I have to reiterate my fundamental disagreement with mainstream liberal political analysts. Stated briefly, their big idea is that the Russian political elite consists of two parties, so-called civic liberals, who support bourgeois modernization, and the security forces, who support the restoration of the Soviet Union in both its manifestations—as a totalitarian political regime and as an economy totally subordinated to the state. All recent events are thus interpreted in the light of the alleged struggle between the two parties, i.e., the party of the security forces has gone on a decisive offensive.
This is a liberal myth. The Russian liberal crowd, who are mainly right-wing liberals, concocted the story that increasing crackdowns and the Putin mafia state’s transition from a soft-core authoritarian imitation democracy to a hard-core authoritarian regime has been opposed by a party of court (systemic) liberals, a party informally led by former Russian finance minister Alexei Kudrin.
Can anyone produce even a single bit of evidence corroborating the so-called Kudrin party’s opposition to the policy of increasing crackdowns? Right-wing liberals would tell me the Kudrinistas are forced to act out of the public eye and play by the rules governing infighting among courtiers (apparatchiks). The fact this infighting has no outward manifestations is no proof that there is no showdown between the two parties, they would argue.
Let’s assume this is true. Where, however, did Russia liberals get the idea there is even one cause for such a showdown? Kudrin and other systemic right-wing liberals have always advocated an authoritarian modernization in which a “progressive” elite imposes unpopular social and economic reforms on the unwashed masses with an iron hand. By and large, their ideal is shared by the so-called Russian fascists, i.e., the “patriots” and statists. The occupation regime running mainland China carried out the very same economic reforms after crushing dissenters on Tiananmen Square in 1989.
Has Mr. Kudrin ever said publicly that he is a principled opponent of such methods of strangling the opposition? He has not. Then why have Russian liberals decided he opposes the mass detention of peaceful citizens for protesting in public at certain times?
Liberals should stop imagining they have intercessors in the top ranks of the Putin organized crime group. There are no such intercessors.
I am sorry for writing what I am about to write, because I have a decent amount of admiration for the man who wrote the passage I have quoted, above, but if there is anything nuttier than thinking that Putin (or any other dictator) is absolutely powerful, it is thinking that Putin has no power at all.
The “impotency” heresy seems to be all the rage these days, because Putin was, allegedly, persuaded by his ex-finance minister and ex-Petersburg city hall colleague Alexei Kudrin to write not one but three official letters telling whoever has been hassling the European University in St. Petersburg to back off and leave it alone, and all three times these sinister forces (whom no one has yet properly identified, because no one believes federal education watchdog Rosobrnadzor and the courts could arrange this sick, nine-ring circus on their own) willfully ignored Putin’s instructions.
The explanation, given by Fontanka.ru investigative reporter Irina Tumakova in the latest edition of Novaya Gazeta v Petersburge—that the mess kicked off due to four complaints filed with the prosecutor’s office against the university by non-entities who now cannot even remember why they filed the complaints and have lost all the paperwork—may be factually true, but it will have the effect of reinforcing the “impotency” camp’s convictions.
In reality, there are as many ways to exercise power as there are ways to be impotent, and so it is easy to confuse the two, especially if you are naive enough to believe that when Vladimir Putin says or writes something, he always means what he says or writes.
Let’s suppose Putin really is not averse to handing over the two mansions on the corner of Gagarin Street and the Kutuzov Embankment to his arch-crony Gennady Timchenko or whomever else Tumakova mentions in her article, and, in the process, getting rid of the European University, towards which he, plausibly, only feels antipathy, since in the past it was involved in using European Union funds to study election monitoring, something Putin, who has stayed in power this long only by rigging elections on a massive scale, would hardly approve.
(Putin even publicly said as much at the time, in late 2007 or early 2008, and soon afterwards, fire inspectors showed up at the European University and shut it down for two months. It was reopened after a loud, noisy, vigorous public campaign by its faculty, its students, and its numerous supporters in the local and international community. I took part in that campaign.)
More generally, the Putin regime has been engaged in a long-term, deliberate program of clamping down on any and all independent forces and entities in Russia, from small and medium businesses and NGOs of all stripes (even ones not mixed up in politics and without financial or other connections to foreign partners) to independent religious groups (e.g., the Jehovah’s Witnesses) and independent educational institutions such as the European University. Hardly surprising for a regime chockablock with “former KGB officers” at all levels and led by another “former KGB officer,” it has increasingly come to regard everyone trying to operate beyond the Russian government’s overweening oversight as extremely suspicious at best, “national traitors,” at worst.
Putin could make large numbers of people loathe him more than they already do by openly issuing a decree closing the European University and turning over its building and the neighboring building to his buddy Timchenko. Or he could play it smart and make clear through all the hundreds of channels he has at his disposal that he wants to shut down the university and hand over the building to Timchenko, all the while feigning to Kudrin and his liberal fans that he is worried enough about that fine little university to write the “back off” letters Kudrin asked him to write.
But the fix is already in, because Rosobrnadzor, the courts, Timchenko, and everyone else who needs to know, know that Putin’s letters of “support” for the university are meant to be roundly ignored. They know this because he has somehow indicated they should ignore them. How he did this exactly is immaterial and, ultimately, uninteresting.
So, in reality, this is yet another example of Putin’s exercising his rather considerable power, not evidence of his impotence. Of course, like any reasonably smart dictator or just plain leader, he wants to appear to be above the fray, but that does not mean he really is above the fray. He is right in the midst of it, whatever “it” is: making peace among the made men in his mafia empire, awarding them for their loyalty, slapping them on the wrists for their lapses, and adjudicating their conflicts between each other as they arise.
A real example of impotence are tenured and celebrated academics who persuade themselves, after being suckered by one of the oldest cons and mythologemes in Russian history (the powerless tsar surrounded by perfidious boyars), that since the allegedly powerful Putin is, in fact, impotent, they can be excused from empowering themselves and their students, and mobilizing them and the rather large community of people in Petersburg and around the world who are sympathetic to the European University to fight the power and get the university’s full rights as a research and teaching institution reinstated, while also forcing the powers that be to have the university’s grand old building restored to it and let it go ahead with renovating the building, as the university had carefully been preparing to do for several years.
That would be a real cause to rally round, but instead we have been treated, in turn, to long bouts of radio silence, various implausible conspiracy theories, and self-defeating disempowerment sessions, disguised as the worldly-wise acceptance of defeat and the lowly station of academics in Russian life.
But we have not seen the slightest hint of a coherent, militant public campaign to save the university, most of whose seemingly feeble supporters have the temerity to call it the “best in Russia.”
If it is really the best, it should be worth fighting tooth and nail for, no? Even and especially if you think the emperor has no clothes. TRR
The Calm before the Storm: Can We Avoid Economic Collapse in 2018?
Vladislav Inozemtsev Slon.ru
August 1, 2016
Last week, Tatyana Nesterenko, one of Russia’s most experienced financiers and a person distant from politics, a person who has held the post of deputy finance minister and head of the Federal Treasury for almost twenty years, said the Russian economy should expect serious financial problems as early as next year, comparing the current situation with the “eye of a storm, [meaning] a condition in which everything [merely] looks quiet and safe.”
In my view, Nesterenko is undoubtedly right. The government has recently appeared to be the epitome of tranquility. It has even been drafting a new three-year budget, although in terms of revenues for 2016, the previous such plan (for 2014–2016) was off by 42%! Revenues were projected at 15.9 trillion rubles, but actual revenues in the first six months of the year were 4.6 trillion rubles. I don’t think the new draft budget will prove more accurate, if only because no sources of income for covering the deficit are envisioned after 2017. The president, who from time to time meets with economists and recommends developing a new development strategy for the country “roughly within a year,” meaning when the Finance Ministry’s reserves will run out and the budget’s huge social commitments will prove impracticable, has mainly been busy reshuffling the security forces, believing, apparently, that a sum changes by rearranging its components.
Today, Russia’s economy, to invoke Economic Development Minister Alexei Ulyukayev‘s maxim, really has hit rock bottom. The authorities are elated that the rate at which the GDP has been falling fell to 0.6% in the second quarter, but we should note this reduction took place in conjunction with an accelerating reduction of real incomes (by 6.2% in May, and 4.8% in June) and a considerable increase in inflationary expectations. Annual inflation was 7.5% as of June and showed no tendency toward decreasing.
Moreover, oil prices have fallen considerably. Brent fell by 15.2% during July, and, apparently, black gold is near a new equilibrium price ranging between 38.5 and 43 dollars a barrel. A 15–16% fall in the oil price will cost the Russian budget 430 to 460 billion rubles in the remaining five months of 2016, which is also no cause for optimism. Responding to it by “managing” the descent of the ruble will not be easy. Devaluing the national currency will no longer lead to a growth in exports, which this year has lagged behind last year’s figures by 30.5%. On the other hand, imports, which have basically not shrunk (they are down by only 10.4%) will inevitably become more expensive, dragging along with them the prices for a wide range of goods, thereby causing inflation and setting the tone for high interest rates.
In mid 2016, the Russian economy really is situated in the eye of a kind of storm. It is quite calm there at the moment: the authorities have become accustomed to the new circumstances. They have no hesitation in spending reserve funds. Generally, fears of popular discontent over lowing living standards have been overcome. Seemingly, a certain reduction in the degree of hostility toward western countries might do the trick of restoring relations with them. There has been a glimmer of hope the EU’s problems will deepen with the UK’s exit. The possibility of Donald Trump winning the presidential race in the US has been taken seriously. Putin feels like a winner in his confrontation with Turkey. It is no wonder officials have dubbed the situation the “new normal.” It really is the new normal, so as long we take into account two factors: oil at 50 dollars a barrel and spending accumulated reserves at the rate of 600 billion rubles a quarter. That is around 8% of the overall amount in both sovereign wealth funds, the Reserve Fund and the National Wealth Fund.
However, the problem is not so much that sooner or later we will have to break back into the open sea through the hurricane’s eye wall, but the fact that the eye of the storm might move, and it would appear we have no instruments for tracking it. The country has not been trying to find the best place in this “quiet corner.” It has simply been drifting, humbling waiting for what happens next.
Evaluating the numerous programs and strategies that experts affiliated with one or another wing of the government are now trying to draft, one cannot help thinking that none of them is capable of boosting the Russian economy in view of two circumstances.
On the one hand, anti-crisis measures should have been implemented yesterday, rather than postponing their preliminary discussion to 2017. By the way, Russian Finance Minister Anton Siluanov warned in early 2016 that, at current oil prices, the Russian budget would be short 3 trillion rubles, which in turn would lead to spending the greater part of the National Wealth Fund. Little has changed since then. In the absence of reserve funds, the hole in the budget cannot be closed in 2018 either by raising funds on the international capital market (in this case, we would have to raise considerably more money than all the central government’s current international obligations) or by privatizing. (One year’s deficit could be papered over only by selling off the lion’s share of the state’s holdings in Gazprom and Rosneft.) Whatever economic development strategy the Kremlin approves a year from now, it will not prevent a large-scale collapse in 2018, with all the attendant consequences.
On the other hand, all the existing programs, however much Alexei Kudrin and Boris Titov stress their differences, are generally focused on the same thing: relaunching the economy on behalf of manufacturers. There is in fact only one difference between them. Titov’s Stolypin Club has suggested priming major enterprises with money through the earmarked and regulated distribution of cheap loans, subsidized by the Central Bank, while Kudrin’s Center for Strategic Research favors institutional reforms that could include reducing taxes on business and limiting the rights and opportunities of security services and the bureaucracy for extracting additional income from business. The assumption is that either by getting its hands on cheap money or ridding itself of the unbearable pressure of regulators, business will be reanimated, sparking life-saving economic growth.
I would love to be wrong, but I don’t think these measures will produce any meaningful outcomes, because the most important factor in the economic slowdown of 2014–2016 has been the crisis in consumer demand. The state has diligently performed its investment obligations, saturating heavy industry with funds via defense sector orders. It has not halted its sometimes pointless but expensive infrastructure projects. It has been encouraging state companies to build new pipelines and railways, but none of it can compensate the effect of declining consumer demand. Moreover, this demand has increasingly shifted towards the continuing flow of imports, while the share of domestic goods on the market has stopped growing. As I understand it, none of the economic development programs has so far offered a solution to this problem.
Therefore, in my opinion, we should introduce as least three new story lines into the ongoing debates.
First, we should stop regarding increases in wages for low-paid earners, pensions, allowances, and other payments to low-income Russians as “costly measures.” Saving money by reducing the incomes of doctors, teachers or pensioners is much more destructive than reducing costs at Gazprom or expenditures in the program for rearming the Russian army. These segments of the populace are most focused on purchasing domestic goods and services, and investing in them produces a multiplier effect in the sales and production of consumer goods. The crisis of 2008–2009 was negotiated much more successfully than the current crisis not only due to the relatively radical reversal in oil prices but also because the government considerably increased people’s incomes at the time, despite budget problems, whereas 41% of the population now say they lack money for food and clothing.
Second, we should think hard about a one-time credit and debt amnesty for people whose indebtedness to banks, the tax authorities or housing and utilities sector companies does not exceed, say, 30 thousand rubles. Obligations of this amount now account for around 20% of the population’s entire debt burden, and a measure like this would affect 10 to 12 million people. The state would have to allocate up to 2 trillion rubles to implement the program, but both the social and political (why deny it) effect of such a measure would be incomparable with a Stolypin Club-style emission of a similar scale, which would completely vanish in the offshore accounts of executives of major companies in bed with the state and sympathetic officials. In my view, we cannot do without this measure now, but none of the people involved in the current discussion has deigned to mention it in their programs.
Third, direct measures for stimulating demand are necessary. They were adopted by all the governments of developed countries hit by the crisis of 2008–2009, but our officials were quite reluctant to copy them. I have in mind not only programs for encouraging purchases of new automobiles but also a system of issuing food stamps, analogous to the American one, to poor people. For example, pensioners could buy stamps nominally worth four to six thousand rubles for two to three thousand rubles at welfare offices. The stamps would be accepted in shops as payment for domestic food products only, with the exception of cigarettes and alcohol, and commercial outlets would then turn them in at banks at face value and have the amount credited to their accounts. This could be a powerful stimulus both to domestic manufacturers and commerce, not to mention the popularity of such a step among socially vulnerable groups themselves.
In other words, now it is not enough to say that Russia has sailed into a perfect storm. It must be understand that not only the captain and his mates will have to fight for our ship’s survival but absolutely all the passengers as well, and so the basis of an anti-crisis program should be attention to the general population, not to state corporations. And, of course, to be at least relatively prepared to fend off the mighty blows of the elements, we must stop postponing actual steps until tomorrow, and begin taking them today.
Source of original text: Worldcrisis.ru. Translated by the Russian Reader.
Zero Sum When nothing is produced, all power belongs to the man who divides and distributes
Maxim Trudolyubov Vedomosti
May 27, 2016
It is probably already clear to everyone that the implicit “social contract,” about whose existence it was customary to natter in the fat years, was a hoax. Rejecting political subjectivity, ordinary folks and not-so-ordinary folks, big business, and regional elites were able to enrich themselves and, in the consumerist sense, converge with Europe.
It was not, however, a one-off deal with a perpetually fixed rate of profit, but a protracted process. We voluntarily became political zeroes. We gave up free speech, the right to elect and be elected, and the right to demand accountability from our politicians, and part of the population gave up the right to funded pensions. But the unit of prosperity we got in return was given to us not as property but was lent to us. Now the government has collected the debt. The zeroes remain, but the unit will soon run out. The government has no other sources for funding projects, but unpredictable and expensive projects—military campaigns as in Syria, for example, and infrastructural projects like the Kerch Strait Bridge—are the whole point of Russian politics.
The authorities supported the population during the crisis of 2008, but by 2011, dissatisfaction with government policy and the Putin-Medvedev castling move had sparked protests. The Kremlin learned its lesson, and it is ordinary people who are now primarily bearing the burden of the crisis, not the state. Having surrendered their rights to the Kremlin, people will now have to surrender not only their pension savings but also their savings accounts and, so to speak, the fat they have saved up on their bodies if they do not decide to take back their political rights. People’s well-being is, in fact, the “source of growth” that President Putin has asked his economic advisers to find. Actually, he was kidding: the source has never been lost.
When the president, in May 2016, summons his economic council, having forgotten about its existence for two years or so, and says the country needs new sources of growth, how are we to understand this? How were we supposed to understand his proposal to reduce economic dependence on the oil price, which he voiced in the autumn of 2015? It is like offering to grow oneself a new liver after sixteen years of binge drinking.
The Kremlin has created the current situation by consistently rejecting any measures that could have, long ago, reduced dependence on oil and generated stable sources of growth beyond the extractive and defense industries. It is impossible to fix in a month what has been done over sixteen years. Moreover, the very same people have been summoned to do the fixing, people still divided by irreconcilable contradictions. What joint effort at seeking ways out of the crisis are Alexei Kudrin and Sergei Glazyev capable of mounting? The sum of their efforts will inevitably be zero.
It would appear this zero quite suits the Kremlin, as economist Konstantin Sonin argued in a recent interview with Slon.ru. Incidentally, efforts are also needed to maintain zero growth, and those efforts are being made. Certain malcontents might not like the “zero” economy, but the Kremlin really likes it, because it strengthens the power of the front office, where decisions about redistribution are made. When nothing is produced, all power belongs to the man who divides and distributes.