Putin’s Economic Plans Will Lead to Russia Falling Ever Further Behind the West, Shelin Says

Paul Goble

            Staunton, October 14 – Behind upbeat verbiage that has changed little over his time in office, Vladimir Putin appears to have finally settled on an economic plan that represents no threat to his power but that will generate such slow growth that Russia will fall ever further behind Western countries, according to Sergey Shelin.

            Putin’s “new economic therapy” for the country, the Rosbalt commentator says, is one that the Kremlin leader at least partially believes in and is based on four principles (rosbalt.ru/blogs/2017/10/13/1652956.html):

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·         The installation in all positions of technocrats, “that is, of people absolutely obedient and with a horror of making any independent decisions. Their task is to fulfill orders from the highest which by definition will be wise.”

·         The building up of “the power of the control and supervisory machine. Each person, be he an official, a business person of any rank, or an ordinary citizen must constantly be supervised from all sides and be in a panic-like fear of doing something ‘shadowy.’”

·         “The completion of the process of bringing state income into line with expenditures … while preserving but no longer increasing the enormous amount spend on the force structures and cutting everything else from pensions to education, medicine and road construction.”

·         The backing of those parts of the economy doing relatively well with state funds and especially on those involved in “beautifully composed projects,” likely of the gigantist type.

There is no place in this system for entrepreneurialism, but it will ensure low inflation, a balanced budget, state control, and the transparency Putin so highly values in others.  It won’t attract much investment or generate much creativity among workers. But that isn’t needed, Shelin says, if all one wants is modest growth that is no threat to the existing political system.

Moreover, it will give some growth, albeit relatively little, but some. This year, as this system has been put in place, it generated about one percent growth in GDP. (The second percent that the government talks about reflects not reality but the constant efforts of Rosstat and the government to be upbeat, Shelin says.)

But one percent is half as much as other countries are achieving, and that means with each passing year, Russia under Putin’s system will fall further and further behind.  Eventually, there will be no possibility of catching up without changing the system as a whole, the Rosbalt commentator suggests.

Unfortunately, there are reasons to think that even this low growth rate will be hard to sustain if the Putin system remains in place. The wrong people are likely to get government money, the continuing centralization of the system will make larger mistakes more common, and the system will lead to the further degradation of management in many places.

Shelin says that any careful observer has already noted that there has been a decline in the level of competence of workers and a weakening of management as people by instinct “return to Soviet standards, something “inevitable in institutions” which lack the opportunity to make any decisions for themselves.

But there likely will be some small amount of growth each year, the Moscow commentator says, something the regime can point to in the hope of saving itself because it will inevitably present any increase in GDP as its work and any problems as the result of the hostility of the outside world.