Russia is once again witnessing an aggravation of political struggles. Although this time it is not a struggle against the Communists, but between clans – specifically between the clan of old oligarchs (those individuals who acquired large chunks of property, including mass media, during the privatization schemes of the 1990s which allowed them to become directly involved in politics and running the country) and the clan of new oligarchs (those who, following Putin’s advent, acquired “law enforcement” clout and other means of leverage for redistributing property, shaping policy, running the country, as well as controlling parliament, the judiciary, media and the electoral process).

The old oligarchs – who replaced politics with behind-the-door intrigue, manipulation, ballot rigging and corruption in all branches of government, and ultimately delivered the incumbent president into the Kremlin – are now trying to cast themselves as “democrats.” Meanwhile, the new oligarchs, who are continuing the same policies as their predecessors but in the interest of another group that calls itself the “State,” are attempting with little success to implement the so-called “authoritarian modernization.”

The presence of “career liberals” on one side or the other – be that public politicians hired by old oligarchs or economists pushed by new oligarchs to prominent positions – makes no real difference.

In setting out to seize or maintain power, neither the old oligarchs nor the new oligarchs formulate any socially significant objectives for the country’s development for the next decade. They fail to substantiate their status in the world, and lack a value system that could enable Russia to finally find its own identity. This compels us to revisit the issue of economic and political reform, and present a new plan of action.

CHANGE WITHOUT REFORM

From the first tentative attempts at social transformation in the second half of the 1980s, known by the untranslatable euphemism perestroika, until now, talk about “reform” and its urgency has dominated virtually all political debate within both the political elite and society at large. At the same time at least two fundamental questions remain unaddressed, namely: First, what is the essence of reform, the need for which is recognized by nearly all active forces in society? Second, can the changes taking place in Russian society be regarded as reform, or at least a preparation for reform?

Not every social change constitutes reform. First of all, reform – ‘reformation’ in the generally accepted sense of the word – is basically a conscious, target-specific transformation of society according to some coherent, well-conceived plan. This does not necessarily have to be a plan in the bureaucratic sense of the word, with deadlines and officials responsible for its execution (although, in my opinion, there is nothing wrong about a detailed elaboration of measures and steps for which I and my co-authors of the ‘500 Days Program’ drew heavy flak). In any case, however, it is vital to have a clear vision and understanding of ultimate objectives, of what needs to be done, for what purpose, how, and in what order of priority. Otherwise, the end result will not be reform but just a series of changes, random or planned, occurring without the participation of the political class or even contrary to its intentions.

Even if changes are brought into existence by design, according to a plan, this is not sufficient to call them reform; there must be a goal to modernize society, make it more advanced and responsive to some positive, historically recognized goals and ideals. Otherwise, we could just as well be talking about reform, for example, in Nazi Germany, or Cambodia under the Khmer Rouge.

From this perspective, there is no reform in Russia today. There are ruling authorities who talk a great deal on reform. There are changes in society. But there is no reform per se. The reason is because the present authorities are not conducting any purposeful activity to modernize Russian society or the State. The measures that they call reform fail in principle to change the situation in the respective sectors (military, administrative, judicial, tax, social service, housing and utilities, etc.) from the point of view of their modernization – that is to say, making them more effective and targeted toward social tasks, ideals, and so on. In the best case scenario, positive changes occur with passive acceptance on the part of the ruling establishment, oftentimes contrary to the logic of its activity and even in the presence of actual resistance to the changes.

At the same time, the need for social reform is becoming increasingly pronounced. This may not be so obvious at the very apex of the social pyramid, where the pursuit of private interests creates the illusion of advancement in the right direction. At the lower and even intermediary levels, however, the acuteness of social problems can no longer be obscured by petty private gains or success stories.

WHAT IS THE MAIN GOAL?

This social requirement will be coming to the forefront despite a worsening stagnation in society, which is leading to conformism and evasion of active protest. For all the civic backwardness and passivity of Russia’s main social groups, the establishment still fails to enjoy a monopoly on political activism. Eventually, the most discontented and dynamic groups within the socially and economically active strata are bound to emerge with a new political force with a positive agenda.

And then the question will arise: What needs to be done to avoid a crisis scenario and ensure that Russia’s economy and society enjoys modernization? Another question is: How should Russian society accomplish these tasks? Today, without waiting until crisis strikes, there needs to be a road map for Russian reform that takes into account both national and international characteristics, not to mention the actual, as opposed to imaginary, capabilities of Russia’s ruling establishment.

What needs to be done? First of all, we must identify the ultimate objectives. It is not possible to tolerate a situation where abstract slogans of “greatness and prosperity,” or an amorphous and toothless ideology of centrism, are replacing a coherent and consistent concept about Russia’s future. It is critical to decide what values will be propagated in a country whose past and present are full of contradictions; what place will Russia occupy in a world that in the foreseeable future – in 10 or 15 or 25 years – will remain internally divided?

Whether we like it or not, the reality is that the world remains extremely heterogeneous: alongside those countries which make up the bulk of the most valuable economic resources (above all intellectual and technological, as well as financial and military resources), there is, and will continue to be, a vast global periphery that is deprived of access to most benefits that result from the use of these resources. Russia, which is situated in the “gray zone,” has only two paths of movement: either integrate into the core capitalist economies (this path can conveniently be described as the “European option” for Russia), or opt to be on the periphery. A good case can be made for either options, but one thing should be clear: There is no “third,” “Eurasian,” or any other “unique” path, and there never will be. The fear of Russia losing some of its sovereignty as an argument against it choosing the “European” or “Euro-Atlantic” path is understandable. The only alternative, however, is to accept a place on the periphery of international processes. It also perforce implies a limitation of state sovereignty – not necessarily on a formal level, but this limitation is even more substantial since sovereignty and independence only exist insofar as there are opportunities for their realization. (The sovereignty of the weak and dependent is like freedom without money: it seems to exist in principle but actually cannot be enjoyed.)

A COMPASS FOR REFORM

If we look at how the countries of the first group differ from all other countries, we find that they all share a set of basic values – above all, the priority of human rights, including property rights, individual freedoms and a concept of social justice. The jury is still out on which comes first – these values or economic effectiveness. I personally believe that the truth, as usual, lies somewhere in between. What really matters, however, is that while admitting it would be counterproductive and downright foolish to try to amend social relations in strict compliance with the above values at one swoop, one cannot fail to see that without adopting them as social objectives, as a guideline to formulating a strategy, no reform as a means of modernizing Russian society is possible. Modernization of the State without the individual, without proclaiming and ensuring the actual priority of individual interests, is bound to lead our nation to poverty and lawlessness – that is to say, the exact opposite of modernization objectives.

Thus, the first step toward real modernization, and effective reform as its instrument, must be the adoption of such fundamental values as human rights and freedoms; the individual’s right to property and social justice; and the priority of law over considerations of political expediency and self-interest on the part of the propertied and power-wielding class. In other words, the rule of law, civil rights, freedom and social justice must serve as a kind of compass for the road map for Russian reform.

Next, we must realize that true reform, which has yet to begin, will not start from nothing. Russian society today is not tabula rasa – it has its own history. Reform has a history of its own, too, and was preceded by one-and-a-half decades of rather controversial developments which evolved against the backdrop of the pre-revolutionary Russian imperial and Soviet totalitarian tradition. Therefore, before going ahead with reform per se, we must weigh the conditions and, most importantly, draw a line under the present period of Russian history with all of its political, social, and economic consequences and implications.

STATE POWER

First and foremost is the question of power. Russia’s present ruling authority (here I mean not only the head of State, but the entire system of State governance on all levels) is a product of the past one-and-a-half decades which experienced colossal political upheavals (suffice it to recall the events of 1991 and 1993), repeated breaks with political tradition, behind-the-scenes dealings and the de-facto imposition of constantly changing rules. Furthermore, the political establishment has been lying to society, manipulating and juggling with concepts, and reneging on its obligations. These factors necessarily affect society’s perception of the State in terms of its legitimacy – even if not by directly and publicly challenging the latter (such things are relatively easy to control and keep in check), but through the public’s skeptical, cynical and indifferent attitude to State institutions and its readiness to subvert and sabotage any of their decisions. At the same time, the political establishment fully inherited the traditions of the past era as established by Stalin.

This setup leaves us with a major, if not insurmountable, impediment to real reform. For creative reform to have any chance for success, the credibility of State institutions, the authority of law, and respect for State decisions in general must be considerably higher than they are now. In other words, government needs greater legitimization by granting representatives of particular political and public groups broader opportunities for accessing the levers of governance in exchange for guarantees to respect the foundations of the Constitutional system and the immutability of the principles of state governance. Furthermore, it is necessary to adopt, on a compromise basis, a package of laws that would curb the political influence of big property owners (“de-oligarchization of the establishment”). This may be achieved by sharply enhancing the transparency of decision-making in the executive and setting clear-cut rules that would not be subject to interpretation. This would annul state decisions made in the interest of particular groups or individuals in circumvention of the procedures established by law, and hold perpetrators to account.

PROPERTY

Second is the issue of property – above all, the large property holdings – that somehow materialized from the privatization of former “socialist” property and which remains a source of major controversy in Russian society. Obviously, the level of its legitimacy remains insufficient to ensure the active participation and cooperation of big business in the modernization process. On the other hand, it is equally obvious that the issue of legitimizing privatization, together with the evolution of property relations, does not have a simple and unequivocal solution since in this case the protection of property rights runs counter to considerations of social justice – a major element in the social consensus that is crucial for successful reform. This factor calls for the adoption of a special package of laws.

The first part of this package should recognize the legitimacy of privatization deals (with the exception of those involving murders and other felonies directed against individuals) and introduce a one-time compensatory windfall tax. The amount and assessment of the tax would naturally be the subject of another discussion. The second part of the package should comprise viable anti-monopoly and fair-competition laws, as well as laws limiting the concentration of capital. The third part comprises laws on the transparency of political party funding and the transparency of lobbying in the State Duma and other bodies; laws on public television, and a number of anticorruption laws, including sanctions against businessmen, state officials, and Cabinet members who took advantage of dubious privatization schemes in the 1990s.

Just as in the case of state power, the issue of property rights should be resolved on a compromise basis. It would, on the one hand, guarantee the inviolability of the rights of property owners, provided that they observe the letter of the law; on the other hand, it would establish – in the interest of society – rules for using assets that were acquired as a result of bureaucratic privatization schemes – that is to say, through essentially non-market mechanisms and procedures. These rules should be differentiated (for example, rules for the turnover of such assets, participation of shell companies or non-resident structures or any non-transparent structures in managing these assets, etc.), and it is important that they minimize the risks for property owners, while guaranteeing the effective utilization of assets under their control. Also, it should be possible to retain a certain level of supervision over their use, as well as compliance with public objectives.

The same principle should be applied to the legitimization of property acquired not only in the course of privatization, but also with substantial violations of tax legislation. The guarantee of property rights to money and/or assets acquired by non-criminal methods – but without payment of the appropriate taxes – may be granted in exchange for some restraints on their use (obligatory, if only temporary, transfer of funds to the Russian banking system, payment of back income taxes with official amnesty on tax violations, etc.).

In light of the recent events in Ukraine, the term “de-privatization” has been gaining currency. The situation there, however, is different from the situation in Russia; Ukraine’s experience, however positive it may appear, will not be applicable in Russia. Yet a law on de-privatization procedure in Russia must be adopted to establish mechanisms for the seizure of property from any owner who has committed especially grave crimes – murder, for example – to obtain it.

THE JUDICIARY

The third issue is the development of arbitration courts as an independent economic and political institution. Just as no sport can be organized without independent, neutral refereeing, so the economic and political system of a developed society cannot function properly without the institution of independent arbiters – state and arbitration courts – that may not be subject to any sanction on any grounds other than deviation from the law in the adjudication process.

Russia’s judiciary system is a product of diverse social relations. It is an institution that has been operating by different principles for a long time. It employs people who are accustomed to being dependent on powerful political and economic interests as opposed to the principles of the law. It would be utterly wrong to ignore this factor in planning any reform, yet the total replacement of the law enforcement and judiciary agencies is a technically and politically unfeasible proposition. So it is critical that we seek to close the book on the past and grant a kind of amnesty on the past “sins” of the judiciary/law enforcement system. At the same time, however, it is important to sharply increase the responsibility of these agencies against any possible departures from the letter of the law which must be regarded as serious crimes. This “amnesty” should, for example, apply to judges for any wrongful verdicts they may have delivered in the past. At the same time, a review system to re-examine such verdicts should be put in place: their numerous victims are still either in confinement or deprived of basic civil rights.

Once the aforementioned prerequisites are in place, the process of modernization reform may begin. Its principal objective is largely self-evident and does not require extensive commentary or substantiation. The basic lines and principles of this reform could be as follows.

INSTITUTIONS

The primary sphere of a viable reform program should be the institutional infrastructure of a developed society.

Just as in the case with basic values, the question of what comes first – the high level of economic development or the accompanying infrastructure; the base or the superstructure – does not have a simple and unequivocal answer. The process should of course develop simultaneously. It would be absurd to attempt to build modern, progressive institutions and expect them to operate effectively in a poor, stagnant society. Yet it is just as absurd to hope that at some stage economic growth will automatically lead to the creation of an effective and incorruptible State apparatus, an independent and efficient judiciary, armed forces and special (security and intelligence) services worthy of a developed State; furthermore, every developed state requires a modern education system, economic policy institutions, government agencies designed to supervise the banking and financial system, a fair and effective social service system, etc. So the first priority on the agenda should be institutional reform, which must become a condition for, not a result of, doubling GDP and fulfilling other ambitious economic goals set by the government. This applies in particular to the reform of the civil service – not “administrative reform” with the latest merging/breakup of government ministries and agencies with attendant personnel reshuffles – but a real reform of the civil service. This reform would work to drastically change the system of incentives for civil servants, making civil service more attractive for gifted, creative and energetic people, while significantly raising the requirements for their qualitative and professional integrity. In addition to significantly higher pay scales, this reform should include the creation of a special system of social guarantees for civil servants, which would include an effective evaluation system, attractive incentives for career advancement, and special clauses for the violation of clearly stated rules and ethics. The operation of Russia’s civil service agencies must be subject to strict regulation. It should also be made more transparent and open to civil and parliamentary supervision.

The next priority is a far-reaching, comprehensive reform of the judiciary. Once a line has been drawn under the past performance of the judiciary branch, the degree of its accountability for unlawful or wrongful decisions must be greatly increased, as must be the responsibility for attempted bribery or exertion of pressure on judiciary bodies, on the part of, among others, the executive. The severity, and more importantly, the inevitability, of punishment for any wrongful or unlawful judicial decisions should far outweigh any possible benefits or cozy relations arising from these positions, while court rulings should preclude the domination by any one group of interests or political force over another. At the same time, judges should be granted fair and effective immunity. A smooth-running judiciary mechanism to review wrongful verdicts delivered in the past is another essential element.

Next, it is imperative to devise mechanisms for the implementation of a host of laws designed to counter corruption and organized crime. Today, it is obvious (and this is borne out by the experience of other countries) that this vice, especially such a long-neglected vice, cannot be rooted out by ordinary, universal methods. To this end, it is vital to establish duly empowered agencies, equipped with the requisite tools and legal expertise, together with the responsibility for their performance. The know-how and practical experience is out there, as we have seen in other countries. The only element required to set this process in motion is the political will.

Another highly important sphere of institutional reform concerns mechanisms that would protect the freedom of information, while at the same time enhancing responsibility for abusing it. As in many other spheres, there is a pressing need to devise clear-cut and unambiguous criteria for limiting the dissemination of information and access to information, on the one hand, and instituting liability for the violation of the norms of law and professional ethics in using this information, on the other. Otherwise society will never be able to break out of the vicious circle of the non-transparency of information where the media are used as political and economic weapons. This vicious circle can effectively nullify even the most promising of efforts to carry out political and economic reform.

The next priority involves the long overdue reform of the natural monopolies, as well as the housing and utilities sector, which mistakenly or deliberately has been only exposed to simple reorganization. The essence of this indispensable reform – i.e., to ensure the openness and transparency of the relevant structures and their exposure to outside controls – is being replaced by endless discussions about organizational restructuring (the merging and breaking up of these structures, the creation of new ones, regrouping them and associating them into holdings, and so on). This will hardly result in the greater transparency of financial flows in the corresponding sectors.

Finally, reform of the social security and pension system, as well as of labor relations, which are designed to lay the groundwork for a modern and socially oriented State in Russia. The importance of these reforms must not be downplayed with references to the generally low level of incomes, the State’s financial constraints, the specifics of the “transitional period,” etc. I am convinced that the existence of a robust socially-oriented State is not only a product of economic development but its prerequisite: an employee without a safety net, who fears an unexpected dismissal, financially devastating illness and/or a poverty-stricken old age, cannot be a fully-fledged actor in a post-industrial economy of the 21st century.

INCENTIVES

The second sphere of the proposed road map should be a system of incentives for long-term investment and complex, cutting-edge forms of modern economic activity. Today, I need no convincing that excessive economic regulation is an economic and social evil, a source of ineffectiveness and abuse, and a cause of irrational business behavior and substantial decline in economic growth rates. Still, it is equally obvious that the provision of effective incentives to ensure the funneling of resources and entrepreneurial energy into sectors that depend on the use of technically and organizationally complex schemes, presupposing long-term business planning and enhanced risks, and therefore predicated on the State’s goodwill and the confidence that this attitude will last, is a key to the evolution of a new national economy and its competitiveness in the global economy. The elimination of incompetent bureaucratic meddling is an essential but clearly insufficient precondition for Russia to join the ranks of the advanced post-industrial economies.

Another such prerequisite is the existence of a large civilized business sector, not so much independent from the State as interacting with the State. This interaction would occur in areas where business’ competitiveness in a global economy is directly contingent on the competitiveness of the State, its ability to reduce long-term risks and protect domestic businesses against the negative impact of non-market factors. From this perspective, the creation of effective mechanisms for interaction between State institutions and business, the provision of positive incentives for the latter and opportunities to adapt to the rapidly changing global economic environment should become a separate and critical area of accelerated modernization.

RESOURCES FOR THE FUTURE

The third sphere of reform includes substantial transformations in sectors that can and must provide resources for future economic and social development. These include education, science and research as a sphere providing the required intellectual resources, and the state financial sector, which provides the necessary capital. Discussion about the need for serious reform in these sectors has been proceeding for a very long time; the number of programs that have been drafted runs into the dozens; yet the quantity – and most importantly, the quality – of measures that have been implemented thus far is lamentable. As a result, the status of these spheres, which are critical to future development, is absolutely inadequate to the scale of the tasks that are facing the country, and is already a hindrance to economic development. It is also obvious that these spheres, due to their intrinsic nature, cannot function or develop outside State policy and should, therefore, be the focus of any modernization program.

Of course, the list of spheres requiring the application of modernization efforts is not confined to the aforementioned. Thus, political reform is a separate subject. Nor has anything been said about the long overdue reform of national security, foreign policy or health care. Furthermore, each of the spheres that have been addressed calls for further detailing with specification and breakdown by the tasks and measures needed to fulfill them. Still, the bottom line is: The claim that the main reforms are already behind us and now, to ensure the country’s sustained development, they only require some fine-tuning and resolution of minor matters is false from beginning to end. Reform in the true sense of the word has yet to begin. A long and tortuous path lies ahead. To get the reform process off the ground, we need to come to terms with reality and demonstrate unwavering political will.

I also think that unless real reform is implemented in a comprehensive way within the next five to ten years, Russia will irretrievably lose the chance to become a modern developed country, while disintegration trends, as was the case with the Soviet Union, will become irreversible.