Putin’s View of Russian State Why He Won’t Aid People and Small Business and Why His Country Won’t Recover as Fast as Others, Inozemtsev Says

Paul Goble

            Staunton, April 8 – Moscow has responded very differently to the current economic crisis than its Western counterparts because Vladimir Putin’s conception of the nature of the Russian state means the he sees little value in aiding the population or small businesses but rather seeks to shore up state industry giants and building reserves, Vladisalv Inozemtsev says.

            But that approach not only will mean that the Russian economy will suffer more in the immediate future than will Western ones but also and more importantly it means that the Russian economy will find it far harder to climb out of the deepening recession it finds itself in, far harder indeed than it did after 2008 (theins.ru/opinions/212280).

            The Russian economist says that Moscow is behaving so differently in response to this crisis because of three views that Putin and his regime have, views that rest on Russian realities as they have emerged under the Putin regime but that are fundamentally at odds with the country’s interests.

            First of all, “Putin’s Russia has taken shape as a country whose well-being is based on resource wealth.” Oil and gas produced 63.3 percent of the country’s foreign earnings last year and supported “more than 40 percent” of the federal subject. But at the same time, only 3.6 percent of Russian workers are employed in this sector.

            Most of the rest work for the government or for firms dependent on the government, Inozemtsev continues. And “in this situation, ‘the government’ not without reason views its slaves as completely dependent people not having the right of a voice … but even the right to receive from the powers something more than the powers want to give.”

            “In the Kremlin’s opinion, Russians do not create the wealth of the state; rather they make use of it. And thus between them and the powers, the relationship is one of dependence rather than partnership. This is the fundamental moment which explains why in Russia today, the state does not intend to recognize its responsibility for what is happening.”

            Second, Inozemtsev continues, Putin’s regime isn’t ready to borrow in order to help the population unlike it must be noted the Yeltsin government of the wild 1990s. Putin’s elite, which “views the country as its own property, has ceased to focus on the real needs” of the population and instead has focused on taking care of the state narrowly defined.

            Not only have its members massively stolen from the people, but they have arranged things so that the Russian government has run a surplus in 13 of the 20 state budgets since Putin came to power.  That has allowed the regime to build enormous reserve funds, but the Kremlin doesn’t want to use them except for its own projects.

            It is critical to remember, the economist says, that “reserves unlike borrowing are finite, and each trillion spent brings closer the moment when this account is empty.” States can almost always borrow, but if they have reserves, these should be spent first especially in times of crisis – but that isn’t Putin’s view and he won’t borrow either.

            As a result, “neither Russians nor domestic business has any right to expect support of the size that Europeans or Americans are receiving.” And there is another reason for the distinction between Moscow and the West that helps explain this: Western leaders know they can always shift responsibility for debt onto their successors. Putin has no such confidence.

            And third, there is a fundamental divide between what Western governments see as economically rational and what Putin does. “The liberal economic model is based on the understanding of the leading role of the individual in the creation of wealth. His actions as producer and consumer promote economic growth.”

            That means that “the economy grows from bottom to top.” It is small business that provides most of the employment and much of the innovation in Western economies.

            The Russian model is different from the outset, Inozemtsev continues. For the Kremlin, the most important parts of the economy are the giant firms and especially the giant state-owned firms.  It is always making lists of “’system-forming companies’” rather than worrying about any others.

            “We have already seen that in2008-2009, the Western model showed its superiority,” the economist concludes. “The economic decline in Russia turned out to be the deepest of all the countries of the G-20.” In this crisis, “the contrast could turn out to be even more significant” given the growing role of the Putin state and the declining income from oil and gas.

            If that turns out to be so, Russia will fall further and further behind unless and until it can break with the Putin system and its “bindings” that are holding the country back.