State is Greatest Enemy to Russian Economy

For Veckans Affärer: In 2010, business paper Euromoney Magazine awarded Russia's Alexei Kudrin finance minister of the year in the world. Less than a year later, he was sacked by president Medvedev and joined a fragmented Russian opposition. This is just one example of how state and politics become Russian economy's greatest enemies. Growing political unrest in the runup to Sunday's presidential elections emanates from middle class discontent with failing governance, corruption, and political parasitism. "Stability, stagnation, and then what?" is what an increasing number of Russians ask themselves. Uncertainty about the future has suddenly increased the political risks with Russian economy.

Russian economy is in good shape. With a budget in balance, one of the lowest state debts among major countries, just over 4% growth and 5% inflation in 2011, the country's prospects seem bright. Threats are the usual: Falling oil prices and turbulence in the financial markets. Despite positive signs, we now see a lapse in recent years' dynamic developments. A temporary "wait and see" in the runup to Sunday's elections may lead to a more permanent economic slow-down because of political inability to cater for long-term economic needs.

January witnessed the greatest financial outflow from Russia since the 2008-2009 financial crisis. Growth was at zero and inflation is expected to rise during 2012. Where political analysts are silent, the market speaks out clearly. Trust in state and politics plummets, as the failed December parliamentary elections have dislodged the power and interest balance within United Russia - the country's ruling politico-economic cartel.

Even if fears prove exaggerated, it will take much time before the system reaches equilibrium again. The effects of prominent politicians' resignations become increasingly clear. Above all, Kudrin's sound financial policy has been replaced by overbid policies and pork-barrelling. Increased state expenditures is like throwing money into a black hole, believing it is a wishing-well. The flow of money instead runs from the oil wells, where energy constitutes a third of state income. Outside the energy sector, only middle class consumption drives the economy.

Putinism's political strategy - to promote the middle class in exchange for power - has failed. Instead, they have to bear the burden of a bureaucracy, which has grown by 40% since 2000. State efficiency has constantly fallen since 2003, with a corruption that affects everyday life of an increasing number of Russians. Only during 2011, the level of bribes tripled, accordning to the Interior Ministry. Bureaucracy and corruption are poisoning the flexible and dynamic business climate, where everything was forbidden, but everything also possible. Opportunities have decreased and hopes for the future changed to skepticism and discontent. Recent popular protests have thus greater depth than ordinary political opposition, as the state obstructs basic preconditions to earn money and make a decent living.

Except for the country's dependence on oil prices, Russian society is confronting fundamental structural challenges, which demand an increase in economic diversity. Declining demography reduces the number of Russians of productive age. Mounting flaws in infrastructure, health, environment, and education threaten to shrink productivity. Politics has not only failed to address these flaws. It has also reduced the economic incentives of the middle classes to contribute to diversification. 

What worries most, is the increase in political polarization that Putin now propels. The protesting middle class, with reasonable demands on those in power, is portrayed as traitors. This is a dangerous message and illustrates a contempt for those, who until recently were seen as Russia's future. As derision turns into threats against protesters, Putin alienates and provokes the very groups that have greatest potential to contribute to the country's further development and shows that material more than human resources are seen as the source of Russian growth. The economy may be sound, but as long as political malaise is spreading in the social body, risks will grow for Russian economy as people now have had enough of Putin.

Saturday May Show the Way for Russia's Spring

For Newsmill.se: The political landscape is characterized by an uncertainty without comparison during the Putin era. How the Russian leaders will handle continued mass protests, they probably do not know themselves. We are heading towards an uncertain spring.   


It was said about Hilding Hagberg, the Swedish 1950s communist leader, that he used to unfold his umbrella when it was raining in Moscow. Kremlin interest in the powers of weather has seldom been as great as now, for the Saturday 4 February opposition protests. Weather might decide the size of demonstrations and thereby the power in demands for Putin's dismissal. On Christmas eve, 100,000 gathered for the largest protests since the fall of the Soviet Union - an unwelcome reminder for the country's leadership that power is not a given.

A prognosis for continued developments up until the 4 March presidential elections is something few want to make today. The political landscape is still characterized by an uncertainty without comparison during the Putin era. How the Russian leaders will handle continued mass protests, they probably do not know themselves. We are heading towards an uncertain spring.

The Russian "tandemocracy" - with Putin at the handlebar and Medvedev as navigator - is swaying precariously when the map does not match reality. The roadmap has been thwarted and where things are heading, nobody knows. No wonder the passengers protest.

Russia during Putin may be read as a success story for a country in chaos and disarray after the collapse of the Soviet empire. A political mess and economic crisis turned into stability and growth, with the emergence of a thriwing middle class - although under increasing authoritarian rule. However, the Russian power paradox remains: The more formal state power, the less ability to exercise it. With the exception of political stability and some recent improvements in the rule of law, state governance capabilities have deteriorated since 2004. In Russian everyday life, this means constant encounters with corruption and wrongs without limitations or end. With falling energy incomes, power may no longer compensatre for discontent, at the same time as an increasingly affluent people demands more from those in power. Stagnation is seen in a system and confidence crisis.

When Putin's presidential candidacy became clear last year, to many it was a sloping road without end. With twelve years in the rear mirror, six year terms and two terms, the perspective of Putin as president was 2024 - half a lifetime for many Russians. The temperature in public opinion - the state of the nation - fell under zero in late summer, with some mild weather during autumn, to turn to new winter cold  after the botched December parliamentary elections, with Putin's support for "the party of crooks and thieves" - United Russia. The voter barometets of the polling institutes are uncertain and at times inflated. Still, approval ratings for Putin have been halved over the last year from 60% to 27%. All the same, he would - lacking alternatives - get half the votes. 

It is thus the lack of alternatives that Putin now attacks. He puts stability, prosperity and national unity against the opposition's chaos, crisis, nationalism and disarray. Is that enough for a victory or must he rely on the system - aimed at fighting "coloured revolutions" - that he has built? The answer is uncertain. On the other hand, crisis is not Putin's greatest talent, with a record of bad judgement, bad information processing, hasty decisions, and sometimes ruthless brutality. Caution and apprehension thus signify regime reactions in the hope of improved sentiments. At the same time, the threat of confrontation is in the air. The question is if the system trusts itself anymore.

For many, an end of the Putin era would be dangerous and unrealistic wishful thinking. However, the power of wishful thinking should not be underestimated, when feelings replace the rationality Putin appeals to. The opposition is no realistic alternative, but the Putinist regime's lack of openness, new thinking, and perspective, carries as little allure. Eventually, one may simply rely on the gut-feeling, as Russians have always done - putting trust in yourself instead of those in power, who only offer more of the same.

Feelings are like weather. No one controls them, not even in a managed democracy. Dark clouds are piling up, but perhaps a ray of hope glimmers out of the dark skies of Russian democracy. Are we heading towards a Russian spring, or will there be a new front of Russian cold? The answer will be given after the 4 March presidential elections, but perhaps we will get an advance glimpse already on Saturday 4 February, as people gather in protest against corruption and misrule in Russian streets and squares. The Kremlin can no longer simply unfold its umbrella and pretend it is raining. Can we?

Why Putin Receives Popular Support

For Newsmill.se: If not Putin - then who? The bitter truth is that twelve years with Putin have eradicated next to all viable alternatives in Russian politics.

"Resign Putin!" has been the primary popular demand of the protests that have shaken Russia ever since the country's farsical parliamentary elections at the beginning of December. An increasingly clear dividing line is now drawn between constructive and destructive interests in Russian politics, where the power's mudslinging of the opposition is a double-edged sword in the political battle that is now underway before open curtain in Moscow, but where the question also is whether the opposition can and wants to shoulder the responsibility that a revolution would involve. Here an open letter from Boris Berezovsky - an exiled oligarch - risks setting the tune to portray the opposition as irresponsible western lackeys with the single aim of causing chaos and set fire to Russia.

When one of Russia's most hated men, Boris Berezovsky, in an open letter to Putin appeals to him that he should resign, the question is whether the purpose is that he should meet popular demands or if the oligarch simply wants to throw a torch at the powder keg that Russian politics have evolved into over the last one and a half month.

Abandoned by both friends and enemies, Putin soon has only the Russian Orthodox left to turn to for protection, as Berezovsky portrays it, and the oligarch turns to the Russian leader in a prayer that he will save the country from a bloody revolution. The reply from the Moscow patriarchate was swift: "All the previous doings of this man prompts a single thought. Listen attentively to this gentleman and do exactly the opposite of what he proposes."

As is so often the case in Russian politics, it is at the same time a both skilled and primitive game that is played out and, of course, this may be viewed merely as yet another cynical ouverture from an exiled oligarch, who seizes every opportunity to sow conflict among the Russian elite from which he himself has become an outcast and now has no influence over.

Berezovsky's ouverture puts the finger on a crucial point in the pre-election debate: "If not Putin, then who?" The bitter truth is that 12 years with Putin have eradicated next to all alternatives in Russian politics. Both history and the present show that opposition leaders either are those who have not been able to get along with Putin or they are marginalised and compromised politicians from both left and right, who have long been thought obsolete.

On two points, Berezovsky is right. The first is that the party in power, United Russia, stands on the brink of disaster. Several of the party's most prominent representatives have been forced to resign and the internal conflicts of interest, that Putin for so long has either skilfully balanced or swept under the carpet, are now out into the open. The second is how the Orthodox church is a power that stands above politics. If the United Russia power coalition collapses under internal and external pressure, then it is possible that the church will stand out as the single unifying force, which may act with sufficient moral weight to avoid chaotic and potentially violent developments.

With the December protests, bottled up discontent has been unscrewed and the spirit has been let out. The current critical media coverage - even on television - would not have been possible or even conceivable a mere month ago. There is discussion about a second glasnost - openness. People in common welcome a lustration and weathering of the stale smell of power, which for so long has lain like a wet blanket of corruption over Russian everyday life. At the same time, Putin and his forces have begun to mobilize a counterattack. The further course of the battle and its final outcome remain uncertain.

When Berezovsky from his western exile pleads with Putin to save Russia by sacrificing himself, he does not only play with a Putinist system on an increasingly loose foundation, but he also plays into the hands of the Russian leader's attempts at blackening the opposition. The motive for an otherwise impotent Berezovsky wants to add to the confrontation of Russian society in order for it to collapse under its own weight.

That the fallen oligarch's, Berezovsky, letter to Putin has been published by the independent radio station Echo of Moscow, has opened the watergates for a crackdown on this leading alternative news outlet. Recently, Putin accused the radio station for "pouring diarrhoea on him all day long" and to b on a western leash. Also other opposition leaders have come in for their shares after a meeting with the new US ambassador to Russia. A picture of the well-known blogger and opposition activist with the (Jewish-born) Berezovsky was also recently published later to be found photoshopped with. The theme is familiar and alludes to the foundations of the Putinist system, namely that oligachs in association with western interests want to plunder and weaken Russia by usurping state power. From the oligarch rule of the Yeltsin era to the coloured revolutions of Eastern Europe, the western threat - often with an anti-semitic undertone - has been drummed into public consciousness in order to legitimize an increasingly corrupt regime. When the backwash of the Arab spring and popular protests in other parts of the world now rolls in over Russian shores, it is a short step to pull off some old tricks.

The system to exercise power that Putin constructed during his presidential reign departed from the role of the office as guarantor of the constitutional order in a very thwarted interpretation. To safeguard the internal and external sovereignty, the constitution was interpreted in a way that gave the president a constant and pragmatic right to declare a state of emergency in both small and big matters. This interpretation was accompanied by systematic legislative work, where basic civic rights and freedoms were limited to the point that they were under constant threat of being repealed in practical legal application. The motive was to prevent illegitimate interests from usurping state power, because without sovereignty - the capacity to self-rule - there could be no talk of civic rights and freedoms. This meant centralization of power and intolerance towards dissent. The result is evident today in a system with both the right and resources to repression, ready to nip any negative manifestation of views in the bud.

What recent events have illustrated is a disorientation and a faltering will to exercise this power. When police and security services stand idle in front of mass protests the fears and apprehensions of repression and retaliation have faltered. It is an inner struggle of popular conscience, filled with undecisiveness to stability or change, where questions of courage, morale, and conviction are put to the test not only among those in power or in opposition, but also to a greater extent among ordinary people. It is simply difficult to picture a future without Putin - to thread into the unknown. One knows what one does not want, but not what one wants. This uncertainty is now used by Putin by urging, in his recently published electoral platform, for reform instead of a repetition of the mistakes committed in the wake of the country's previous revolutionary convulsions. How successful this tested formula will be this time is yet to be determined, as an increasing number of people associate continued stability with increasing stagnation.

Putin's credibility as a reformer is limited, as twelve years in power have shown little result despite recurrent plans and persistent attempts at reform. The division of powers between an executive Prime Minister and a reformatory President, which would have driven change, has moreover led to an increasingly marginalised Medvedev, despite the latter's attempts at forming a higher profile and greater independence during the last four years' "tandemocracy".

With the December events, Putin's popularity figures have reached a low. From a persistent support of some 70% of Russians, figures now oscillate around 50%. Additionally, in the latest opinion poll - from a state-directed institute - a quarter of respondents state that they have lost confidence in him. Much thus indicates that the results of the 4 March presidential vote will determine whether Russians will consider the elections as legitimate or not. If Putin receives more than 50% of votes and the election is decided by a single ballot, people are likely to question its validity. Being forced to a second round might however also be construed as a sign of weakness, which could strengthen the opposition in the runup to the final ballot. The temptation to tamper with the vote to gain a appropriate result may therefore increase in the eyes of power.

Putin's leadership will be put to a hard test in the coming months. Previous experiences have shown that he has difficulties in coping with crisis situations, which either have caused passivity or rash decisions. There is good ground to assume that Putin under such circumstances has trouble to reconsider and act in changing and unclear situations. The Russian leadership currently appears fumbling to grasp various ways of handling popular protests, with both concession and confrontation. The overarching tendency though seems to be to tighten the screws on the opposition. Several representatives of the opposition and their relatives have become subject to direct or indirect threats and reprisals. The great protest manifestation planned for February 4 has also been banned by Moscow authorities.

As Russia now is likely to meet with continued popular protest, it constitutes a balance act for Putin and his power apparatus. If he chooses to be too tough in quelling the opposition, the popular reaction may lead to greater protest to the extent that it threatens the regime. The risk is then that loyalty to power will collapse like a house of cards. At the same time, it is hard for Putin to allow continued public critique of how Russia is ruled, as it may lead to the same result in an avalanche of discontent over social evils disclosed. The question is if he will be capable of balancing between confrontation and tolerance.

That most people seem to take it for granted that Russia's next president will be called Vladimir Putin is also rather a curse than a blessing, as it creates unclarities as to which voter groups will be activated or become passive - regime supporters or opponents. The question here is if the mere threat of instability may drive the people to the ballots in support of the prevailing order. Will Putin be able to portray his policies as constructive and that of the opposition as destructive, there is still a chance that he may conquer a positive agenda in relation to the electorate. Here, it appears that the letter of the widely hated Berezovsky comes as a godsend, but at the same time sows a seed for a dirty election campaign, which may eventually be a curse to Putin.

What the outcome will be may be indicated at the 4 February opposition protests - already the next weekend.The final say will however be made only by the 4 March presidential elections. The question then is if fears for a white revolution and instability or the wish for free and fair elections will emerge victorious. Because, regardless of how one judges the Russian regime's ability to weather the storm, the recent protests mean that Russia stands at a crossroads between repression, revolution, or reforms.

Is Also Russia Finally Awakening?

For Newsmill.se: As tens of thousands gather in Moscow and other Russian cities, it is in protest against a corrupt regime, which no longer can provide its people with a belief in the future that might legitimize its further possession of power. The feeling of "we cannot live like this anymore" that became the hallmark of the last days of the soviet empire has reawakened, but the question is only how decisive this feeling will be for the further development of the country.

Russia is currently undergoing one of the most interesting and crucial phases since the Russian revolution. In contrast to the chaotic collapse of the Soviet Union, these are developments that are met with open eyes. Fundamentally, it is a question of whether the political system that has been created may assume the great structural challenges, which the country will meet with over the next decade. In short, all the problems and deficiencies that have been ignored since 1991 will peak around 2020: Demography, infrastructure, economy, environment, health and medical care, education, etc. The list goes on in what seems like eternity, but it essentially means that the people will meet with an increasingly tougher everyday life at the same time as people in power either do not want to or are unable to do anything about it.

The comparison with the dramatic fall of the Soviet Union however risks leading thoughts astray, as the challenges Russia currently is facing are of another character and dignity than was the case 20 years ago. The country instead is sick with a slow but fatal disease if not proper medication is administered. Here, the question is whether Putin and Medvedev are the right doctors.

That we now see people take to the streets and squares on a scale not witnessed since the soviet demise in 1991 is on the surface a consequence of the farcical fraud that took place at the 4 December parliamentary elections. To an even higher degree, it bears witness of a growing popular realization of a profound systemic crisis and that the current regime is uncapable of assuming rising challenges. Power is not even capable of arranging election fraud without it becoming embarrassingly obvious how badly organizsed even the fraud is. For Russians in general it thereby stands beyond doubt that elections are primarily intended for the division of power within the reigning United Russia party and not even represents an approximate popular will. That is an arrogance of power that fewer and fewer Russians are willing to accept.

That a Google search under the Russian term of "party of crooks and thieves" ends up with United Russia as first result is as good an evidence as any of how corrupt the regime is considered. People are simply not prepared to go on along a road chosen that seems to go over the cliffs. The question is how strong and wide the public wrath is and if it is sufficient for continued and increased outdoor protests in sub-zero degrees when the Russian New Year approaches with party and leisure. Disconent with the system still remains and handling it may become a hard task for both Putin and Medvedev for the upcoming 4 March presidential elections. A lot may still happen before then.

What kind of a system is it then that has been constructed during the Putin era and now is questioned by an increasing number of people? Simplified, it is a classic trade-off between power and people. Political power is handed over to an elite in exchange for economic prosperity. From an ideological perspective, Russia's political system is very alarming in combination with a failure of power to deliver on its economic promises.

That civil rights and freedoms have been heavily limited over the last decade has probably been observed by most. These limitations are however not only systematic but depart from an interpretation of the constitution with very reactionary roots. The role ascribed to presidential power under Putin departed from the ideology of the reigning party United Russia, which then was called "sovereign democracy". 

The fundament is a system where the president - or sovereign - always has the final say. In its pure form, the president has the constant right to proclaim a state of emergency without democratic accountability.What constitutes a rule of exception, only the president is privy to determine. In essence, it is from this constitutional interpretation that the country's systematic limitations of civil rights and freedom should be perceived. In current Russia the Damocletian sword is constantly hanging over the heads of each and everyone who expresses a divergent view and opposition is considered extremism and an attempt to usurp state power.

Despite president Medvedev's skepticism towards this constitutional interpretation and a high measure of pragmatism in its implementation, it remains a political system practically applied. The practical reason is that supreme political power in Russia has been transformed into a role of arbiter between conflicting political and economic interests, which lack democratic legitimacy and mandate. It is in light of this that the reigning United Russia party should be considered a representation of disparate interests, where primarily Putin but also Medvedev have had to act as arbiters to preserve domestic peace among cynical actors only looking out for their own egotistical interests. As parliamentary elections were carried through, the main purpose was to divide power and positions between different interests within United Russia and not to allow for any expression of real public will.

Why then protest now, in connection to elections to an apparently powerless parliament, when elections for the mighty presidential office awaits in just a few months time? As the Russian electoral system has been designed, it constitutes a two-stage rocket, where parliamentary elections in December determines the division of power within United Russia and presidential elections in March decides who will act as arbiter during the coming six years. That an increasing number of Russians now rise against this system is thus not that strange, as the parliament by way of United Russia symbolizes the corrupt exercise of power felt in everyday life. Protests emanate more from the effects of the system than from its contents.

That the economic component of the trade-off between elite and people has failed is obvious. United Russia's urging the Russians to "enrich yourselves" has not been accompanied by such economic liberalizations that would allow for a wider popular enrichment. Against the background of growing corruption and bribery, today's Russian youth do not consider enterprise and entrepreneurship as a method to reach a reasonable living standard. Instead, the youth is encouraged to seek their livelihood by serving the state within the public sphere. That the future of the young generation would lie within the public sector however rests on the cynical perspective that the more people are corrupted the less will be the interest to upset the fundaments of the system. What stands out is a reality where on the one hand every public office may be purchased at a determined price and on the other hand that the citizens' price list to access public services is decided by the cost of appropriating a public office. As bureaucracy grows, corruption feeds itself and becomes sui generis in a way that lies beyond the bounds of any political exercise of power. In this context, the December parliamentary elections have become a symbol of the corruption and lawlessness, which means that many Russians have lost their fate in the future.

Considering the fragmented opposition and an almost total lack of political alternative, the political failure of Putin and Medvedev becomes evident. Basically, this failure consists of increasing differences between political vision and reality. Despite the image in the West of great limitations on societal discourse, the discussion of the great challenges Russia is confronting has been both extensive and nuanced, and pointed to both acute and necessary measures from area to area. Most Russians thus know what awaits during the coming years if not drastic and extensive measures are imposed. Putin, Medvedev, and United Russia, have also presented plan after plan, which though have fallen apart when confronted by realities. Plans may be great, but without the capability to implement them, they eventually just end up the object of ridicule. The system's principle for a divsion of power has simply left Russia without a competent and powerful leadership.

Here, primarily Putin has eroded the ground he himself is standing on by allowing for a leader cult of himself. In the official image, Putin is portrayed as the potent, enlightened and determined leader, while Medvedev represents the reform, development, and innovation that will lead Russia towards the future. The image of Putin as the strong-man has though gone so far that he as a person and politician increasingly stands out as almost ridiculous in confrontation with reality.

The people of Russia is today met with a political leadership characterized by impotence and incapability - hopelessly dug down in attempts to balance the internal struggles of the elite over political and economic power. The power's message to the people seems to be: "Stay put in the sinking vessel!" That the people now asks "Can we live like this anymore?" - despite the absence of political alternatives - bears witness to the deep crisis of the system. The question is still if the Russians have concluded that "We cannot live like this anymore." Is it really the case that Russia is awakening out of its torpor by the realization that an authoritarian system cannot solve the challenges of the future?