21.11.2005
Restoring Russia’s Future
№4 2005 October/December

Russia’s list of achievements in the past five years must
include its stopping the degeneration of the state, together with
its associated institutions, thus allowing the country to build up
considerable resources for a potential breakthrough in the
future.

More importantly, Russia stopped the seemingly unavoidable rise
of an oligarchic dictatorship disguised as liberal democracy. This
dictatorship was a potential liquidation committee set out to
destroy the great project captioned “Russia.” Omens that the
oligarchy may regain its power, which slipped from its grip in a
miraculous way, will hang in the air until we decide whether Russia
has a future and what kind of future that is.

STARTING POINTS

Collapse. Unexpectedly for many people, the collapse of the
Soviet Union turned into a collapse of the state and its
institutions. It was a systemic crisis manifesting itself in the
inability of the Communist system to react adequately to challenges
of the time.
The disintegration process was a betrayal of the country by its
political leadership that used slogans like “new mentality” and
“common human values” to conceal an actual squandering of values –
both tangible and intangible values alike.
A new post-collapse Russian elite came into being as a coalition of
werewolves from the top Soviet ranks. They also included
businessmen from amongst the New Russians flocking in and around
the Kremlin, and former dissidents turned reformers.

The collapse of Russian society in the 1990s was peculiar in
that society did not truly sense it. That very society, or rather,
the profusely pro-democratic and pro-Western Soviet intellectuals
which made up that society, recognized the catastrophe only after
they had been displaced and turned into the “recipients of budget
money,” to cite the terminology of Russia’s financial and statistic
agencies. By that time, they had largely abandoned their democratic
pro-Western stance and ceased being a society.

Society’s new offshoots could only imitate the popularly known
civic and political institutions of the West, and the only
institution fully accepted was that of the President, elected
through a universal vote. The presence of this institution helped
Russia to avert final collapse.

The division of property. An evaluation of former Soviet assets
provides a realistic picture of the extent of that catastrophe. Not
only did the country’s Gross Domestic Product shrink by 50 percent
during the reforms (in fact, it might be considered as a natural
consequence of the decay of the inefficient Soviet industries).
McKinsey’s data indicates that labor productivity in basic
industries fell by a factor of three, and the aggregate value of
assets as such plummeted more than 97.5 percent. Construction of
the capitalist system devalued the whole country.

Despite a diversity of the forms of privatization, the division
of former Soviet assets boiled down to fragmenting the long chains
and amalgamations of industries. Any elements that could not be
sold fast were forced to degrade and die out. This was not the way
to create real owners who understand the real value of the assets
they acquired or the knowledge of its proper use.

It is noteworthy that state institutions were commercialized at
much the same time and along much the same principles as the former
Soviet economy. Quite naturally, the government dissociated itself
from any responsibility for economic performance and focused
entirely on its market function, namely, on selling its own
services. It became acceptable then to brand this policy as
“liberal.”

Debts. Nonetheless, a new class of owners came into being that
was comprised of two quite unequal groups. The first group includes
big property owners, above all those controlling natural resources
– Russia’s only highly marketable commodity. These are the
so-called ‘oligarchs’ who acceded to the top positions upon special
arrangement with the authorities, or by grabbing up property
indiscriminately. 

The second group is rather populous and includes the owners of
medium-sized, small and very small businesses who have survived a
terrible battle against various government agencies, competitors
and gangsters.

These two groups, however different, share a common
characteristic: they believe they are totally free from any
obligations to their society, to say nothing of the state.

Privatization in Russia was remarkable by its almost complete
appropriation of assets that was not, however, accompanied by an
appropriate compensation of the relevant costs. While the
government parted with property virtually for free, it retained
many debts to its citizens, and the absence of the necessary assets
made paying off those debts all but impossible.

When the nation came to realize how catastrophic the situation
was becoming in the country, it raised claims against the state –
very mild claims in the form of vague electoral and political
expectations.

The nation realized its need of government, embodied in
legitimate power (in the direct meaning of the word) and legitimate
ownership. Legitimacy can have only one ground in Russia, and this
is justice, and no legislative or juridical procedures can
substitute for it.

Legitimacy. The legitimacy of presidential power relies on
general elections. Representatives of the post-collapse political
elite demanded that the new President, Vladimir Putin, ensure their
proprietary legitimacy – they needed guarantees. In 2000, there was
endless talk about guarantees, against a revision of privatization,
about taxes and capital amnesties, and so on. Yet no one can
explain the justice as to how Russia’s huge government property was
distributed. The President does not have a mandate for such
confirmations. A president who affirms the unacceptable results of
privatization immediately loses legitimacy and becomes simply
redundant, which is exactly what Mikhail Khodorkovsky dreamt about
before his arrest.

On the other hand, a radical revision of privatization means
ruining an entire existing system of economic relations. It implies
yet another revolution, which post-disaster Russia could not
survive. More importantly, the current condition of government
institutions and the composition of the elite dooms any revolution
ordered from above.

At the same time, it is equally impossible to create effective
economic and political institutions without a real nationwide
process of legitimization. Nor is it possible to defend elementary
proprietary rights. That is why a step-by-step transformation of
the relationship with the largest owners is the only possible
method of achieving success. Property as such must transform in
step with the rehabilitation of basic government institutions. This
requires the gradual transformation of the elite through the
removal of the most odious and treacherous elements within it.

Oligarchy and democracy. The so-called YUKOS affair, wich
actually meant the removal of the oligarchs from the commanding
heights in politics and the economy, was unachievable under the
former media-dominated, corrupt liberal procedures. The Russian
state did not have levers to act either way given the conditions it
had found itself.

Regardless of the time or place, a liberal democracy always
implies a mechanism for the domination of the elite with attendant
instruments in the form of political parties, elections of various
colors, together with their elaborate financing, as well as control
over the ostensibly independent mass media – the very ones who
belong to different groups of the elite (mediacracy). Generally
speaking, there is nothing disastrous in such a system per se, as
it has been functioning successfully in many countries.

And yet there is a vital condition to such a system: the elite
must be loyal to its homeland. In Russia’s case, that condition is
more than simply neglected (according to Khodorkovsky, “this
country looks like a good place for game hunting”). The new Russian
elite seeks guarantees of its status and security abroad rather
than at home.

Thus, a system called ‘controllable democracy’ – that is, the
partial restoration of government control over the largest mass
media outlets, as well as the legitimization of those political
entities that used to represent the interests of different groups
of post-Soviet elite – removed those members of the oligarchy who
relied heavily on the mediacracy. The development that demagogues
called “the wrapping up of democracy and freedom of speech in
Russia” meant, in fact, actions to keep the state united (as an
institution and as a territory).

While some quarters make attempts today to decry the restoration
of vertical power as one more method of curtailing the democratic
system, it is worthwhile recalling that by the end of the 1990s the
regional elites and leaders had begun to make outright claims for
dominance over Russia’s sovereignty, or for multiple sovereignties,
which would spell the automatic loss of Russia’s national
sovereignty. The need to void the regional leaderships of general
political functions made the elimination of direct elections of
governors the only feasible move. Importantly, the political
procedures of parliamentary and presidential elections remain in
place and cannot be ‘wrapped up.’ Those elections represent the
groundwork for the legitimacy of the acting Russian government.

Challenges. The huge drop in Russia’s combined economic and
political power did not merely accompany the process of post-reform
transformation – it coincided with the plans of individuals who had
ordered it from abroad and the ones who executed it inside the
country.

There was no primordial, or specifically anti-Russian scheming
behind those moves. Every nation has a normal political objective
to rule out the emergence of an outside force that is capable of
overpowering it.

However, there is another matter of more importance, and that is
for the first time in centuries Russia had become an object of
history making, as opposed to an active subject.

All the problems which existed in relations between contemporary
Russia and its Western partner – and in essence there is only one
partner – pertain to Russia’s claims to re-impose itself as an
active participant in world politics, i.e. make claims to genuine
sovereignty. In other words, so long as Russia did not exhibit any
particular ambitions about becoming active, it did not feel any
special hostility on the part of others.

Terror. As long as Russia was collapsing through its own
initiative and inertia, real terror against the Russian state was
rather restricted and could be described as subversive separatist
movements and political operations; however, after the authorities
stopped the process of disintegration, its character changed
radically. We are now witnessing an unprecedented type of terror
that aims to break up the very institution of the state and deny
the legitimacy of government.

Presently, the state is being subjected to a form of public
torture, including a type of persecution by the mass media, that
must eventually either make it assume full responsibility for the
death of innocent people, or disband of its own will in the face of
the terrorists’ ultimatum. The intensity of that torture is growing
– terror is working in close affiliation with separatist groups,
religious extremists, political oppositionists of every imaginable
color, and the ‘fifth column’ in the business community and
government agencies. The process receives powerful overseas support
that is not limited to only the media. No separatism agenda can
provide material backing, coordination and specification of goals
of such magnitude.

The overt hostility of the majority of Western mass media toward
Russia is caused by the mere fact that this country has openly
stated its ambitions for becoming an active player in the vital
neighboring zones of the post-Soviet space, that is, in Ukraine and
Georgia. And if the restoration of Russia’s might becomes a
reality, the reaction will be close to hysterical; this is
something we must be prepared for. This fact, however, should not
discourage Russia from rebuilding its political and economic
power.

GROUNDS FOR BEING OPTIMISTIC

Nonetheless, Russia retains the military, economic, moral, and
political grounds for rebuilding its might.

1. Strategic nuclear arsenals. This is the only area where
Russia has a semblance of parity with the world’s only domineering
superpower. Russia can maintain such an arsenal that will be
sufficient for a modernization breakthrough, at the very least.
Rehabilitation of the nation’s nuclear deterrence may lay the
foundation for the real maintenance of Russia’s sovereignty.

2. Over the past five years, we managed to stop the collapse of
our major government institutions. The institution of the
presidential office is functioning, and there is little doubt that
it is functioning of its own accord. The government is diversified
yet controllable; the administrative reform, although not fully
assimilated, has been launched. Today, it is technically possible
for the government to perform the tasks that are essential for an
economic breakthrough.

3. Russia, in one way or another, has built for itself the
foundation for a self-regulating market economy that is adapted to
normal market standards. If the conditions are created for fair and
tough internal competition, without the government meddling in
business matters it has nothing to do with, then a free economy
will ensure the powerful support necessary for an economic
breakthrough.

4. Russia has preserved its natural resources and maintains them
under state control. These resources are the world’s largest and
not only make Russia a crucial element of the world economy, but
also furnish this country with a sufficient degree of economic
security even in the most unfavorable economic conditions.

5. Russia has accumulated huge (some experts say ‘excessive’)
financial resources over the period of stabilization. If that money
is not squandered, we will be able to apply it to a rapid
modernization, including in the military sphere, and Russia’s power
will exponentially increase then.

6. This country maintains a leading position among the
neighboring former Soviet republics, since virtually all of them
are experiencing a civilizational degeneration. Only Russia has
retained its scientific, educational and technological potential,
although not without a loss.

7. Last but not least, the post-reform trauma did not shatter
Russia’s psychological health. The initial mess following the
collapse of the Soviet Union has largely given way to strong
expectations that must be met. Public consciousness is yearning for
its historic revenge, and whether this desire takes a productive or
destructive form will depend on the adequacy and efficiency of the
government’s policy.

TASKS

The re-establishment of the sense and objectives of Russia’s
existence as a state, society and civilization, together with the
restoration of its strength and power for implementing those
objectives, are the main tasks for our government.

Justice. Justice is a fundamental value for our society, for
nothing can be built anew without remedying injustices.

As political analyst Vitaly Naishul noted, “while the first
revolution in the early 1990s promulgated the slogan of freedom,
the next revolution will wave the banner of justice.”

One can add that the implementation of freedom produced a severe
shortage of justice, and we must find ways of meeting the demand
for that basic value unless we want to stir up more social
revolution. Today’s government is trying to identify ways of
reconciling with society without rupturing the existing ownership
relations. Thus far, the results are rather unimpressive. This is
due not only to the insufficiency of the resource base, but also to
the impression of injustice and the real humiliation that the
reconciliatory approaches evoke (recall the notorious replacement
of benefits with monetary compensations). It is important to pursue
the general principle of ‘social reforms as popular reforms,’
meaning that everyone understands who benefits, how big the
benefits are, and on what grounds they are offered.

The problem of income distribution, social security and the
distribution of property is, to a great degree, connected with the
government’s debts to the population. Those on government payrolls
are entrusted to a state that had handed out for free the sources
of the funds for paying off debts. One of those sources should have
been found through the tax base.

Yet the taxes, which are enough to guarantee the normal
functioning of the economy, are not enough to pay back government
debts to the people. The current level of taxes cannot cover such
debts as the compensation for Soviet-era bank deposits that were
razed to zero by rampant inflation in the early 1990s (these are
acknowledged debts), as well as payments of back wages to public
sector workers and back pensions. The resources for paying back
these debts lie in the property that has been taken away from the
government.

An issue tightly linked to the debt issue is the legitimization
of the largest property holdings, which cannot occur given the
current amounts of foreign debt that must be repaid. The only way
for these owners to make that property legitimate is to engage in
the repayment of debts. An investment company servicing securities
issued against debts to the population must be insured by the
assets of the largest companies, above all the producers of mineral
resources. This scheme may become the basis for signing a New
Social Contract between society and the largest businesses.

Big economic growth, along with a much steeper rise in the value
of assets, could offer a tangible prerequisite for the Social
Contract. This is the only way of peacefully building the
institutions that will distribute national wealth in the manner
that the people will deem acceptable. This implies a mutual
engagement toward an economic breakthrough, not the expropriation
of property. Society can be reconciled with the results of
privatization only through a wide-ranging contract.

Public reconciliation. Russia has not solved the problem of
social reconciliation either on the historic plane – between the
supporters and adversaries of Bolshevism and Communism – or on the
social plane (between the rich and the poor). The Civil War of 1918
to 1921 continues, in fact. The incumbent government is trying in
earnest to develop a unified history of Russia and a united Russian
statehood. But the Day of Concord and Reconciliation, a former
national holiday, has been abolished. Since we cannot come to terms
with one another regarding the past, the only possibility for us is
to come to terms on the future of a Great Russia. The Restoration
of Russia’s future is the essence of Russian policy at present, and
our authorities must design the image of that future and guide the
country to that end.

National might. Any policy that aims at increasing the power of
the nation, will also work toward sustaining freedom. The degree of
might determines the ability of any politician, political group or
state to make and implement sovereign decisions. No kind of
sovereignty or law can rely on legislative acts, contracts,
coalitions, guarantees or promises if it does not rely on power as
well. In the end, the might of a country is the only basis for its
sovereignty.
A strong economy is a crucial element of a powerful state, however,
military might, as well as political and diplomatic weight, are the
most important and sometimes most decisive part of economic
strength. America’s economic might rests to a great extent on the
number of its aircraft carrier groups and their combat capability.
One can easily surmise that the value of the U.S. economy would
drop by a factor of three if its military power shrank to that of
Japan.
Capital strength and political power are the two interrelated
components of freedom and independence of any country. If either
part sustains a setback, then encroachments on freedom and a loss
of independence are pending. These factors mean that Russia must
choose its criterion for attaining power on its own, not from the
norms and rules dictated by “civilized” mentors.

Sensible goals and guarantees. Russia’s main resource is found
in the propensity of the Russian people for having clearly
identified goals. The people find sense in government if they have
a goal and a momentous and detailed task. Then the people develop
energy – the very machinery of economic growth – the efficiency of
which can be judged by specific criteria inherent in the goal. The
presence of a goal sets conditions for building state and economic
institutions. A country’s long-term goals and, consequently,
long-term money enables businesses to engage in long-term
development projects. These projects stimulate making money through
development rather than on corruption or other methods that tear
the country apart.

The government has a major goal in its relationship with the
business community, and that goal is to provide tough guarantees
for the immunity of property, as well as guarantees for legitimate
deals. For large property holdings, the issue of guarantee rests on
legitimization. As regards the bulk of medium-sized and small
businesses, the main problem of proprietary guarantees boils down
to protective measures from state agencies, that is, institutions
acting on behalf of the government.

Thus, the government’s major task in a market economy is to
launch institutional reform, or to create the institutions whose
basic task with regard to market relations is to defend proprietary
rights.

There is also a crucial task of ensuring maximum free
competition, above all domestic competition. If Russia wants to
develop a car-making industry, for instance, the government must
also provide for competition through the introduction of two – or
better, three – national manufacturers with comparable
capabilities. To make this possible, one or two modern car
factories of foreign origin might be built in Russia.

To set the scene for tough and equitable competition, we must
defend our domestic market. Its defense should be an absolute
priority in two cases. First, the protection of those industries,
manufacturing facilities or technologies, the loss of which might
mean an impending threat to national security.

Understandably, this suggestion refers primarily to defense
industries, financial institutions and vital infrastructures.
Second, we must control strategic resources. Selective
protectionism is imminent in those areas where an open market would
bring about the expulsion and/or destruction of national
manufacturers. Only then will the government be able to open its
doors to a tough and efficient competition of manufacturers within
the domestic market.

National projects. Apart from market-oriented institutional
reforms, the government has a strategic goal in specifying
long-term priorities and making them known to the business
community.

The government also shoulders responsibility for organizing the
investment process. This is essential, unless we want to be witness
to a situation where the invisible hand of the market brings
structural degradation to the Russian economy to the point where
the Russian state becomes all but redundant. This brings up the
issue of an advanced industrial and growth-oriented policy. Let our
government finally get down to the business of adjusting economic
mechanisms inside separate industries and groups of industries that
would stimulate growth and development.

The government should focus on strategic national projects,
which private companies are unable to implement independently or
cannot due to the current situation in Russia. These projects
pertain to our national security and the development of our
intellectual potential, not to mention high technologies (since the
state has an indisputable duty of keeping up the industries and
research schools where Russia enjoys world leadership). Russia must
promote the growth of projects that are the engines of economic
growth, or help at facilitating a sizable expansion of the domestic
market.

One such engine involves the fundamental modernization of the
Russian Armed Forces that can ensure economic growth and protect
research and technology potential. Unlike in the U.S. where this
lever is broadly used to stimulate the economy, Russia really needs
an amassed modernization of its military hardware to ensure a
minimum level of security. An impressive increase of defense
spending for the re-equipment of the Armed Forces appears to be
essential from both the political and moral point of view.

The list of other high-priority national projects may
include:
– rehabilitation of commercial aircraft manufacturing;
– a national space project (contrary to the current trap of the
International Space Station);
– transport projects of intercontinental strategic
importance;
– a system of widely accessible mortgage loans (unlike the dismal
undertakings of the Ministry for Economic Development and Trade,
Russia needs a project with a fairly limited initial government
financing that could produce a real construction boom and get
millions of people, not a few dozens of thousands, engaged in
housing construction.) Mortgage loan programs have an important
advantage: they can be substituted for by imports by a small
degree, boost the domestic market and have a quick and obvious
social effect.

Such national projects have an important result and by-product,
that is, a new national elite within the business community and
state machinery. This will be a creative elite that will replace
the post-collapse collaborationist elite. In a nutshell, the
enactment of national projects will serve economic goals and also
help to solve the dramatic task of replacing the elites. This, in
turn, will open up the sole opportunity for Russia’s development
along the path of democracy.
Even a small part of our excessive reserves will suffice to set
these national programs in motion. At any rate, it will not exceed
the funds that will vanish in plugging numerous budget failures
that are bound to happen should the present economic policy
continue.

Russia is bound to have no less than $200 billion at its
disposal by the end of this year, even by official estimates. Those
funds are being used with utter inefficiency, while losing their
value by inflation or an unfavorable exchange rate. Transferring
them into the currency or securities of the potential enemy is not
only unprofitable; it makes those assets highly vulnerable.

Finally, Russia must design a sovereign monetary policy instead
of the “currency control” patterns that presuppose printing certain
amounts of rubles depending on the arrival of hard currency
revenues. Let us decide for ourselves on whether a fully
convertible ruble might be more lucrative for us. If it is, let us
sell our natural resources abroad for rubles.

Another option is to renounce the ruble’s internal
convertibility (like in the Chinese model) and to turn monetary
policy into an efficient instrument of stimulating the economy.
However, given the structure of our exports and the cost of the
workforce, renunciation of the internally convertible ruble will
hardly bring us benefits similar to the ones China is getting. But
we must make the choice immediately since continuation of the
current policy line would mean mocking common sense.

And of course, the state has an obligation to make social
investment (not to be confused with social obligations). Social
investment in education, public health, science and culture is
always efficacious, and the beneficiary is the whole national
economy, not just a separate corporation.

Civilization-state. The essence of Russia’s existence as a state
and nation is preserving and developing the Russian civilization as
a unique way of life, culture and system of values that, although
being different from all other civilizations, incorporates many of
their features and serves as a foundation for state and public
institutions. Individual material successes and money grabbing, for
instance, will never be a dominant attribute in the Russian system
of values, nor define a person’s social status.

Many talk now about the decay of the nation-state and national
sovereignty, not to mention the collapse of empires. All of that
refers to globalization. The problem is that globalization presumes
the survival and swelling of one global empire against the
background of dissolution or fragmentation of former nation-states
within global entities of some kind reporting to the empire.

On the other hand, there are liberals and Russian fascists who
try to spellbind the public with the chimera of an “ethnic state”
with the underlying suggestion “Why don’t we drop off all those
people from the Caucasus, Tatars and elsewhere?” No single state
can structure itself on these idea, as they pave the road to
carnage and, as a consequence, to the fragmentation of and tribal
feuds on the entire post-Soviet space. Ironically, it is precisely
this path that some former Soviet republics have taken after they
made a ‘European choice.’ Some have already sensed the phenomenon,
while others are yet to sense the energies of national conscience
that suddenly burst forth from the peoples inhabiting multiethnic
territories; and the energies do burst despite the stringent
“humanitarian guardianship” of the global arbiter.

Russia has always existed as an empire. It can exist only as an
empire in the modern sense of the word, which stresses a harmony of
all the constituent elements and cultures and their synthesis, as
opposed to a system of power and a form of external expansion.
Russia is a civilization-state where the ethnic Russians are a
cornerstone people that cannot exist outside the multicultural
environment of other peoples making up and filling that
civilization. The imperial mentality is a profound foundation of
our anti-fascism. Any chauvinist who calls for the repression of
non-Russians and non-Christians is a foe of the empire and a menace
to its existence.

The future world should be seen as a multifaceted amalgamation
of civilization-states, each having an identical tradition,
lifestyle and hierarchy of values. This country has the goal of
reserving a place for Russian civilization and state among other
civilization-states.

We must convince those peoples who are close to us in spirit,
history and culture about the importance of building a state
together unless we want to be turned into objects of manipulation,
with the nation being partitioned amidst competition for our
resources and their transportation routes. In essence, this is the
basis for post-Soviet integration. A modern centralized democratic
civilization-state can alone maintain its might and ensure justice
on its territory that is bound by a common civilization. The latter
must be durable, as well as hospitable. It must be comfortable for
its friends and invulnerable to its foes.