Tuesday, December 24, 2013

Window on Eurasia: Russia Likely to Be ‘Poor But Stable’ for Some Time to Come, Yasin Says

Paul Goble

            Staunton, December 24 – Russia is likely to be poor but stable for some time, the result of an elite that it more concerned about retaining power than avoiding stagnation and a population that is willing to defer to the authorities however arbitrary then may be, according to Yevgeny Yasin, a leading Moscow economist.

            On Forbes.ru yesterday, Yasin, who was Yeltsin’s economics minister and now works at the Higher School of Economics, said that he believes Russian economic growth will be even lower than officials now a concede and amount to only two percent a year (forbes.ru/mneniya-column/makroekonomika/249011-plokhaya-stabilnost-kak-rossiya-doshla-do-stagnatsii).

            And what makes this low rate especially troubling is that it cannot be changed by economic measures alone. Political changes are needed as well, and the current Russian political regime is so arranged that any such changes are unlikely because there are real fears that they could make the situation worse.

            In Russia today, Yasin says, there has evolved “a special political regime and a legal system unique to it” that accepts “the arbitrariness of the authorities” as something normal even as “citizens themselves are not very inclined to observe the laws.”

            One can call this regime a “’defective democracy,’” a system in which when faced with the choice between “political stability and the creation of conditions for high rates of growth, the authorities will always choose the stability suitable for themselves.” But that severely limits the country’s possibilities.

            Neither gigantist mega-projects not leftist populism will work, Yasin argues, at least not for very long.  The only way out of Russia’s current economic problems is the development of the market by eliminating existing barriers to investment and first of overcoming the “low level of trust characteristic for society as a whole.”

            Sociological surveys show, he continues, that “trust ‘horizontally’ among citizens is much higher than trust ‘vertically’ to such institutions as the parliament, police and church.”  For the economy, that is very much a bad thing because it makes businessmen more reluctant to invest and officials unwilling to address structural issues.

            It is understandable how Russia reached this point. In the 1990s, some businesses were prepared to act boldly and independently of the bureaucracy, but after the rise of Vladimir Putin, the bureaucracy won and “business lost a sense of trust” because it “understands that force methods can always be applied to it.” That does not promote economic development.

            A similar situation has existed in other countries, Yasin says, and he points to the example of Brazil during the 1970s and 1980s when a military hunta came to power allied with particular business interests. Other business players seeing this had little incentive to invest. And the economy only took off after the return of competitive elections.

            Russia’s particular problem is that “the longer the current arrangements continue, the more complicated it will be to return to a policy of reform. Today is not 2001 when there as a much higher level of trust in society and a certainty that ‘these guys’ will lead the reforms that had begun to the end.” Now, any change could make things worse at least in the short term.

            In short, any “perestroika” of the Russian political and economic regime “will be a quite risky operation which could lead to a still greater slowing of growth and even to economic collapse.”  The only way to avoid that is to avoid radical shits and to approach the problems in a step by step manner, with society and business putting pressure on the regime to change.

            Such pressure must be combined with a “demonstration of the possibility of cooperation,” Yasin says. “A constructive response by the authorities to such pressure would be the best scenario.” But, the economist says, he is “not entirely certain in the reality” of such a response.

          The authorities at present are not confronted by “strong external stimuli for changes.”  Even if the economy deteriorates, that alone will not “force people to go into the streets.”  They didn’t do so in the 1990s when social convulsions were greater. And consequently, it is “possible” that Russians face “years of stability but a poor stability” without development.

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