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Analysis & Opinion
30.10.09 Will “Modernization” Meet The Fate Of “Perestroika”?
Introduced by Vladimir Frolov

Contributors: Vladimir Belaeff, Stephen Blank, Ethan Burger, Vlad Ivanenko, Sergei Roy

President Dmitry Medvedev has decided to make “modernization” his platform for re-election in 2012. Medvedev is investing a tremendous amount of political capital in promoting a vision of Russia as an innovation-driven economy, where knowledge, intellect and desire for experimentation create more wealth for ordinary Russians than the hydrocarbon and metal exports that enrich a handful of oligarchs today. Will Medvedev’s “modernization” succeed? Are there parallels with the way Gorbachev launched his “perestroika” in the mid-1980s?

His biggest risk, of course, is that this vision is so far unembodied, and ordinary Russians are unlikely to see the signs, much less enjoy the benefits, of Medvedev’s agenda succeeding before his 2012 presidential run for an extended term of six years.

Medvedev is already running out of policy instruments to either stimulate or impose innovation, as his aide Arkady Dvorkovich has recently suggested. He has pretty much already tried everything – legislation by a special presidential commission for bypassing the state bureaucracy, meetings with innovators and entrepreneurs, orders and threats to the oligarchs, and online appeals for public support for his cause.

So far, there is little to show for these efforts, and Medvedev’s “modernization” is running the risk of repeating the sad fate of Mikhail Gorbachev’s “perestroika.” The president is expected to present a roadmap for building an “innovative Russia” (or Russia 2.0, as some have suggested) in his second State of the Nation address next week. It would be the first innovation program that could claim input from thousands of ordinary Russians who responded to Medvedev’s call for net-sourcing in his “Go Russia!” article. Most of those proposals would yield results only after Medvedev’s term expires in 2012.

Now, there is an innovative theory that suggests that Medvedev could still rule Russia even if his run for the second term fizzled out – he would become the ruler of “Russia 2.0,” the leader of choice for the most dynamic and vibrant part of Russian society – the “innovating class.” Vladimir Putin would continue to lead a “traditional Russia” and its economy of oil and gas.

Will Medvedev’s “modernization” succeed? Is it mostly just talk, or will there be real action to reform and modernize Russia? Are there parallels with the way Gorbachev launched his “perestroika” in the mid-1980s? Would Medvedev, like Gorbachev, face the need to modernize Russia’s politics in order to modernize its economy? Would he be able to remain in the driver’s seat of his modernization agenda, or, like Gorbachev in the 1980s, be thrown off the ship he is trying to upgrade? Could Medvedev really “rule Russia 2.0” with Putin coming back to rule “Russia 1.0”?

Vlad Ivanenko, Ph.D., economist, Ottawa:

Juxtaposing Medvedev’s hypothetical “agenda” with Putin’s imaginary “plan” is a bit of an exaggeration, as the two sides show remarkable congruence of opinion for all practical purposes. But let’s, for the sake of argument, try to imagine what will happen if the two potential policies that Russia can implement (that is a “traditional” export-oriented model and a “new” internal-growth strategy) end up competing for popular support.

On the one hand, there is the approach that has suited the needs of Russia’s elite (if not ordinary citizens) since the time of the Soviet Union, when, in the mid-1970s, it was discovered that pumping hydrocarbon riches to Europe could prolong the union’s existence. On the other hand is a policy which has long been touted as indispensable, but which has never really brought the country into the global limelight, except possibly in the late 1950s, when Russia basked in space exploration glory.

The first method is straightforward. If this is what Putin wants, he can reasonably expect to deliver on his promise, made in 2000, to see Russia’s $16,000 of GDP per capita at PPP prices to rise to equal Portugal’s coveted level of $22,000, albeit later than the predicted year 2010.

The second policy is not so obvious. It is not accidental that Medvedev, whom we assume to be our hypothetical innovator, cannot truly explain who would push the “innovation” agenda forward, and how it benefits the elite (not to mention the man on the street). Therefore, if things stay as they are now, both the elite and the voters are going to back Putin and not Medvedev in the 2012 presidential campaign.

The last “if,” however, makes an important difference. Currently, the global order hangs in a precarious balance. What we have called “Putin’s plan” might turn out to be a castle built out of sand. First, global economic clout is shifting in favor of the Asian powers. While Russia recognizes this change and hurries to reverse its oil and gas flows in the eastern direction, China and its neighbors may prove to be less willing to accommodate the “oil-for-goods” type of trade that the Soviet Union enjoyed with Europe. Secondly, one should not confuse the rise in crude oil prices, presently driven by investors running from the weak U.S. dollar, and structural change in the global demand for energy products. World petroleum imports – on whose revenue Russia bases its development strategy – have stabilized from 2005 at about 170,000 tons a month, and might even decline as the developed world switches to renewable energy. Thirdly, Russia’s performance during the latest bout of the economic crisis was so shaky compared to its BRIC peers that rising to the level of this second-tier grouping might be a challenge for a country that some leading economists claim to be a BRIC imposter. Will the Russians still approve the leader whose policy relegates the country to the third tier in the global order?

The next wave of crises may spell disaster for the Russia’s “traditional” economy, as Medvedev appears to understand. Talking to a group of oligarchs a few days ago he mentioned that if this happens, many top Russian companies will not survive as independent entities. This suggestion could be interpreted as a veiled threat of re-nationalization, probably associated with the intolerably high costs that the public treasury incurred when salvaging the national “champions.” The message seems to be clear: Russians either learn to win in the global innovation race, or face the consequences.

Ethan S. Burger, Adjunct Professor, Georgetown University Law Center, Washington, DC:

Just as Russian President Dmitry Medvedev and former Soviet General Secretary/Soviet President Mikhail Gorbachev have some common personal characteristics and have encountered similar obstacles to promoting true reform, their efforts are likely to share the same fate. Both men appear to have a great deal of insight into some of their country's problems. Unfortunately, both men are/were indecisive and do/did not grasp the true nature of their respective countries until it is/was too late.

Gorbachev came to power after a long period of economic stagnation. He understood that the Soviet Union could not survive without significant political reform of revolutionary nature. Unfortunately, Gorbachev failed to grasp the true character of the Soviet Union -- a multi-national empire with some national groups having ambitious leaders who believed the Moscow/Russian-centric state was past the point of reform and that dismantling the entire edifice was the only option. Using "glasnost" and technological innovation to combat false nostalgia, Gorbachev hoped to transform the Soviet state into something resembling a truly democratic and federated political entity, but did not have a viable plan to implement his goal.

Like the current Russian president, Gorbachev did not see the necessity of promoting belief in an "external threat" as a tool to hold on to power. He saw foreign states as allies for improving the country’s economy and a likely source of political support. Unfortunately (and not surprisingly), Gorbachev's plans threatened the power of the intelligence and military establishment. Furthermore, the masses feared that change would lead to instability. He could not bring about change from the top without the active involvement of the citizenry, which was risk-adverse.

For some time, Party Secretary/President Gorbachev had the power to introduce new policies, but his campaign against alcoholism hurt his popularity and he lacked the cadres to replace those who held power with capable individuals loyal to him. Gorbachev failed to appreciate the need for or lacked the ability of replacing the individuals who masterminded the August 1991 putsch: KGB Chairman Vladimir Kryuchkov, Minister of Defense Dmitry Yazov, Minister for Internal Affairs Boris Pugo, and Vice President Gennady Yanayev, to name a few.

Medvedev may favor policies that differ from those of prime minister Putin (as well as the oligarchs and the siloviki), who oppose setting course in a new direction, but he lacks the will and/or institutional support to implement them.

Medvedev is an intellectual who appreciates the country's problems and has ideas about "what is to be done," but unless forced to by circumstances, he will be unwilling to exercise his constitutionally-granted powers, and will simply play the role of a voice for more moderate policies in deliberations by the ruling elite -- for whom the "rule of law" still means the use of law as a political weapon to be wielded against their opponents. Medvedev's acquiescence to the alleged election fraud in the regional and local elections suggests that he is too indecisive to fight for what he purports to believe in. Demanding new elections would indeed unleash forces that will force him to confront the beneficiaries of the existing power structure.

The Russian strategy of drawing closer to China, not pursuing a more moderate policy in the Caucasus, and crushing Russian national elements and politicians that support the status quo in Siberia and the Russian Far East implies that Medvedev's fate is tied to the unreformed Russian state's fate. Being change adverse, Medvedev is unlikely to be the vehicle for introducing genuine reform in Russia, unless there is a catalyst. In the near-term, the predictions of economic collapse may not occur, but the death of the existing system need not occur with a bang, but a whimper. In Russia, political change has traditionally been the result of the actions of a small number of individuals, whether they be insiders or a cadre of "revolutionaries." Indeed, there will be no people's revolution in Russia.

Sergei Roy, Editor,, Moscow:

The view has been expressed that president Medvedev stands for modernizing Russia, that he represents a future innovative Russia, a sort of “Russia 2.0” where a knowledge-driven economy will benefit the entire population, whereas premier Putin’s agenda has more to do with Russia staying in the present mode of existence, in which exports of raw materials enrich a few oligarchs while the public at large has to be satisfied with mere crumbs.
Like all black-and-white, cut and dried schemata, this one looks suspicious just for reasons of ordinary commonsense: life is rarely as simple as that; politics, never. A comparison of the two top officials’ rhetoric and, most importantly, actions, shows the above dichotomy to be pretty wobbly.

Who stands in the way of Russia’s modernization, of its innovative development? These enemies were colorfully described and castigated in Medvedev’s recent article: “Influential groups of corrupt officials and do-nothing ‘entrepreneurs’ are well ensconced. They have everything and are satisfied. They’re going to squeeze the profits from the remnants of Soviet industry and squander the natural resources that belong to all of us until the end of the century. They are not creating anything new, do not want development and fear it.”

Absolutely correct. I myself have been writing philippics against industrial and regional barons, as I called them, for years. Now, who has done his best to kick these barons into line by main force, pulling out their fangs that were tearing the country apart? The record is quite clear on this score: Putin, that’s who. I am not saying that he has won victories on all fronts (for one thing, ethnocracies remain big sores on Russia’s body), but the financial-industrial barons now know better than to buy up Duma deputies and entire parties, wholesale. And regional barons, at least most of them, no longer run their fiefdoms like criminal kingpins while cherishing almost undisguised plans for secession. Presenting Putin as these same barons’ leader and protector simply doesn’t fit the facts, and that’s putting it very mildly.

Of course, au fond Russia’s ruling class has remained the same, rapacious, unpatriotic, and totally deaf to the call of the common weal. Here, Medvedev might have repeated what Joseph Stalin once said: “I haven’t got any other writers for you,” just substituting “oligarchs” for “writers.” The problem is how to make these oligarchs serve the good cause of Russia’s modernization instead of buying estates in milder climes and other toys worth untold millions.

One way would be to take away the oligarchs’ assets and nationalize them, following up to a point the example set by the United States when the crisis hit it with gale force. That is not Medvedev’s way, it’s not liberal, it’s undemocratic, and when all is said and done, it’s a bit foolhardy. Rather the contrary, Medvedev is calling for the privatization of the existing state corporations, thus increasing the might of those same oligarchs whose iniquities he rails against. Sensing a kind of impasse here, Medvedev resorts to the age-old bureaucratic wisdom: when in doubt, set up a commission. It does not seem to work all that well, either, so he writes articles, appeals to the nation on TV and the Internet, and generally makes a lot of noise that sounds for all the world like an election campaign.

The modernization of Russia is a vast undertaking of historic proportions. In the past, Russia has gone hunting for this Firebird on several occasions. Each time achieving this goal took an enormous national effort, a great deal of sacrifice, vast resources, and iron political will both in the country’s leader and in the political force led by him.
I guess we know who in Russia may – just may – provide this kind of leadership. He changed the direction the country was going in once, and he may do it again. One thing is certain: he will not do it by indulging in campaign rhetoric.

Vladimir Belaeff, President, Global Society Institute, Inc., San Francisco, CA:

Let us agree a priori that Russia indeed requires modernization of its economy. Such a need is not exclusively Russian – every country needs to upgrade its economic mechanisms in order to deal with emerging opportunities and challenges. Furthermore, modernization is not a singular event, nor is it a one-step action, but a process – a continuous unfolding of constructive renewal and improvement.

The definition of modernization as a national strategy is testimony that Russian social and political thinking is alive and responsive to present and future challenges and opportunities and that the political leadership is able to formulate genuine system-wide objectives. This is a very important attribute. Modernization is not a political gimmick, but a rational response to real issues and opportunities facing Russia. This response is demanded by circumstances far above the political plane.

Eschatological paradigms like Marxism, economic shock-therapy or Schumpeter’s “creative destruction” tend to view change of economic architecture in terms of a one-step, radical transformation (i.e., revolution). The vision of perestroika, defined by people who applied Marxist methods to their synthesis (even when they abandoned Marxism as model for teleology) proposed a quick and possibly somewhat painful reconstruction of the Soviet system, which would somehow inject new meaning into a structure that was never designed for such change.

It is erroneous to view president Medvedev’s strategic goal of “modernization” through the prism of perestroika. Medvedev’s starting point is not an ossified Soviet economic structure, but a dynamic, flexible and in many aspects quite effective market economy in 21st century Russia. The goal of modernization is to upgrade, not to reconstruct. Modernization is a strategy of evolution, while perestroika was a vision (an illusion, according to some observers) that was fundamentally revolutionary – because in Marxism-Leninism, transformation must be revolutionary (consider the polemics against Eduard Bernstein).

Therefore, whatever the fate of the modernization strategy may be, it is unlikely to repeat the pattern of Gorbachev’s perestroika – the setting and the goals are different, and the dynamics will be intrinsically different.

There are, however, several factors in the perception of modernization that are worthy of note. One factor is the expectation of quick results. Consider the view that modernization has so far yielded few results. But the seminal article by Medvedev was published only a few weeks ago, and the State of the Nation address has not yet been delivered. It seems unrealistic to expect end results from a formulation that is currently just weeks old.

Another factor is a foreshortened time horizon, with a certain “completion state.” As mentioned previously, such a perception is essentially eschatological and does not recognize that modernization is not a revolutionary transition from one operating state to another, but must be and shall become a process, continuously evolving and yielding improvements, but never really ending. Modernization is a mode of operating an economy, and not a revolutionary event, like the Soviet collectivization of farming.

Thirdly, and as a consequence of the aspect mentioned above, modernization is not really linked to politics and to political milestones, as 2012 is to president Medvedev’s end of term-of-office. Therefore, it is not realistic to propose that modernization will result in profound political changes or in the stratification (“Russia 1.0 / Russia 2.0”) of Russia’s political, social or economic architectures. Again, modernization of Russia’s economy is not perestroika of the Soviet Union. The goals and the results will be different.

The strategy of modernization will solve some very daunting problems and will create new economic objects and processes. With time, the realization and even the formulation of the strategy itself will change. Such is evolution.

Professor Stephen Blank, the U.S. Army War College, Carlyle Barracks, PA:

It is a mistake to liken Medvedev's inchoate calls for modernization (which he has not defined) to perestroika, which, even though it too was inchoate and unformed, became to a significant degree a real policy with genuine momentum, for all its failures. Moreover, until modernization encompasses first of all the state, it means little or nothing in real practice. In Russia, as in most places, optimal economic innovation or modernization cannot be accomplished without a wholesale reformation, if not transformation, of the state, and Medvedev has not shown the slightest inclination to take on this subject.

As a result, whatever the length of the current crisis, Russia is condemned to sub-optimal economic outcomes and continued backwardness as it remains imprisoned in the magic circle of autocracy and non-market economies (and we should not take those declarations that Russia is a market economy seriously for they are political statements, not accurate descriptions of reality).

The failure to modernize Russia could lead to a direct expansion of the authoritarian model of today which would, in my opinion, return us to something like authoritarian modernization, and resemble Mediterranean Fascism, another example of failed modernization. This would take time to reveal its bankruptcy, but given its demographic situation and the rise of China, Russia does not have time to waste. It could be Putin or someone else who leads that regressive formation, but until and unless Medvedev shows more political courage, insight into his own system, and skill in transforming it, as Gorbachev did, and greater understanding of economics than Gorbachev did (for he was horrible here), all reforms will be essentially cosmetic and will fail to come to grips with the fundamental dysfunctionality of the Russian state under its present dispensation.
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