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The
Russian Economy, Stupid, Is the Election Winner
By JONATHAN
POWER
Feb 2, 2000
LONDON- Any advantage acting Russian president
Vladamir Putin might have gained from being seen as the
successful strongman is being whittled away by the day,
as the war in Chechnya moves from its heroic phase of
revenging the bombing of innocent civilians in Moscow and
becomes one more drawn out, slog-in-the-mud, war of
attrition, with not much prospect of quick victory. Once
again, as before the last election, Chechnya is in danger
of becoming an election albatross. Putin either has to
have an immense stroke of luck in Chechnya or he has to
announce that Russia has got what it wanted with the
capture of Grozny and given the terrorists a smack on the
nose they'll never forget. So he is withdrawing his
troops and switching off the spotlight. Who knows, he may
even ask Alexander Lebed to fix it for him.
The election issue is not going to be the war, it is
going to be the economy, stupid - the same formula that
won Bill Clinton, first the presidency and then a second
term.
What was not very long ago a disaster story has become
the incumbent president's strongest suit. In the election
for the Duma held just before Boris Yeltsin's surprise
resignation the sense of economic improvement won Putin's
party its powerful position in the legislature. And since
then the economic news has only improved.
The nightmare scenario that was predicted for Russia
by both insiders and outsiders following the dramatic
collapse of the ruble in the summer of 1998 has not come
to pass. In retrospect, it appears as if a lot of
powerful Russians looked into the abyss and decided that
the old course of minimalist economic reforms,
over-dependency on foreign capital and corrupt and
speculative day to day business practice had now got so
out of hand that if it continued unchecked even the
oligarchs and tycoons would suffer.
A telling joke is making its rounds in Moscow: "There
are two ways out of the Russian economic crisis: the
natural and the miraculous. The natural way is that the
archangel Michael and all his angels come down to earth
and work 12 hours a day to save the Russian economy. The
miraculous way is that the Russians will do it
themselves".
It is, in fact, says Anders Aslund, the Swedish expert
on the Russian economy, an old Polish joke, from the
days, not that long ago, when Poland, now a high charging
economy, was mired in economic stagnation and
corruption.
The transformation that happened in Poland could even
happen in Russia, argues Aslund in the current issue of
Foreign Affairs. In the late 1970s Poland's reputation
for honesty was dire. The exchequer was regarded as a
trough for the elite to feed in. Commentators explained
it in terms of Polish culture: the legacy of persistent
foreign rule and an omnipresent Catholic Church that
never allowed people to think for themselves. Now we can
see that Polish culture is the country's strong suit.
When a reformist government was elected in 1989 radical
reform became possible - and other elements in Polish
culture came to the fore, Christian probity and an old
tradition of hard work in the face of adversity.
Russia, it must not be forgotten, did have a period
when real reformers were in power - between November 1991
and August 1992. The West (or some of it) now realizes it
missed its big chance. Then the West was seen by the
Russian leadership as a good friend in the making and the
country was ready to take its medicine if given a helping
hand. Yet Washington in particular but also the Europeans
rebuffed Yeltsin. All Washington could think of was how
to secure payment of the old Soviet debt.
Having missed its historic opportunity the West has
spent the best part of a decade running after Russia in,
at best, an haphazard manner, at worst irrationally and
counterproductively.
Feeling guilty that it was slow to recognize the
moment of real change in Russia - as it likewise failed
in Gorbachev's time - the western powers have encouraged
the International Monetary Fund to keep money coming in
on no more of an argument than that Russia is too big and
too nuclear to be allowed to fail. Even foreign portfolio
investors caught the mood and poured in money in such
quantities that the corrupt Russian oligarchs felt no
pressure to mend their ways.
But the fall of oil prices and the spillover from the
Asian financial crisis in August 1998 punctured a hole in
the Russian ship that even the West was powerless to
avert. No one, now, was prepared to lend a hand until the
ship hit bottom. Yet a year and a half later, out of the
wreckage, something worth while is becoming apparent. The
sinking, in fact, radically curtailed the power of the
corrupt elements in the business community; no longer is
there so much money swilling around for them to grab.
Moreover, they have been forced to see, as in Poland,
that the competition for bribes had become
counterproductive. For those who are interested in the
long run a more legitimate economy is becoming more
attractive.
Could it be under Putin that there is a cultural
change afoot that will draw on better elements in Russian
traditions? Certainly there appears to be more of a
stable political consensus around the need for moderate
market reforms.
At last, the tax take is going up and the deficit
down. The economy has begun to grow at a surprisingly
healthy clip, particularly in the industrial sector. And
if Putin can quickly realize his goal of convincing the
Duma to legalize private ownership of land, the pitiful
state of Russian agriculture should begin to change.
The question is, is the West clever enough to make the
best of this third opportunity? A major debt write off of
half the old Soviet debt, as was done for Poland, would
be in order if Russian progress continues. The West,
again as it did for Poland, needs to open wider its doors
to Russian exports and for Russians to come and
study.
Meanwhile, whether he has sensible Western support or
not, Putin knows he has enough under his belt to play the
economy card. None of his rivals can outflank him on
this. He is as probably as sure of victory as Bill
Clinton was on the eve of his re-election bid. The
economy, stupid, is not just a great slogan, it's how it
is.
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Copyright © 2000 By JONATHAN POWER
I can be reached by phone +44 385 351172 and
e-mail: JonatPower@aol.com
 
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