Russian President Vladimir Putin turned Russia's parliamentary election into a referendum on himself -- and won by a landslide. But while he refuses to spell out his plans for remaining in power once his second term expires next spring, his economic policy is clear.
The strangest thing about the Duma election was that Putin lost his nerve. He over-exposed himself in public appearances that were as aggressive as they were vague in substance. He ran against the West and the "chaos" of the 1990s, just as he raged against Chechen terrorists in 1999 and against oligarchs in 2003.
The Kremlin abandoned democratic procedures, controlling which parties were allowed to run and their candidates, while Putin's United Russia monopolized media coverage. Opposition activists were blocked from most campaigning and often arrested, while Kremlin-controlled courts denied their complaints. People were intimidated into voting for United Russia on a mass scale. Independent election monitors were barred.
As a consequence, the new State Duma has not been elected so much as appointed. It lacks legitimacy and its members are unknown. But Putin's legitimacy has also been tainted by the pervasive fraud. His only "mass" meeting in Moscow drew no more than 5,000 people. The main questions are how authoritarian he will become, or whether this pathetic campaign will weaken him.
Putin's policy is easy to understand if one realizes that he usually does the opposite of what he says. In his first term, Putin appeared to be an authoritarian reformer, undertaking substantial market reforms, such as introducing a 13 percent flat income tax.
But in his second term, Putin was simply authoritarian, undertaking no economic or social reforms worth mentioning. The expropriation of the oil company Yukos, valued at US$100 billion, was the signal event, and was followed by rising corruption.
Putin has established a purely personal dictatorship. He rules through the presidential administration and competing secret police forces without ideology or party. United Russia is little more than a bunch of state officials. He has sapped most power from other state institutions.
Personal authoritarianism rarely survives its founder. Since Putin has created an over-centralized regime that cannot survive without him, he has to stay as president. Law is of minimal relevance, as he can always order the Constitutional Court to approve his third term.
Putin's regime may be described as a group of clans, consisting of state-dominated corporations -- such as Gazprom, Rosneft, Vneshtorgbank, Rosoboronexport and the Russian Railways -- together with the security agencies.
Putin's KGB cronies, usually from St. Petersburg, control these institutions and tap them for huge kickbacks. At the same time, Putin has made sure that they all hate one another so that they need him as arbitrator or godfather.
In a sensational interview before the election in the Russian newspaper Kommersant, one of these previously unknown KGB managers explained how they use state extortion against private enterprises to accomplish their "velvet re-privatization" through state corporate raiding.
According to the European Bank for Reconstruction and Development, the share of GDP originating in the private sector has declined from 70 percent to 65 percent under Putin. Re-nationalization through extortion is likely to accelerate.
This re-nationalization has not been justified ideologically, but rather cynically. The purpose is simply to generate corrupt revenue for top Kremlin officials. Although corruption has been declining in most of the former Soviet Union, it has surged in Russia since 2004, becoming more rationalized and concentrated. None of Putin's KGB kingpins has been arrested or even demoted.
As re-nationalization gained momentum, public economic rhetoric changed and become statist. Putin now favors protectionism, state intervention and subsidies. In this climate, no progressive structural reforms are likely.
Until recently, Russia has pursued an admirably conservative macroeconomic policy, running up huge budget and current account surpluses. It has paid off its foreign debt and built up foreign currency reserves of US$450 billion.
Before the Duma election, however, Putin jeopardized this last vestige of responsible economic policy. Currently, Russia's greatest economic concern is growing inflationary pressure, driven especially by food prices. Rising food prices are an international phenomenon, and Russia's inflation is driven by the large current account surpluses and capital inflows.
But Russia's government is no longer trying to mitigate these factors, instead pursuing an inflationary policy.
Monetary policy has been loose for the last year, and before the Duma election the government poured huge sums into pensions and other social welfare transfers. Not surprisingly, inflation has shot up from 7 percent last spring to 11 percent now, and may reach 15 percent in the spring.
Naturally, monetary and fiscal policy should be tightened, but that is difficult when Putin is trying to placate the population. He could liberalize the exchange rate and let it float upwards, but he is not even doing that. Instead, in an old Soviet tactic, Putin imposed informal price controls, which cannot hold for long in a privatized economy.
Russia's economic growth is still driven by the sound market reforms undertaken in the 1990s and Putin's first term, together with high oil and gas prices. But while growth is not likely to stop any time soon, Russia's economic success increasingly hinges not only on high but rising oil and gas prices.
The main question about economic policy in Putin's third term, then, is how fast it will deteriorate.
Anders Aslund is a senior fellow of the Peterson Institute for International Economics.
Copyright: Project Syndicate
Chinese actor Alan Yu (于朦朧) died after allegedly falling from a building in Beijing on Sept. 11. The actor’s mysterious death was tightly censored on Chinese social media, with discussions and doubts about the incident quickly erased. Even Hong Kong artist Daniel Chan’s (陳曉東) post questioning the truth about the case was automatically deleted, sparking concern among overseas Chinese-speaking communities about the dark culture and severe censorship in China’s entertainment industry. Yu had been under house arrest for days, and forced to drink with the rich and powerful before he died, reports said. He lost his life in this vicious
George Santayana wrote: “Those who cannot remember the past are condemned to repeat it.” This article will help readers avoid repeating mistakes by examining four examples from the civil war between the Chinese Communist Party (CCP) forces and the Republic of China (ROC) forces that involved two city sieges and two island invasions. The city sieges compared are Changchun (May to October 1948) and Beiping (November 1948 to January 1949, renamed Beijing after its capture), and attempts to invade Kinmen (October 1949) and Hainan (April 1950). Comparing and contrasting these examples, we can learn how Taiwan may prevent a war with
A recent trio of opinion articles in this newspaper reflects the growing anxiety surrounding Washington’s reported request for Taiwan to shift up to 50 percent of its semiconductor production abroad — a process likely to take 10 years, even under the most serious and coordinated effort. Simon H. Tang (湯先鈍) issued a sharp warning (“US trade threatens silicon shield,” Oct. 4, page 8), calling the move a threat to Taiwan’s “silicon shield,” which he argues deters aggression by making Taiwan indispensable. On the same day, Hsiao Hsi-huei (蕭錫惠) (“Responding to US semiconductor policy shift,” Oct. 4, page 8) focused on
In South Korea, the medical cosmetic industry is fiercely competitive and prices are low, attracting beauty enthusiasts from Taiwan. However, basic medical risks are often overlooked. While sharing a meal with friends recently, I heard one mention that his daughter would be going to South Korea for a cosmetic skincare procedure. I felt a twinge of unease at the time, but seeing as it was just a casual conversation among friends, I simply reminded him to prioritize safety. I never thought that, not long after, I would actually encounter a patient in my clinic with a similar situation. She had
RSS