20.12.2009
Missing in Translation
№4 2009 October/December
Piotr Dutkiewicz

Professor of Political Science and Director of the Institute of European and Russian Studies at Carleton University, Canada

Of late, a palette consisting only of black and white has seemed
sufficient to paint a picture of Russia. A sketch of the dominant
Western (and recently, increasingly Russian) conceptualization of
the last two decades of the country’s history looks something like
this: The democrat Boris Yeltsin introduced a market system and
erected the foundation of a Western model of democracy. This free
market and a newly free press effectively overhauled the Russian
political system, giving rise to hope for the emergence of a
democratic and pro-Western Russia; one which would become a good
citizen of the post-Cold-War rapidly globalizing world order.

In 2000, all such hopes were dashed. A new ruling elite led by
Vladimir Putin (often with a military or KGB background) decided to
undertake a coup d’йtat. Granted, this coup was constitutional, but
due to its radical nature it was no less revolutionary. It moved
Russia back to the level of a Mega Euro-Chinese gas station. It
became no more or less than a classic petro-state, albeit one
protected by a mighty nuclear arsenal. The talk these days is
increasingly about a new authoritarian state, within which one can
already discern the resurrection of the Soviet Union.

Economic arguments (particularly after economic crises hit
Russia in the fall of 2008) are equally damaging. In short, Russia
has been hit by a “double crisis,” one growing out of its own
faults and another created by global processes.

If so, then why does the majority of Russians support Putin (and
his successor)? The answer is complex as Putin’s Russia is neither
a banal authoritarian state nor a soft incarnation of the Soviet
Union. But such an understanding requires that we add some colors
to a hitherto black-and-white etching of the country. 

A NEITHER-NOR RUSSIA

Today’s Russia is certainly a challenge for the willing analyst.
It is obviously not a liberal democracy, but, given the freedoms
available for every Russian citizen, neither can it be labeled an
authoritative regime. Russia does have democratic electoral law,
but the electoral mechanism does give considerable influence to the
party in power (and the bureaucracy that accompanies it). Vladimir
Putin is considered by many to be a 21st century incarnation of the
czars, but in reality his power – especially in the regions (mainly
due to the “autonomous bureaucracy”) – is seriously constrained.
The Kremlin, though it fosters an aura of omniscience, continues to
base its politics on what might be termed as a timid
trial-and-error approach.

Russia has a market system (as recognized by the EU and WTO) but
the system of accumulation is to a large extent based on non-market
political access. The media are not “free” per se, but neither are
they under state control (with the exception of state television).
The government’s rule is seen as strong but the state’s
institutions remain fairly weak. While the decisions of the
Kremlin’s elite are seen by many as systemic manipulation – or just
a PR exercise – many of them are real responses to the needs of the
Russian people. Strength and weakness in one. Russia is seen as
pragmatic but the role of its ideological component (as in the case
of the concept of “sovereign democracy”) is more important than
many assume. Russian politics is becoming increasingly assertive
but its implementation is everything but that. At the moment there
is neither stability nor change. In other words: a neither-nor
Russia.

Moreover, while Russian foreign policy may at times seem clear
to the West, it is anything but, even for insiders. Russia wants to
influence the decisions of other countries and of international
institutions, but in reality there is little certainty (in most
cases) exactly what her position on many issues is.

Just as authoritarian actions do not necessarily equate to a
belief in an authoritarian system, a lack of a central governing
ideology does not necessarily signify a lack of ideological basis
for state governance, a lack of democracy is not synonymous with
the absence of freedom, rejection of Marxism is not a rejection of
the historical value of the Soviet Union as this elite’s
fatherland. A classical neither–nor situation dominated by shades
and ambiguities, in many cases dressed up for the occasion in
boldness, strength, high morality and sometimes arrogance and
self-righteousness.

It is worth returning to the late 1990s as it deeply shaped the
systemic thinking of the Kremlin’s ruling group. A sense of
humiliation rooted in the all-too-obvious evidence of social and
economic collapse, evaporating sovereignty, “democracy a la
Yeltsin” pushing Russia away from its “great status”, indeed a
sense of Russia being “driven to its knees”, all contributed to the
“deep mental formation” of a current elite.

As analysts know, production dropped in the 1990s in Russia;
however, not everybody knows that this decline was of a magnitude
unprecedented in the 20th century. Neither the First World War
along with the revolution of 1917, with the subsequent bloodshed of
the civil war, nor the horrors of the Second World War, brought
about such a dramatic drop in output as was seen in the
1990s.  In 1998, at the lowest point in the transformational
recession of the 1990s, Russia’s GDP was 55 percent of the
pre-crisis peak of 1989. In short, the economic losses from the
1990s recession were exceptional in scale and, importantly, in
duration. 

Such an unprecedented plunge in production caused equally
unprecedented tension in society. Due to the immense growth in
income inequality, the real incomes of the absolute majority – 80
percent of the more vulnerable members of the population – were
approximately cut in half. During privatization, there occurred a
massive redistribution of national wealth; in just a few years,
somewhere around a third of all state property passed into the
hands of a few dozen oligarchs for a song.

Inevitably, the brunt of these hardships was borne by society’s
most vulnerable groups because they had fewer resources with which
to cushion the impact of economic decline and increased insecurity.
This was further exacerbated by their limited ability to respond
constructively (either through political or economic means) to
rapidly changing circumstances and by a lesser capacity to protect
their vital interests in the political process.

The transformational recession was brought on not so much by
market liberalization as by the virtual collapse of the state.
Russian spending on “ordinary government” (excluding spending on
defense, investment and subsidies, and debt servicing) in real
terms decreased three-fold, so that government functions – from
collecting custom duties to law enforcement – were, for all intents
and purposes, either curtailed or transferred to the private
sector.

The shadow economy, estimated at 10–15 percent of the GDP under
Brezhnev, grew to 50 percent of the GDP by the mid 1990s. In
1980–1985, the Soviet Union was placed in the middle of a list of
54 countries rated on their level of corruption, with a bureaucracy
cleaner than that of Italy, Greece, Portugal, South Korea and
practically all the included developing countries. In 1996, after
the establishment of a market economy and the victory of democracy,
Russia came in 48th in the same 54-country list, between India and
Venezuela.

The regionalization of Russia proceeded in leaps and bounds in
the first half of the 1990s. The percentage of the regional budgets
in the revenues and expenditures of the consolidated budget
increased, while the federal government was forced to haggle with
the subjects of the federation over the division of powers,
including financial jurisdiction. Russia as a Federation was on the
brink.

I have argued that an indispensable attribute of any state is a
minimum of three monopolies – a monopoly on force, tax collection,
and currency issue. All three monopolies were undermined in the
Russia of the 1990s.

The voucher privatization of 1993–94 and the “loans for shares”
auctions of 1995–96 led to state property being sold off for a
pittance, and this at a time when the state needed money more than
ever before. As a result, anyone who could call themselves at least
bit well-to-do at the time not only had unlimited opportunity for
incredible enrichment, but was also able to take partial control of
the economy of the former superpower. The Russian business elite
had found joy in the unbearable lightness of living within a weak
state.

In 1998, the short-lived stabilization of the mid-1990s ended in
stunning failure with the August devaluation of the ruble and
subsequent default. Real incomes on a month-to-month basis fell by
25 percent in the fall of 1998, only climbing once again to the
pre-crisis mark in 2002.   

The state crisis had reached its apex: federal government
revenues and spending fell in 1999 to 30 percent of the GDP at a
time when the GDP itself was almost half of what it had been 10
years before. State debt and foreign debt had peaked; the currency
reserves had shrunk to $10 billion, less than those of the Czech
Republic or Hungary. The prevailing feeling was that the federal
government was so useless that it might as well just shut down.

It would be hard to name countries with a developmental level
similar to Russia’s, where the state lost so much of its
independence in its relationship with private capital. A virtual
merging of big business and the middle/upper management levels of
the bureaucracy occurred in Russia, and their interests became
practically indistinguishable one from the other. Neither the
civilian ministries, nor even the top bureaucracy were able to
counter this force; even the “power” agencies, such as the Ministry
of the Interior, the army, and the security services began
“privatizing.” As a result of this process, the state became
neo-patrimonial (a capitalist-cum-feudal system) and to a large
extent privatized. In such an environment, the issue of improving
equitable policies became irrelevant (as it is almost impossible to
implement any kind of policy interventions that might challenge the
fusion of such powerful interests).

To sum up, in the 1990s the Russian state lost its capacity to
govern and to manage tremendous burden of transformational change.
The state, facing internal and external pressures, withdrew from
its basic functions (protection of its citizens, provision of
health care, securing legally bounded transactions, monetary
oversight). The accidental elite that took power lacked both
coherence and a long-term plan and so leased the country to a
merger of oligarchs (formed by the state’s privatization scheme)
and the top echelon of Kremlin insiders. The state became engaged
in a massive redistribution scheme that gave away state assets and,
with them, the dominant power within the system. As state
provisions were disappearing, a “parallel state” started to emerge
to secure a smooth process of primitive (based on the state’s
distributional capacity and de-industrialization) accumulation at
the regional and federal levels. This mutation of capitalism
transformed market relations into a system of complex symbiosis
between nominally legal structures and organized crime, which
became not only a systemic economic force but also a political
actor in its own right. That process led to a massive
impoverishment of society with all the associated negative
consequences for societal cohesion, health, education, and so
on.

Putin’s group decided to reverse that trend. For that task they
needed not only more power than Boris Yeltsin had as President but
– most importantly – a different kind of power. The Kremlin’s
future rulers were convinced that at the very core they needed to
restore what was a traditional and central engine of social
development in Russian history: the State. In order to accomplish
this project, they had to link the state and accumulation into one
undivided whole of social power. If one looks for a singular
explanation of “Putin’s Idea”, most probably this is the closest we
can get. Their long-term task was to reconstruct and modernize
Russia but in order to have some results in that remarkably complex
goal, they had to dramatically change the pattern of accumulation
and the structure of power; indeed, to reshape the political
economy of Russia.  

ACCUMULATION – POWER – MODERNIZATION

The logic of the capital expansion in the 1990s was nothing
short, as Jonathan Nitzan and Simshon Bichler argued, of “to
penetrate and alter the nature of the state itself”. They were,
however, caught in an existential dilemma – to have a weak state
was good for business (no taxes, corrupt officials, etc.) but to
have too weak a state was bad for business (their main problem was
that the state was too weak to secure/protect the gains of the
dominant capital). In a truly Hegelian spirit they solved this
seemingly deep contradiction by evoking the notion of politics. The
oligarchs, then, “had to take things into their own hands” by
engaging in a collective political action.

But it was not enough, and as early as the mid-1990s, Russian
oligarchs were actively looking for international capital backing.
They were seeking transnational ownership to, on the one hand, gain
access to international capital (in order to gain more power
domestically) and, on the other, to secure their access to safer
investment abroad. Having advanced the “privatization of the
state,” Russian oligarchs were getting ready to make a real deal:
to merge with international capital and put the Russian economy on
the trading block.

Are we still puzzled why Putin’s group obsessively put “state
sovereignty” at the core of their program? Why were the Kremlin’s
planners besieged by the “threat of unpredictability,” “lack of
control” and “need for stability”? And are we still puzzled by the
Russian population’s support for Putin in light of the “double
failure” of the 1990s – the loss of “empire” and the collapse of
the economy?

It is time now to try to decipher the political economy of
Putin’s Russia. A seductively simplistic algorithm of Russia’s
political economy would look something like this:

  • Putin’s group rule = power + oil/gas + TV
  • Power = state-based accumulation + Presidency
    (trusteeship) 
  • Oil/Gas = principal state/private revenues
  • TV = relative control of mass opinion 

Therefore, Putin’s rule + power + oil + TV = the Russian
developmental state in progress.

In order to make any change, to define new rules, and “bring the
state back,” Putin’s Kremlin elite needed more power and new
resources (in order to avoid becoming trapped in a new dependency
cycle by the oligarchs). So what they were really looking for was a
different mode of accumulation; accumulation that would not
differentiate between “economic” and “political” power; where money
would not be “separated” from the institutions, law, culture, etc.;
accumulation that would be more totalizing in their capture of
economy/society; accumulation that would epitomize power; or in J.
Nitzan’s and S. Bichler’s terms “…what we deal with here is
organized power at large. Numerous power institutions and processes
– from ideology, through culture, to organized violence, religion,
the law, ethnicity, gender, international conflict, labor
relations, …all bear the differential level and volatility of
earnings… there is a single process of capital accumulation/state
formation, a process of restructuring by which power is accumulated
as capital.”

In other words, they attempted to intertwine capital linked to
politics with politics linked to institutions and law, which in
turn was linked to ideology, with ideology linked to value systems
and culture, with a culture linked to religion, which is linked to
almost everything that matters and, by the end of this logic chain,
to turn to power again – power as confidence in obedience. I shall
note, however, that while the confidence in obedience was quite
high (but never taken for granted by the Kremlin) in the first
years in power, the current economic crisis may change that quite
significantly. As recent opinion polls show, the confidence in the
ruling group may evaporate quite fast as Russians expected much
more after being obedient for so long.

The relatively easiest and most profitable source of
accumulation (and hence power) was oil and gas. With prices spiking
for almost a decade, it gave Putin’s group enormous leverage and
confidence domestically and internationally. Oil has its vices too,
but as a second component of Putin’s rule, it became indispensible
for the project. The third module of power to capture was to take
control of TV. More that 75 percent of the information absorbed by
Russians comes from TV. So, to put tighter controls on TV than on
any other printed or e-media was the third principal rule of
survival in a long-term, strategically thought plan.

The second part the “algorithm” (Power = state-based
accumulation plus Presidency) is that Putin’s group reversed the
main vector of accumulation from private to state. The state became
the principal agent of accumulation; the state (and state
“hegemonic” bureaucracy and key interests groups related to it) is
also its main benefactor. By paraphrasing Joseph Schumpeter’s
famous conception of capitalism without the capital that led him to
the conclusion that the “dynamic characteristics of capitalism
arise from non-capitalist sources” we come to the core of Putin’s
group’s base of accumulation: the State. 

Putin’s group is much closer to the ideas of Friedrich List’s
National System of Political Economy than to Adam Smith’s The
Wealth of the Nations. It is not the invisible hand of the market
but a very visible hand of the state that is to be responsible for
“development and progress.” F. List’s justification of the de facto
protectionist approaches through the creation of a constructivist
doctrine of national development fits squarely into the “Putin
Plan.” If we also consider List’s moral and spiritual overtones of
productive force and his emphasis on the defensive capacity of the
state to protect its “integrity,” we can add Putin to the list of
his hidden admirers.

But to put any plan into motion you need the implementers,
supporters, and at least a slim but trustworthy social base for
change. Here enters the need for the Presidency – the office, the
collective, the institution, the prestige, legitimacy, charisma,
and the man himself. There emerges a distinct need to find the
ideal individual/collective holder of the trusteeship. Who
shall/can lead society in a truly revolutionary time of
transformation? Society itself, the idea goes, cannot be trusted
entirely as they have lived too long in an entirely different
system, and so they can’t grasp   the “goal of the
change.” Society is also prone – as the 1990s showed – to massive
media/political manipulations. Oligarchs and high-level officials
were not the best option in 1998 for a ruling group either, as they
were engaged in stripping assets and placing them abroad. They
were, after all, businesspeople, not interested in the wealth of
society or the future of the state. So who was to lead Russia to
its revival?

From the utopian socialists, through the Hegelian principles of
development, Marx’s debate on the role of the “individual man”, the
Fabian’s society ideal of correcting the socio-economic change in
the British colonies, the League of Nation’s institution of
trusteeship, the ideas of Sergei Witte, and Lenin’s notion of a
“vanguard party,” theorists and practitioners of all stripes and
colors have struggled with the answer to this very question: Who is
to lead society into development and progress? Who can be entrusted
to lead the change? Hegel’s “spiritless mass” or someone else? In
their brilliant book on development, Robert Shenton and Michael
Cowan observed that, “A ‘handful of chosen men’ could now assume
the mantle of the ‘active spirit’ to become the inner determination
of development”, regardless of the system of governance and its
ideological dress. This reminds me of the Saint-Simonian ideal that
to remedy disorder, “Only those who had the ‘capacity’ to utilize
land, labor and capital in the interest of society as a whole
should be ‘entrusted’ with them.” Putin’s version of a trusteeship
is thus given its philosophical justification. Sociologists are
ready to support me with their empirical studies of the
configuration of the Putin’s inner circle. The notion of the
trusteeship – I believe – explains a lot about Putin’s
leadership.

It may explain, for instance, the Kremlin’s partial distrust of
society (which explains why only very limited change via
grass-roots social movements was permitted) but also their
desperate need to “have society engaged” in the convoluted form of
the Social Chamber (among other things, in order to keep the
bureaucracy in check). It may also explain some of the reasons for
the relative freedom of the parliamentary elections in 2008 and the
Kremlin’s actions against the “not trustworthy oligarchs” and their
anti-bureaucratic outbursts. It can explain an uneasy cohabitation
of conservative and liberal ideas that are transformed into
policies and institutions by the Kremlin’s rulers. It can also
explain their “philosophy of power”.

The final part of the algorithm (Putin’s rule + power + oil + TV
= the Russian developmental state in progress) deals with the
longer-term, intentional as well as unintentional consequences of
ruling Russia for the last ten years. In other words, what was the
power for? Today, Russia is a developmental state in progress
(being, I shall underline, in a state of policy hibernation – or
stagnation – for the last three to four years). The current
economic crisis has shown that the painfully accumulated state
capacity (both institutional/legal, financial, and moral) to act as
a principal agent for change did not result in an economically
effective, politically significant, and socially viable
transformation of Russia’s socio-economic system (or, in the words
of Gleb Pavlovsky, one of the Kremlin’s chief alchemists, “Medvedev
is right, this is a dead end”). The question is: Is it really “a
dead end”?

To answer, we should make a small detour to trace the main
features of the “developmental state”. The idea is not new. The
postwar period saw the coming together of statist theories,
specific measures of state intervention and more general extension
of state regulation in critical aspects of the economy. Herein lays
the origin of the contemporary developmental state. The
idea/practice was first applied in post-colonial Africa, then later
– more ambitiously and consistently – to a cluster of rapidly
growing economies in East Asia such as Japan, South Korea, Taiwan,
Singapore, Indonesia and Malaysia. Many argued that their
spectacular growth was possibly due to the activist and “market
friendly” state. But not all states can be evaluated as
developmental. Adrian Leftwich, one of the key authorities in this
area, proposes that only “…states, whose politics have concentrated
sufficient power, autonomy and capacity at the center to shape,
pursue and encourage the achievement of explicit developmental
objectives… can aspire to be the ones”. The argument goes that in a
developmental state, the state itself becomes the main instrument
for the pursuit of both public and private goals. The state comes
to define and determine who will be able to make which decision of
administrative, political, and economic significance. Political and
administrative positions become – obviously – a fruitful means of
securing economic resources and opportunities (so it is normal that
state came to be an important avenue for realizing private goals).
The claim of the state to define public goals and the legitimate
means for pursuing private goals is formally recognized in a notion
of “national sovereignty.” The expansion of state economic
management is justified by the notion of “national development.”
The state’s “capacity for coercion gives the content to these
otherwise vacuous concepts”. However, there is a twist to this
story. The power arising from the state capacity to allocate
resources depends largely on the exclusion of alternative sources
of access to capital; hence the tendency of the holders of the
trusteeship to organize the provision of services and commodities
along monopolistic lines (something that Russian materials and
energy producers know by heart).

As you can see, from a comparative perspective the approach
taken by Putin and his group is a general approach to development,
not new. What is new is the specific historical circumstances in
which this project was being launched and its fundamental
understanding of its amalgamated accumulation-as-power and
trusteeship-led mode of reproduction of social relations. The
Russian ruling elite faced a formidable developmental task which
required coherent and strategic actions, and the only agency
capable of achieving social and economic stability in the given
circumstances was the state.

So far so good, but as the perennial East European question goes
(particularly in times of crisis), “If it is so good, why is it so
bad?” I may offer, as an explanation, two fundamental drawbacks of
the model’s implementation. First, the model seems to be based
(even if unintentionally) on the “old-fashioned” approach of the
first generation of developmental state theorists such as Dudley
Seers and Hans Singer, who emphasized the need for a distributional
approach to economic growth (with the state’s main role being that
of principal distributor of wealth). In that sense, the policies
based on that notion were emphasizing just one side of the role of
the state. What was needed was rather a dual-track, more flexible
approach.

Contemporary theorists of the developmental state would suggest
that the state should be an engine of “liberal” policies (and a
guarantor of their implementation) in the area of economic growth
and generation of national income, and, simultaneously, of the
“social and re-distributive” mechanism (by giving some
developmental opportunities to the poorer section of the population
and worse-off regions).  

Everyone now is talking about modernization and modernity in
Russia. Such talk has become fashionable for radio hosts and
newspapers. The problem is that there is no comprehensive economic
modernization underway. Whether we like it or not, Russia is today
a largely de-industrialized, resource-dependent country with no
serious base for technological innovation. Except the enormously
powerful energy sector and high-tech pockets of the military
industry, it is not internationally competitive. Is that adequate
for the Russian aspirations?

Another important point relates to the sequence of the Putin
Group Project’s implementation. The first six years of the
trusteeship-led process of stabilizing the economy, re-creating a
state, re-grouping power, re-shaping politics, diminishing poverty,
stopping criminalization of the society, saving oil money, and so
on, were largely necessary steps. Cumulatively, they formed a
strong foundation for the developmental state and, in general, were
quite indispensable prerequisites for making the system work again.
However, it is quite clear that there was no “second-phase plan” to
move from “stabilization” to “accelerated modernization” (ideally
from mid of the first decade). I can only speculate why such a plan
did not materialize in 2005-2006 when the Kremlin “got everything”
– political power, resources, and high social support “in one”. The
point is that Russia did not enter (having enough resources and
power to do so by 2005-2006) a second, logical, and fundamentally
important phase of fast modernization of industry accompanied by
political empowerment of the citizenry. It looks as if groups of
busy construction workers suddenly stopped building the road they
had so promisingly started, switched off their machines, and went
back to patch the holes that were formed while they were busy
advancing the construction. (Does this not seem reminiscent of the
idea of the National Projects?) In other words, Russia did not
capitalize on her wealth to the extent she could have done (as its
BRIC fellow members did).  

For the above two reasons, the answer to the key question of
whether Putin’s project has hit a dead end, shall at this point be
quite ambiguous. Everything depends on the
government’s/Presidency’s next steps. The economic crisis finally
made it painfully clear that the patch-work approach is not an
option. Russia has no other choice  than to try to reinvent
itself. There are three basic ways to follow now.

DO IT OR LOSE IT: THE RUSSIAN DEVELOPMENTAL STATE IN
(IN)ACTION

A perennial question among Russia’s intelligentsia is Chto
delat
? What is to be done?

Based on our best knowledge, we can only point to the best
examples known and extrapolate/adjust their experiences into the
specific conditions of today’s Russia. Crudely, there are three
basic choices to be made (each with its nationally-shaped
variations and mutations): there is the “EU way,” the
“developmental state way” (as in the East-Asian model) and “slow
adjustment” way. Each model has some inbuilt uncertainties and
contradictions; each requires strong political will and policy
implementation capacity. Guaranteed success of either one is
everything but certain. However, by not making a decision, Russia –
willingly or unwillingly – will slide down to the junior league of
states regardless of a quite possible oil price recovery.

Let me start with the developmental state option as a lot of
energy, money and political capital have already been invested in
it. This scenario would hypothetically look as follows: Based on
the hitherto achieved pattern of accumulation/power, the Russian
ruling group decides to move to the next level of developmental
state evolution: a deep and systemic modernization of the country.
But the initial Kremlin-elite-based trusteeship of the
stabilization/consolidation period (roughly 2000-2005) is no longer
enough to move ahead. They prepare a plan that will envision
modernization, not narrowly defined (as the need for new technology
and equipment) but as an all-embracing, staged process of
legal/institutional, economic/social, technological,
research/educational, and conscience/ideological change. They set
in motion reforms and then move to a clear cluster of priorities in
their plan, centered on re-constructing a sophisticated industrial
base linked to the innovative scientific research/implementation
and pushing banks to finance it. Only those who are really
competitive get the money. The Kremlin makes special efforts to
make rules and procedures as clear as possible for business and
supports these through a strong, corruption-free court system.
Corruption at large is at least halted thanks to changes in the
regulatory system, punitive actions and changing social attitudes
that no longer accept it. As the Kremlin needs to find a larger
pro-modernization consensus and (simultaneously) ways to
convince/co-opt/neutralize powerful, interest-based opponents
(located mainly in the energy sector), they make a choice of
relying on the small middle class, medium-scale business, and that
section of bureaucracy that is dynamic enough to implement new
policies. At the same time, they launch a mass media campaign to
explain to the different constituencies the benefits of going
through a quite painful and unexpectedly long (five to six years)
initial modernization process (and of the danger of not setting off
down this path). As the process advances, the Kremlin is peacefully
undermining rising social discontent (which is normal as the
re-distributive function of the state is becoming step-by-step
diminished and increasingly targeted) and gaining enough support to
make the bold move of reforming the resource and energy sectors.
Finally, they move to the point of the democratization of the
developmental state. Does this sound like fantasy? But is there any
other choice than some form of this fantasy other than a
comfortable oil-and-gas-cushioned stagnation?

The “EU way” is a second possible option. Obviously I am not
advocating transposing a copy of the European Union onto Russia or
her applying to join the EU. Vladislav Inozemtsev, a well-known
Russian economist, made a very good point by saying that: “This
path doesn’t require such a strong developmental state as the first
one, but needs radical political decision to be made, …a
pro-European policy based on accepting if not European values, but
EU practices. If Russia accepts the major part of the EU-wide
regulations known as acquis communautaire, complies with European
ecological, competition, trade and some social protection
standards, the modernization of this country may take another
direction.” Of course, it would be a revolutionary decision that
would shake the whole system. Russia is far away
(institutionally/legally and strategically as far as state is
concerned) from the EU. This would also mean re-shaping Russian
foreign policy and some portion of the elite’s mentality, but as
Russian economic interests are located between Europe and Asia this
might be the most sustainable choice.

The third way is to have a “status-quo modernization.” Such a
scenario embraces at least  four components: first, some
transfer of most modern technology (mainly to military industry);
second, keeping the budget filled with petro-dollars (that will be
quite sufficient at $68-70 per barrel to fulfill current level of
social and security obligations); third, strengthening military
capacity to secure Russia’s diminishing economic and social power;
and fourth, implementing even more assertive international policies
to hide domestic weakness. Within this scenario the Russian state
can go on without any significant change for at least couple of
years. The deep modernization can be postponed and reconsidered at
the later stage. This is a socially risky but doable scenario (but
one that might relegate Russia to the “secondary powers” club).

In the first two cases, the ruling group shall consider moving
from the “trusteeship” mode of ruling Russia to a “social
coalitions”-based system. As history has shown, even the most
enlightened “trusteeship” cannot reorganize the system (in a longer
term) without broader societal support. At this moment the game is
not – narrowly defined – about technology  and innovation
transfer, as some members of the elite advocate; rather, it is
about making Russian society and economy innovatively oriented,
with the state playing a decisive role in that process.

The choice between accelerated continuity, “discontinued
modernization” and “status quo evolution” should be carefully
considered as the future of a huge country is at stake. What is
certain is that the lack of real modernization policies of the last
four to five years cannot be continued without serious, negative,
long-term consequences. The only good thing about the current
crisis is that no one can deny the necessity for accelerated change
and the need for a larger, societal debate about the future of the
country. And this in and of itself is a good thing for Russia.