The leading nationalists have varied. Vladimir Zhirinovsky emerged as the nationalist leader in the Duma elections in December 1993, but soon he turned out to be a political jester, happy to support the government for suitable returns. In the early 2000s, the hard-core nationalist Dmitri Rogozin formed the nationalist party Motherland (Rodina). From 2011 until 2018, he was deputy prime minister for the military-industrial complex, and he is now CEO of Roscosmos, the State Corporation for Space Activities.
The communists and nationalists had only one credible economic policy advocate, Sergei Glaziev, who paradoxically gained his authority as a “young reformer” as first deputy minister for external economic relations in November 1991 at age thirty-one. However, he was more young than reformist. In December 1992, Glaziev advanced to become minister for external economic relations, but he resigned in September 1993 in protest against Yeltsin’s dissolution of the predemocratic parliament. Initially, he joined the communists and became their chief economist, but soon he jumped ship to the nationalists, and, like Rogozin, he eventually joined Putin.3
Kudrin and Glaziev stand out as the most prominent spokesmen of the liberals and the Russian statists, respectively. There are many others, but for the sake of focus and relevance, I shall concentrate on these two men. Kudrin’s position largely coincides with the Western economic mainstream, though he is more conservative on fiscal policy. He has many eloquent companions. Glaziev is more exotic, representing statist and nationalist positions. He is a prolific author, and his ideological outlook has changed little over time.4
Putin incorporated the strife between liberalism and statism in his administration by appointing Sergei Glaziev as his adviser (sovetnik) in July 2012, responsible for economic affairs in Eurasia. At the same time, Glaziev became a member of the board of the Central Bank of Russia.5
In 2004, Glaziev ran as an independent nationalist presidential candidate against Putin, coming in third, with 4.1 percent of the votes. In his campaign, he attacked Putin sharply for being a liberal. Afterward, he gradually moved toward Putin, though ideologically it was Putin who increasingly adopted Glaziev’s views. Starting in 2010, Glaziev was deputy general secretary of the Eurasian Economic Commission.6
As Putin’s official adviser, Glaziev has remained a free-wheeling radical. He advocates state capitalism, protectionism, and loose monetary and fiscal policy. In January 2013, he presented a big economic program written under the auspices of the Russian Academy of Sciences. He argued that monetary policy had constrained the supply of money and financed commercial banks’ international speculation rather than domestic production. Russia had become too dependent on international credits. Glaziev favored cheap credits for business and support for small and medium-sized businesses with subsidized, long-term credits. Inflation, he argued, should be controlled through a more effective antimonopoly policy, and not through tight monetary policy.7
Glaziev complained that “our tax and budget system holds back economic development, although right now it is necessary to pour enormous resources into the modernization of infrastructure and the development of new technologies.” In particular, Glaziev opposed the budget rule transferring a share of oil and gas revenues to the Reserve Fund, one of the two national wealth funds. He wanted to abolish the value-added tax and introduce a progressive income tax as well as a progressive ecological tax, and he wished to stimulate investment and research and development with generous depreciation rules.8
Under his leadership, the Institute of Economic Forecasting of the Russian Academy of Sciences, one of the Soviet-oriented institutes, formulated a development strategy to achieve and exceed Putin’s goals with an annual GDP growth rate of 8 percent, industrial production growth rate of 10 percent, fixed investment growing annually by 15 percent, and research and development by 20 percent.9
Glaziev condemns the structural reforms of the 1990s as a “catastrophe.” He attacks privatization as harmful, complaining about the criminalization of property relations, the destruction of Russia’s scientific and technical potential, and the impoverishment of the people. The privatization hampered the formation of large, competitive companies, while it benefited foreign investors.10
His salient idea is that a militarization of the economy and a stronger role of the state will lead to technological leap-frogging and higher economic growth. He claims that Ronald Reagan’s Strategic Defense Initiative catapulted the information technology revolution in the United States. Increased military expenditures would stimulate the demand for new technological products. He calls for more nationalization of large enterprises as well as state planning: “To achieve the necessary investments and innovation activity state participation in the development of the economy must sharply expand both in volume and quality.” He favors industrial policy: “It would make sense to work out a five-year program for the modernization of the economy.”11
This sounds like the Soviet past, which probably explains its popularity among old Russian academics. Yet Glaziev carefully avoids Soviet references, and his language is modern and technological, without socialist or Marxist terms. His militarized state capitalism rings like President Putin’s actual policy. He emphasizes that Putin salvaged Russian corporations from bankruptcy with large credits during the global financial crisis and that only the state can provide long-term financing for investment today.12
As Putin’s main prophet of Eurasian integration, Glaziev rules supreme on this favorite topic of Putin’s. Glaziev cites fantastic and implausible numbers about the positive effects of the Eurasian Economic Union, which he claims will add up to $900 billion to the GDP of the three member countries Russia, Kazakhstan, and Belarus. Born in Ukrainian Zaporizhe, Glaziev played a leading role in designing the Russian military aggression against Ukraine and has been sanctioned by both the United States and the European Union for that reason. Surprisingly, he mentions the World Trade Organization positively, although his industrial policy involves considerable protectionism. He saves his scorn for the International Monetary Fund and the Washington Consensus.13
Putin has repeatedly cited Glaziev, especially on the positive economic effects of the Eurasian Economic Union, but as a skillful politician, Putin has a habit of appealing to contradictory constituencies. During a meeting with his Economic Council in 2012 just before Glaziev’s appointment as his adviser, Putin mentioned the liberal former minister of economy Yevgeny Yasin and Glaziev as counterpoints, suggesting that they should work together.14
In late 2012 and early 2013, Moscow’s large liberal economic establishment had a field day attacking Glaziev during the battle over the chairmanship of the Central Bank. Leading critiques were Yasin, Kudrin, and Vladimir Mau, Gaidar’s former adviser and president of the Russian Academy of the National Economy and State Administration.
The liberals agreed with Glaziev on the poor state of the economy and shared many of his concerns: decelerating economic growth, deteriorating demographics, technological backwardness, low labor productivity, and the absence of structural modernization. The outflow of capital also disturbed them. However, they sought the opposite solution, a conservative fiscal and monetary policy and more market reforms, especially in the social sphere.15
The liberal economists knew they were on the safest ground on macroeconomics, with Kudrin as Russia’s leading fiscal conservative. Yasin put it succinctly: “Glaziev’s option is absolutely unacceptable: He proposes an increase of money supply in excess of demand, which inevitably raises inflation, excludes private investments and leads to reliance on state investments, which are considerably less efficient.” Kudrin recommended that a substantial share of the oil and gas rents continue to be set aside in a stabilization fund, which was anathema to Glaziev. Kudrin also insisted on controlling inflation with a flexible exchange rate, that is, inflation targeting.16
Mau delivered his most stinging attack on Glaziev’s program, though he carefully avoided mentioning him by name. Instead, he attacked the Soviet Union and its backwar
d economy as a deterrent. “In the present Russian situation the main macroeconomic indicators are reminiscent of the situation of the USSR at the end of 1970s and the beginning of the 1980s.” In the late Brezhnev years, the Moscow leadership overestimated the “crisis of capitalism” while underestimating the West’s successful reforms. Now the Kremlin exaggerated the Western crisis and did not realize the significance of Western developments. Russia’s “key problem is poor capacity of the economy to generate innovations and modernization.”17
The old division between backward and progressive industries no longer held true, Mau argued. “In the contemporary world, any industry can be high-tech or outdated,” the technological revolution in energy being a prime example. Economic growth must derive from increased productivity, which requires far more creative destruction. Even Mau, who favored privatization, said little about it, understanding how unpopular privatization had become.18
Mau and other liberals emphasized the need for real democracy for the sake of economic modernization, again drawing parallels with the Soviet system. “The political system of the USSR was exceedingly rigid, unable to react flexibly to arising new global challenges.” Russia needed “political modernization, meaning qualitatively broadening of political and economic freedoms, which must correspond to contemporary international standards.”19
Mau carefully avoided contradicting Putin or Glaziev on the need for Eurasian economic integration and the Customs Union, but he emphasized the WTO and economic integration with the European Union and the United States. His positive view of the European Union contrasted with Putin’s dismissive attitude.
The disagreement between the liberals and Glaziev was almost total. First of all, the liberals criticized Glaziev’s haphazard macroeconomic policies, arguing that fiscal and monetary stimulus would not generate much growth because Russia no longer had an output gap. Second, they advocated substantial deregulation and opposed state capitalism while remaining understated about the need for privatization. Third, the liberals aspired to international economic integration primarily with the most developed economies rather than the Customs Union. Last, they spoke up for real democracy, though rather softly.
In May 2012, Putin returned as president, and the official mood turned less liberal. Clearly, he had been taken aback by the large-scale public protests against fraud in the December 2011 Duma elections. He accused the US State Department and Secretary of State Hillary Clinton of having instigated the unrest. He claimed that opposition leaders had “heard the signal and with the support of the US state department began active work.” In response, he unleashed repression of the opposition and an anti-American campaign.20
This change of mood influenced economic thinking. Vladimir Yakunin, then CEO of the Russian Railways and one of Putin’s close associates from the KGB in St. Petersburg, remarked on the new official attitude: “The neo-liberal paradigm was exhausted by the 2008 crisis and never recovered.”21
Russia’s liberals feared that Putin would dismiss them and replace them with Glaziev and others of his ilk. Glaziev’s appointment as Putin’s counselor in July 2012 appeared to be a first step. In 2013, the longtime liberal chairman of the Central Bank, Sergei Ignatiev, was set to retire. Glaziev declared himself a candidate in competition with several bankers and liberal economic officials. The Moscow rumor mill reported that Putin wanted Glaziev, but all Putin’s senior economic policy makers united against him. Unexpectedly, Putin selected his close economic aide (pomoshchnik) Elvira Nabiullina, who had been minister of economy. Though Nabiullina had not dealt much with macroeconomics, she was the liberal closest to Putin. As her successor, Putin appointed Andrei Belousov, a statist, and Glaziev was ousted from the Central Bank board.
Even so, both Glaziev and the liberals suspected that the president would adopt Glaziev’s policies. The key issues were fiscal and monetary policies. However, with Nabiullina as Central Bank governor and Kudrin’s former deputy Anton Siluanov as minister of finance, Putin has remained committed to conservative macroeconomic policies.
For the rest, Glaziev won. He praised Putin’s policy of state capitalism, discretionary state intervention, enterprise concentration, and militarization, telling him to proceed even more daringly on that antiliberal road. In doing so, he also appealed to Putin’s power base of state corporations, the armaments industry, and the old Soviet industries. Putin usually refuses to acknowledge shortcomings in Russian structural policies, blaming the West instead. In December 2012, for example, he faulted the eurozone and the bad harvest: “What were the causes of the slowdown this year? . . . The general slowdown in global economic growth and even a recession in the Eurozone, one of the leading global centers. The second reason is our domestic problem, which is primarily crop failure.”22
Only rarely has Putin expressed worries about the slowing growth. In April 2013, he stated: “The Economic Development Ministry has revised its economic growth forecast for 2013 downwards to 2.4 percent, but this is with energy prices still high. Let me bring to your attention that a growth rate of 2.4 percent is lower than the global economy’s growth rate. It’s been a long time since we were last in this situation . . . we need to do everything we can to ensure our economy’s stable development. We need a package of measures to stimulate economic growth.” As the economic growth disappeared, Putin glossed over the bad news.23
In his December 2012 annual address to the Federal Assembly, Putin embraced state capitalism explicitly: “Russia is characterized by a tradition of a strong state.” He adopted Glaziev’s view of the “damned 1990s”: “You know that the anarchy of the 1990s discredited both the market economy and democracy.” He moderated his statement slightly: “Poor government efficiency and corruption are major problems that everyone can see.” From time to time, Putin complains about corruption, but less and less, and his tone has changed. Early on, it was a problem to be resolved. Now he emphasizes that corruption exists everywhere and that Russia is no worse than other countries.24
Putin’s choice of economic policies is firmly set. He favors macroeconomic stability, as proposed by the liberals. He insists on propping up international currency reserves, secured with a current account surplus, thanks to a competitive floating exchange rate. In his view, the budget should be reasonably close to balanced and public debt minimal. These policies aim at securing Russia’s sovereignty. He also desires low inflation and limited unemployment to keep the public satisfied.
For the rest, Putin has opted for statism and protectionism. His code word has become a “strong state,” which implicitly means that state companies are allowed to expand and that the power of the state agencies is more important than the rule of law. In foreign trade policy, his favorite topic is the Eurasian Economic Union, whereas he scarcely mentions the World Trade Organization.
Though they remain in high government positions, the remaining liberals cannot defend democracy, the rule of law, or structural reforms. They have therefore been nicknamed “systemic liberals,” prior liberals who have remained within the system but do little for any liberal cause.
In the spring of 2016, Putin encouraged a new discussion about economic policy. His initial signal was to appoint Kudrin, who had been out of government since the fall of 2011, vice chairman of his Economic Council. Kudrin also became president of the Center for Strategic Research, a think tank, which was formerly called the Gref Center when it prepared his reform program in 2000.
Putin convened a first meeting of the Presidium of the Economic Council on May 25, 2016. His obvious but unstated purpose was to prepare for the presidential elections on March 18, 2018. He proposed “that the Economic Council Presidium serves as the platform for holding a whole series of discussions, including on the transformations that will take place in our social sector, in healthcare, education, and the housing and utilities system, technological modernization of our country’s economy, improving the business climate, and enhancing our state management system.” He encouraged “a broader a
nd more open discussion,” continuing “that the Presidium’s membership includes people with a range of different views. In some cases, they hold diametrically opposed views.” Yet he also told the participants “to put aside as much as possible ideological preferences and not stay locked within particular theoretical constructs and concepts, but to take a pragmatic approach and concentrate on coming up with realistic and objective decisions.”25
Putin returned to the need for higher economic growth. He lamented that if “we do not find new growth sources, we will see GDP growth of around zero. . . . We must simultaneously ensure higher growth rates in the economy and carry out structural reforms to make it more efficient. At the same time, it is very important to preserve macroeconomic stability and not allow the budget deficit to grow and inflation to pick up speed.” He called on the participants to “start with the growth sources for Russia’s economy over the next decade.”26
Whereas Putin mentioned the magical phrase “structural reforms,” photos of the Economic Council meeting that showed Kudrin sitting far down the table clarified that his standing was not great. This looked more like a trial balloon than a policy declaration.
A year later, answering a question about Kudrin’s coming program, Putin said that “the Government is drafting a program too. I have agreed with Prime Minister Dmitry Medvedev that he will present it very soon. We also have other groups working on programs, the Stolypin Club, for example. These are different approaches and often different visions.”27 He could hardly have been more noncommittal, and no program was actually presented. Putin acknowledged that Russia’s economy was likely to stay stagnant. Yet he warned against undesired ideological views, and censorship had tightened. Clearly, he did not want much change, and the sophisticated participants understood that.
Both the Center for Strategic Research and the Stolypin Club have published studies numbering thousands of pages about the details in their proposed reforms. Although the number of pages is intimidating, these studies have attracted little public attention, for good reason. With the publication of his empty program decree in May 2018, Putin made it clear that he did not wish to pursue reform of any kind. Glaziev remained as his adviser for Eurasian affairs, and Kudrin became chair of the not very powerful Auditing Chamber.
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