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Sunday, March 4, 2012

Vlad the Stabilizer, Tsar of the Russias.

Demography, exporting brains, and the Middle Class. Putin's great challenges.

by StFerdIII


In 2006 Tsar Vlad said,

Russia needs a strong state power and must have it. But I am not calling for totalitarianism.’

Indeed. Just call it Putinism. Statism married to Kremlin Corporatism.

Why Putin? With all mafia regimes state ownership and corrupt markets only limit Russia’s potential. But facts are facts. The GDP of Russia is now quadruple that of the level of 1993 or about $1.9 Trillion – 80% bigger than Canada's. Indeed this remarkable accretion in GDP is a magnificent feat, and is far superior to the economic development of China during the same period. GDP per-capita is about $16.000 per person. This is a 7 fold increase since 1993 – a staggering increase.

Economic growth is the key to Putinism. GDP is growing at 5-7 % per annum and inflation runs at about 9% p.a., though this high rate is offset by income growth per worker, of $900 per annum. Unemployment is 1/3 of real Western European levels or 7%. In 1993 a middle-class did not exist, now about 20 per cent of Russians are demonstrably middle-class. In essence given current economic trends by 2020 50 % of Russians will be in the middle class versus zero percent circa 1990. The economic gains are not marginal, and no one in 1993 would have been brave enough to forecast a Russia with an economy almost 2 times the size of Canada's, and a per capita income of $16.000 some 20 years later.

Simply put, most Russians feel richer, more secure, and happy. Add economic growth to the Russian nationalist rhetoric issued by Putin, and the Kremlin controlled media, and you have a society in which most voters – while not 'content' – prefer to let the current regime further develop the Motherland and restore pride and morale, rather than trust to new faces that might derail the project of Russian renewal. Never underestimate Russian pride, or the view of Russians as a special nation.

Further, the Chechen issue is quiet. Russian tennis stars dominate the sport. Even the national hockey team is competitive again. NATO had its missile bases chased out of Eastern Europe. The Ukraine is run by a Kremlin puppet, Yanukovich. It appears that Putin's supporters have plenty of evidence to cite as to why Russians should venerate their dear Tsar.

The Dark Side

The Russian political-economy is of course Oriental and incredibly corrupt. It has always faced figuratively and theologically, towards the east. The ideology and essence of Russia can be found between the invasions of the 'Rus' or Varangian Vikings in the 9th century; and the eradication and domination of Russian civil society by the Mongols in the 13th. One does not easily escape one's history. This is true for national units as much as it is for individuals. Great man rule was an early fact of the first Kyivian Rus' empire. It was a necessary antidote to first combat and then overthrow Mongol-Tartar rule. It became institutionalized during the reigns of Peter and Catherine. Putin is simply, if improbably, just another Tsar. Even the Russian church is now in line, stepping in rhythm to the beat of the 'new' [read 18th century] Russia.

Dancing Bears

Putin is immensely popular. Medvedev was simply a puppet. Master Putin will be around for 12 more years one would expect. His successor will be hand-picked. The King handing off to the Prince. For anyone expecting change, you won't find it in Russia. 4 years ago it seemed so obvious to make the following statement:

Putin and the KGB have now have their trained dancing bear, Mr Medvedev, and the Russian people have been duped or forced, to accept him. Not even the dancing bear himself really believes that he is in charge. It will be Putin, the KGB and Gazprom, the state owned energy colossus which will continue to run Russia. Little has changed since the days of Peter the Great. Mafia cliques and secret police manage the world's 7th largest economy. At least Medvedev's name in English – bear – is suitable. Russians even under Peter the Great were and are very fond of dancing bears.    

Dancing Bears all jigging to the tune of the Kremlin. Kremlin controlled oil and gas revenues flood the state budget. All major firms and concerns are managed by the Kremlin. Corporate Fascism, so emblematic of the Mussolini-Hitler era, is alive and well especially in energy, media and telecoms. Even so-called private firms understand that what the Kremlin wants it usually gets and that annoying the state is a quick way to either losing your assets – or your life. A functioning private economy in Russia in the major industrial sectors is not a reality. Whether owned by the state or not, the key areas of economic life are controlled and managed by the Kremlin and politics and corruption trump transparency and price signals. This has to limit Russia's individual and collective economic potential.

Will Russia ever change?

It is fairly clear that change in Russia will not happen until political reform is initiated and this will only happen when Russia creates a genuine middle class. This will not occur until about 2020. The vast majority of urbanized Russians live in housing that would be condemned in most Western cities. The average salary for a lucky worker in Moscow might about $800-1200 US per month and families shack up together in small, fetid apartments to allow economies. Infrastructure development in most areas vital to economic and job creationism is lacking. Improvements to health care and social welfare are quite noticeable but still somewhat unreliable and in general, not enough for most of the population.

Corruption still runs amok. Education certificates, driver’s licenses, and official papers of all varieties are regularly ‘bought’. Due processes are not followed; an independent legal system is a dream; state-owned media blare nationalist pulp for the consuming masses; Communism is widely lamented as the 'great era of power and a better life'; and babies are not conceived. Russian women are leaving the country en masse, and those that remain have less than 2 babies each – far below the 2.1 replacement level. 

Demography, a rising middle class and higher aspirations and expectations might force some changes in the Kremlin and within the Putinist theology. But it is highly doubtful. Young middle class voters want 'in' on the system of politics and governance of course. But all elites are loathe to give up their privileges. Entrepreneurs want to be left alone. As long as they generate jobs and don't enter 'key' markets they will be. The internet might well change and challenge the endless statism of the Kremlin controlled media. Or maybe it will be used as it is in Canada, the UK and even the US, to impose more governmental power over its citizens. The real challenge is for Russia to keep its talent and not export its women, capital and brains abroad. The threat of an exodus might engender some change and minor concessions by the regime to the middle class. Yet one should not underestimate this central issue. Demography, keeping talent and buying off the middle class are the real challenges the Putinistas will face in the coming 10 years. Stability is one thing. Ossified corruption and degradation another.