Over the past few days, the debate over “the next objectives of the Russian government,” as announced by the Kremlin in September, has been joined by two “leading state economists” (as they are described in Nezavisimaya Gazeta): Economic Development Minister Herman Gref and presidential economic advisor Andrei Illarionov. Both spoke out in Western publications: Gref gave an interview to Die Zeit and Illarionov gave one to the Financial Times. Both were surprisingly critical of Kremlin policy, and this attracted attention from the Russian publications controlled by Boris Berezovsky.
Excerpts from Gref’s interview were reprinted by Nezavisimaya Gazeta, with an emphasis on the link between the Russian economy’s prospects and the creation of a “cast-iron hierarchy of governance” (as Die Zeit put it). When asked about this, Gref at first lived up to his solid reputation as a radical liberal economist, but then ended on an unexpected note of social democracy.
According to Gref, the Kremlin’s political innovations have their advantages and disadvantages.
Gref says the reforms are mainly good for “uniformity of policy” – at long last, the difference between Russia’s “liberal” and “communist” regions will disappear.
As an example, Gref referred to the situation in the Ulianov region, which was ruled for eight years by a Communist governor: “Bread is cheap there, of course, and the costs of garbage collection are low. But the region’s enterprises are bankrupt. That’s the price of populism.”
The reforms will solve this problem, since appointed regional leaders “will be afraid to ignore instructions.”
As everyone knows, however, Russia is a land of extremes – and the need to follow orders from above will naturally lead to regional governments losing touch with the citizenry. Thus, while acknowledging that the Kremlin’s proposed structure of governance is good enough for “the period of rigorous reforms,” Gref says there should be a return to direct elections for regional leaders after these reforms are complete. “Because our problem is that those in power don’t always do what the people need done.”
As always, it’s interesting to note the approach taken by one of the Russian government’s leading reformers to the issue of relations between business and government.
Then again, some ambiguity is also evident there.
On the one hand, Gref says we should “stop talking about the past, about revising privatization outcomes,” since “if anything of the kind is begun, it could go a long way.”
On the other hand, Gref says that not all oligarchs are the same: “There are some who acquired a large chunk of property in the past, and are now resting on their money. But there are also what might be termed ‘civilized’ oligarchs, who are developing their assets.” The latter group should be encouraged in every possible way: “If entrepreneurs invest their profits in Russia, in creating new jobs or new technology, they ought to get awards for being willing to take risks.”
As for the growing trend of including representatives of the presidential administration on the boards of directors of Russia’s largest companies, Gref believes this practice is unjusitifed: “Of course, it would be better to get rid of them and recruit independent directors. The state should stay as far removed as possible from business activities.”
Nezavisimaya Gazeta published this interview with the headline: “Gref attacks the presidential administration.”
Andrei Illarionov is also skeptical about the state’s role in the economy. However, in an interview with the Kommersant newspaper’s economic editor Nikolai Vardul, Illarionov complained of “several gross errors” in the published version of his interview with the Financial Times. Illarionov emphasized: “When I spoke with the journalists, there was no mention of any individuals at all. But in the published text, my comments on the quality of policy in the 1992-2003 period were contrasted with the presumed views of the present prime minister.”
Illarionov claims that right from the start of his interview with the British journalists, he refused to criticize anyone. In his view, “evaluating the quality of the government’s performance in Russia’s conditions is difficult,” and besides, “we shouldn’t count our eggs until they’re hatched.”
In Illarionov’s view, the most economically effective government in the post-Soviet era has been the government of Yevgeny Primakov, “although his public statements could hardly be called a model of liberalism.” All the same, “the economic policy implemented in that period proved to be the best in several decades,” and “that is precisely when our economy started to grow.”
However, the relationship between words and deeds is more often the reverse: “Speaking in liberal slogans, but actually implementing protectionism. Swearing by liberalism and democracy, but actually creating super-monopolies and super-empires.”
Illarionov says there is a real “risk of state and quasi-state regulation expanding, a risk of economic decisions being imposed on private companies in the name of the state.” He emphasizes that such decisions “might have nothing in common with national goals, only reflecting the personal interests of individuals who hold political power.”
It would be hard to describe these remarks as anything other than criticism – even though Illarionov doesn’t name any names.
However, Illarionov came out with a rougher statement further on. In his opinion, the most dangerous for the Russian economy and “the country’s development” is “a climate of fear which did not exist even a few years ago.” This looks like a doom: “The life is full of challenges, problems, crises. The state represented by officials (even if they were the pattern of wisdom, acumen and fidelity to principles) is able neither to foresee all complications of the development, nor offer a variety of solutions and select the most effective option.” Only free society, “which is discussing all problems and all optional solutions available without fear and restrictions” can do that.
For this very reason, stresses Ilarionov, “emergence of socio-political taboos, the mere mention of which creates “pathological reactions” means “a letdown in society, a blow to the country that no external threat can compare with.”
“Refusal from discussing the major problems of the nation is the main danger in the climate of fear. A country paralyzed by fear is doomed,” the presidential adviser concluded.
This is likely to be the ideological side of the problem. The purely economic side is also available. According to Illarionov’s statement for Kommersant, “the seizure by the state of the economy’s commanding heights, in particular in the energy sector, is a guarantee of stagnation. Long, hard and tortuous stagnation. For decades.” As evidence the presidential adviser brought “degradation of OPEC member countries in mid-1970s,” for which the high oil prices give no salvation. “Unfortunately, the risk of Venezuelization of Russia is very likely now,” says Illarionov.
In the meantime, according to the State Statistics Committee, in September the Russian GDP grew by only 3.5% as compared to September 2003. “Our economy haven’t seen growth this low since December 2002,” says the Novaya Gazeta newspaper, publishing an interview with another renowned economist – Yegor Gaidar, who headed the government of “young reformers” in the 1990s and is now director of the Transition Economy Institute.
In Gaidar’s opinion, the structural reforms launched during Putin’s first term in office are “significant, positive, and on the whole successful.” In particular, the tax reform: “The achievements obtained in Russia in this sphere are a dream for any reformer.” Gaidar says the Cabinet’s macroeconomic policy (fiscal and monetary) remains quite considered.
However, the reforms have ground to a halt since last year: “The problem is that the simple reforms have already been done, and those that remain are technically complicated, requiring great effort to plan and implement.”
The “method of mere pressure” is insufficient in this matter: “The government needs to lay the foundations for stable, long-term economic growth in the 21st Century – to create a mechanism that enables Russia to maintain economic growth at least at the international average (the minimal objective) or even faster (the maximal objective).”
Meanwhile, no scientific grounds for long-term forecasting of the economic growth exist in Russia. It’s natural for the authorities to aim for high economic growth rates; but it would be a mistake to factor these ambitions into the budget planning process: “If we start planning spending on paying military salaries and the wages of teachers and health-workers based on the theory that GDP growth will be 8% a year, we may run into some serious problems.”
The figures from the State Statistics Committee, published in the same issue of Novye Izvestia, confirm this. The GDP growth in September induced the Ministry of Economic Development and Trade “in very proper time” to issue a warning that the GDP rise by more than 6.9% should be expected this year (as is widely known, Mikhail Fradkov hoped for a rise of 7.5%).
The experts are certain about the causes of the economic halt: a lack of capital investment, both on behalf of the state and the private sector. “The latest real investment in the industrial production happened in the late 1980s; the key assets have been worn out long ago and require new supplies,” Vasily Solodkov, an analyst with the Higher School of Economics, explained in Novye Izvestia.
Besides, since oil exports remain the basic component in the GDP structure, the suspension of oil deliveries to China by YUKOS in September could be regarded as a negative factor.
In general, says Novye Izvestia, “the Cabinet probably remembers the GDP growth of 7.4% in 2003 as the highest over the past several years.”
However, the presidential administration is filled with optimism: Novye Izvestia quotes Arkadi Dvorkovich, head of the Kremlin’s expert directorate, who is sure that GDP growth could be 7-7.3% for this coming year.
Apparently, few people in Russia share the optimism of the authorities.
According to results of the polls done by the Public Opinion Foundation (FOM) and published by Izvestia, 39% of respondents say Russia’s affairs are heading in the wrong direction; 57% are concerned about the situation, while two-thirds of respondents say there is no longer any stability in Russia. The “collapse of hopes” to the level of 2000, when Vladimir Putin was elected president for the first time, proved to be notable in the societal groups which had shown the greatest increase of confidence in the future over recent years.
” It’s not a case of stability being destroyed entirely – but we are certainly seeing the start of a downward trend in how people evaluate the situation in Russia,” Dmitri Oreshkin, head of the Mercator Group, told Izvestia.
It is hard to establish the turning point, ” that’s how public opinion works: everything seems to be unchanged, but all of a sudden people start perceiving it differently,” notes Oreshkin. “This comes through in the climate of opinion: the ‘disgrace’ in Abkhazia, ‘something untoward’ in Belarus, ‘they’re going after YUKOS again,’ they’re ‘taking away’ the right to elect regional leaders.”
Commenting on the poll results, the political consultants note once again: ” the stability so persistently trumpeted by the propagandists as the regime’s major achievement was largely decorative.” Even in the time of “complete satisfaction” with the fact that “Putin’s order” has replaced “Yeltsin-era chaos,” the poll participants were anxious about the problems of personal safety, insufficiently high living standards, specific actions of the authorities.
According to the FOM, the highest level of optimism was observed in 2001-02: the statements became more skeptical in 2003 and the trend has persisted this year.
As reported by the Levada Center, in a poll done among the main working age group (aged 25-39), 48% of respondents said they felt confident about the future in a July poll; by September, this was down to 38%.
Nevertheless, managers are the social layer where an evident revival of lost hopes is observed. According to the poll results, 40% of management personnel were confident in June and in September this figure was even higher.
According to the Levada Center, this is “moving back towards the figures seen in 2000, when 61% of respondents holding management positions said they felt optimistic.”
Political consultants explain that “wealth is becoming a less important factor, while security and law enforcement, and the role of the state, are becoming more important factors: so specialists are losing confidence, while managers are gaining confidence.”
Dmitri Oreshkin provides his own comments: ” Previously, ordinary citizens viewed current events as follows: Putin is doing some good and necessary things – he’s using an axe to carve the pillar of Russian statehood out of a log”; some side-effects are hard, but unavoidable.
But once it turned out that the pillar was not forthcoming, “the people started noticing the side-effects.”
In the opinion of experts, the latest reforms in the system of benefits and state administration contributed greatly to the disruption of stability. “More precisely, the methods by which the reforms were carried out,” notes Izvestia.
“Whatever the authorities are doing is based on contempt with regard to the people, a definitely shaped belief that the people are in serfdom and their opinions must be ignored. Those in power must be running the country, since they are better, cleverer, more professional and they alone know the direction to follow,” said independent deputy Vladimir Ryzhkov, member of Free Choice 2008 Committee, in an interview with Novaya Gazeta.
Therefore, “all institutions which envisage participation of ordinary citizens in running the state have been consistently eliminated in Russia.” Indeed, the Federation Council was “restructured” first, followed by the adoption of a draconian law on referendums, then by the law on public gatherings and demonstrations. The matter has recently concerned abolition of the direct gubernatorial elections – and the press promises that this will be extended to mayoral elections as well.
“The logic is clear: push the public out of politics, exclude it from the process of running the country,” Vladimir Ryzhkov stresses.
In general, it appears that “under the logic of the president and his administration the public has made the right choice only once: when electing Vladimir Putin. After that, the public has evidently again fallen back into unconscious state and cannot therefore be trusted in all other cases.”
Evidently, despite statements of the Kremlin the political initiatives proposed by the president have nothing to do with the cause of fighting terrorism, says Georgy Kunadze in Novoye Vremya magazine.
It would indeed be strange to link terrorism to the existence of the institution of direct gubernatorial elections or elections in single-mandate districts, not to mention the fact that the reform launched recently will only show results in several years at best, whereas we need to fight terror now.
“There isn’t anything wrong, as such, in the fact that the authorities have chosen this particular moment to launch some reforms they’ve been planning for a long time,” notes Kunadze. Indeed, “cynical as this may sound, the tactical maneuver has worked: everyone is talking less about the Beslan tragedy, but more about the impending reforms.”
Meanwhile, notes Kunadze, “the exalted military mobilization rhetoric,” and “another theory of global conspiracy against Russia typical of Soviet-era agitprop” proposed by Vladislav Surkov, deputy director of the presidential administration, “are too evidently absurd to refute them seriously.” Why is this being done?
The author offers two answers “a bad one, and a very bad one.”
In the opinion of Novoye Vremya, the bad answer is that “contrary to common sense the Russian authorities simply believe this delirium.”
If this is true, we have “a diagnosis,” notes Kunadze: “The weak are beaten,” our president often says; fools are mocked… To be fair, it is unknown which of these is worse.”
As Vladimir Ryzhkov said to Novaya Gazeta, “I have the impression of late that decisions made by the Kremlin are irrational, that they are based on its fears, complexes, and emotions. Irrationality in politics is frightening, since it is based on the wrong evaluation of threats and generates wrong answers.”
In the opinion of Ryzhkov, since September 3 (the tragedy in Beslan) “all actions of the Kremlin are irrational and insane. I appears to me that the people making decisions there have slightly gone mad.”
On the other hand, continues Novoye Vremya, it would be strange to suspect the Russian authorities of being mentally unsound: “We are electing our leaders yet.” Therefore, we only need to accept the second version of the answer – the very bad one.
It is about the following: “being sane and in good memory the authorities are trying to instill the mania of persecution to its nation and society.”
This process may prove to be a success: “the technologies have been polished, resources are available, the fighters of the visible (primarily television front) are ready to fight and set on a march… We’ll get ill before we have time to look back. It is easy to deceive us: we are glad to be deceived.”
Undoubtedly, the opposition will appear (has already emerged) in the country; somebody will object and even try to take actions of protest (Yezhenedelny Zhurnal informed about the imminent actions due to take place on October 28 at the initiative of 2008 Committee, Yabloko and support of the CPRF in its latest issue).
However, “our sound safe and sound authorities won’t be embarrassed: they know that advisability is a moral principle in politics, while advisability is evident in this case.”
A besieged country could “easily be driven into a stir, political opponents declared as enemies ands the rest filed so that they could see the breast of a 4th person along at the farthest,” concludes Novoye Vremya. Many things could be done under the martial laws: “And even more could be done now that a war is likely to exist but no martial laws are available.”
It is at least required to make two issues clear to make it out, Yuri Levada says in Moskovskiye Novosti.
The first is: “Do we have things to lose given that the democratic rights are known for a little while and are appreciated at low levels?”
It is required to account for the fact that “the democracy is first of all a process, rather than a state,” says the author, the process “of consolidating and protecting definite institutes and rights,” which began in Russia in late 1980s – early 1990s.
According to the author, this very quest for methods of instilling the democratic order in Russia has been jeopardized.
The second issue is: “Where is the border between what’s normal and an emergency situation in Russia?”
Undoubtedly, any normal life is out of the question during a fire – to save one’s life is the chief concern. “However, it terrifies when instead of putting out a fire the officials in charge advise that the people get accustomed to the fire. As a matter of fact we are offered to get accustomed to our own past, when the emergency had been made a standard,” says Levada.
However, reverting to the Soviet era or, according to Vladimir Ryzhkov, building up a new German Democratic Republic is not that easy.
Indeed, according to the Levada Center, quite a large percentage of respondents agree to some emergency measures, especially if these measures don’t apply to them.
For instance, at least 80% are ready to permit elimination of terrorists abroad by the special services and won’t object to enhancement of control over suspicious individuals.
Almost 60% (mainly the elderly people and “those of average education”) would even agree to temporarily give up the freedom to travel abroad and accept a ban on activities of public organizations and publishing which “question the president’s policy with regard to terrorists.”
The trouble is that these doubts are evidently to reside not the opposition and pages of the liberal press alone.
According to results of the poll published in Moskovskiye Novosti, 76% are confident that no measures of the state can protect them from terror; 40% more assess all official announcements as an expression of confusion and helplessness.
It seems that irrationality in the actions of the authorities (on which so many hopes was pinned) is becoming obvious for their most loyal supporters.
“For a very long while – five years – Putin has been the president of hope and it suddenly turned out that he is not omnipotent,” Dmitri Oreshkin told Izvestia.
A danger exists that “he’ll be blamed for everything, retroactively.”
Undoubtedly, notes Oreshkin, “this is unfair, but the terror is that the people’s ingratitude is as unavoidable as the liking.”
There are reasons enough to lose one’s head…