Making the Same Mistake Thrice

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The 2016 Elections: Making the Same Mistake Is Fate
Nikolay Mironov
Moskovsky Komsomolets
September 19, 2016

It is apparent to almost everyone the country has fallen into a deep pit. (That is the most decent word for describing the situation.) Economic stability (and, along with it, the stability in our lives) is irreversibly over, and it is clear a new (moreover, radically new) economic policy is needed to bring it back. The current, extractive economic policy has run out of steam. Both the regime and society are aware that a crisis has ensued, but for the time being no one is doing anything about it. Meanwhile, the time for reform is running out.

Now, after the elections to the State Duma, as new and old MPs take their seats, 2018 moves into the foreground of the political agenda. In fact, the main issue is not whether Vladimir Putin will seek a fourth term. The main suspense revolves around whether in the near future we can expect a change in the country’s economic and political model. Which transition scenarios are the most likely? The future president’s name is interesting only from this viewpoint. Whether the president is young, mature or elderly, what matters is whether he or she will be able to implement reforms and how they will implement them.

The country’s reserves are running out, and the system acutely, critically needs a reboot. However, launching reforms becomes more complicated with every passing year. The situation has now almost been brought to an extreme. The government obviously is now no longer coping with its obligations to society: the population is rapidly plunging into poverty. The political structure is held together only by the president’s word of honor and good health.

At a critical time for the country’s future, however, the regime has preferred to act tactically rather than strategically.  When the oil price was high, it was possible not to think about costs, effective spending, and rampant corruption. When circumstances worsened, the regime also took the easy, well-trodden path of spending reserves, introducing new taxes for the general population, clamping down on small business, reducing social spending, and commercializing health care, education, and research.

Soon, however, it became clear these measures were insufficient for riding out the crisis. So, currently, the mechanism for confiscating “superfluous” money from major businessmen and top officials, previously untouchable, has been set into motion. This is borne out by the alleged anti-corruption campaigns that have been unleashed. In fact, their goal is to collect tribute from certain segments of the elite. But not from all segments, only from the “extended” circles, without affecting the circle of businessmen and administrators closest to the regime.

The system is going down the same road as the Soviet nomenklatura did in the 1980s. Initially, it firmly “brezhnevized” itself, stagnated, and rusted on the inside. Now, experiencing a lack of resources, it attempts to get by with superficial half-measures, in particular, by tempering corruption, which is sucking the country dry, by jailing a limited number of individuals. Ultimately, when the common folk learn of the colossal wealth possessed by middling colonels they are convinced of the regime’s utter corruption, but see no decisive measures being taken and are persuaded the elite has no desire to change anything. Eight billion rubles are seized in anti-corruption official Dmitry Zakharchenko’s flat, and people are paid eight-thousand-ruble pensions! [I honestly don’t know where Mironov got the second set of figures, although, of course, pensions in Russia are usually entirely to low to cope with the rising cost of living. — TRR.] A million times difference! But none of the higher-ups in the Interior Ministry has resigned. This fact alone is enough to shatter confidence in the entire political system.

The problem, however, and it is the main problem, is that the people with power and money—the nomenklatura-slash-oligarchy of our time—do not want to change their position even in the midst of a crisis. They cling to their extreme wealth and privileges. But the realization that change is necessary dawns on them with catastrophic tardiness. It was this way during tsarism’s final days, and under the late-Soviet regime. Instead of launching reforms in timely fashion, the regime has put them off, pushing the situation to the point of no return.

In the recent elections to the State Duma, United Russia, trudging to victory under the leadership of Prime Minister Medvedev, refrained altogether from proposing an anti-crisis plan to the nation, either a strategy of some sort or even a winning tactic. Quotations of Putin and tiresome references to Crimea and the country’s rising from its knees were the entire content of their campaign. The nation responded partly by skipping the elections, partly by voting as they were told, and partly by voting because there was no alternative. But the question of what to do next remains unanswered. Does the regime intend to answer the question, or will all this uncertainty crystallize in 2018?

Meanwhile, Russia finds itself at a crossroads. The first road is the inertial scenari0. Politically, it involves further crackdowns. The unwritten “social compact,” which emerged in the early noughties, has become impracticable since it cannot ensure a comfortable life. So without purging possible rivals and curtailing grassroots activism it will not be possible to painlessly solve the problem of extending the president’s term or transferring power to a chosen successor. So, for example, further censorship of the media will be required, as will the strict administration of what remains of elections, and increased persecution of undesirables, and more frequent trials and more show trials.

In economic terns, this simple plan involves the the “dekulakization” of less than totally loyal oligarchs and wayward officials, who will have to pay for the crisis. Undoubtedly, this will have a temporary effect and make it possible to plug certain holes in the budget. For a country like Russia, however, given the scale of the crisis, the effect will be quite short-lived. When this money runs out as well, reform will be the only option. But I am afraid that by then the last capital will be spent, and there will nothing left to invest in the economy. The chance to change things without radical demolition could be missed. The country will spend the last bits of the Soviet legacy, and exiting the crisis will once again require titanic efforts on the part of the people. Given increased global competition, however, Russia risks never catching up with anyone ever again.

The second scenario, vital for our survival, involves carrying out reforms right now. The government has to support the economy to give it a leg up and get development up and running. I would argue this is impossible without injections from the budget and, consequently, without strategic government planning, facilitating the rational use of the resources we have left. We not should support the economy per se, but those areas of growth that will encourage import substitution and the establishment of competitive production in the non-extractive sector and agriculture.

Where do we get the money? From reserves, tax reform (redirecting the tax burden toward the super wealthy), confiscation of funds acquired through corruption, and capital export controls. This will require quite stringent measures towards the business elite and high-ranking officials. Medium-sized businesses and rank-and-file servants should not be touched, however. Not scapegoats but the genuinely super wealthy should be involved in getting the county out of crisis.

To keep the money meant to bolster the economy from being stolen, we need a perestroika of the political system, because that is where the roots of corruption lies. It comes from secrecy, the regime’s accountability to no one but itself, and officialdom’s bloat and inefficiency. There are no miraculous prescriptions in this case. Throughout the world, free media and judicial, parliamentary, and public control help to temper the appetites of those in charge of the budget. The regular turnover of those in power is also necessary, and the only cure in this case are free and fair elections.

We also need to support the population, which has been rapidly growing poorer during the crisis, and not only from a sense of social justice. When people have no purchasing power, the economy is alway in crisis. Government financial assistance should be used to stimulate consumer demand, ensuring import substitution in those sectors where funds are received from public. Otherwise, the money will be converted to foreign currency and sent abroad. We must protect domestic producers from robbery and extortion. Otherwise, they will hide everything they get from the government and the public abroad. Plus, interest rates on loans to business must be drastically reduced. If all these things are done, tax revenues will start to grow in a few years, and government aid will be recouped.

Strategically, a reboot of the educational system is also needed now in keeping with the country’s development priorities for at least the next twenty years. Science and the national technological base must be supported.

The prescriptions for solving Russia’s problems are self-explanatory. Given the president’s high ratings and United Russia’s overwhelming majority in the Duma, it is high time to carry out large-scale reforms. There is a margin of safety and the required level of support. But everything in Russia is topsy-turvy. In Russia, it is more likely reforms will be launched if the regime’s ratings take a catastrophic nosedive. They will inevitably reach a critical level when the socio-economic situation worsens. You cannot fill your belly with endless tales of patriotism. People, after all, need to eat something, clothe their children, and get medical care.

We could also arrive at a different fork in the road: reforms from above or turmoil from below. Attempts to stop time have always led Russian regimes to ruin, destroying the country in the process. Must things come to this? The populace’s passivity in the face of a purge of the opposition is a temporary and illusory phenomenon. Many local social protests have erupted around the country. Their number is not diminishing, and general discontent has been growing. And things could seriously explode somewhere. Is it our fate to make the same mistake again and again?

I recall the joke about Ivan the Fool. A father had three sons. The eldest went into the yard, where a rake lay on the ground. He stepped on it and was killed. The middle son goes out, and it is the same story. Ivan, the youngest brother, realizes a rake is lying in the yard and he should not step on it, but there is no way around it. Such is life.

It would be funny if it weren’t so sad.

Nikolay Mironov is head of the Center for Economic and Political Reform, in Moscow, and a frequent columnist for Moskovsky Komsomolets newspaper. I have published translations of his columns “Whipping Bear: Why the President Needs a ‘Bad’ Prime Minister” (June 2016) and “Despair as a Sign of the Times” (September 2016). Translation and photo by the Russian Reader. Thanks to Sean Guillory for the heads-up.

One thought on “Making the Same Mistake Thrice

  1. This is an excellent article it was a very good read. I agree with you on your annalists of the situation in your country. When Mr. Putin came to power in Russia I believed that he was exactly what your country needed yet he and his cronies have far out lasted their usefulness to your people. Like all military minded (and spy agency) type people he has shown that he has no idea how to manage the economy of a country. Mr. Putin and his friends have robbed the people of Russia of their ability to survive financially. It appears that Mr. Putin and his friends are only going to leave office if the people of Russia stand up together and physically remove them. I hope that you yourself do not end up with a poison pill like so many honest people in your country have when they dare tell the truth. It is very obvious that Mr. Putin is the Kingpin of the crookedness and of the ignorance that is ruining the lives of the everyday people of your great country. All that I can do is pray for all of you, including Mr. Putin.

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