The Kremlin’s long-standing resident is heading for troubleby James Sherr / September 19, 2012 / Leave a comment
Published in October 2012 issue of Prospect Magazine
Photo: World Economic Forum
Vladimir Putin’s return to a third presidential term—de facto his fourth—says more about Russia than it does about him. Whether or not he has been good for Russia, he has understood it. When he ceases to understand it, he will be on borrowed time. Perhaps that time has begun.
Western views of Putin often say more about the west than about him. These views have changed. When Putin first came to power in 2000, what many saw behind the KGB façade was an economic reformer, and Putin lived up to that image for three years. He simplified taxes and made oligarchs pay them, he ensured that workers and the elderly received salaries and pensions, and he established the confidence and predictability that macro-economists and foreign investors like.
Russians also liked these things, but just as much they liked his promise to restore “a great state.” When Putin had Mikhail Khodorkovsky, head of Russia’s largest private energy company, Yukos, arrested in 2003, the state got greater. Putin became less popular in the west and more popular in Russia. Between 2000 and 2008, he not only restored order to Russia’s affairs, but collective self-respect, and on the basis of prosperity and defiance of western liberal orthodoxy.
Yet for Putin as for nearly every Russian leader, the ultimate political prize was never public support but dominance of the system of power. For much of the past 200 years, this has been a networked system of patronage and privilege that has based its authority on rewards, penalties and the distribution of rents—rather than rights, rules and robust institutions.
It has also been a system of vicious, subterranean rivalries. Under Boris Yeltsin, these rivalries became visible and flagrant. Money bought power; the country’s wealthiest oligarchs effectively privatised much of the state. Putin’s “power vertical” did not end this relationship but reversed it. In 1999, more than 50 per cent of Russia’s GDP was controlled by seven relatively independent bankers, according to Boris Berezovsky. By 2006, five senior Kremlin officials chaired companies that produced 33 per cent of national wealth.
Today power buys money. Those with the right backing can not only increase their own wealth, but acquire somebody else’s. Clean Hands, the NGO, has calculated that illicit rent-seeking redistributes 52 per cent of GDP. According to Forbes, there are 96 billionaires in Russia today. Most of them are both dependent upon and at the mercy of a system that has given them their wealth and can take it away.
The mood of the country is therefore very different from what it was in 2004 or even 2008. The financial crisis, which hit Russia harder than any other member of the G20, not only exposed the predatory mores of the state, but its wastefulness and dysfunction. Corruption and the abuse of power have become increasingly intolerable to the new urban middle classes whom Putin’s initial reforms largely created.
It is hardly surprising, then, that Putin’s less than scrupulous return to the presidency has aroused vehement opposition. But it is neither a unified opposition nor an overwhelmingly democratic one. A fair proportion calling for Russia without Putin is from the far left or far right. Moreover, it is unclear how divorced from the culture of power some of the non-systemic opponents really are. Alexey Navalny, a scourge of corruption but a supporter of the nationalist cause, was appointed to the board of Aeroflot in June. Ksenia Sobchak is the daughter of Anatoliy Sobchak, former mayor of St Petersburg (and Putin’s former boss). What is clear is that most of the leaders of the democratic opposition are past their sell-by dates. Needless to say, there is more to the country than opposition. Independent polling suggests Putin would have won the election in the first round even if “electoral technology” did not inflate the figure to 64 per cent.
Nevertheless, Russia is entering less charted waters. In the matrix of power, Putin is arbiter rather than dictator. Russia’s 50 or so principal power brokers have no wish for him to be more, and if he is unable to secure their positions and restore economic momentum, they will wish him to be less. Putin is therefore manoeuvring within increasingly narrow co-ordinates. With cold political logic but dubious wisdom, he is marginalising the middle class and their agenda. He is drawing an ominous connection between western democracy promotion and Russia’s internal problems and has authorised some $700bn until 2020 for a modernisation drive “comparable to the industrial modernisation breakthrough in the 1930s.” This is not modernisation as any liberal western observer would understand it.