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Putin 2.0?

Posted by democratist on March 19, 2012

March 19th 2012,

In the wake of the presidential elections, commentators across Russia and the world have been asking how Vladimir Putin will govern Russia in his third term. How will he respond to the rise of an increasingly critical urban middle class? Is he about to recast himself as a reformer (“Putin 2.0″), or will he crack down on the unrest as a populist autocrat? Finally, will he imitate reform but actually maintain the status quo?

A mixture of the last two options looks most plausible. The rhetoric of reform will be pushed once again to the fore but the system will remain unchanged. Just as was the case with the Medvedev “liberalization,” “Putin 2.0″ looks likely to prove a non-starter; a convenient lie designed to provide the illusion that change may on the way in a society that is (mostly) aware that this is not true, but also one where many people are keen to keep up the pretence of reform.

In this regard, it is not much of an exaggeration to say that political and economic reform in contemporary Russia are “being implemented” in the same way that the communist utopia was “just a few years away” during the late Soviet period. In both cases this narrative serves the same purpose: A legitimizing tool that can be trotted out by those with an interest in keeping the existing system in place in the face of popular scepticism. In both cases the message is essentially the same; you are part of a “greater project”; stay the course; things will improve gradually; there is no need to rock the boat.

But the fact that issues of property rights, the promotion of small and medium-sized business culture, and especially corruption persist after 12 years of Putin strongly suggests that serious change is unlikely. Indeed, for an indication of the source of much of Russia’s corruption, we need look no further than Angus Roxburgh’s analysis of the extraordinary good fortunes of Vladimir Putin’s friends from his Saint Petersburg youth, and the Ozero dacha collective. (Strongman, I.B. Tauris 2012). Arkady and Boris Rotenburg, Putin’s erstwhile judo partners, each now have assets worth $1.75 billion. Yuri Kovalchuk, from the Ozero collective is worth just under a billion dollars. There are many other similar examples.

More broadly, Roxburgh notes, “…by far the biggest obstacle to foreign investment (or the creation of an international financial center in Russia) can be summed up in one word – corruption – a word so complex that one leading Russian businessman told me I would never, as a Westerner understand it. “Theft,” he said, “is not theft as you know it. It is the entire system – the political system, the business establishment, the police, the judiciary, the government, from top to bottom, all intertwined and inseparable.””

In this regard, Professor Alena Ledeneva (of University Collage London) has argued that the Putin corruption systema is fundamentally unreformable, and will remain in place until a change in the political or economic situation provokes a collapse. Given the evidence presented above, the continued popularity of the government, and the involvement of large sections of Russian society in various corruption networks, the re-election of Vladimir Putin is unlikely to herald a period of reform. Rather, a better case can be made that Putin has become captive to a system he helped to create, and will be unable to introduce the reforms Russia needs without alienating these constituencies.

Nonetheless, change is certainly coming, because the middle class is growing, and Russian society is changing. But the tipping point is years away. The oil price is again on the rise, and so social spending can remain high. This will be enough to placate large parts of the population. Many people are living materially better lives, and indeed have more freedom than Russians have enjoyed throughout almost all of their history.

Additionally the current system has the backing of the FSB, an organization which acts in a manner closer to an arab mukhabarat than western Security Services, and which sees the protection of the regime as a key priority. Therefore, in addition to the (already evident) shift towards renewed state media restrictions and manipulation, the FSB will not hesitate to use all of the many tools at its disposal (surveillance, subversion, kompromat) to ensure the opposition remains weak, divided and marginalized.

Posted in Russian Corruption, Russian Economy | Leave a Comment »

Democracy and Innovation: Mr Putin’s Very Very Large White Elephant.

Posted by democratist on April 21, 2011

21st April 2011,

Apart from its political implications, the most interesting thing about Prime Minister Putin’s speech to the Duma yesterday is what he said with regard the future of Russia’s five trillion rouble military innovation programme, and how this optimistic vision conflicts with the current state of the Russia defence sector as we see it.

Democratist was especially interested to hear Putin say that, while Russia will need to almost completely rearm and re-equip its armed forces over the next decade (implying that similar attempts over recent years have been less than successful), “I am absolutely convinced the modern weaponry for our army and navy can and must be supplied by the Russian defence industry. Obviously, certain technology and weapons types can, and probably should be purchased abroad. But we need to understand that nobody will sell us the most advanced and latest generation technology.”

As regular readers will know, since we set up shop almost a year ago, Democratist has considered Russia’s increasing national inability in the sphere of (especially military) technological innovation as one of the key motivating factors behind the Russia 2020 ”modernization” drive. While superficially novel, this desire for modernization reflects a historical preoccupation with the importance of military competition against comparatively advanced western nations, that runs throughout modern Russian and Soviet history at least as far back as Peter the Great, and which has provided the impetus for various spurts of attempted technological modernization.

However, elite and popular resistance to liberalisation combined with the expectation (and now realization) of a rise in hydrocarbon prices over the last few years have meant that genuine and deep systemic economic reform was always going to be something of a non-starter: From our perspective, the Medvedev liberalisation project always had more to do with encouraging (mostly state-partnered) foreign investment than the introduction of meaningful, economy-wide reform.

Subsequently we have argued that, in the general absence of a culture of innovation from within the domestic Russian public or private sectors, or from foreign investors, and with a continuing “brain-drain,” as many of Russia’s most talented young people leave to pursue careers abroad, the State would seek the innovation it has historically seen as essential in order for it to remain militarily competitive, through an enhanced reliance on espionage. This seems set to remain the case despite increased arms sales to Russia by European firms because, as Putin has effectively admitted the West remains fundamentally unwilling to sell the Russians their cleverer toys – lest they eventually find themselves on the wrong end of them.

However, even if (what is probably a much weakened) SVR or FSB still manage to come up with the goods in terms of stolen intellectual property, Democratist remains far from convinced by the Prime Minister’s claims that the (still largely Soviet-era, and extraordinarily corrupt) Russian defence sector will be able to supply the armed forces with modern weaponry in the numbers required any time soon.

In short, our prediction is that, without a sharp change of tack, the next decade will see a the technological gap between the Russian armed forces and those of the West widen, despite these proposed investments.

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

Bunga Bunga! Russia Today lends an old friend a hand.

Posted by democratist on April 15, 2011

15th April 2011,

A wonderfully bonkers piece of dezinformatsiya on RT this morning (“Silvio and I are closer together than ever” – Berlusconi’s Russian flame”), that seems to owe more to the News of the World, or Channel Four’s 1990′s comedy “documentary” Eurotrash than what one might normally expect of the average international news channel.

The main point of this “exclusive interview” with Berlusconi’s, “reported Russian flame” Raisa Skorkina is that, in Ms. Skorkina’s opinion, allegations that Berlusconi paid for sex with an underage prostitute (the trial began on April 6th, but was adjourned) must be false because he is “simply too attractive” to resort to such “desperate measures”.

Quotes from Ms Skorkina, fashionably attired in a pink suit and white bandage-like bandanna (which gives the unfortunate impression that she may have recently suffered a severe blow to the head) include the following gems;

“Silvio and I are closer together than ever. Earlier, we were together like this [holds hands to heart], but now are much, much closer together!” 

“I can’t even explain what I felt inside when I met him, he gave me goosebumps, when I saw him, because he’s a very handsome man. It was love at first sight. He’s such a gentleman. 100% percent man in every sense!” [covers face to hide girlish blushes].

“For me he’s always been like a “guardian angel”, as he puts it himself. In my heart, my feelings for him sparkle, and he knows it. This is going to stay for ever. You should understand that, even if I fall in love or marry, my husband might resent it, but Silvio will stay in my heart forever. [Smiles and licks lips] I’m going to cry now.”  

And who could be behind this clearly unfair “media campaign” against Il Cavaliere?

“It’s the communists! Of course it’s them, who else would benefit? They want to get rid of him as fast as possible, by any means…I don’t know, they might even bring something from the Moon and say that Berlusconi did something there.”

While the allegations against Berlusconi remain of the sublunary variety for the time being, we at Democratist have certainly also been moved to tears by Ms. Skorkina’s story of her “romance” with the Italian premier.

And it is surely entirely coincidental that Skorkina has been implicated as a central participant in the Berlusconi “harem” (and may have acted to procure other women), or that Berlusconi is known to be personally close to Vladimir Putin, or that wikileaked State Department cables describe Berlusconi as acting as a “mouthpiece” for Moscow in Europe over the past few years, and suggest that he may have been “profiting personally and handsomely” from secret deals with the Russian prime minister.

And doubtless, none of this could possibly have affected the decision of the “editorially independent” (although 100% state-owned) Russia Today to run this story.

Posted in Russia and the EU, Russia Propaganda, Russia Today, Russian Corruption, Russian Foreign Policy, wikileaks | Leave a Comment »

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 »

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 »

Autocracy and Innovation: Lessons from Russia and China.

Posted by democratist on February 17, 2011

17th February 2011,

Democratist has just read another interesting article by Stephen Blank over at Jamestown, which serves to once again illustrate our oft-repeated point that autocratic rule and corruption in Russia have had a devastating (and continuing) impact on national research and development, especially over the last 10 years, and that this weakness is in turn seriously damaging the country’s status as an international political, economic and military player.

Blank quotes Konstantin Sivkov (Vice-President of the Academy for Geopolitical Issues, and a former General Staff officer) to the effect that the avionics and technical specifications of China’s new J-20 strike fighter may suggest the PRC will be capable of attaining highly advanced strategic-technological breakthroughs for fighter-aircraft over the next five to fifteen years.

According to Sivkov, while the J-20 does not approach the capabilities of the US F-22, its specifications may imply that China could soon surpass Russia, whose defense industrial sector still relies on Soviet models (Interfax-AVN, January 17). There is no sign, according to Sivkov, of Russia’s defense industry’s capability to keep pace with its peers.

While autocrats (and their apologists) may find comfort in the technological advancements of the PRC, Democratist notes that, despite having recently become the second largest economy in the world, and in many ways the world’s industrial “workshop”, China still apparently lags considerably behind the US in terms of military technology, and is still heavily reliant on espionage and the reverse-engineering of Western technology in an attempt to catch up. Democratist believes that, even with plenty of resources, a lack of democracy, openness, and accountability will make innovation difficult, even for the PRC.

So, while Russian and Chinese espionage certainly pose a threat to US military superiority, it does not appear that either country is currently producing their own military industrial innovations, but are rather seeking to copy those of Western countries. As long as the West can prevent their secrets from falling into the wrong hands for a reasonable amount of time, they seem likely to be able to maintain an innovative advantage over autocratic states for several decades, if not longer.

       

 

Posted in Autocracy and Innovation, Russian Corruption, Russian Espionage, Russian Military | 1 Comment »

The “Virtual Mafia State” Strikes Back.

Posted by democratist on February 7, 2011

7th February 2010,

When the Russian chapter of the Wikileaks “cablegate” story broke in early December last year, Democratist suggested that one of its key impacts was to highlight the claims made by Transparency International (TI) and others about the truly outrageous extent of corruption throughout the country (at all levels) in the Western press, and that this would have a significant subsequent negative impact on the flow of the much hoped-for western FDI into Russia over the coming months. We concluded that, “Russia surely now has the worst PR of any major country on earth.”

Well, looks like the “virtual mafia state” tag has really struck home. Why else would the FSB (directed from the top, no doubt) have chosen to expel Luke Harding, the Guardian journalist who authored the story (and many others) under his own name, when he finally attempted to return to Russia earlier today, other than because the subsequent bad press has not only had a negative impact on Russia’s image (which wasn’t in great shape anyway), but also significantly contributed to a fall in investment into Russia?

It appears that we were correct in our suggestion that Russia’s superficially dynamic image of a few years back has become so toxic that many major western companies are seeking to avoid the country like the plague, fearing an unending nightmare of kickbacks and extortion, and that Harding’s role in publicizing Russia’s failings was an important element in his final expulsion.

It remains to be seen what effect the economic trends implied by these most recent moves will have on the long-term health of Medvedev’s “liberalization” project; they could either spur it on, or encourage a return to the “petrostate” model of development Russia followed prior to 2008 if the oil price continues to rise.

It will be interesting to see what the next batch of official FDI figures reveal (and whether they match up with independent estimates).

Posted in Russian Corruption, Russian Economy, Russian Liberalization | 6 Comments »

Russia and the WTO: Not so fast, Seymour.

Posted by democratist on January 12, 2011

12th January 2011,

Last December’s agreement between Russia and the EU, and the subsequent speculation about potential accession to the WTO at some point in 2011, has prompted Democratist to cogitate upon the likely impact of international economic integration on Russia over the next few years.

While the agreement with the Europeans may have brought accession further towards reality, there remains a great deal of protectionist sentiment domestically within Russia. This is best exemplified by Putin’s own attempts last year to modernize domestic industry through a renewed emphasis on industrial policy (to be funded by raw materials rents). A lack of cash seems to have put paid to that strategy for the time being, but Democratist maintains that a rise in raw materials prices beyond a certain point will likely prompt a shift back towards protectionism.

However, while we cannot yet be fully sure that it will finally happen, the prospect of accession looks like being one of the Kremlin’s key trump cards for 2011. In the face of western investor scepticism, anger over the second Khordokovsky trial and the imprisonment of Boris Nemtsov, Medvedev will doubtless find it convenient to offer up the prospect of Russia’s eventual WTO accession as an indicator that the country is basically on the right, liberal path.

This will play well with many Western leaders as it appears to accord with liberal political theory. According to this perspective (often attributed in origin to Seymour Lipset’s 1959 classic Some Social Requisites of Democracy), WTO accession will act as an anchor for long-term reform and increase economic growth, leading to the consolidation of a democratically minded middle class. Seen in this light, the privatization program that began in Russia last year promises a lengthy pull-back by the state, and continuing rapprochement with the West as Russia seeks support for modernization.

But we might wish to refrain from opening the champagne for a second; Democratist has long argued that whether Putin or Medvedev wins the Presidential election in 2012, any liberalization in Russia will remain tightly constrained by the interests of the nomenklatura. The current government has demonstrated comprehensively over the past decade that the manipulation of public opinion is one of the few things they genuinely do well. In this regard, in contrast to the rosier expectations of some of our liberal friends, Democratist suspects it may take several decades for economic development to provide a basis for the promotion of the rule of law and a broader liberalization.

Additionally, WTO membership seems unlikely to do much to promote the diversification of the Russian economy away from reliance on raw materials without a concerted effort to tackle corruption. Given that the current regime has itself acted as an important facilitator and beneficiary of corruption since 2000, Democratist is of the opinion that change in this area will take a long time to emerge, and will face many serious setbacks. If parts of Russia’s backward (and still largely state-controlled) industrial sector start to lose out after the country joins the WTO, causing unemployment and unrest, this may also prompt a return to a greater reliance on industrial policy, or back to protectionism. 

As is so often the case, much depends on the price of hydrocarbons; Russia requires deep and potentially unpopular reforms to diversify its economy, but many among the elite seem to believe that, despite the apparent lessons of the Soviet period, the economy can be developed effectively (and painlessly) through state-led industrial policy. If the money becomes available again, this would presumably be the prefered option. However, if prices stagnate or decrease over the coming year or two, the prospects for economic reform within the context of WTO accession will be somewhat better (although they will still face resistance from elements within the elite).

Posted in Russia 2012 Elections, Russian Corruption, Russian Economy, Russian Foreign Policy, Russian Liberalization, Russian Middle Class, Russian Politics | Leave a Comment »

 
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