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Archive for March, 2011

Putin vs Medvedev 2012 – Update.

Posted by democratist on March 31, 2011

31st Match 2012,

Democratist has been greatly enjoying this rather groovy piece of satire from the Communist Party of the Russian Federation (KPRF)

http://www.youtube.com/watch?v=FHgQbrkS_is

Putin vs Medvedev on 2012? Where could they have got such an idea?

Posted in Democratization, Russia 2012 Elections, Russian Politics | Leave a Comment »

The Arab Spring and “Structural Power.”

Posted by democratist on March 31, 2011

March 31st 2011,

A few days ago we noted Michael Cox’s recent restatement of the argument that, despite the current debate about it’s supposed decline, the US has managed to retain a great deal of “structural power.” However we did not explain this concept in any detail.

The notion of structural power was first put forward by the British academic Susan Strange in the 1970′s. In her classic States and Markets (1988) she defined it is as;

“the power to shape and determine the structures of the global political economy within which other states, their political institutions, their economic enterprises and (not least) their scientists and other professional people have to operate…Structural power in short confers the power to decide how things shall be done, the power to shape frameworks within which states relate to each other, relate to people, or relate to corporate enterprises.”

Essentially in Strange’s view, “structural power” is the power of a state to shape various kinds of international frameworks: For her, the advantages for the US of the dollar as the key post-War currency for international trade was the central example of structural power at work, because it allowed the US to run large deficits at reduced cost (a feature of the International Monetary System which continues to this day).

However, it has occurred to Democratist that beyond the realm of economics, the “Arab Spring” we are now witnessing may well represent the strengthening and maturing of a new and potentially far more important form of structural power, one that may well confer considerable advantages for the US, and the wider West over the coming years.

As Halliday argues in Revolutions and World Politics (1999), in addition to expressing the tensions that occur within societies in transition, revolutions are also a result of the pressures placed on traditional societies by international factors.

And over the last 20 years the international trend towards democratization - which therefore increases pressure on others to democratize - has strengthened markedly; the end of Communism, the enlargement of the EU, the continued democratization of Turkey,  the revolutions in Serbia, Georgia, Ukraine, Lebanon - and now Tunisia, Egypt and (possibly) Libya.  These will all add to the already considerable domestic problems faced by developing autocratic states as an additional, and now heightened structural pressure for domestic reform, if revolution is to be avoided.

This trend has in turn been encouraged by a developments in IT and globalization;  Al Jazeera, Twitter, Wikileaks, Wikipedia and Facebook are all a part of this process.

But while the US has consciously (and sometimes counterproductively) sought to export democracy for much of the last century, a great deal of the attraction of democracy - its equation with modernity for increasing numbers of people throughout the world - has been partly independent of the United States’ actions. Rather the desire for freedom and egalitarianism which informed the French and American revolutions has taken on something of a life of its own – regardless of (for example) the US invasion of Iraq, or support for Hosni Mubarak.

Nonetheless, since democratization represents the development of an international framework within which states relate to each other, and one which seems likely to disproportionately favour the democratic West (no two democratic states have ever gone to war with each other), whilst placing an additional pressure on authoritarian competitors, this democratization has to be seen as a burgeoning form of Western structural power.

Posted in Democratization, Egyptian Revolution, Historical Materialism, International Political Economy, Jasmine Revolution, Libyan Revolution, Orange Revolution, Revolutions, Russia 2012 Elections, wikileaks | 4 Comments »

The Great “Arab Spring” of 2011: Causes and Consequences.

Posted by democratist on March 28, 2011

28th March 2011,

As the “Arab Spring” rolls onwards through Libya, and towards Yemen and Syria, Democratist – like many others (not least a number of red-faced foreign policy professionals), has been looking to get some sort of an explanatory purchase on recent events in the middle East. Why there? And why now?

For Democratist,  the key factor lies in the interrelationship between globalization (Al Jazeera, Twitter, Facebook, Wikileaks and the rest), and a number of other historical-sociological factors that have been perhaps slightly less eagerly grasped upon by (especially the US) media.

These include the rupturing of corrupt political, economic and social systems dominated by authoritarian cliques (and supported by the West) for decades; tremendous social upheavals provoked by poverty, the evident injustice of crony capitalism (abject poverty cheek by jowl with decadent wealth), the rising expectations of the (literate and tech-savvy) young; and the delayed flowering of civil society.

Looking at the broader, global context, a superbly insightful, if so far largely ignored framework for understanding these events is to be found in Revolutions and World Politics: The Rise and Fall of the Sixth Great Power. (Palgrave, 1999) by the late Professor Fred Halliday of the LSE (1945-2010).

One of the main conclusions of this 300-page comparative study of revolutions and their international aspects is that over the last three centuries, the focus of revolutionary upheavals has been, not (as Marx had hoped) on the most developed states, but rather in the contrary direction; that revolutions have historically tended to occur in less developed countries, and during periods in which the “conflicts of modernity” were at their sharpest, with these states only subsequently settling down into democratic reformism.

In other words, the historical pattern has been one in which revolutions take place in societies that have embarked on, but are at a comparatively early stage of economic and political development: One of Halliday’s key insights is the idea that, in the contemporary world, revolutions express the pressures placed on traditional societies by international structural factors, in addition to the tensions that occur within societies in transition, and the drive for accelerated development.

All three elements have been present in Tunisia, Egypt and Libya. They are also present to a very considerable degree in a large number other less developed countries – including Yemen, Syria and Iran, and throughout much of the former Soviet Union.

What the revolutions in the middle East represent therefore, are the increasingly inevitable consequences for states which refuse to meet their citizens expectations, after a certain level of development has been attained, in an increasingly integrated world.

While not linear, or liable to easy prediction, this trend has become all the more evident since 1989; in the collapse of the USSR itself, in Serbia (2000), Georgia (2003), Ukraine (2004), Lebanon (2005), Kyrgyzstan (2005). Moldova (2009), and now with the great Arab Spring of 2011, whereby the democratic agenda has been firmly set for much of the rest of the developing world.

As Halliday notes;

“Revolutions are moments of transition which, once passed, may not need replication. Instead, they lay down an agenda for political and social change that through reform, struggles and democracy may take decades or centuries to be achieved. This is at once evident from the programmes on rights of the American and French revolutions, the radical egalitarianism and the international programme associated with each; the point is not whether America or France always, or ever, lived up to these ideas, any more than Russia was to do after 1917, but rather how ideas and aspirations that emerged from these revolutions retain their validity in subsequent epochs.”

2011 may then therefore eventually come to mark the decisive point at which among the populations of developing states, democractic reformism ceased to be seen as essentially a restrictedly “Western” phenomenon, and became recognized as a potentially universal one.

See also my pieces:

Russian Autocracy and the Future of the Arab Spring

Revolution, Democracy and the West.

The Arab Spring and Structural Power

The Egyptian revolution and the precariousness of autocracy.

Posted in Democratization, Domestic NGOs, Egyptian Revolution, Fred Halliday, Historical Materialism, Historical Sociology of International Relations (HSIR), Jasmine Revolution, Libyan Revolution, Moldova, Russian Corruption, Soviet Union, Ukraine, Western Foreign Policy, wikileaks | 12 Comments »

Ekaterina Zatuliveter and the Neglect of Public Opinion.

Posted by democratist on March 24, 2011

March 24th 2011,

This morning Democratist has been enjoying yet another prize example of media manipulation, disinformation and obfuscation, courtesy of the (curiously) increasingly amateurish Russia Today (“Neglecting Public Opinion is a Privilege of the West“)

Given permission from the relevant judge, the Kremlin’s English-language mouthpiece has taken to employing Ekaterina Zatuliveter (Mike Hancock’s former parliamentary researcher, currently on bail after being arrested on charges of espionage last December) as a “contributor.” 

And naturally, the chosen subject for  Zatuliveter’s  journalistic debut is that mainstay of Soviet-era propaganda; Western hypocrisy – as expressed through the pretext of support for the anti-war movement.

In halting, accented English, the lissome Ms. Zatuliveter gives it her best shot, reading out the following (which we reproduce in full);

“This Saturday, London might experience the biggest protest in its history. Bigger even than the anti-war coalition march in 2003. Up until now the [inaudible] political activist groups have not been very well-organized, but they have finally decided to gather everybody who has been badly effected by the actions of the coalition government. With 35-45% of British people opposing intervention in Libya, it seems that on Saturday those intervention protestors will not be lost in the crowd. I will not expect [sic] the government to rush into doing everything straight away, it rarely happens in practice, but those protests are simply a part of a democratic system. However, there is a paradox in here; when non-Western countries experience protests, and their governments do nothing about it, western countries immediately accuse those governments in being undemocratic, but when western countries do the same, they ignore opinion of people [sic] in their country. [Inaudible very short sentence]. The polls show that public opinion in the UK regarding intervention in Libya, is not mirrored by MPs in the house of commons, with only 13 of them voting against the military intervention this vote was taken on Monday, two days after the UK had started bombing Libya. This was a rare moment in the House of Commons, when Labour literally occupied seats next to Tories and the Lib-dems, vacating the opposition side of the chamber to the people of Britain.”

Where to start with the unravelling of this inelegant, unwieldy macédoine of quarter-truth?

Apart from the obvious questions about Zatuliever’s impartiality/objectivity, and why the “independent” Russia Today has seen fit to employ her as a commentator (thumbing their noses at the British establishment, whilst in fact unwittingly highlighting the UK’s liberal bail conditions and commitment to freedom of speech – even for suspected spies) Democratist sees Zatuliever’s first journalistic effort as raising the following main points;

The first is that the piece appears to have been edited to focus more on Western military action in Libya than originally intended; a quick check of the Stop the War Coalition’s Website reveals that this weekend’s demonstration is not principally intended to be about Libya, but rather that, “Stop the War will be marching with CND in an antiwar and peace contingent on the 26th March TUC anti-cuts demonstration.” – i.e. Stop the War and CND will be tagging along on a larger TUC demonstration focused on spending cuts.  This explains some of Zatuliever’s otherwise more opaque comments (“intervention protestors will not be lost in the crowd” etc). But this information is not contained in the piece as broadcast – which misleadingly implies that the entire demonstration is in opposition to Western military action in Libya.

Second, the original YouGov opinion Poll (upon which we assume Zatuliever/RT are basing their figures – and we have to assume this, because the data provided in the piece are not attributed) was taken between 20th-21st March, and is poorly worded in terms of the question it posed (“Do you think Britain, France, the US and other countries are right or wrong to take military action in Libya?”) because it did not differentiate between the imposition of a no fly zone, and a full ground invasion, or between action that had been mandated by the UN, or not: Further work is therefore required before British public opinion on this issue can be satisfactorily established. But the figures cited seem to support the idea that military action is unpopular, and that a big anti-war demonstration due to take place this weekend in London as a result of that, and they seem to imply that British MPs don’t really care about, or represent the opinions of their constituents (just like the Duma!) - so why let something as trifling as accuracy get in the way of a good story?

Let us finally then examine the core question of Western hypocrisy. Zatuliveter’s  report suggests that the UK government is ignoring popular anti-war demonstrations at home, while accusing non-Western countries as being “non-democratic” when these experience supposedly comparable demonstrations. But we have already established that i) this weekend’s “anti-war” demonstration may well turn out to be for the most part something quite different from what is implied by RT, ii) British public opinion has not yet been fully established on the subject of military action in Libya, and that therefore iii) the question of the extent to which British MPs represent their constituents on this issue remains open. It is however, certainly correct to say that the UK government is accusing Libya of being undemocratic (to say the least), and has helped to enforce the UN no fly zone. But then again (the very real considerations of geopolitics and oil aside), that might be to an extent because the regime in Tripoli used its airforce to repeatedly strafe and bomb its own population over much of the past month: The Libyan government response was not (as Zatuliveter implies) to “do nothing about it” when they experienced protests, but rather to kill large numbers of their own people.

Perhaps if President Medvedev (partly in reaction to events in the middle East over the past few months) was not quite so concerned about the long-term reaction of his own population, he would have had the guts to veto UN Security Council Resolution 1973, and say in public what Prime Minister Putin did effectively say; that the West has no right to interfere in the affairs of repressive regimes such as Libya (or Russia for that matter). But in fact, as Medvedev (but not Putin) seems to understand, it looks increasingly that taking public opinion for granted is a privilege that not even the Russian elite will be able to maintain for that much longer, despite the best efforts of Russia Today’s domestic homologues.

Posted in Democratization, Human Rights, Libyan Revolution, Russia Propaganda, Russia Today, Russian Espionage | 2 Comments »

The Enduring Relevance of NATO in “an Asian Age.”

Posted by democratist on March 21, 2011

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March 21st 2011,

Over the weekend Democratist has been watching a video of a recent public debate at the LSE entitled, “Out of Europe? The United States in an Asian Age.”

The debate brought together three highly respected commentators on international relations; Professors Niall Ferguson, Michael Cox, and Arne Westad; each of whom took it in turns to give their respective opinions on the extent to which US engagement in Europe is likely to wane – or not, over the coming years, as Asia becomes a more important focus of policy.

The lecture is certainly worth exploring in its entirety, but rather than give a blow-by-blow account, we would like to highlight what we thought were some of the most perceptive points.

These were;

  • Despite the headlines of a new US orientation towards Asia, transatlantic relations will continue to be important because the United States’ global reach will remain connected to the transatlantic economy, NATO, and its political relationships with the Europeans.
  • The decline of American “empire” has been repeatedly over-predicted since the 1960′s, and while the financial crisis and rise of China have contributed to a renewed “decline debate”, the US retains a great deal of (what Susan Strange identified as) “structural power”; major economic, geographical, historical, political, and cultural advantages, which no other country is able to emulate.
  • While an economic shift is underway, this does not imply a contemporaneous power shift. The US will remain at the heart of the international order in terms of military power, and indeed this order is currently incapable of functioning without it.
  • While US economic problems may imply some drawdown in overseas commitments, this may not be the case in Europe because continued US involvement in the middle East/North Africa imply that Europe will remain a strategic base for the US. The purpose of NATO/Europe is changing, and it is becoming an appendix to American power projection “out of region.”
  • NATO will remain fundamentally demand driven. It provides a security guarantee, especially for states in Central and Eastern Europe, but equally there is no appealing alternative to the US security umbrella: Many Europeans want the US to stay because, given the history of the 20th Century, they fundamentally distrust themselves, as well each other: NATO prevents the renationalization of foreign policy in Europe.

Regular readers will not be surprised to discover that Democratist finds considerable solace in these words. We remain resolutely Atlanticist: While the US may have made a number of mistakes since the end of the Cold War, it is a fundamentally democratic country which mixes both realism and liberalism in its foreign policy. Its presence in Europe guarantees internal peace, and counters attempts to “divide and rule” from outside.

Russia, despite its current (largely self-inflicted) military weakness and reformist rhetoric, is run by a small, autocratic, highly nationalistic clique of nomenklatura; its foreign policy is essentially guided by realpolitik, with little regard for democracy or human rights beyond what is politically expedient (just ask a Belarussian or Georgian). The nomenklatura respects and understands power, and will always be tempted to exploit any perceived European weakness for its own advantage. An American presence in Europe will therefore remain an important counterweight to Russia for at least as long as the nomenklatura remains in power; and - as a source for internal European stability - may well remain relevant for far longer.

Posted in Human Rights, NATO, Russian Foreign Policy, US - Russia | Leave a Comment »

The Russian Military Industrial Complex: An Unresolvable Discrepancy.

Posted by democratist on March 15, 2011

15th March 2011,

In our last article in our “Democracy and Innovation” series we looked at Crane and Usanov’s analyis of the relationship between Russian government policy and the main internationally competitive high-tech sectors of the Russian economy.

Among their (very measured) conclusions were that current policy to encourage growth in these industries through the creation of state-controlled agglomerates had not been effective, and that a favourable outlook was largely dependent on the extent firms were integrated with, and open to, the global economy. However, prospects for the Russian defence industry were limited in this regard, precisely because of its insularity.

In line with the “liberal” innovation model outlined by WolfDemocratist maintains that, while the Russian state is continuing to make a concerted attempt to drive innovation through increased funding and R&D, contemporary corruption, lack of competition, problems with the rule of law and government accountability have all had a demonstrable impact on the ability (and willingness) of many Russian high-tech firms to innovate, commercialize their ideas, expand, and reach their full potential.

With regard to the military-industrial complex more specifically, in an article published todayin the World Politics Review  Dr. Richard Weitz (also of the Hudson Institute) provides some additional and very relevant detail about how such problems are affecting Russia’s current proposed, decade-long $650 billion rearmament programme (supposedly set to include the procurement of 100 ships, 600 aircraft, and 1,000 helicopters).

Here’s a sample;

“….although Russian designers can still develop first-class weapons, Russian defense companies — which have yet to recover from the traumatic disintegration of the Soviet military-industrial complex — remain unable to manufacture large numbers of some advanced systems. As a result, the Russian government has made the unprecedented decision to purchase expensive Western military equipment.”

“…the record of recent SAPs [State Armaments Programs] is not encouraging. They all envisaged providing the Russian armed forces with hundreds of new weapons, but their execution was undermined by insufficient financing, the inefficient and ineffective Russian defense sector, and pervasive corruption.”

“Estimates suggest that one-third of Russia’s defense companies are bankrupt, while another third desperately need an infusion of financial and human capital to modernize their aging production lines and work force. Pending modernization, many defense firms will prove unable to design and produce sophisticated weapons without frequent cost overruns and production delays.”

“…according to some observers, corruption absorbs as much as half of all Russian defense procurement spending due to the irresistible opportunities for graft that exist behind the veil of military secrecy. Serdyukov’s surprise 2007 appointment as Russia’s first civilian defense minister reflected the Kremlin’s hope that, as an outsider, he might be more willing to tackle defense inefficiencies and corruption. Unfortunately, some bad practices have become so ingrained in Russia’s defense sector that they could take more than a decade to root out. “

From Democratist’s perspective, what is most immediately interesting about what Weitz says is that, while Russian weapons designers are apparently still coming up with the goods in terms of innovative ideas, the state of the country’s defence industry is such that it is unable to reproduce a proportion of the required systems in large numbers.

We see this inability as being at the core of the Russia’s “innovation deficit”; it isn’t that the ideas and the creativity aren’t there – they are. But the unreformed Soviet-era military-industrial complex lacks the competition, investment and flexibility that an advanced industrial economy – and an advanced defence industry require.

In our opinion, this unresolvable discrepancy between design and finished product, between planing and implementation, and subsequently in Russia’s military position in relation to the West (and therefore also the desirability of her military exports) can only become wider in the future, given the current politico-economic system.

Posted in Autocracy and Innovation, Russian Corruption, Russian Economy, Russian Military, Russian Politics, Russian Science | 3 Comments »

Policy and innovation: A more detailed view.

Posted by democratist on March 14, 2011

March 14th 2011,

So far in our “Democracy and Innovation” series, Democratist has outlined the liberal case that innovation generally requires the development of a creative and competitive culture, which must in turn be based on democratic government and the rule of law; we have briefly explored Niall Ferguson’s argument that the command economy led to Soviet economic stagnation in the 1980′s which, combined with an unsustainable levels of defense spending in order for it to be able to compete with the (more innovative and competitive) West, drew it inexorably towards collapse;  and we’ve looked at Kolesnikov’s argument that Medvedev’s Skolkovo project will not solve Russia’s underlying problems in relation to innovation, because it does not include an element of political, or systemic economic reform.

Now let’s take a closer look at Russian government policy and its relationship to the most important internationally competitive sectors of the wider Russian economy, so as to establish a more detailed picture ofthe key problems facing these sectors, and how they have been affected by the way the country is governed.

A good starting point here is Crane and Usanov’s article “Role of High Technology Industries,” in Aslund, Guriev & Kuchins’ (Eds.) Russia After The Global Economic Crisis. (CSIS, 2010).

Crane and Usanov begin by noting that both Putin and Medvedev have envisioned increased output from high-technology industries as driving Russia’s future economic growth, and (thanks to the massive and unsustainable funding highlighted by Ferguson) that the USSR passed on to Russia a large cadre of well-trained scientists and engineers, and a highly developed system of national laboratories and research institutes, capable of building sophisticated machinery, such as the world’s first satellite (Sputnik), nuclear weapons, advanced fighter aircraft and intercontinental ballistic missiles.

However, the number of active research laboratories has fallen sharply since the Soviet period, and the aging Soviet-era industrial base still forms the core of Russia’s current high-tech industry: Software is the only substantial high-tech sector to have emerged in Russia since 1991.

Crane and Usanov’s article explores the current state of Russia’s software, nanotechnology, nuclear, aerospace and armaments industries in turn;

Software

Software has been a post Soviet success story, but is still operating on a small-scale (gross revenues of about $5.5 billion in 2008 compared with $60 billion in India). It benefits from its young workforce, low entry costs, absence of legacy assets and small size (as the government has not yet bothered to regulate it).

However, “…the greatest barrier to the development of the industry is thuggery and corruption that Russian entrepreneurs face from the police and other government officials. Bribing inspectors, tax collection agents, and the police places a substantial burden on companies…. This climate of intimidation and fear discourages entrepreneurs from expanding their businesses and puts a premium on moving assets outside of Russia.”

Nanotechnology

This field is considered a key technological priority by the government, and several well-funded programmes have been set up by the state to support it.  Russian scientists have been relatively productive in theoretical research, but performance has not been as strong at the commercialization stage of the innovation process. Russia has only produced 0.2% of the total of global patents related to nanotechnology (2008).

Nuclear

In 2007 the civilian and military sides of the industry were integrated into the State Atomic Energy Corporation (Rosatom – $11.7 billon of sales in 2008). Rosatom’s subsidiary Atomenergoprom is one of the world’s largest nuclear companies, and Russia has a  strong competitive position in the nuclear fuel cycle. The Russian state has continued to invest in R&D, funded construction of new plants domestically, and provided strong political support for projects abroad. Nuclear power and related industries are one of the few high-tech sectors in which Russia has a serious R&D base and can compete on the world market.

Aerospace

Russia remains a world leader in the production of space launchers, and now the US Shuttle has been retired, Russia’s Proton rocket remains the only well-tested rocket capable of ferrying people and heavy payloads into space. By contrast, Russian communications satellites have not been competitive internationally. Wider use of GLONASS, is hindered by inferior quality and the higher cost of receivers. Other satellites tend to be for military use only. Soviet aircraft were never competitive internationally, and there has been little improvement since the Soviet period (although a number of recent foreign partnerships may change this).

Armaments

During the 2000′s exports grew rapidly, especially to India and China (which accounted for about 70% of total sales). The Putin administration made a concerted effort to consolidate the industry by creating large holding companies. This trend has continued under Medvedev, and has had the negative consequence that prices have risen domestically, as a single seller makes it more difficult for the government to negotiate lower prices.

Conclusions 

One of the main conclusions of this study is that Russian government policy to encourage growth in high-tech industries through the creation of large state controlled agglomerates – especially in armaments, the nuclear industry and aerospace – has not been very effective, and such industries continued to account for only about 3% of GDP by 2008.

This is fully in line with what the liberal model of innovation would predict; while the Russian state is making a concerted attempt to drive innovation in many of these fields through increased funding and R&D programes, the evident lack of competition stemming from the creation of agglomerates, problems relating to corruption, the rule of law and government accountability, have had a demonstrable impact on the ability of many firms within Russia’s high-tech sector to innovate, commercialize their ideas, expand, and reach their full potential. This is having a gradual impact on the ability of many of these firms to compete internationally.

Crane and Usanov believe that those companies or sectors that are most integrated with, and open to the global economy have the most favourable outlooks; software, scanning probe microscopes and uranium enrichment. They suggest,  “The record of the past two decades indicates that future success in these sectors will depend on increased integration into the global, especially European economy. In aerospace, sales of rockets, aircraft components, aircraft design services, and the new Sukhoi Superjet have depended on collaborating with foreign manufacturers. Prospects for Russia’s armaments companies are dimmer because they remain much more insular than firms in other sectors.”

Posted in Autocracy and Innovation, Democratization, International Political Economy, Russian Corruption, Russian Economy, Russian Liberalization, Russian Military, Russian Science, Soviet Economy, Soviet Union | 9 Comments »

Democracy and Innovation: Mevedev’s Skolkovo Illusion.

Posted by democratist on March 10, 2011

 

10th March 2011,

In our last article, Democratist looked at Niall Ferguson’s insightful analysis of the impact of autocratic government and the command economy on the Soviet Union, and the effect this had on the USSR’s ability to compete with the United States, and its eventual collapse.

But the Soviet Union has been history for almost twenty years. The more skeptical among our readers will doubtless be thinking, “The Command economy may be finished, but surely the Chinese example shows that authoritarian capitalism can come up with the goods just as well as democracy, if not better. Why shouldn’t Russia follow an authoritarian capitalist model?”

One obvious answer to this question is that the Russian elite has been following their own interpretation of just such a model since 2000, and that the results in terms of Russian economic diversity, industry and technological capability have been poor at best. 

While economic growth was indeed strong for much of the last decade (and is returning) this has been largely a result of Russia’s vast natural resource endowments, which account for around 70% of exports, and which played an important role in attracting the financial flows that boosted other sectors such as construction and the retail trade: Given easy access to money from hydrocarbons after 2002, and an ingrained fear of the social dislocation that would arise from the introduction of a genuine market economy, with a couple of notable exceptions at the start of Putin’s first term in office, the nomenklatura came to largely ignore the need for economic reform between 2000 and 2008.

One of the results of this has been that the Russian industrial and technological base has stagnated; while Soviet science and technology were inefficient and generally lacking in innovation, they at least had the advantage of being seen as strategically important and prestigious: Under the current system a mixture of cynicism and deep corruption, misjudged industrial policy and protectionism have set in, and while recently the government has again come to see science and technology as strategically critical, they face the problem that (following the nomenklatura’s own example) many of their brightest young people seem more interested in milking the state than serving the nation as scientists. Subsequently, the old Soviet engineering culture is slowly starting to die out.

But, as Andrey Kolesnikov, a columnist for Novaya Gazeta wrote in an excellent article for Open Democracy last July, even since 2008 President Medvedev has felt obliged to restrict his plans for Russian innovation within the confines of the “ghetto” of the Skolkovo project, and in a manner heavily reliant on foreign investment, as opposed to domestic innovation.

According to Kolesnilov, Medvedev is attempting, just like Peter the Great, Stalin, Khrushchev and Brezhnev before him, to import technological know-how into Russia from the West, lest the reforms necessary for the development of an innovative culture at home threaten Russia’s social order, and the existing power structure.

But as we saw in our piece about the roots of innovation, genuine innovation (as opposed to re-engineering the ideas of others) can only come from the kind of flexible, creative and inventive culture that emerges from a competitive market economy, backed up by democracy and the rule of law.

Kolesnikov states that the results of this are that;

 “…currently just over 9% of Russian enterprises invest in innovative technology. A comparison: in Germany, the number is eight times that. Fundamentally new Russian products account for just over 70 billion roubles (£1.5 billion). This was 0.4% of the total volume of industrial production in 2007 (in Finland, the figure was 16%). The percentage of innovative production in the total volume of sales in Russian industry is around 5%. Put another way, Russia is backward. 98.5% of patentable innovations are created by 15% of the world’s population, and Russians do not number among them (we are talking in the main about OECD countries)…And this technological gap can only get worse, since the speed of progress is increasing with each year: if in earlier times, moving from one technological generation to another was a matter of 10 or 15 years, now we see that, in aviation at least, this is happening every five years (my source of data are the four 2009 editions of Moscow’s Higher School of Economics Foresight magazine).”

In the first article we posted to Democratist in May last year, we quoted Dimitry Trenin as saying, “The Kremlin …[has been]… forced to come to terms with the fact that Russia cannot modernize on its own and that it needs Western investment and strong business partnerships with the West.”

But upon reflection, even if that partnership were to bear fruit in Skolkovo this still would not really resolve the broader problem of the stagnation of Russian science and technology: That kind of change implies a deeper political and cultural shift.

 

Posted in Autocracy and Innovation, FDI, International Political Economy, Liberalism, Russia - US Relations, Russian Corruption, Russian Economy, US - Russia | 3 Comments »

Democracy and Innovation – A Cold War Case Study

Posted by democratist on March 9, 2011

March 9th 2011, 

So we have established a liberal theoretical model of the interrelationship between democracy and innovation.

But before we look at how a lack of democracy and rule of law have effected contemporary Russia, let’s take a step back, and explore to what extent the historical presence/absence of democratic government, the market economy, competition and property rights might be considered as factors in US-Soviet economic competition during the Cold War, and in the eventual collapse of the Soviet Union. 

Fortunately, we have some very high quality research close at handProfessor Niall Ferguson gave a talk on “The Political Economy of the Cold War” at the LSE in October last year. The aim of this lecture was to chart the competition that existed between the US and Soviet economic systems, and assess how far the fall of the USSR was economically pre-determined.

As Ferguson  points out;

  • Soviet growth rates declined dramatically after Khrushchev’s period in office, and more importantly, total factor productivity (a measure of the efficiency of the utilization of economic resources) plummeted to the point that Soviet factories eventually became value subtracting (the raw materials were worth more when they went into the factory than when they came out as finished products).
  • Price controls and a planned economy fundamentally did not work, because in the absence of market signals resources were grotesquely misallocated, so that for example, steel consumption was four times higher in relation to GDP in the Soviet Union than in the United States. Monstrous inefficiency was in fact a predictable consequence of economic planning.
  • The only thing that kept the Soviet show on the road after 1969 was the rise of the oil price on international markets.
  • Corruption was endemic to the planned economic system because incentives were completely misaligned. As Paul Kennedy correctly argued at the time,  the Soviet Union crippled its economy with its excessive defence expenditure. Even in 1991 the USSR was still spending 14% of their GNP on the military in an attempt to keep up with the US (which was spending 5%).
  • Comparing the rate of Soviet growth in total factor productivity with the major Western economies, and particularly with the West European economies, where productivity grew rapidly even in the 1970′s, it’s clear that the USSR was in serious trouble after 1973. By the end of the Cold War Soviet GDP was probably about 36% of the US level.
  • In order to match the (three or four times  larger) US economy in an arms race that was conducted at every level, from space to espionage, the Soviets had to spend a significantly larger portion of GNP on the military. A reasonable figure is that even on the eve of collapse the defense budget was 14% of GDP, while the US was averaging about 5%.

The Soviet experience after the late 1960′s therefore shows the devastating impact of autocratic government, a command economy, along with no competition or property rights on the economy of the USSR.

It also demonstrates that how by the early 1980′s, as a result of economic stagnation (combined with a huge temporary cash injection from oil exports in the early 1970′s), the USSR came to spend an unsustainable proportion of its GDP on military competition with the US.

At the same time the United States and Western Europe were able to maintain economic growth while keeping military expenditure comparatively limited (as a proportion of GDP). The USSR had to spend so much on their military to keep up, that this further compounded their already serious economic problems, leading inextricably towards eventual collapse.

Posted in Autocracy and Innovation, Soviet Economy, Soviet Union | 2 Comments »

Democracy and Innovation: the Liberal Model.

Posted by democratist on March 8, 2011

March 8th 2011,

As many of our readers will be aware, Democratist is fascinated by the interrelationship between democracy, economic growth, and scientific innovation.

We have often suggested that autocratic rule in Russia (and its attendant corruption) is having a devastating (and continuing) impact on Russian industry and technology.

Recently however, we decided to look at this question from a slightly different perspective. Instead of saying what we think is wrong with the Russian government, and the impact this is having on Russian S&T, we decided to go back to basics a little and look at what actually it takes for a country to develop an advanced industrial economy, and a flexible, creative, inventive culture.

We have found a good general explanatory model of the social, political and cultural basis of innovation in Why Globalization Works (Yale, 2004) by Financial Times chief economics commentator Martin Wolf. We will call this the “liberal model.”

Wolf writes that the historical record suggests that the really key thing you need to promote an inventive culture is a market economy, backed up by the rule of law.

As Wolf states;

“The liberating technological changes of Promethean [i.e. technological] growth did not emerge from nowhere. They reflected a new way of organizing the economic activities of society as a whole – a sophisticated market economy with secure protection of property rights. Unshackled from the constraints of tradition and driven by hope of gain, economic actors were tied by competition to the wheel of what the great Austrian economist Joseph Schumpeter called “creative destruction.” To achieve success in their battles with their competitors, businesses have been driven to exploit the ever burgeoning power of technology and science. Within a market economy the hope of gain and fear of loss drive inventors and innovators to apply new ways of doing things, or to produce new products.”

But how does democracy fit in here?

First of all, Wolf explains that democracy has the same cultural roots as the market economy: historically, protestant culture put an intrinsic value on all individuals, and moulded them to accept personal responsibility for their actions. Moreover, this was a key factor in promoting the initial development of liberal political and economic institutions in countries such as Great Britain (although evidently the post-1945 record demonstrates that their implementation is by no means restricted to protestant countries).

As Wolf explains;

“The bedrock of a liberal society is, as John Locke argued in the seventeenth century, the right of all individuals to own and use property freely, subject to well-defined, law-governed constraints. A liberal society is therefore a commercial society. But freedom to seek one’s own way in life, outside the boundaries of caste, class, community or, more recently of gender, cannot be restricted to economic activities alone. The culture of a liberal society is, for this reason, inimical to established hierarchies of power or opinion. It is no accident that commercial societies came to consider freedom of thought and expression of great value. A merchant is a practical man who must make rational judgements about the world, not least the risks he runs…The combination of practicality, rationalism and freedom of inquiry became the basis for the West’s greatest achievement – modern science. It is again, no accident that science reached its greatest flowering in a commercial West.”

If individuals are to be free, they need protection both by – and from – the state. For individuals to enter into long-term investments (which promote strong growth and innovation) they need to be able to trust each other, and the state. The condition for such confidence is normally expressed as the rule of law. This is a key driver of both economic growth and scientific innovation.

Historically, states which were both strong and beneficent emerged from a combination of forces including regulatory competition and internal representation; Regulatory competition developed from the multiplicity of competing states in medieval Europe. But;

“Regulatory reform is not enough. An absolute monarch may still seize the wealth of his subjects or default on his debts when his dynasty is threatened. Secure freedom requires governments interested in the long-term health of their countries. The best solution is a constitutional democracy with representative parliaments – government accountable to the governed. Such a democracy must be constitutional, that is law governed. It is not enough to move from the tyranny of one person to the majority.”

So democratic (or at least meaningfully representative) government an institutional prerequisite, according to the liberal model. This form of government will be accountable and therefore have a high degree of interest in the long-term health of the country it governs.  The rule of law is another sine qua non of long-term investment, the development of a market economy, and a creative competitive culture that leads to technological innovation and the emergence of an advanced industrial base and economic growth.

Posted in Autocracy and Innovation, Book Reviews, Liberalism, Russian Economy, Russian Liberalization, Russian Science | 3 Comments »

 
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