Discussions about the socio-political system that has been established in contemporary Russia have long been marked by two clearly different approaches. On the one hand, supporters of the Vladimir Putin regime believe that over the last seven years Russia has recovered from its economic crisis, solved many internal problems, strengthened the state governance system, and restored, albeit partially, its positions on the international scene. On the other hand, opponents of Putin’s nomenklatura emphasize that the country has been swept by corruption and arbitrariness, the judicial and law-enforcement systems have been built into the “power vertical” to serve its interests, Russia’s wealth is being plundered even more intensively than before, relations with leading Western powers and former Soviet republics are becoming increasingly strained, and social problems in the country are being aggravated.

However, both sides admit that the system built over the last few years contains a wide margin of security. It remains stable in the face of any “external threat,” that is, it can withstand any criticism from the outside and any mass movement inside the country. It is even less dependent on standard economic and financial factors (for example, fluctuations in oil or gas prices) than was previously believed to be the case. Meanwhile, it is highly unlikely that Russia will find itself in international political isolation, while chances are also slim that it will get involved in military conflicts that would demonstrate its inefficient defense potential. Finally, a social outburst, which might be caused by increasing wealth inequality and economic distress among a significant part of the population, is also ruled out.

But what are the fundamentals of the existing system – the “principles of Putinism” – that allow an elite that emerged by sheer accident to run the country in a manner that is highly effective for itself and not too ruinous for others, yet in a direction that is opposite to the one chosen by the more successful states in the world?

IN THE NEW CENTURY WITH LATE-SOVIET MENTALITY

The present system owes its emergence to President Putin. It reflects his mentality and the mentality of his entourage, together with their positive and negative features. It reflects their dreams and hopes, grievances and fears, and views of how the world should be built. Apologists of this system attribute to it the historical and “natural” features of Russian society, which are in fact not peculiar to it. Thus, we are witnessing an attempt to lead society along a path that is more understandable to the ruling minority than to ordinary citizens.

The majority of this elite has features that preclude the possibility of society’s effective management entering an information epoch. The ruling regime acquired their qualities in the late 1970s-early 1980s, at the time when their personalities were being formed. These are people with a late-Soviet mentality; many of them have a record of service in the Armed Forces, the Interior Ministry or security services. The Soviet military’s views of the world were, as a rule, “black-and-white;” they tended to attribute unfavorable developments to conspiracies or actions by one or another interest group. Such people are wary about the “risks” and “uncertainty” associated with the contemporary world, where momentous events may result from a coincidence of numerous circumstances and cannot be precisely predicted. At the same time, their lifelong adherence to a simple and even primitive worldview makes them reject all the other points of view on any issue.

The old mentality shows in dual peculiarities in the conduct of the Putinite elite. First, the Soviet outlook was based on the idea that the Soviet Union had a global mission to show the world the way to the Communist future. Members of the present regime have preserved that world outlook, but have discarded the “international” component, focusing their dreams instead on the historiosophic “Russian idea” of the late 19th-early 20th century. This is why the Russian elite does not make much effort to understand the reality: it oftentimes seeks to find a clue to a plan given from on high.

Second, while being at odds with reality when it comes to high politics and strategic goals, the “workers” of Putin’s “power vertical” show exceptional commercial enthusiasm and tailor any “administrative resource” for the purpose of increasing their personal wellbeing. No other country has so many ministers and high-placed officials from the presidential administration on the boards of directors of major corporations. At the same time, in no other country does state participation in a company make these business entities less transparent and accountable to other shareholders.

In 2000, power in Russia fell into the hands of individuals who had previously served as cogs in the vast bureaucratic hierarchy. It cannot be ruled out that many of them still cannot get used to their rapid rise. Their narrow-mindedness, coupled with an unnatural situation, produced an irresistible desire to use all of the available opportunities for personal gain. The volume of “classic” and latent corruption over the last five years has increased three to five times.

President Putin stands out among his associates only by his rank. He is flesh of the flesh of the team that came to the Kremlin with him. Had he been a cut above the others, as is believed today, he would not have brought them with him. Today’s Russia is ruled not by a leader, but by a strong-knit nomenklatura; it contains no individuals who would be distinguished for their talents and abilities.

At a time when the ruling elite is not waging a political or ideological struggle, the only chance to lose one’s post comes when an individual is found to be professionally unfit for his job. But since each bureaucrat knows perfectly well that he occupies his position not according to meritocracy but rather due to sheer accident, the desire to conduct personnel purges is rare simply because no one feels safe. This once again underlines an obvious fact: the present Russian elite is a cohesive mass that recruits new members that are of a similar mental and intellectual mold.

PHANTOM OF A STATE

The State is the main obsession of the ideology of Putinism. In the contemporary English language, the words ‘state’ and ‘nation’ are not only interchangeable, but the latter is even gradually replacing the former. Meanwhile, in Russia, ‘state’ and ‘nation’ are not only mismatching notions – they are practically opposite in meaning to each other. The contradictions between citizens and the state are discussed in a way that suggests that citizens are no longer a part of the state and the bureaucrats have long ceased to be citizens. A Putinite state is a classic Leviathan [an absolute authority] derived from the title of Thomas Hobbes’s book, which bears no responsibility to the people and pursues only its own interests. In fact, the “state” is a synonym for the ruling class and the mechanism this class has created to uphold and consolidate its domination over society.

Putin’s etatism graphically manifests itself in his efforts to strengthen the ‘power vertical’ in the country, and ‘state sovereignty’ on the international stage. Both efforts remarkably point to the absence of one important element in the discussions led in Putinite logic, namely efficiency. Europe recognizes that the transfer of a portion of sovereign rights and powers of the state to supranational institutions can improve the efficiency of services essential for society, while in the United States no external challenges can result in a redistribution of state powers in favor of the federal government. In Russia, however, the issue of efficiency of governance and the interests of the population are not taken into account at all. It seems that nobody has ever tried to calculate the changes in the efficiency of power after the abolition of direct gubernatorial elections. No one has established to what degree the needs of the disabled have been met following the implementation of ‘monetization of benefits,’ nor the efficiency of so-called ‘national projects.’ No one has calculated Russia’s benefits from the ‘gas wars’ with Ukraine and Belarus, the deterioration of relations with Georgia and Azerbaijan, or the absence of real progress in negotiations concerning membership in the World Trade Organization. Finally, no one has considered the consequences of Russia’s cooled relations with the European Union.

A Putinite state does not seek to solve problems but rather to accumulate powers. The state in today’s Russia is not “Vladimir Putin personally,” but rather a mysterious “nothing.” Suffice it to cite official reports that “there are shortcomings” in the work of public services, or that the system “needs to be improved and reformed.” Occasionally there are obvious failures, yet no one bears personal responsibility for them. Has anyone been punished for the hostage-taking drama at Moscow’s Dubrovka Theater, or for the Beslan tragedy? Has anybody been held responsible for the educational and pension reforms, or for many more programs that cost dozens of lives and hundreds of millions of dollars? No one.

The Russian state not only is ineffective; it is also irresponsible. These qualities are essential features of the Putinite ‘power vertical;’ they stem from the total cover-up that binds all of the individuals who are admitted to government posts. Such a state of affairs is extremely dangerous – a government that bears no responsibility and is unable to determine its goals and tasks must not be extolled and given virtually unlimited powers.

So what exactly is a Putinite state? It is a system that provides for a three-tier structure of society, a structure that is archaic and inefficient. This structure cannot be described in terms of ‘democracy’ or ‘authoritarianism’ – it is neither democratic nor authoritarian; it is simply disunited. The first tier comprises ordinary people who make up an overwhelming majority of the population. People are now freer than in Soviet times: no one is forbidden to own property, leave or enter the country, do business, or even avail themselves of the imperfections of the Russian legal system. The second, smaller tier comprises those “admitted” to participate in economic projects that the federal or local elite consider to be important. This group of citizens is much better off than the rest of the population; yet they are seriously limited in their activities since the ruling elite have many ways to quickly and effectively destroy their businesses. The third tier comprises the ruling bureaucracy, which establishes and changes the rules of the game at its own discretion and bears no personal responsibility for the game’s result.

This system of “divided society” crystallized during the second term of Putin’s presidency and is now a well-established structure. It corresponds to increasing budget revenues, when the authorities are in the position to buy off the population. It also gives them the ability to confidently control limited resources, access to which opens the way to wealth for controllable businesses and – especially – lucky representatives of the bureaucracy.

How stable is such a system? It is believed that the main risk is a fall in commodity prices and a decrease of budget revenues. This is true, yet the significance of this factor should not be overestimated. The Russian economy is now growing not only due to petrodollars, but also because of the multiplier effect of domestic demand. Reforms intended to reduce imports, partially depreciate the ruble rate, and carry out minimal demonopolization on the consumer market can remove the negative effect of the commodity price decrease.

More dangerous would be the disorganization of the bureaucratic class, a subject that is not discussed at the present time. Unlike the Soviet Union, today’s Russia is an open country. Members of the elite can transfer their capital abroad, register property in offshore areas, and send their families and relatives to other countries. Many industrial assets today are pledged to attract bank loans. Therefore, the king-for-a-day logic, which prevails amongst the ruling elite, has every chance of being translated into practice. Any serious test, even a test that the economy will be able to withstand, may have disastrous consequences for the elite’s cohesion and for its ability to continue controlling the situation inside the country. Just like the owners of American companies who are always ready to sell them for a good price, the Russian elite will abandon the country if it senses that the capitalization of the “Russia Corporation” has reached its highest level.

DE-INTELLECTUALIZATION OF THE COUNTRY

Over the 15 years of its independence, Russia has not come out with a national idea, while those versions that have become widespread among the population have proven to be nationalistic as opposed to national. Yet a way out has been found: Putin has chosen ‘de-ideologization’ as his ideology, and the people’s insulation from information as the main task of the information and propaganda system.

This project embodies – perhaps in the best way – the principles of Putinism. The authorities, which have had to admit their inability to formulate attractive national ideals, are now seeking to dupe the nation and thus bring its mentality closer to the mentality of their own. News is replaced by events, and meanings are replaced by images. Sensational scenes and happenings that are covered by television or coffee table magazines only serve to distract people’s attention from reality or, at least, from attempts to understand why this reality is such.

In contemporary Russia, it is not information that has become the target of attack, but rather the demand for it. This attack has been quite successful. In Soviet times, one could not even imagine that a newspaper like Novaya Gazeta could be freely published, or a radio station like Ekho Moskvy could freely broadcast, or that people could freely browse the Internet. Today, such news outlets are considered to be natural – because the number of those who read and listen to such news outlets and respond to their reports is insignificant, while such people are increasingly considered to be outcasts.

The general feeling of helplessness in citizens – and the ensuing devaluation of any information – is only one aspect of the present regime, however. Another aspect is the generation of images – usually abstract ones – that are intended to substitute for major ideologies that governed the world throughout the 20th century. Russia, Cosmos, Russian Idea, God, State, People, West – all these different words (which are often written with a capital letter) have flooded much of the dull writings by modern political analysts, as if to emphasize the profundity of the thoughts behind them. Putin’s era has created an unprecedented demand for theories explaining specific phenomena by highly abstract reasons or reasons veiled from the eyes of the man in the street.

Original concepts, like ‘sovereign democracy’ or ‘real sovereignty,’ alternate with kaleidoscopic speed. Sometimes one even would like to believe that a united Russia cannot be just, and vice versa. Oftentimes, fantasies are translated into life: even the wildest speculations made in 2002-2003 about the possible clampdown on democracy in Russia are a far cry from the present reality. At the same time, optimistic economic goals have been overshadowed by unprecedented prosperity over the last few years. These developments make any hope for a “return to reality” illusory, at least for the time being.

In recent years, the Putinite system has completely devalued the meritocratic principle, peculiar to all managerial structures. Amidst the absence of competition, new bureaucrats are recruited from among those who are believed to be incapable of undermining the positions of those individuals higher in the hierarchy. This is the classical system of “negative selection” where the absence of talent and ability is not considered to be a shortcoming of a candidate, but rather a merit, thus guaranteeing that he is less dangerous for those already riding the gravy train. This is why the professionalism of the decision-making process is on the decline, while the state machinery is steadily worsening, even though poor performance is not its goal. At the same time, ideas concerning the merits of dilettantism, and disregard for professional qualities, are being imposed on society as the new ideology of contemporary Russia. The new heroes of TV now include cynical young people without any particular profession – pop stars, for example, who decide on a whim to skate together with world figure skating champions in front of millions of television viewers. This is like a game where anyone can become an “outstanding politician” if he or she attends a presidential meeting, sitting next to the president with an intelligent air without uttering a word.

The de-intellectualized elite of Putin’s Russia represents the main threat to the country’s security, whose real scope cannot be assessed only because of the de-intellectualization of its citizens. The emergence of even slightly uncontrolled situations drives the elite into a stupor, making it absolutely helpless. But in our difficult and dangerous world, such situations will often emerge, and it cannot be denied that Russia has done its utmost to become completely unprepared for them.

DESTRUCTIVE ECONOMY

The Putinite system rests on a raw-material economy that dates back to Soviet times when the worldview of the present Russian elite took shape. The mass privatization of the early 1990s did a disservice to the Russian economy – not because industrial assets fell into the hands of inefficient owners, but because privatization changed the views about their real value. Private investors, who bought factories, electric power plants, oil fields, or pipelines, began drawing up balance sheets on the basis of the valuation of fixed assets, at which they purchased them. This is why nearly all serious investment in the retooling of production facilities – especially where the pricing instruments of competition were primarily used – only resulted in negative results, increasing production costs, and no advantages. Thus a “de-industrialization spiral” was launched, which became the main economic phenomenon of post-Soviet Russia. In 1989, energy resources and raw materials accounted for 58 percent of Soviet exports, whereas in 2005 this figure increased to 78 percent. The rapid growth of export prices promised new prospects, but in reality little changed. Sensing an improvement in the economic situation, oil companies quickly put into operation oil fields that had been sitting idle and boosted supplies to international markets. As a result, between 2001 and 2004, oil exports from Russia increased by 59 percent. However, the vast development potential was soon exhausted, and production peaked at the level that the Soviet Union had reached in 1991 – not the most successful year in Soviet history. In 2005, Russia produced only 469 million tons of oil and 637 billion cubic meters of natural gas. By comparison, in 1991, when Russia was a Soviet Republic, it produced 462 million tons of oil and 643 billion cubic meters of gas. Over the same 15 years of independence, oil production in Azerbaijan has increased from 8 million to 16 million tons, and in Kazakhstan, from 27 million to 59 million tons. Gas production in Kazakhstan has grown from 8 billion to 20 billion cubic meters, and in Uzbekistan, from 42 billion to 60 billion cubic meters.

Healthy economic news came from a different direction: increased export revenues allowed Russia to easily service its foreign debts. The country’s sovereign rating was eventually upgraded, while domestic and foreign investment began to flow into the Russian stock market, which had been oversold in 1998. In 2003, stock exchange indexes exceeded the 1997 figures. From then on, the capitalization of major companies was a new obsession, and was used as a gauge to assess the state of the economy. This factor played a crucial role in the economic growth in the period 2002-2007: business people closed their eyes to rising costs, as they could rely on additional loans secured by their assets – a thing inconceivable in the 1990s. At the same time, export revenues allowed the authorities to ignore the limited nature of the effective demand. Starting in 2004, they switched from the tactics of intimidation and devastation, employed against YUKOS, to the “friendly takeover” of assets that seemed attractive to them. As a result, the capitalization of major industrial companies went up, which did not stop the buying frenzy: Sibneft was purchased by Gazprom when its price was at the highest, and Norilsk Nickel, if the authorities decide to purchase it as well, will also pass into the state’s possession at an obviously overestimated value.

By early 2007, when the RTS [Russian Trading System] index approached 2,000 points, the capitalization of 10 major Russian commodity companies reached U.S. $650 billion, or two-thirds of Russia’s GDP, and the value of Gazprom stood at $270 billion, more than a quarter of the GDP (the market capitalization of the most expensive U.S. company, ExxonMobil, does not exceed 3.5 percent of the U.S. GDP). Eventually, the state share in the aggregate equity capital of Russian companies reached 35 percent. This bubble, which had no direct relation to the performance of these companies, caused a massive buildup of external borrowing. While in 2003-2006, Russia’s public debt decreased from 98 billion to 66 billion dollars, or by 49 percent, the debt of Russian banks and industrial companies (primarily the state-owned ones) surged from 31 billion to 167 billion dollars, or by an astonishing 440 percent. Has this money been utilized? You bet, as the spending of corporate investments is much less controlled than national budget spending, and if something happens, it will be the whole of Russia that will pay for it.

Since the demand of both consumers and producers is considered to be unlimited, the authorities do nothing to curb the appetites of the monopolists. As a result, average production costs in 2003-2006 grew by 160 percent, although the official inflation rate over the same period decreased to below 10 percent. Russia is quickly losing its last competitive advantages and has actually become a freeloader in the global economy, trading raw materials for industrial products. Russia lives exclusively on the exploitation of its resources: if we would deduct the revenues from oil and gas exports to Western Europe alone from all our export revenues, Russia’s balance of payments in 2006 would be in negative territory. However, it seems that the authorities do not see that the Russian Federation is simply becoming redundant in the world: while discussing Russia’s role as a “bridge” connecting East and West, they fail to notice the 40-percent decrease in shipments by the Trans-Siberian Railway following yet another rise in tariffs by the Ministry of Communications (whose chief so much likes to speak about the “dialog of civilizations”). But the authorities do not consider this noteworthy: it seems that the appetites of the Russian bureaucracy are close to satisfaction.

BALANCING BETWEEN CHAOS AND CHAOS

What will happen in Russia in 2008? Everyone is discussing this today, and there are serious grounds for entertaining this question. The year 2008 will be critical for the Putin system, most importantly because it will test the much-publicized stability that the incumbent regime views among its main achievements. It is for the sake of stability that the government is increasing spending on law-enforcement agencies, cutting down democratic norms and civil liberties, and so on. And for the time being, Russian citizens seem willing to sacrifice their freedom for the sake of stability.

But the problem is that the regime, which continues to speak about stability, cannot ensure it. How can one speak of stability when any decision can be revised as many times as the authorities want? Or when Duma elections have never been held by the same rules for at least two consecutive times. The inability to achieve stability is the main problem for Putin and the individuals he has brought to power. This is not surprising as the source of the power and wealth of the bureaucratic class lies in control over changes in rules rather than in their implementation. Stability, which everyone supports in word, is actually dangerous for the elite and therefore unattainable. This is why public attention is now focused on “Problem-2008.”

The year 2008 will be problematic because the bureaucratic class is divided. One part of the bureaucracy, which has gained control over substantial assets, is ready in principle to formally change the image of bureaucrats for the status of businessmen – especially since they have actually been engaged in business for a long time already. The other part of the bureaucracy, which has recently gained access to state funds, or acts as a parasite on the management of financial flows, fears any changes. The conflict between the two parts of the bureaucratic structure remains latent, and the system has been working in a “managed chaos” mode. “Managed chaos” is an adequate strategy in a system that lacks clear-cut norms and rules; the problem is whether it can grow into uncontrolled chaos.

And on this point there are obvious grounds for concern, primarily because today we are witnessing, on an increasing scale, a sign of a transition from managed to uncontrolled chaos, namely a hypertrophied overestimation of nonexistent threats. In such a situation, “Problem 2008” does not seem to be far-fetched. If President Putin does leave his post, the authorities will have no problems with the election of a Kremlin protégé, which will be a kind of “confidence plebiscite.” To all appearances, problems will emerge later, when the highest post in the country will go to a person who only yesterday was a cog in the system of controlled disorder. Then all the participants in the ‘power vertical’ (including the president) will need some new legitimization. What will this legitimization be based on? Not on emphasizing the merits of one official or another, simply because these merits are not so easy to detect. The main tactic will be to whitewash oneself and organize any compromising leaks regarding competitors. Very soon there will erupt a war of all against all, which most certainly will be marked by an increasing number of cases of contrasting the new order with the previous one – simply because all compromising leaks will one way or another be linked with events that took place under the current administration. Putin’s image may remain unaffected, like the image of Mao in China, but his present associates will certainly face difficult times.

The prolongation of Putin’s rule – through a third presidential term, amendments to the Constitution, the introduction of a state of emergency, etc. – would not be the worst option. Not because that would ensure further stability, but because it would enable the system, built by the incumbent president, to finally reach a complete stalemate, which it is now heading for. It would show that the principles of Putinism are ineffective not only in the absence of Putin, but also in a situation where the symbiosis of primitive nostalgia and occasional economic achievements, which generated this system, is becoming history. That would cause the Russians to accept an obvious fact, namely that they themselves – not an accidental group of former fellow students and colleagues – must choose a way for their country to develop.