02.03.2008
Russian Modernization: Interests and Coalitions
№1 2008 January/March
Leonid Grigoriev

Leonid Grigoriev is chief advisor to the head of the Analysis Center under the Government of the Russian Federation, Head of the World Economy Chair of the World Economy and International Affairs Department of the National Research University–Higher School of Economics.

The modernization
of Russian society, business and the Russian state urgently needs a
broad public coalition.

Russian society
realizes that the problems it is facing today are rooted not only
in its Soviet past, but also in the nature of its transition
period. The transition has resulted in an irreversible departure
from the Communist experiment of the twentieth century and in the
formation of a new Russian capitalism marked by profound inequality
and broad diversification of the interests of various social
groups, regions, and types and groups of businesses. Therefore, the
nation as a whole should be modernized by revamping its civil
society, the economy and the state. The prospects for economic
growth in the country remain generally favorable, which makes it
possible to set new, much more ambitious tasks.

It is also
important to understand the current and long-term interests of the
players taking part in the transformation, and where these
interests differ or coincide. Conflicts of interests may slow down
development, but a coalition of social forces in the interests of
the country’s modernization also suggests self-restraint; that is,
making it impossible for the main players to attain their current
goals in the here and now.

The general goals
of Russia’s modernization in 2007 largely coincide with the goals
of the transformations in the late 1980s and early 1990s: the
development of democracy, the formation of a civil society, a
growth in Russian living standards toward the European level, an
effective economy, the reorganization of the state in these new
conditions, and a withdrawal from senseless global confrontation.
In other words, Russia would like to emerge from the Soviet
political system and the Cold War without lowering the country’s
standard of living, but while maintaining the development of
science and culture, the stability of the state and the country’s
position in the world.

Russia, in the
previous period of its history, faced the problem of “triple
transition:” from the Soviet (authoritarian) state to a democracy;
from a planned economy to private property and the market; and from
a republic within another huge country toward an independent state.
Russians under 35 years of age never experienced a planned economy
and they did not live in Soviet society or in the Soviet Union (as
adults). Stable economic development during a transition depends
largely on the supremacy of law, political stability, security, and
reliable guarantees of property rights. The combination of these
three transformation processes resulted in enormous adaptation
costs. The decade of crisis only briefly suppressed people’s
natural need for a normal social life, for a dynamic economy and an
effective state. Poverty made them endure or emigrate and now a
better standard of living is causing people to set higher standards
for their quality of life and economic policy, and these standards
will keep increasing.

Russia’s
macroeconomic success over the past few years has created a feeling
of euphoria among the political elite; as everything seems possible
now – from social stability to modernization and an active foreign
policy. Many of the problems of the previous fifteen years have
gradually become insignificant. The government now has the freedom
to maneuver in using budgetary resources and additional funds are
available for social programs, the Army and the defense sector.
Leading oil, gas and steel companies have amassed huge financial
resources and have actively started positioning themselves on the
global market. Real personal consumption has grown at an average
annual rate of 11 percent over the past eight years, or
approximately 80 percent higher than in 1999.

However, even
this strong growth over many years has failed to solve many of the
country’s pressing problems. The magnitude of these problems can be
measured indirectly by a drop in GDP, which has fallen 43 percent
from the 1989 level. GDP losses amount to five yearly volumes of
1989 (the maximum level) over the period from 1990 to 2007. Even if
we assume that GDP will grow by two percent, GDP losses would
already equal seven yearly amounts. The depth of the social crisis
in the country can be illustrated by the trends for murders and
suicides (Graph 1). Russia’s 1998 financial default fueled a wave
of depression among Russians, even though there was a quick rebound
in GDP growth. The number of violent deaths only dropped to the
early 1990s level by 2006.

Russia lagged far
behind developed democracies in many ways when the transition
period began. The costs of the transition and the severe
consequences of the crisis – in particular, social costs and losses
of human capital – increased this gap still further.

Two decades
later, one can see what development opportunities were missed,
where foreign competitors have caught up with and overtaken Russian
producers, what kind of people have left the country and where they
have gone. The results of global competition over these years are
immense; new countries have entered a period of rapid growth,
including in industries where Russia had some chances.

Russia has
considerable reserves today, yet they are not large enough to
implement a large-scale modernization of the country. In the
current market-based world, a country can administer budgetary
financing within a few percentage points of its GDP – business must
make the main investment of 15 to 20 percent of GDP. The fifteen
years of post-Communist development have been lost from the point
of view of renovation and modernization. Forecasts for rapid
modernization without adequate institutional grounds are only
consoling fantasies.

Russia must now
work out a development and modernization strategy for the next
generation, and not just for another political cycle. Russia is
hoping again for a large-scale modernization, for an improvement in
people’s living standards and for a  respectable place in the
world in the third millennium. These general goals unite all the
public forces in the country, but the objective situation of
individual groups makes them rivals with regard to each other, with
conflicting interests.

GROWING
INEQUALITY

A general growth
in consumption amid economic growth stands in contrast to growing
inequality. Russia has changed from a quasi-egalitarian Soviet
society to a society with an Anglo-Saxon income structure over a
short 17 years (see Table 1). However, it is wrong to evaluate
social inequality based only on income and consumption. The
available data on property is incomplete, while the huge
concentration of property in Russia, to all appearances, is
comparable to or even superior to the situation in major Latin
American countries. This kind of social structure (especially the
distribution of property and income) is supposed to be highly 
rigid:  the concentration of wealth and poverty on the fringes
of society. The Anglo-Saxon version of social inequality, even
though it is characterized by a high disparity, still has chances
for a vertical  mobility.

The division of
the Russian population into the well-to-do (20 percent), the medium
income (40 percent by Russian standards) and the poor (40 percent)
does not coincide with similar categories in European countries.
The 40 percent medium income layer is part of the middle class in
developed countries, which is a source of stability. The income and
consumption levels in this group in Russia are not enough to live
comfortably. This induces feelings of injustice and this group
exerts pressure on employers and the state for higher social
spending. The income distribution structure in Russia has gradually
stabilized over the past decade: the rich 20 percent account for
about 50 percent of total income (40 percent in Europe), the
medium-income 40 percent range account for 35 percent (40 percent
in Europe), and the poor 40 percent account for 15 percent (20
percent). It is important that the richest (10 percent) people in
Latin America and Russia account for 35 percent of visible income
(25 percent in Europe).

This disparity
narrows the political choice for Russia: one can expect a struggle
among various social programs, which may result in keeping the
structure or its enhanced mobility – movement “from Latin America
to the United States,” rather than to Europe.

Social disparity
is noticeable even in Russia’s developed regions, but friction is
checked by a fast growth in consumption, owing to income in the
private sector and to the national budget. With an average annual
growth in real consumption at 11 percent, even the poorer sections
of the population believe that their living standards have improved
somewhat. However, there are still dangers for social stability: if
overall growth rates for income and consumption slow to a moderate
3 to 5 percent, many sections of the population may find themselves
in the zone of “zero consumption growth” – especially if the
situation remains tense in the social sector. Therefore, a deep
distribution conflict is emerging inside Russian society at its
present stage of post-Soviet development.
Unfortunately, despite statements by reformers about the importance
of the middle class, little has been done thus far to support the
intelligentsia. The latter  now has the right to go into
business and to emigrate, but there is an absence of clearly stated
intellectual property rights. In order to implement technological
ideas, their authors still prefer to go to the West and use the
services of Western innovation firms. Furthermore, the government
does not protect small businesses against extortion, protection
rackets or corrupt officials.

The emerging
middle class is still relatively small, yet its influence and role
will grow. Yet the question is how this growth will affect the
socio-political processes in the country and how soon the influence
of the middle class will become comparable with the “weight” of
bureaucracy and big business. Most of the Russian middle class
still has limited assets and limited financial stability; therefore
there is not much hope for its political activity. In addition,
there is a distribution conflict between groups within the middle
class: businessmen must pay taxes, while scientists and the
bureaucracy have quite different views on how these tax revenues
should be spent.

The weakness of
civil society in Russia is acknowledged not only by its active
members, but also by representatives of the authorities and
business. On the face of it, businesses and the authorities find
life easier when civil society and its organizations cannot exert
strong pressure: the weaker public control is, the less
accountability there is on the part of businesses and the
authorities. In a situation like this it is easier for corporations
to evade responsibility for violations of labor or environmental
legislation. The local authorities find it is easier to ignore
public complaints about corruption and other violations of public
interests. Unpopular ministers find it is easier to “survive” in
their posts. However, this “easiness” results in losses for the
country in global competition and affects how state and businesses
can withstand external challenges. The weakness of civil society
and the limited possibilities for political competition or for
influencing the decision-making process only create an illusion of
peace and bring about mistrust, disappointment and cynicism among
the country’s citizens. Given a favorable economic situation and a
growing resource rent, Russia can continue living in this way for
another five to ten years, but it cannot be modernized under
conditions of mistrust and social apathy (especially among
businesses and the intelligentsia). A civil society is one of the
foundations of a government and a partner for business. The
consolidation of civil society and the improvement of citizens’
well-being would mean the success of the country’s transformation.
Currently, however, the weakness of civil society is slowing down
Russia’s modernization, while inequality is a potential threat to
it.

CENTER VS
REGIONS

The
redistribution of budget revenue from exporters of natural
resources in favor of agricultural regions has a very limited
impact on regional development. Some studies have revealed that
such a policy has a disincentive effect on both recipients (an
addiction to dependency) and donors (“the government will take
away  revenues all the same”). Adjusting the budget does not
help to even out regional development – despite economic growth,
the gap between regions is only deepening (see Table 2). There is a
conflict between consumption and accumulation in economic terms –
subsidy recipients use  these funds   largely to
maintain consumption. Therefore, the transfer of financial
resources from the rich to the poor has a dual effect – donors
cannot invest the resources, while the recipients become accustomed
to consumption for free. In Russia, there is a strong similarity
between the more and less developed regions as regards their GRP
(Gross Regional Product) growth, while medium-developed regions are
going along a different path. This observation points to two
implications: economically weak regions have sufficient bargaining
power to get a share of the country’s progress through federal
redistribution mechanisms; rich regions are capable of preventing
this redistribution from affecting their growth rates.

The greater the
distribution spreads of income in the country, the more difficult
and more intensive redistribution conflicts may be. In Russia,
there is a conflict between poor sections of the population in the
more developed regions, for example in metropolitan areas, and poor
regions. Just as developed countries in the world have to choose
between rendering aid for developing countries and financing the
poor in their own societies, poor regions in Russia are also
demanding redistribution and aid, but their interests often do not
coincide with the general interests of the poor sections of the
population in developed regions.

There are
significant differences between various Russian regions regarding
their economic development, institutional settings, and the conduct
of local political and business elites. These differences are
comparable to the global diversity of countries in the United
Nations. This factor, along with the equally complex diversity of
borders and neighbors, plays a crucial role in Russia’s domestic
policy and complicates dramatically the process of modernization.
Significant regional differences and gaps in standards of living
are typical of many countries, including in members of the European
Union. The EU is trying to make the development levels of its
members more balanced, but the gaps between these levels in EU
countries are much less than the gaps among Russian regions. In
Russia, the regional factor (not to mention national, religious and
other peculiarities) requires balancing of very diverse interests,
a system of incentives, compensation, etc.

CONTRASTS IN
RUSSIAN BUSINESS

Russian
capitalism has been developing in a very unusual way and it is
still very far from looking like the models that many thought it
would follow.
Unlike “normative” privatization, which presupposes specification
of property rights and a possibility for new owners to receive
guarantees of the inviolability of these rights, Russia used a
method of maximum de-specification. It resulted in weaker corporate
control and the concentration of huge controlling stakes (full
control only at 75 percent of shares – much higher than is
practiced in Western business) required for resale or for
preventing hostile takeovers. The restoration of clear-cut property
rights will require a great deal of time and effort. Moreover, a
phenomenon of “quasi-hidden” owners has emerged, who are
represented on boards of directors through nominal offshore
holdings, yet these owners do exist, use their rights, manage their
assets, etc.
Russia is the largest economy in which the bulk of private property
belongs to offshore owners rather than to national owners. This
factor explains why transactions to buy or merge companies are
conducted abroad – such transactions do not  affect processes
of domestic fixed capital formation.

There are several
categories of co-partners exercising control over production assets
in Russia who want a share in income (rent). These include former
and incumbent officials, shady-business figures and representatives
of local administrations who took part in the initial privatization
or assisted in its implementation, but who could not make legal
claims and become shareholders, and who now claim that they have a
right to income as hidden creditors or portfolio
investors.

Due to the lack
of clear-cut property rights, privatization dragged on and entered
a phase of redistribution, which continues to this day. If an owner
receives assets at zero value without encumbrance, he does not have
much incentive to maximize the current value of these assets. It is
much easier for him to resell his assets until their value reaches
the market level than to bear the commercial and other risks of a
strategic investor. Redistribution may take the forms of seizure,
false bankruptcy, or abuses of material and procedural law in
corporate conflicts.

There have never
emerged millions of shareholders in Russia because of the high
concentration of property, large controlling interests and offshore
ownership. The Russian population is not very interested in buying
shares, which is one of the obstacles to the legitimization of
large amounts of private property in the eyes of
citizens.

The
legitimization of property acquired through privatization has
slowed down greatly. A formal amnesty has already taken place: the
statute of limitation for privatization transactions has expired.
The government has made respective political decisions to prevent
the institution of legal proceedings against violations committed
over the course of privatization, but Russians still have a deep
mistrust toward large private property. The vague nature of the
property rights and violations committed during the transition
period open up the possibility for new players, who did not
participate in the distribution of assets in the 1990s, to demand
some share now, specifically by using the so-called ‘administrative
resource.’

Many
“co-partners” seek advantages that are not related to the
creation  of wealth and new value (rent-oriented behavior,
accompanied by the disguising of the true owner and his income),
which keeps high risks for owners. The rate of national savings
stands at 33 to 35 percent of GDP for years, while the rate of
accumulation only rose from 16 to 19 percent in 2001-2006. There is
a surprising phenomenon at the same time: there has been capital
outflow amounting to at least 10 percent of GDP a year during the
last seven years along with relatively expensive and short money
inside the country. The balance of payments for 2006-2007 is
unusual (for other countries), as well: there is huge capital
outflow which stands in contrast to a huge import of portfolio
capital. Russian companies borrow heavily abroad, while Russian
securities and the stock market as a whole have become attractive
again for portfolio investment. However, an investment boom is not
coming.

All of these
factors have a negative impact on the pace of the country’s
modernization, increase risks for business projects, and create a
feeling of dissatisfaction among the educated population and the
political elite. Ministry forecasts and programs have kept their
plan for the accumulated growth rate unchanged at 25 percent for
the past ten years. Now the state is trying to involve big business
in large-scale projects through public-private partnerships. Thus,
it is actually offering a deal: reduce political risks and support
the export of capital (for macroeconomic reasons the government
must get rid of excess savings all the same) in exchange for
cooperation in investment.

DOMINATION BY
GIANTS

The
emergence  of two dozen Russian companies on the global arena,
while Russian per head GDP is at $7,000 (or $12,000 if measured by
the purchasing power parity), came as a surprise for many outside
observers. The formation of a group of national giants in Russia is
following the path earlier taken by other mid-developed countries
(Brazil and Spain), yet the industry diversity is much broader.
Together with large companies from India, China and Brazil, Russian
business is entering the fast-growing second tier of world
corporations. By using their natural advantages, they are making
their way into the ranks of the global majors. These advantages
naturally include government support, as it happened during the
advancement onto global markets – half a century ago and now – of
large companies of member countries of the Organization for
Economic Cooperation and Development, among them Airbus, Statoil,
Air France or South Korea’s chaebols. The consolidation of Russian
companies in the aluminum, shipbuilding and aircraft industries and
their emergence as world heavyweights in their respective sectors
is in line with global trends.

The performance
indicators of Russia’s leading companies (see Table 3) largely
resemble figures for U.S. companies during the first few decades of
the twentieth century, which were marked by a high concentration of
capital and savings. Unlike small businesses, which are unable to
effectively resist the bureaucracy, large companies are better
protected against corruption and can prevent the diversion of their
funds from investing. At the same time, the consolidation of the
public sector in large-scale industry may provoke a conflict of
interests in such a sensitive area as property rights, which shapes
the vector of development.

The domination of
giants complicates the performance of medium-sized regional and
small businesses. The latter suffer because their interests are
ignored by officials and large companies. Meanwhile, small business
is a natural occupation for the active part of the population and
immigrants and it needs a special economic environment and the
restoration of pre-Soviet forms of relations with the population
and the state, especially regional and local authorities. The
problem of developing medium-sized business is related to foreign
competition and access to financing on domestic markets, which is
more expensive and short-term. Small and medium-sized businesses
gradually take root in a free economic space. If the rent-oriented
behavior of large local companies and the authorities does not slow
down the legalization and the development of competition, the
development of small and medium-sized business will promote the
growth of the national economy, accelerate vertical social
mobility, and may liberalize  economic activity from
bureaucratic oppression. The legalization of small businesses
depends primarily on the nature of taxation and on the reduction of
unofficially paid rent and corruption. Businesses cannot function
normally if they have to pay “double taxes” – the official one is
paid to the state, and the other, unofficial one is paid as
“protection money” to racketeers.

The government
acted as a generator of formal institutions during the transition
period. Simultaneously, the government as a reformer observed the
emergence of informal market and property rights institutions,
apparently failing to keep pace with the course of events. The need
to transform state institutions amid a deep and multifaceted crisis
caused difficult problems for the new state and its apparatus. One
such problem was the initial impoverishment of the bureaucracy,
which had previously belonged to a relatively privileged group. One
can say that at the start of the reforms Russia had a
reformer-government (whether it succeeded or not is another
matter), but did not have a government  that would be capable
to regulate economic activity.

Decision-making
was ineffective because of an internal struggle for power and
influence and because of difficulties involved in the formation of
a new elite, which is inevitable in a new state. Additional
difficulties were caused by the conflict of interests between the
new business class and the old nomenklatura, as well as by the
interference of regional elites. Plans for the first few years of
reforms reflected “institutional nihilism.” Conflicting interests
were not understood and formulated, and no attempts were made to
link formal institutions with the real behavior of economic agents.
In those years the people still believed that the market would
itself form a basis for effective economic management. The vacuum
of institutions was in many ways filled with chaos; the dominant
positions were taken by various informal institutions, which now
will have to be painfully reformed.

The later
strengthening of the state changed the balance of forces and the
state apparatus began to grow again. The federal apparatus
increased from 377,000 to 593,000 employees in the period from 2001
to 2005 alone, while the number of executive agencies grew from 60
to 84. The number of federal officials (not including law
enforcement agencies or in the Armed Forces) increased 20 percent
in 2005 (and 29 percent since 2001). The ratio of this number to
the total number of employees in the country grew from 2.6 percent
to 4.15 percent. In 2006, the total number of civil servants in
Russia increased by another 8 percent. A growing economy makes such
enhanced regulation unnecessary, while administrative barriers and
bureaucratization are the main obstacles to modernization. Business
administrative costs are still high and the number of supervisors
and their powers and rights keep growing. Meanwhile,
innovative-based development presupposes maximum freedom for
scientific and social creativity and a high level of vertical
mobility. Graph 2 illustrates not so much the growing number of
civil servants as the ineffectiveness of the government apparatus.
Highways are complex facilities which require stable property
rights, transparency of the nature of financing and management
principles, as well as a balance of interests between users and the
authorities. The fact that amid intensive economic growth the
number of highways has not only failed to increase, but has even
begun to decrease is a clear indication of inadequacy of the
institutional basis of the investment process in the
country.

There is no doubt
that a strong state is needed to implement the chosen policy and
oppose special interest and lobbying groups. Many problems of
development and modernization cannot be solved without a
full-fledged government. At the same time, one should not mix up
the interests of the state and those of bureaucrats who now 
seek  growing and excessive control (that is, control that is
not necessary for effective market operation), which increases
business costs and impedes productive investments.

Corruption has
become a national problem, while mistrust toward government
agencies and officials at various levels inevitably reduces the
effectiveness of governance. Universal corruption is now viewed as
a norm, which is making the public even less hopeful for legal
solutions to even simple problems. The implementation of laws, even
the most reasonable ones, is still a problem in Russia. New
legislation is often passed hastily without considering the
possible side effects and long-term consequences. Occasional
campaigns against individual corrupt officials cannot change the
situation. Moreover, the repetition of such campaigns, especially
if they fail to produce stable positive results, will require ever
more political and other resources.

A strong state is
an engine of development, but a state that is too strong is a
bureaucratic brake. Attempts to put social development and
businesses under bureaucratic control weaken the innovation
potentials of both and complicate the solution of national
problems. The reformer-government will still have something to do
for the foreseeable future: its task is to prevent the state
regulation from “cutting off oxygen” to innovations. The state must
increase the effectiveness of governance in the next decade, reduce
corruption, and see to it that laws are implemented and that the
actions of government and executive agencies are
predictable.

COALITIONS FOR
THE COUNTRY’S MODERNIZATION

Creating a large
and long-term coalition for modernization in democratic conditions
is an extremely difficult task. A strong leader might play an
important role initially, but later the significance of social
forces grows. A technocratic implementation of reforms and
strategies has its limits – sooner or later the voice of large
social groups must be heard.

In stable
democracies with a mature market economy, there is a consensus on
basic principles for the social and state systems among an
overwhelming majority of citizens, regardless of their party
affiliation. In Russia, where there is still no consensus on such
issues, there is a need to take into consideration the interests of
many social groups, which may differ essentially or even conflict.
The political parties in the country are unable to consolidate and
express group interests.

The set of
expectations in society and the nature of demands by individual
groups may significantly change under the influence of political
interests and as the situation changes. Therefore, coalitions may
be fluid and change their configuration. Accordingly, the
implementation of one or another strategy  supposes the
creation and maintenance of a broad coalition. For example, a
coalition of social forces against corruption may be the most
popular and most useful one from the point of view of modernization
of both society and the state.

The interests of
various social forces may differ considerably. There are dozens of
goals for the country’s development, various limitations and
conflicts of interests (see Table 4). Yet one must form a coalition
of political forces and ensure support for the public and various
(competing) business groups in order to maintain a modernization
choice for a long time – the most desirable but, unfortunately, not
the most likely scenario for Russia.

The specific
socio-economic development and the current political conditions
suggest that events in Russia may develop according to various
scenarios.

The
“Renter” scenario
is an attempt to go on living on rent.
Various groups in society eagerly support this strategy as long as
the federal authorities can continue distributing resources. Under
this scenario, modernization is pushed to the background, while
there may not be enough resources for everyone; moreover, in case
of an external shock (a fall in export revenues or financial
turmoil) the risk of a redistribution conflict grows
markedly.

The
(neo)mobilization scenario
is based on the concentration
of resources in critical (presumably correctly chosen) sectors,
such as the implementation of infrastructure projects, or efforts
to increase Russia’s economic influence in the world. This scenario
presupposes large-scale involvement of the state budget financing
and state-owned companies and development institutions, as well as
semi-compulsory private-state partnerships. The main problem of
this approach is the low efficiency of a big government, coupled
with a high concentration of resources, which must be maintained
for a long time.

The
inertia scenario
is tactical maneuvering among interest
groups, where problems are addressed when they become acute. This
is constant maneuvering between populism with the distribution of
subsidies and partial mobilization, and attempts to continue the
reform of market institutions in order to meet the interests of
various social groups in addressing the most pressing tactical
tasks. There is not much of a chance for strategic success under
this scenario, yet it makes it possible to meet the requirements of
the stronger social coalitions or to suppress emerging
threats.

The
modernization scenario
enjoys wide support in word and has
no opponents, yet everyone understands it in their own way. To
date, this strategy is the most difficult one for all participants,
and therefore it is not very likely that it will be implemented.
The modernization scenario presupposes high costs for some of the
players, while the positive effects for the country and the economy
are not immediate and require some patience from both population
and elites. Modernization is impossible without a strong civil
society, joint progress of market and state institutions, and
effective business. Since the modernization of the country and its
search for a place in the world will take a generation, a
broad  coalition – the support base of this project – must
exist for a long period of time, although its composition may
change.

If the emergence
and maintenance of such a coalition is possible – which is not at
all obvious – this scenario would be a more reliable basis for
modernization than  a “benevolent dictator.” However, the New
Deal Coalition of Franklin D. Roosevelt, created in the 1930s,
united such unlikely allies as southern whites, urban liberal
intellectuals, Trade Unions, poor blacks in large northern cities,
Poles and Italians, Catholics and Jews, etc. In Russia, the
combination of its deep problems, large national ambitions and the
consequences of the all-embracing crisis causes natural skepticism
about the feasibility of the modernization scenario.

The first three
scenarios would lead the country into a deadlock and each would
involve its own group of risks. Although they do not pose any
immediate critical threats, they do not solve the main problem of
the country either, namely universal modernization and advancing to
a new level of development. Attempts to overcome a serious crisis
and launch the process of modernization can be compared to trying
to climb out of a deep well. Neither the state, nor business nor
civil society can climb out on its own. The three forces will only
be able to move upward if they realize that they must pool their
efforts to transform the country, keeping in mind that they should
not try to climb over each other, or they will fall  back down
into the well.


The
programs of Russian political parties do not differ much from each
other, specially in election years. All parties recognize the
existing problems and difficulties and promise to solve them, not
saying a word though about the timeframes, the costs of reforms or
how compatible the different goals are. They almost never analyze
issues pertaining to the establishment of social coalitions that
could support potentially painful reforms and do not mention the
need for accord among various social forces. In fact, their
programs imply different goals and different methods and
instruments for achieving them. Political parties oversimplify the
tasks facing the country and focus in their programs on the
public’s well-being, which sounds noble but is not nearly enough.
The emphasis on the redistribution processes might bring about
rent-seeking attitudes, a waste of resources, and attempts to
please everyone and miss out on the chance to modernize the
country.