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   June 18
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Analysis & Opinion
18.07.08 Russia Profile Weekly Experts Panel: Russian Democracy – From Manual
Introduced by Vladimir Frolov

The debate on Russian democracy has been launched by no other than President Dmitry Medvedev’s think tank, the Institute on Contemporary Development, which commissioned a report by the Center of Political Technologies (CPT) entitled “Democracy: The Development of a Russian Model.”

The report, based on in-depth interviews with leading Russian intellectuals, politicians and businessmen, opens by stating that Russia is an “atypical democracy” akin to Taiwan and South Korea, temporarily (in terms of its processes of modernization) controlled by authoritarian methods. Democracy is the product of modernization. This goal is worthy and the existing distortions are justifiable: the freezing of public institutions, state control over the economy, and suppression of political parties, the mass media, the court system, and the electoral institution. Modernization should be initiated from above and carried out by the government.

But the main conclusion drawn up by the report’s authors from interviews with the Russian elite is that the elite has begun to reflect on whether or not now is the time to gradually discontinue “manual control” and switch to a universal model of democratic rule.

While acknowledging the justification in using elements of “manual control” at certain stages, the elite is nevertheless arranging a request for the development of mature state and political institutions that will allow Russia in time to move from “manual control” to a self-organizing system which does not need to be constantly “saved” from further “revolutions.”

The interviews show that the Russian elite views such institutions to contain the following: large, strong, and independent political parties; an electoral system with equal and fair conditions for all candidates; an efficient parliament which has the capacity for sincere debate and discussions; media coverage which creates an objective depiction of events; and, finally, a fully-fledged civil society that ensures public control over the institutions of power.

The conclusions of the report have ignited a fierce debate between the two main political groups – the conservatives and the modernizers, as described by Igor Bunin, President of CPT and one of the authors of the report.

Conservatives insist on freezing the “Putin course” by declaring it inalterable and unchallengeable. They assert that Russia needs to implement the model for “political and social mobilization,” and must consciously restrict political competition, and maintain tough rhetoric in foreign policy. All these measures are to be taken in order to minimize political risks and ensure Russia’s international standing as a major power, according to the conservatives.

Modernizers, on the other hand, closely link the success in the country's development with a new level in the quality of developing the nation’s institutions. Now that a stable vertical of governance has been constructed, processes towards modernization will require a more competitive political and economic environment, one which will provide an impetus for economic agents to initiate development.

Conservatives and modernizers have different answers to the question of what needs to be done to get a more dramatic breakthrough in the development of Russia. In essence, this is a discussion about what parts of “Putin course” should be implemented.

Where will the debate finally lead to? Will it fade out or will it bring about substantial changes in the Russian political system? Will it produce a national consensus on what kind of democracy is suitable for Russia? Who is likely to prevail – the conservatives or modernizers? What is the balance of power between the two camps? And where do Putin and Medvedev figure in this debate? What are the implications of this discussion for Russia’s foreign policy?

Vlad Ivanenko, PhD economics, Ottawa:

By and large, the general public does not consider public governance to be a subject of economic analysis. In truth, however, they should. First of all, the authorities establish the institutional framework on the conditions of which private entities consider making business decisions. And second, the form of public governance defines the state choice between two extremes – a comprehensive laissez-faire market system or an overall command and control economy. There are extensive scholarly publications which deal with the lively debate surrounding this topic, although they are at times inaccessible due to the complexity of the terminology used in the works.

Many economists, including myself, consider the merits of different types of public governance using the concept of optimality, which, unsurprisingly, is the prime criterion of economic analysis. Let me share the results of my research started at the Bank of Finland (see “Markets and democracy in Russia”) and continued after that (e.g., in “Russian global position after 2008”, both are available online). Again, to avoid misunderstanding, I repeat that the statements below are justified by the criterion of optimality, which in this case means minimizing the distance in terms of the quality of life, particularly the GDP per capita, between Russia and the collective “Western world.”

First, the quality of bureaucratic apparatus is considered to be the single most important factor that impinges Russian progress. According to every publicly available comparative estimation, Russian bureaucracy ranks as one of the worst global offender in terms of corruption and “friendliness” of its regulatory environment. Thus, I am very pleased to see that President Medvedev places the task of combating corruption and simplifying government business procedures, especially for small and medium enterprises (SME), among his top priorities.

However, a direct attack on corruption that is along the lines advocated by laissez-faire proponents (greater public oversight – democracy and state withdrawal from economic decision-making – deregulation) may actually impede Russian GDP growth in the short run. The problem is that a country can pass the “catching-up” stage faster and more sparingly if its government is free to make decisions without submitting them to cumbersome public oversight procedures. This feature of economic development has been noticed by the late economist Alexander Gershenkron whose theoretical principles have been explored by such analysts as Bolton and Farrell (see their "Decentralization, Duplication, and Delay").

This trade-off between future benefits at the expense of short-term gains is a feature that, alas, Medvedev, as a self-proclaimed “modernizer”, will find out sooner rather than later in his current debate with pro-Putin “conservatives” in the government. Their argument that the state should take a greater role in, say, infrastructural investment or demographic support measures makes perfect sense. If Medvedev agrees, then he has to agree with their argument of state corporations strengthening and greater government spending power at the expense of the private taxpayer. This is not what private entrepreneurs would favor. However – and somewhat paradoxically – they are exactly the policies that the average, so-called “pro-Putin” voter would keenly approve of. Medvedev should also keep in mind that his public rating trails that of Putin and be careful not to upset the balance further to his detriment.

Can Medvedev over time reconcile the differences between modernizers and conservatives or can he outperform Putin in the eyes of voters? Yes, if he chooses to tread carefully. Modernizing Russia requires an environment conducive to limited competition between these two groups. Figuratively speaking, the conservatives run out from the starting blocks well but cannot maintain their good speed for long; the modernizers start slow but speed up after catching their breath. To realize the benefits offered by both types of participants, Medvedev would be justified in letting the “fast starters” (state corporations and hierarchical organizations) to take the initial lead bringing Russia closer to the world leaders. At the same time, the argument is compelling for “creative learners” (SME and horizontal alliances) to enjoy favorable (protective) environment until they overcome the established national heavyweights and are ready to propel Russia ahead on the global stage. The balancing of these two groups’ opposing interests is a complex task which, I believe, requires the creation of the third center of power that defines the time when the “old-timers” (conservatives) surrender their positions to the new champions.

Eric Kraus, Director, Nikitsky/Anyatta, a Russian consultancy and asset management firm, Moscow:

The Russian political system is currently reminiscent of that in Singapore, Taiwan or Korea a decade ago. It is heavily managed – as fate would have it – by the best governmental team in Russia’s long and painful history. The initial success of the Putin team has been impressive indeed. However, as the economy develops and becomes more diversified and service based, an increasing degree of decentralization of power becomes vital; the old, vertical structures become outdated. The really question here is one of timing.

If Russia moves too late, the risk is stagnation and inefficiency, as was the case prior to the collapse of the ruling party in Japan and Korea. If Russia moves too early, they run risk of anarchy and chaos breaking out. That would mean the destruction of all the progress made since 2000; Malaysia post-Mahathir is the example which springs to mind.

This is true in economics as well – by prematurely dismantling currency exchange controls, President Putin forced the Central Bank to juggle the massive revaluation pressures on the rouble, while trying to keep the banking system fluid while somehow controlling inflation. If his aim was to demonstrate that Russia now boasts a world-class economy, he was successful, but at a huge cost. Thankfully, factors lying totally outside the Kremlin’s control have prevented Russia’s joining WTO long before it is ready.

To further complicate the issue, there is an unfortunate tendency in the West to equate “democracy” with a furtherance of Western interests. Despite numerous examples, our American friends seem unable to imagine that a democratic election would bring to power a government unfriendly to their own interests. Thus, the development of Russian democracy under Putin/Medvedev should not be equated with a shift in Russian diplomatic or economic policy towards a more pro-American stance. Moreover, under a truly democratic system, Russia would now have an elected government far more inimical to American interests than Mr. Putin’s administration.

Russia remains a severely fractured society. The majority of the population grew up in the Soviet system, with neither a collective memory of a functioning civil society nor any experience of a capitalist economy. Poverty, disorientation, cynicism, and a hunter-gatherer mentality will gradually cede to middle-class comfort as the country grows wealthier and a new generation grows up under conditions of relative stability. We continue to believe that, as in the Asian tiger economies, a more pluralistic political system will develop as the rising middle classes demand that their voices be heard. It is an excellent thing that the debate has started now, but it is a debate that can be expected to run for decades.

Professor Stephen Blank, the US Army War College, Carlyle Barracks, PA:

If the report recommends all these things and Medvedev were to take effective action towards implementing these recommendations it would be a marvelous thing.

However, all reform efforts in Russia are doomed to fail because Russian political culture cannot overcome its tsarist/autocratic foundations. And we have yet to see Medvedev move in a genuinely new direction.

If anything, signs have been negative. The turmoil surrounding TNK-BP clearly suggests efforts to continue the takeover of foreign property on illegal grounds. Similarly Chemezov's initiatives, woefully underreported in the United States, reflect the continuation of the state takeover of more and more of the industrial sector. Third, Russian foreign policy remains openly anti-Western and anti-American while supporting Iran and Zimbabwe, where Russia has no vital interests at all.

Obviously all the key political players, not just Putin and Medvedev, figure in this political debate. But if I were a betting man, until and unless there is a general crisis as perceived, democracy or democratic reforms at the top will not be instituted. There may be reform from the top, which has a long tradition in Russian history, but they will not be democratic reforms.

Nonetheless this report highlights what we in the West know. For all its boasting, the Russian government is fundamentally unlawful, weak, and in its innermost sanctum knows that it is horribly ineffective and poorly adapted to the urgent challenges facing the society and the state.

It will be most interesting to see if Russia can finally overcome its history or instead will once again choose the path of relapsing into some version of the neo-Tsarist paradigm.
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