Is Russia able to Handle the Crisis?

Introduced by Vladimir Frolov
Russia Profile

Contributors: Vladimir Belaeff, Stephen Blank, Ethan S. Burger, Vlad Ivanenko, Eugene Kolesnikov

A debate on whether the Russian political system needs an overhaul has turned into a shouting match between senior Kremlin officials. Last week, First Deputy Head of the presidential administration Vladislav Surkov criticized Dmitry Medvedev’s senior advisors Arkadiy Dvorkovich and Igor Yurgens, who had the audacity to criticize the government’s approach to handling the crisis, and even went as far as to suggest that Russia’s political system has become too rigid to enable Russia to withstand the crisis. What does this debate reveal? Does it show that there is room for a healthy debate at the highest levels of power in Russia? What could be a realistic adjustment of Russia’s political system now that would not bring the house down?

Surkov took issue with Yurgens’ thesis that the political bargain of Vladimir Putin’s era, when Russian society renounced some of its rights and freedoms in exchange for the petro-dollars trickling down, is no longer viable, and that now, when prosperity is over, the society would like to have some of its abdicated rights back.

A week before that, Presidential Aide Arkadiy Dvorkovich said that the authorities were ill-prepared to handle the crisis due to the institutional deficiencies in the system.

Surkov ridiculed Yurgens and Dvorkovich by arguing that their position lacks credibility and substance. “A host of conclusions follows from this suggestion,” he said. “We should get together somewhere for some kind of forum — what kind is unclear; and discuss something — no one says what; we should remake everything from scratch and create new institutions. The ‘old’ political system was either not created for these tasks and can no longer fulfill its functions, or it was the fruit of the previous plenty, and everything now will be different, and it is apparently necessary to change this system urgently.”

Former Prime Minister Mikhail Kasyanov and the Solidarity coalition have called for the government’s resignation, early elections, elections of governors, and a new Constitution, all by the end of 2009. This is obviously not serious.

Surkov scoffed at the notion that prosperity limits freedom. “Freedom has a material dimension,” he argued, “and the prosperity of citizens increased in recent years not in order to take away people’s freedom, but in order to make people free.” He defended Russia’s political system as “working” in these challenging times. Its rigidity, he asserts, is its strength, not its weakness, because it will hold the country together during the crisis and won’t allow it to come apart at the seams, as it once nearly did in 1990s.

Surkov is right in saying that calls for a complete overhaul of Russia’s political system are downright irresponsible. Now is probably not the time to engage in soul searching. Action is needed more than words. “It is always much more fun to change everything, to reject everything, and to try something new,” Surkov said. “This, in my view, is our biggest vice: we are unwilling to finish anything off, we are ready to abandon everything at the half-way stage — sweepingly and without thinking about the consequences. At the same time, no one has calculated how the new political system will look, or what the cost of introducing it, yet another new system, will be.”

But Surkov is wrong in claiming that the system is working well enough. It is not. The Duma and the Federation Council, as well as all major political parties, have been emaciated by their utter irrelevance in developing the response to the crisis. Surkov’s claim that no parliament in the world can produce effective solutions is simply ill-informed. A political system where the nation’s parliament is an irrelevant institution needs more than a facelift.

What does this debate reveal, other than that there are conflicting groups in the Kremlin vying for the right to set the agenda of Medvedev’s presidency? Does it show that there is room for a healthy debate at the highest levels of power in Russia? If so, could it be proof that the system may indeed be working? How viable and politically savvy are the opposition calls for razing the Putin/Medvedev system to the ground, before something good actually happens in Russia? What could be a realistic adjustment of Russia’s political system now that would not bring the house down? Are there similar calls for reforming the political system to better withstand the crisis in Western democracies? Surely people in Iceland, Latvia, Lithuania, Bulgaria and Greece went to the streets to demand a better response from the government? Do political systems in these troubled nations deserve a complete overhaul? And could the election of Barack Obama count as such in the United States?

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

Several years ago I informally rated people in then-president Putin’s entourage according their ability to view things strategically. According to my estimates, Vladislav Surkov was at the top, while Arkady Dvorkovich occupied the middle position and Igor Yurgens was not considered. Judging by the account given above, I do not see the need to change my previous estimates: again, Surkov outclasses his opponents. In order to see the logic of this argument, it is necessary to regard the current Russian situation in the context of the global economic crisis and the Russian government’s binding constraints.

In the situation of general uncertainty, two national governments seem to outperform their peers: the Chinese and the Russian. True, their relative success is largely based on huge foreign currency reserves that they have accumulated, but also on the quality of their public decision-making. I am more knowledgeable of Russian affairs, to which I return now.

Data demonstrates that Russia performs relatively well in the areas where its government has a role to play. It has averted the collapse of its banking system and withstood speculative attacks on the ruble, contrary to popular expectations. The Central Bank registers modest growth in its foreign reserves ($387 billion in mid-March), while the Ministry of Finance reports that the federal budget continues, surprisingly in recessionary times, to be in surplus. I have had a look at the Russian plan to reform the “obsolescent” global financial system, which the country will present at the G20 meeting, and I have found the proposals sensible. Since the facts that I know indicate that the government has performed satisfactorily, I cannot agree with Surkov’s opponents that the Russian system does not work.

The tradeoff between social well-being and democracy that Yurgens has postulated in his claim that “economic well-being is shrinking … (hence) civil rights should expand” is not substantiated. Globally, the crisis shows an acute deficit of leaders who can not only react to the problems, but also take a proactive stance, nipping appearing problems in the bud. The economic system that economists have learned in their schools is collapsing in front of our eyes. The time has come to review the recipes prescribed in current economic cookbooks, but they are exactly what the majority of the democratically-elected governments try to follow: to enlarge government expenditure, to provide fiscal stimuli, and to ease financial credit constraint. To make a definite break with established practices requires a charismatic leader who can take the sole responsibility for the consequences. Let us be honest here: democracy with its ingrained system of checks and balances is not suitable for a battlefield.

I share Dvorkovich’s pessimism regarding “the present elite, which is above all bureaucratic,” but I do not see how he is going to replace it with “a new elite which will be more open to society,” save by the way of revolution. My opinion appears to be congruent with the view that Russian society at large exposes in opinion surveys: respondents continue to show a high degree of confidence in the ultimate representatives of the elite—that is, in national leaders. Surkov’s response shows that he is also aware of the problem, but leans toward an evolutionary replacement of the elite.

Curiously, this debate within the Kremlin walls reveals a weakness of its economic camp. Apart from Finance Minister Alexei Kudrin, who is largely responsible for macroeconomic stability, there is no economist of a high caliber who would take the lead in developing an economic strategy for Russia. There are sensible ideas floating around, but I have yet to see what the government strategy is regarding the questions of Russian global specialization and the degree of its economic integration with its neighbors. Surkov needs to meet a formidable opponent on the economic flank before he starts losing points in the Kremlin’s games.

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

In recent weeks, the Russian policy-making process seems to have become slightly more transparent. Indeed, not merely political figures but their advisors are beginning to publicly engage in serious debate. Query to what audience they are addressing themselves. In is unlikely that the First Deputy Head of the Presidential Administration Vladislav Surkov (a former intelligence officer and then Deputy Chief of Staff to then-President Vladimir Putin) as well as Medvedev’s advisors Arkadiy Dvorkovich and Igor Yurgens are making spontaneous remarks to the Russian media. Are we embarking on a new era?

Russian Constitution chapters four and six, respectively, set out the powers of the Russian president and the chairman of the Russian government (i.e. the prime minister). The Russian Constitution provides that the Russian president directs foreign and domestic policies; acts as the guarantor of the Constitution; appoints and fires the prime minister, as well as other federal ministers subject to parliamentary approval. Whereas, the Russian prime minister generally chairs the Russian cabinet; implements domestic and foreign policy as well as presidential edicts, laws and international agreements; coordinates economic and fiscal policy, manages federal property; sets prices for gas, electricity and domestic transportation; and controls domestic policies. Both the late President Boris Yeltsin and then-President Vladimir Putin had multiple prime ministers.

A cursory reading of the Russian Constitution envisions that the prime minister is subordinate to the president. In practice, the line between determining policy and implementing it can be difficult to discern – the prime minister has a large amount of discretion with respect to the manner in which policy is carried out. Furthermore, when the prime minister is also head of the majority party in the State Duma, further complexity is added. The Russian Constitution was drafted in a fashion where the president was the most important political actor. Typically, in parliamentary governmental systems, the president (or monarch) has largely ceremonial functions, and the prime minister, as the leader of the largest party in the legislature, plays the most prominent role.

Undoubtedly, at present the Russian Constitution does not seem to describe the Russian political reality. This situation appears to become increasingly problematic. The divide between policy and politics is not always clear, and may change over time. In fact, policy differences may give rise to political differences, as well as the reverse. The magnitude of the global economic crisis is so complex and enormous that it would be unrealistic to assume that two informed individuals would be in complete agreement on the proper approach to take to address the ramifications of the present situation, both in the short and long terms.

The Russian President Dmitry Medvedev has noted that some Russian business persons had become extraordinarily wealthy in a short time. Almost as a moral imperative, he has called on those individuals who amassed great wealth not to downsize their workforces – in an ironic way, he seems to be implying that in the absence of a government-provided safety net, those who became wealthy (often as a result of their acquisition of the country’s natural resources) cannot act as if they have no social responsibility for the well-being of their employees and even the country as a whole. At present, one can only speculate as to whether this thinking is his own, or if it is shared by his mentor prime minister Putin.

During the Putin presidency, political power became increasingly centralized and authoritarian.  In the aftermath of the disorder of the Yeltsin years, the majority of the Russian populace regarded this situation as tolerable, because the economic conditions seemed to be improving — largely a by-product of higher commodity prices. That era is certainly over with regard to economics – it remains to be seen whether Russian society has the capability to effectuate change in the country’s political system.

The centralized Russian political system seems to make a smooth transition to another form of government difficult. The greatest uncertainties for Russia are how severe the current economic crisis is, and will something resembling a consensus on the steps that need to be taken develop.  If there is some form of consensus, will it be global, regional, or country specific. Can it be achieved peaceably and with a minimum of human suffering, or will economic stratification lead to political instability and insecurity? In any case, will the existing political framework both domestically and international prove sufficiently adept at managing the inevitable changes?  While a “mixed-economic” system may well emerge in many countries – will new political systems also be necessary? Unfortunately, in many countries, merely to raise these questions may involve great hardship for some.

Eugene Kolesnikov, Private Consultant, the Netherlands:

t is implied in the introduction to the panel, and has been stated recently by a number of public figures in Russia, that an effective response to the crisis requires more democracy. The argument goes as follows: a more democratic setup at all levels of society can help better capture numerous distress signals arising as the crisis unfolds, and it can also ensure flexibility and promptness in responding to such signals.

Nothing can be farther from the truth than this unfortunate belief. Russia, as indeed all other countries, is fighting an economic and a related societal emergency that may escalate into an existential threat. Anyone who has ever worked in corporations or organizations that prepare for emergencies or had to respond to them knows full well that the first order of business in crisis management is centralization of control. Tighter control and centralized management of a crisis is essential for quick mobilization of resources, making hard decisions and maintaining discipline. The more organized and aligned the emergency response is, the better the chance that it will succeed.

Fortunately, Russia’s current political system gives it major advantage and opportunity in crisis management. There is substantial centralization and discipline for the state to be able to mobilize resources, make unpopular decisions and respond to problems strategically rather than tactically in a populist fashion. The worst case scenario for the country and its people would be a democracy galore with populists, liberals and adventurists capitalizing on the difficulties, fueling popular discontent, and destabilizing the response to the unfolding crisis.

It is really a big question whether the so-called developed democracies of the West can deal with a real crisis. They are generally slow, inflexible, obsessed with polls and elections and lacking stamina to make and carry out unpopular decisions. Western countries are stabilized by either prosperity or war, with almost no middle ground between these two poles. Not for nothing Zbigniew Brzezinski recently appealed to the rich to share with the poor and warned of possible riots in the United States if the situation is not changed.

This crisis will test the strength of all systems and societies. I believe that Russia has a good chance to get through the crisis successfully thanks to the transformation of governance that took place during the last nine years. I have serious doubts that the touted western democracies are strong enough to emerge from this crisis unscathed or, indeed, as democratic as they had been before it started.

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

It would take more than 600 words to answer all the questions posed here, but we should not make the mistake of thinking that because the debate is confined to high-ranking officials that it is not a serious debate. Unfortunately though, while liberalization could be in the offing, fundamental reform is not. As Anders Aslund once said, Russia has an exceptionally venal ruling class, and that has not changed, if anything it has probably gotten worse given the stakes involved and the ubiquity of corruption.

This debate to my mind does not show that the “system is working.” If anything, it shows that it is not working as intended, because Russian leaders like Putin have a horror of public controversy. Of course, Medvedev or Putin could be orchestrating this to smoke out the opponents of each other’s policy. But it would be fair to say that it only betrays the ignorance and provincialism of the Russian elite to assert that no parliament in the world can produce effective solutions.

Likewise, demonstrations against failed governments in Europe suggest that the democratic system, though not the government, is working. In Russia we’ve already seen the response to protests, and the idea that conflict must be kept in house only leads to a hot house which ultimately boils over, as it did in 1917 and 1991. Furthermore, there are so many places to begin when one contemplates what could be done to reform the system entirely that one could start anywhere, e.g., instituting genuine accountability of the government before the parliament and the law, ending political trials and what used to be called “telephone justice.”

But I will use the opportunity here to suggest that as long as Russia has a political police whose real mission is not the defense of the state but suppression of dissent and domestic political intrigues, and which is not answerable to and accountable to the law and the parliament, it cannot be considered a democracy.

Likewise a secure right of private property is another touchstone of a legal system (Rechtstaat) and market economy, neither of which exists in Russia. I know that a herd of political scientists and economists believe that Russia has a market economy, but they are wrong.

Thus, it remains to be seen whether Medvedev will do more than tinker around the edges of the patrimonial or neo-Tsarist regime. And until he does, it will also remain the case that every such debate will be anxiously scrutinized to see if it heralds the beginning of the end of the system, a scrutiny that eloquently testifies to the archaic, neo-feudal nature of the Russian state and its inherent “dysfunctionality” for modern times.

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

Sometimes perceptions originating inside a system can be clouded by too much proximity: “not seeing the forest for the trees.”

The global economic crisis is extremely stressful to all countries, including those which are highly advanced,

Organizationally. In these circumstances, in comparison, the performance of Russia’s political and governing system so far has been quite good. It must be remembered that the crisis is acknowledged as the worst in at least 60 years, possibly as many as 80. Yes, Russia experiences painful phenomena – growing unemployment, significant (although moderate: 14 percent in 2008) consumer price inflation, a drop in tax revenues, a draining of currency reserves.

But – the Russian social safety net continues to function (unlike some other countries) there have been no spectacular corporate failures or financial scandals (unlike the United States, considered by many a paradigm of effective governance). Strategic economic sectors and major projects continue to work; there is growing import substitution; the devalued ruble is holding steady, and occasionally regaining lost ground relative to the dollar and the euro. Agricultural output grew substantially. In 2008 Russia’s current account balance dropped by 25 percent relative to the prior year – and remained strongly positive at $78 billion.

In Western media there appear frequent alarmist comments forecasting “imminent” collapse in Russia; these forecasts migrate by a kind of news osmosis into some Russian domestic media as well. However, so far these dire predictions are fortunately false. Certainly, quite a few developed countries show evidence of a much deeper economic dislocation caused by the crisis, when compared with Russia. There is a view that the alarmist Western forecasts may be a kind of negative advertising, intended to create uncertainty about an economy that can obviously attract scarce liquidity in current capital markets. Capital that avoids Russia because of alarmist forecasts will be invested somewhere else.

Therefore, in my opinion, the question of adequacy of Russia’s political institutions in the present severe crisis must be answered in the affirmative. Evidently, there is no perfect system, and just like in America, the European Union and other complex societies, Russia can and should continuously examine and work to improve its governance. Corruption is an issue – and at this time there are 40,000 corruption prosecutions in process: probably close to the saturation limit of Russia’s justice system.

Russia’s economic governance in conditions of exceptional stress is generally effective and is shifting the economy in the direction of active survival, with positioning for post-crisis growth. Given recent events, like the AIG executive bonus scandal, one would rather challenge the effectiveness and results of the U.S. government’s response inside the original locus of the crisis. In comparison to other countries, Russia’s governance appears significantly more effective.

On Sunday March 1 there were elections for local legislatures and city governments in major regions of Russia. These elections are correctly viewed as a kind of “referendum” on Russia’s governance. The results of these elections confirmed broad support for the governing party–United Russia. In some districts United Russia posted increases relative to prior polls. This result confirms that the electorate of Russia continues to approve the current policies of the government.

Russia’s political system is responding well and better than in other countries to the extreme challenges of the global economic crisis. Although some impatience may be understandable, in my opinion it is misdirected. In other countries (the United States, UK, Portugal, Iceland, Greece) the effectiveness of the political system is questioned less, and yet recent governance experience in some of these countries is obviously disappointing.

Source:  www.russiaprofile.org, March 20, 2009