The need to modernize has become one of the most important topics in the internal political debate in Russia in the past year. Other important problems ranging from the quality of state governance, to corruption, to the depth of the economic crisis and to the prospects for democracy are discussed either as tied up with modernization or in its context.

The intensity of these discussions is easy to explain, as the state power has made a bid – at least verbally – to convert the idea of modernization into a national development project for the next ten to fifteen years.

FROM STABILITY TO DEVELOPMENT?

The Kremlin made an attempt to re-brand the mechanism for the transition and continuity of power during the 2008 presidential election. The term “stability” rapidly receded into the background in official rhetoric, although it did not fully lose its sense or meaning. Along with the very same continuity, stability turned into a required – albeit insufficient – condition for a successful and efficient transition of power and the further development of the country.

In addition to those phrases about a markedly new stage, calls for new challenges and tasks for the country began to sound louder and louder. A development program for the period up until 2020 was made public. It declared the customary goals such as economic growth and boosting economic prosperity, as well as new ones like diversification and structural reform of the economy along with social modernization and changes in the structure of society.

The ideologeme of the four I’s – Institutions, Innovation, Investment and Infrastructure – and projects for improving the judiciary system, curbing corruption and eliminating “nihilism towards the law,” which Russian President Dmitry Medvedev stated as the priorities of his presidential term, do not have any close link to modernization rhetoric, yet they embody a de facto full list of the basic components of any modernization project.

It is not accidental, however, that we have to speak here about the re-branding of the power transition process, since in the first half of 2008 we witnessed only political declarations of the new course, but no practical action. The declarations about the importance of furnishing the country with a decade of rapid and uninterrupted development and the very architecture of the Russia 2020 program sent clear signals that a changeover to a modernization policy – if any at all – would be based on the pattern of a gradual, durable and compromise-orientated strategy to transform the former strategy of the maximum capitalization of opportunistic benefits gained during the first decade of the 21st century into a modernization plan.

Attempts are still being made to review this situation in the traditional categories of Russian red-tape and clan policies. There is a search for contradictions between Dmitry Medvedev and Vladimir Putin and the interest groups linked to them. No one can deny that such factors may indeed have an impact, and yet the surfacing of the modernization rhetoric in mainstream Russian policies and the use of this rhetoric by both Medvedev and Putin can hardly be explained exclusively by a new style of intra-elite political games.

It is very likely that Russia’s ruling tandem took a pragmatic view of the very fact of the transition and renovation of power as a window of opportunity to launch essential social, economic and – to a much smaller degree – political changes. Along with this, Medvedev’s first four-year term would be perceived as a “slow start” of the new policy unfolding amid favorable economic conditions and the continued accumulation of resources. As for the final solution to the problems of power and the future destiny and/or dynamics of modernization, it was put off until the 2012 election, when the final choice of the parameters of future development could be determined by either Vladimir Putin’s return to the Kremlin or Dmitry Medvedev’s continued presidency.

However, two vital factors – the five-day war between Russia and Georgia in August 2008 and the ongoing economic crisis – have had an impressive impact on the logic of the “slow start” – which the Russian authorities must have initially put into the political planning of the state power – and have made it practically impossible.

In the new situation, the opportunities for modernization are viewed differently and the range of assessments is very broad. Some experts say that the process of forming a modernization coalition by the elite and the public at large has become irreversible and, consequently, the launch of the modernization project can and must be brought forward. On the other hand, people who claim that Russia has missed the opportunities for a real transition to modernization policies, which it had in 2008, have their arguments as well. They say the crisis and the new dangerous tendencies arising from it (the further spread and increase of the role of the state in the economy, the emerging prerequisites for a new repartitioning of property in Russia, etc.) may throw the objectives of modernization away. Thus it has been suggested that the window of opportunity, which is slightly open now, is not opening further and might be shut at anytime instead.

The discussion also includes other serious problems that affect the assessment of modernization opportunities and specific plans of action. Specifically, there are problems concerning the correlation of economic and political aspects in the modernization strategy, interconnection between and consistency of the economic and social change, and development of democratic political instruments. Of no smaller importance is the clarity on the issue that has a special significance for today’s Russia: the correlation, volume and order in which the tasks of late industrial modernization (the re-industrialization and super-industrialization of the economy) and the post-industrial innovative transition should be solved.

Still, the most critical issue remaining on the agenda is whether the idea of modernization and its discussion (which unfortunately may turn out to be endless) can turn into a real and well-thought-out nationwide development project for the next several decades. There is no doubt that such a nationwide project can only be initiated by the state. Simultaneously, it should rest upon a consensus inside the elite and in broad public quarters on two issues. The first is recognizing that Russia has fallen behind other countries and that this has to change, and that the competitiveness of its previous development course has decreased. The second is tapping realistic modernization objectives and the fair price that all social groups and sections of the population will be ready to pay for achieving them.

For Russia there are several vital clues to this basic and multi-dimensional problem.

20 YEARS LATER… THE END OF THE POST-SOVIET ERA

Modernization as a search for new resources in order to achieve rapid economic growth, eliminate backwardness and become competitive has been a task for the Soviet Union and Russia for the past 30 or 40 years at least.

The Soviet Union succeeded in becoming industrialized in the 1930s, albeit in an inefficient, socially destructive and politically repressive way, but it shamefully missed the next economic and technological transition in the 1960s and 1970s. This resulted from many factors of the Cold War and the bipolar world. Coupled with the arms race and the Iron Curtain, these factors played the role of anti-modernization instruments in exhausting the country. Those were weighty factors indeed, and yet it was the Soviet system itself that made the choice in favor of the oil revenues curse that is typical of an economy that relies on exports of natural resources instead of moving towards modernization.

After the breakup of the Soviet Union, Russia spent the 1990s and the first decade of the 21st century conducting a long and painful test of numerous prerequisites for, scenarios of and limitations on transition to a modernization strategy.

The stimulating potential of values like freedom, democracy and the market that could be perceived as a resource for an accelerated social and economic transition at the end of the 1980s and the beginning of the 1990s was squandered rather quickly. The reason was not so much the depth of the economic collapse and the social crisis, but Russia’s economy and policies in the 1990s that were defined as just a phase of a redistribution of power and property, while strategic development goals moved into the background. Privatization and market reforms lost their social legitimacy quite rapidly.

In addition, an objective feebleness of the state, scattering tendencies, a real danger that the country could break apart and the importance of keeping up its integrity through bargaining with regional elites and the practical use of force in the North Caucasus all worked against the task of development.

Moreover, Russia did not have the two strategic policy lines or basic points of an intra-elite and social contract that were present in all Eastern European countries and in many post-Soviet states at the time, or else they looked totally different in Russia.

The Russians would perceive the breakup of the Soviet Union and the empire’s disappearance as a painful collapse and not at all as liberation. Moreover, the idea of modernization as Westernization and a clear strategy for joining the West and the European Union could not prevail because of Russia’s historical, socio-cultural and political factors.

The transition to new policies starting in 2000 had a profoundly echeloned social and political basis closely linked to the dominance of the ideas and values of strengthening unity and restoring the viability of the state. This transition envisioned limiting redistributive competition between elitist groups; “the pleasant revival of being a traditional superpower” on the international stage and identifying the start of rehabilitational economic growth and quality of life after the 1998 financial crisis that had summed up an entire decade.

Nonetheless, the nascent signs of a simultaneous return to the limelight of the tasks of development and modernization (that were quite plainly seen in the so-called Gref program and resembled at a certain point an exotic “catching up with Portugal”) became blurred. The idea of accelerating the rate of economic growth and doubling GDP remained the catchwords throughout the first decade of the 21st century, offering a supply of figures instead of a solution to a completely different task – understanding the problems of economic development.

This accelerated growth model gradually evolved towards the maximum benefits – in the political, economic and foreign relations spheres – inherent in a natural rent-orientated economy dominated by mineral exports. Domestic policy and social environment factors (ranging from the start of a second wave of property distribution and control over revenue to the social and political risks of deep reforms) played a certain role here, as well as foreign policy and the global economy.

A combination of favorable developments on international commodity markets, a rapid global expansion of financial speculations, the “beefing up” of corporate capitalizations and the effects of energy geopolitics that intensified sharply after the start of the U.S. military operation in Iraq in 2003, set the scene for an increase in the government’s role in the Russian economy (above all in the fuel and energy sector). The same factors made it possible to accept the idea of an “energy superpower” as a development strategy.

In short, there was a revival of strategic thinking concerning development issues, but its formula remained bent on the maximum capitalization of dividends in the rent-oriented economy connected to mineral exports. This meant that there was a consolidation of social and political stability of the consumer society, the accumulation of reserves and an increase in the capitalization of national corporations. There was also a possible expansion to foreign markets and greater participation of state-run “national champions” and businesses close to the government in the rise of multinationals and the sharing of their profits; access to new assets and foreign technologies; and expansion of opportunities for political influence in individual countries and regions.

However, the economic crisis in 2008 has considerably changed views on the prospects for development. The elites now emphasize the low competitiveness of the economy, the failures in economic reform and diversification, and Russia’s strong dependence on foreign markets over the past decades. Taken per se, these factors do not make transition to a new development strategy and a modernization scenario mandatory, though.

Still, the current economic decline may mark a watershed that could bring an end to the long and intensive period of Russia’s post-Soviet development.

This period not only saw the downward slide of the economy into the pitfalls of the 1990s and its subsequent re-emergence, but also its shameful de-industrialization and an increase in dependence on imports and on the export of raw materials. The opportunities of the rent-oriented model of development waned and a cycle of a rapid and sporadic democratization began in the political system. This was followed by a post-revolutionary reaction and restoration of state-controlled centralization. Transitional processes filled the social sector. They were marked by generational shifts in the elite and society and the exhaustion of reserves accumulated in education, public health and science back in the Soviet era. Russia became accustomed to living in the consumer and information society.

This period is over now and the very awareness that the Soviet phase of history has ended, while the exploitation of the tapped-out economic, social and even political resources of the past is not possible anymore, may play the role of an important stimulus for accepting the idea of modernization and working out a relevant national project. In this sense, the upcoming years will not be post-Soviet anymore, as they will determine Russia’s development for decades in the future. Furthermore, they will furnish us with new definitions and characteristics of today’s Russia that will not have the “post-” prefix.

THE POLITICAL CONTRACT FOR DEVELOPMENT

Many researchers believe that democracy follows in the footsteps of prosperity; that is, democracy matures and becomes steady once its per capita GDP hits a certain level.

Frankly though, this GDP-centric approach to modern economics and politics is losing some of its popularity among scholars today, since it is impossible to draw a direct and unequivocal line of dependence between a country’s democratization and the size of its GDP per citizen. Nor is it possible to state unconditionally whether democracy speeds up or slows down economic growth. More than that, the so-called resource-intensive economies have a specificity which, according to economists Jeffrey Sachs and Andrew Warner, may put the brakes on economic and political development. In the final count, much depends on the stage of development when the country discovered the wealth of resources for itself and the type of political regime it had at that moment.

Still, there is an old thesis by Seymour Martin Lipset that a rich country has a better chance to build a stable democracy that will reproduce itself. Adam Przeworski and Fernando Limongi showed in a number of research works at the end of the 1980s and in the 1990s that democracy is rarely defeated in countries where per capita GDP is higher than $6,000.

One way or another, the Russian authorities still find that this approach is twin to their own ideas. After all, for many years the country has lived under the slogan of doubling GDP and, as for political development, Russians have always believed in its natural slow pace and gradualness, saying the things that are destined to happen will happen anyway.

For instance, Russian policy has been sending out quite a few democratic signals, as measured improvements have been achieved in electoral and political party legislation. The authorities do not rule out that the vote threshold may be lowered in the future. Moreover, the fact that the political system should become more complex and rest upon high-quality institutions has both been recognized and declared as an objective. Russian officials stress that the rise of a rich information society (together with the vast penetration of the Internet and digital television) will boost the future technological expansion of democracy and freedom of speech.

Dmitry Medvedev’s campaign statement that the country needs a decade of steady, rapid and unabated social and economic growth clearly stands behind this picture. If this turns out to be true, the Russia of 2020 would certainly be a democratic country with an annual GDP of around $30,000 per capita, the middle class would account for 50 to 60 percent of the population, and Russia would have a diversified innovative economy, not one pegged to rent or resources.

So the only thing left to do was to wait and see the strategy materialize and genuine democracy flourish at the appointed hour owing to objective circumstances. Yet the financial crisis erupted right at the time when, according to the above-mentioned view on democracy, Russia was in a zone of uncertainty with its GDP at $13,000 to $14,000 per capita. It appears that even though an irreversible and steady democracy seems to be at the threshold, far from everything is preordained and the authoritarian tendencies may be fairly strong.

Moreover, it may take a long time to emerge from the crisis and the rate of economic growth will likely remain slow for quite some time, while the uniquely advantageous market situation of recent years will scarcely be seen again for decades. All of this only means that Russia may have to stay in this zone of uncertainty for awhile. Quite understandably, however, it is much better to pass through such periods quickly or at least avoid getting stalled there, as stalling creates additional political risks.

The latter is even more important considering that the economic boom and an almost accomplished doubling of GDP in the first decade of the 21st century took place in the framework of the very same resource-intensive economy and rent-targeted/distributive policies that have a traditional tendency towards authoritarianism and create additional complications for translating modernization plans into action. From the political point of view the current situation in Russia reveals two key problems.

The first problem is fairly obvious. A part of the elite considers the upkeep of the previous rent-oriented model after the crisis as an acceptable and, more than that, a preferable development scenario. Before the crisis all the calls for modernization came up against impressive inertia. It is possible even now to emerge from the crisis by going astern and the ongoing discussion about the role of the state in the economy, state-run corporations, the priorities of economic modernization, the role of the energy sector and the future bolstering of innovations thus turns out to be a discussion of the future of democracy.

The second problem is closely linked to the first. The elite – and society in many ways, too – is split not only into ardent proponents of modernization who necessarily call for a democratic way of development, and strong advocates of natural resource revenue who abide by more authoritarian ideas with regard to the prospects for political development. One can find adepts of a tough authoritarian modernizing arm (an approach having a profound tradition and broad practice worldwide), as well as supporters of broad democratic procedures for redistributing natural resource revenue. It is the latter group that is quite capable today of speaking out in favor of rapid democratization because it has been pushed out of the crowd of fighters for the earliest possible access to the distribution of resources.

The presence of these two problems pushes to the foreground of public discourse the content of the so-called social contract as concerns the prospects for Russia’s development. This discourse started a long time ago, but it overshadowed the actual existence of two separate contracts.

The first one was indeed concluded between the powers that be and the population, or the so-called Putin majority. The parties signed it at the beginning of the 2000s, bypassing a large number of elite groups. It enjoyed mass support and had a high public ranking. The state (that is, supreme power) thus got a legitimately high rating so as to pacify the elite, the nobility of our time. In the light of it, the majority of the public took a generally encouraging stance on the infringement on the powers of regional elites and oligarchs.

A supplementary agreement to the contract concerned the country’s growing prosperity. It was drafted in the recent fat years and it envisioned the exchange of political rights for a better standard of living. This is not surprising. Given the very low level of trust that Russian society has in market institutions, economic and political competition, the main demand to supreme state power remains a paternalistic one. It boils down to a high degree of nationalization of natural resources and their further public redistribution so that the elites would not have a chance to use the tool of “democratic dough-chopping” and thus deny the public access to profits from rent revenues. Whether or not much has changed in this sphere during the crisis remains an open question.

The second contract was signed by the supreme state power and the elites. Drawing on mass support from the people, the government demanded a high level of loyalty from the elites in exchange for giving them a free hand in the administrative market (representing a symbiosis of power and property held together by the corrupt practices of converting one into another). The contract opened the doors to the elites for grabbing, “dough-chopping” and “fronting for interests,” thereby providing for their own prosperity.

Those who did not swear their loyalty or withheld it later destroyed their opportunities, while the rest of the lot – bureaucrats, businessmen and regional chieftains – continued to make their careers. Quite naturally, this went hand-in-hand with the redistribution of power and hierarchic positions. Take, for instance, law enforcement agencies – guardians and inspectors of loyalty – who clearly raised their status and felt pretty good in the markets of power and property.

All of this highlights the importance of revising, first and foremost, the intra-elite contract and uniting the supreme power and the elites in a new pact. Loyalty alone is not enough for modernization, as the latter requires a different degree of efficiency, competence and ability to act on the part of the elites. Furthermore, the paradigm of the convergence and permanent transfusions between state power and property creates a perfect environment for simple operations like addition, subtraction and division, but not multiplication, which means the creation of something markedly new and more qualitative.

However, this intra-elite contract should envision self-containment on the part of the elites, too. The latter can be discussed and reached in the form of a slow evolutionary movement (it stands in line with the idea of cultivating an “inner culture” in the elite, which Dmitry Medvedev has said on a number of occasions), or an amassed rapid “coercion of the elite.” This tradition has much deeper roots in Russian history than the former one. It has taken the form of Ivan the Terrible’s oprichnina (purges with the aid of the tsar’s personal bodyguards), Peter the Great’s forcible Europeanization or Stalin’s repressions. But the political and social costs of this approach are unacceptable today, while the evolution strategy may take too much time to implement.

It is obvious that a search for a compromise and the presence of a political resource for resolving the tasks of self-containment and tightening the rules and norms of life for the elites, as well as their responsibility and efficiency, has become a key problem in Russia’s changeover to the modernization strategy.

THE CLOSED CIRCUITS OF EVERYDAY SOCIAL ROUTINE

The question about the possibility of Russia’s modernization has, apart from the political aspect, a broader social dimension.

Today’s Russia is in many ways the land of triumphant bureaucracy. The bureaucratic state is revealing its corporative traits more and more boldly. It issues meticulous regimentations for everything. It builds hierarchies and verticals, actively intervenes in the economy and there are social redistribution mechanisms in the face of persisting huge proprietary and social imbalances.

The tradition of having massive state machinery that handles an enormous volume of issues is not new and has various explanations. Some of them allude to the traditions of statehood and political culture, thus leading to the idea that this state of things should stay intact here “for ever and ever.” This, in turn, entails a very narrow conception about the ways of and resources for further development. It would be rational therefore to look at the principles of reproduction that the system has in the social sphere.

Russians do not trust closeness much or society on the whole and its institutions (including market ones), or competition as such. It is no wonder then that “the big state”’ and its permanent meddling work towards preserving this situation. There are other factors as well, like the difficulties of the transition and the state of society over the past two decades.

Another important issue is the decreasing number of channels for social vertical mobility that underpin the current phase of society’s development. Career-making processes are slowing down, the prospects are diminishing and the lifts taking social climbers up have been shut down because they are of no use. The slowdown of social dynamics after the profound social transformations of the 1990s is an objective factor, but this does not make life any easier for office workers or young professionals who represent socially significant trades, but which are currently discriminated against, such as scientists. This is especially true if the rules of the game suggest tough and inequitable career growth restrictions that have a proprietary, clan or corporate nature and are often sized up as being unfair.

In the face of the low level of trust in society the state has to constantly issue expansive regimentations for public and economic life, strengthen state-run distribution mechanisms and build a hierarchy of social groups and, speaking figuratively, their class rights. This is not a uniquely Russian situation however, as similar tendencies can also be seen in other nations that are properly developed, as Yann Algan and Pierre Cahuc have shown it in their works using the example of France.

The rent-related nature of wealth only intensifies corporate tendencies, inequality and the impression of unfair redistribution and the “rein of privileges.” Paternalism on the part of the state continues to erode the opportunities for public cooperation and social solidarity and fuels mistrust. It makes different social groups (classes and corporations) engage in a struggle with the state and with each other in order to gain more privileges and bigger slices of the pie, rather than to achieve freedom, equal opportunities or justice.

Another important factor is the higher degree of “monetarism” found in social relations in today’s Russia. A lack of trust and value-related links in society makes it very difficult to maintain mutual understanding and interaction between various social groups, generations, subcultures and sub-systems of values. Money often happens to be the only equivalent of social relations or a surrogate substitute for a unified system of values that turns the price of the issue into an element of social communication of an overblown dimension.

The absence or insufficient development of efficient formal institutions in society does not at all mean that anarchy, the law of the sword or a war of everyone against everyone else reigns in society instead. On the contrary, informal shadow structures and practices (bribes, kickbacks, fronting and loopholes for private arrangements) come into play in lieu of formal visible ones. They ensure a certain level of trust and predictability and operate the technologies of competition, efficiency and communication.

The rampant corruption of the past few decades does not signal any deviation from or the corrosion of the system – it itself has been transformed into a system-building component. The system is functioning as a mechanism for the redistribution of resources, rent and status not only between the government and business, but also between various social groups. Money is instrumental in securing government support and, in addition, competitive advantages in society. Representatives of some professional communities use illicitly obtained revenues or the exchange of services to increase their status or living standards to a level that matches the social significance of their work, which is measured inadequately in their official wages or has been devalued by the market.

Corruption is an element of the social contract, too. For instance, having leeway in buying oneself off or evading the law often works as an important mechanism to justify society’s non-interference in government affairs. On the other hand, status-bearing elitist groups consider the struggle against corruption in these circumstances to be an illegal competitive advantage.

We are witnessing a vicious circle; a system where the root causes have been mixed up with the consequences and where they reproduce each other with the vigor of a perpetual motion machine. The mechanisms for the everyday functioning of this broad-format social contract – and not only the contract between the state and society – appear to be the biggest obstacle in the way of the country’s development today.

This proves again and again that Russia’s modernization project depends not only (and often not as much) on political liberalization, but also on social therapy – the removal of the monetary peg from values, the elimination of corporative and class imbalances and inequality from social communication, the restoration of social dynamics and mobility, and a return of the principles of trust and public solidarity to the social contract.

This set of objectives brings up the importance of the role played by the quality and meritocratic principles of forming the elite and nurturing effective institutions for the protection of people’s rights and property – above all an effective and independent legal and judicial system.