The Kremlin’s long-standing resident is heading for troubleby James Sherr / September 19, 2012 / Leave a comment
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…