2 billion loan to the aluminium magnate Oleg Deripaska (who held first place on the Forbes list before the crisis) to pay off Western creditors. While experts are not sure whether Deripaska will repay the loan, the Kremlin and the oligarchs have their own ways of settling debts.

Deripaska, who accompanied President Dmitry Medvedev on his recent trip across Latin America, appealed to Russia’s rulers to study Franklin Roosevelt’s “New Deal” in the 1930s as a model for economic recovery. Roosevelt’s idea of a treaty between industrialists and the authorities appeals to the Russian oligarch. Notably, Deripaska has suggested that the government create an “aluminium stabilisation fund”, because the industry — his industry — is losing money and global market share.

Of course, Vladimir Putin had already put in place a treaty between Russia’s government and the country’s richest men, who agreed not to comment on the actions of the state in exchange for the freedom to earn as much money as possible in any way they wanted. And if a well-placed official wanted to enter into a successful business, refusals were not accepted.

Fortunately, Russians know how to survive hard times. I remember the late 1980s not only for its hopes for freedom, but also for a total absence of baby food for my newborn daughter. Twenty years have passed. My daughter has grown up. There is enough baby food in the shops. But now there are no hopes for freedom.

Moscow intellectuals debate whether the current economic crisis will bring a new wave of liberalisation to Russia. This is the key question for me. With a feeling of approaching freedom, any economic crisis can be endured more easily. So far, that feeling remains a ghost. —DTPS

Irina Yasina is an analyst at the Institute of Transitional Economy, a weekly economic commentator for RIA Novosti, and a representative of the Open Russia Foundation

 

[Moscow]

truely a great insight to the modern crisis in russia thanx a lot sir.

 

[Neo]

Good read indeed but I didn't write it.

 

[Moscow]

Good read indeed but I didn't write it.

i thanked you sir for uploading the post, i know you didnt write it.
below i am posting another article which deals with the similar issue.
its the western perspective about russia's future

January 02, 2009
By Josh Calder

When setting goals for the future, it is important to question one's assumptions. Russia today faces some crucial geopolitical and social tipping points, and so Moscow might do well to rethink some ideas that seem to be common currency in Russian political circles.

First, does a "strong" government mean a strong Russia? Under former President Vladimir Putin -- and now under President Dmitry Medvedev -- the Russian government has seemed obsessed with being "strong." Paradoxically, however, a government bent on controlling everything risks creating a hollow state.

Diminished democratic decision making reduces the feedback Russian society can give to the government, increasing the likelihood that popular and elite interests will diverge. Centralized, secretive processes also give scope for corruption, which in turn hastens the alienation of the people from the state and causes great harm to the country's developing business sector.

Softer Power

The state's domination of the media amplifies the trend of alienation at home and undercuts Russia's ability to tell its story beyond its borders, reducing its "soft power."

Securing direct or indirect government (elite) control over resource industries has been a leitmotif of the last decade in Russia. But a state that relies on resource extraction can easily lose the inclination to attend to other aspects of economic strength that are more stable and promising over the long term.

In addition, disruptions to business by a government demonstrating its power -- from leaning on foreign energy companies to Russia's overreaction to Georgian provocations this summer -- strike at the core of Russian economic competitiveness, undermining a key component of national strength.

Second, where do the real threats to Russia come from? In the face of NATO, EU, and U.S. encroachment on the former Soviet sphere of influence, Russia seems fixated on threats from the West. But this sense of danger is misplaced.

Although Western countries may be skeptical of various Russian choices and policies, there is no genuine hostility toward Russia. A military attack on Russia from the West is almost inconceivable.

Western Reality

Russia faces much more plausible security threats from the south and east. To the south, it has numerous possible points of collision with the Islamic world, from the Caucasus into Central Asia. Moscow's past actions in Afghanistan and Chechnya have brought it the active hostility of Islamic radicals. If they escaped state control, Pakistan's and North Korea's nuclear weapons -- and possible Iranian nukes -- are more likely to threaten Russian cities than are U.S or French weapons.

In the east, Chinese power will eclipse Russia's to a greater degree with each passing year. Even though they have resolved their border issues, the two giants will face each other across potentially unstable Central Asian states and along a vast Siberian frontier, whose Russian side is demographically empty and resource rich.

In the face of these longer-term threats, closer relations with the West are clearly in Russia's interest. In future crises, Russia will need global powers that view it sympathetically rather than indifferently or suspiciously. Nonetheless, Moscow is devoting resources to petty sparring with the United States: while China is following the money toward new markets and building relations with rising powers such as Brazil, Russia is preoccupied with geopolitical stunts with countries like Venezuela and Nicaragua.

Finally, what is the real greatest threat to Russia? The country is losing nearly 1 million people a year as death rates exceed birthrates by a wide margin. No foreign power is likely to do Russia as much harm as its dire demographic decline.

Not Adding Up

Russians -- especially men -- are dying at younger and younger ages of heart disease and other complications of drinking and smoking, as well as of diseases like tuberculosis that have been virtually eradicated in the West. Economically strapped young people are having few or no children.

Stated starkly, these trends portend the disappearance of a crucial component of national power -- a growing and healthy population. Russia's population is currently about one-half that of the United States. By 2030, according to some projections, Russia's population may have fallen to 124 million, about one-third of what the U.S. population is expected to be.

The government has paid some attention to this issue, offering subsidies to new parents and other enticements to have more children. But its basic priorities are open to question, as its actions clearly do not match the gravity or complexity of the problem. Demographer Murray Feshbach noted recently that Russia's defense budget is rising rapidly -- up to 26 percent per year -- but one-fifth of Russia's tuberculosis hospitals lack running water and some 70 percent of newborns suffer complications at birth because of prenatal deficiencies.

Long-range planning demands asking hard questions like the ones posed above -- and honest answers to them. A sober look at the driving trends in Russia's future casts serious doubt on many of the Kremlin's basic policies today. And Russia is a country that cannot afford to be shortsighted.

Josh Calder is an analyst at Social Technologies, a Washington-based foresight consulting firm. The views expressed in this commentary are the author's own and do not necessarily reflect those of RFE/RL