Each January, Mau’s Academy of the National Economy and State Administration organizes the giant Gaidar Forum in memory of Russia’s great reformer. For three days, thousands of Russia’s social scientists and hundreds of foreigners gather to discuss economic policy. Moscow’s economics professors hope to hear something radical and liberal, but they show no interest in challenging the ruling elite. The ministers on the panels are relaxed and open, appearing highly competent, but carefully avoiding stark pronouncements. Russia’s large economic establishment is too well off to want to rock the boat, and the conservative elite is sufficiently confident to allow a reasonably open economic discussion.
At the meeting in January 2017, which I attended, the main event was Kudrin’s speech. He called for reining in law enforcement agencies, judicial reform, releasing private initiatives, and checking state companies, but quietly and briefly. He did not even mention democracy.28
Kudrin and Yevsei Gurvich offered the best presentation of the liberal camp’s agenda in an article published in 2014. Having taken a victory lap around macroeconomic stability, they now focused on productivity, which stopped growing after 2009, and they saw no reason for anything but stagnation unless Russia adopted a new growth model. “The problems of our economy are of a chronic character and cannot be resolved with singular measures, such as a softening of the monetary or budget policy. The roots of these problems lie in the weakness of the market, which have been caused by the dominance of state and quasi-state companies, which have distorted objectives . . . and informal relations with the state.” They recommended “a radical reduction of the burden of state regulation and defense of property rights.”29
The expansion of the state and quasi-state sector has emasculated the market forces, and state enterprise managers act like government officials rather than trying to achieve profits. Kudrin and Gurvich called for more competition, stronger property rights, less state regulation, and harder budget constraints to provoke creative destruction. The larger the share of state employment in a region is, the worse its economic performance. Most of all, they emphasized the poor defense of property rights and the excessive regulatory burden on business.
Although their critique was hard in substance, they did not criticize anyone specifically for this unfortunate development. With great political caution, they merely recommended that the government implement numerous existing laws and decrees, such as abandoned privatization plans, reduce political and noncommercial commands to state companies, restore local self-government, establish a stronger antimonopoly policy, and publicly audit state companies. They concluded that it is necessary “to radically weaken the burden of state regulation and defend property rights.”30
Kudrin has always favored judicial reform and decriminalization of the legal system, and the eminent scholar Vadim Volkov is responsible for his judicial reform proposals. Kudrin has also opposed increased military expenditures and has desired the restoration of good relations with the West. In his public posture, however, he has become more cautious over time.31
A typical example of how Kudrin’s technocratic Center for Strategic Research operates is a two-hundred-page report of December 2016 evaluating the fulfillment of the official 2008 program known as Strategy 2020 and Putin’s eleven decrees of May 2012. The study concludes that only 30 percent of Strategy 2020 has been accomplished, in comparison with 39 percent of the far larger and more ambitious Gref program, or Strategy 2010. This bureaucratic product resulted in one article in the business newspaper Vedomosti, but little else. It refrained from the obvious conclusion that Putin is not interested in reforms. Even as economic problems have increased, official political debate has become more cautious.32
During a trip to Moscow in October 2017, I met Kudrin and several of his collaborators. Although they were all positive on their program and their freedom to elaborate it, the prospects did not sound very plausible. Kudrin had forty people working full-time on his program and five hundred people altogether engaged in various working groups. To this outsider, the program seemed more like official therapy to keep reformers away from real opposition than any serious effort toward reform.
In 2016, the Stolypin Club was formed as a counterweight to Kudrin and his Center for Strategic Research. The club was named for Petr Stolypin, the authoritarian tsarist reformer and prime minister from 1906 until his assassination in Kiev in 1911. Its leader was Boris Titov, the president’s business ombudsman and cochairman of the association for small enterprises Delovaya Rossiya, which the Kremlin had promoted to take the wind out of more independent and liberal business associations.
The Presidium of the Stolypin Club has twenty-one members, all men. They are slightly younger than Kudrin’s group, and several are businessmen. They are allowed to participate in public television debates. Several are token liberals, and no outright communist has been included, though the club’s most prominent member is Glaziev. The Stolypin Club has taken a big step toward mainstream economics. It calls for a looser monetary policy, but only moderately so, advocating “quantitative easing” and using modern economic discourse. Members present themselves as “market-oriented realists and market-oriented pragmatists.”33
At Putin’s request, the Stolypin Club’s economic institute elaborated a growth strategy for Russia to 2025. Its analysis of Russia’s economic problems is confusingly similar to that of Kudrin’s center. The club regrets that market competition and the role of the private sector have dwindled and that investment projects in most sectors are unprofitable. It points out that in purchasing power parities, Russia ranks fifty-second in the world in GDP per capita. The number of jobs fell by 6.8 million from 2011 to 2015. Western sanctions have restricted Russia’s access to capital, and the country suffers from technological backwardness. Entrepreneurs and qualified specialists have emigrated en masse. The quality of institutions and governance is poor.34
Yet, with astounding optimism, the Stolypin Club expects Russia’s GDP growth to rise to 5–6 percent a year by 2025 by diversifying the economy and developing an innovative business environment. These grand forecasts have not been substantiated by credible policy proposals. The Stolypin Club claims to propose an alternative model of development, stimulating real competition, the growth of a multitude of private enterprises, an inflow of investment, accelerated industrial modernization, and effective social policy. It wants to stimulate investment, consumer demand, and import substitution through a low exchange rate. It favors entrepreneurial initiative, competition between all forms of property, and more private production without stating how. For the rest, the Stolypin Club offers no concrete policy proposals but moves on to “determine a group of first-priority growth projects,” as if it has a sound methodology for doing so. The club also calls for a “cardinal reduction of the administrative pressure on business, judicial reform, and reform of the criminal economic legislation.” In short, the Stolypin Club wants all good and nothing bad, but it cannot say exactly how.35
Both groups agree on the need for a larger private sector, but neither has a credible prescription for this outcome. Kudrin has called for privatization of the entire oil sector within seven to eight years, whereas the Stolypin Club hopes for the emergence of new private enterprises.36
Corruption and democracy are the key issues, but both of these insider groups leave such battles to others. Sometimes Kudrin discreetly expresses his preference for freedom and democracy, while the Stolypin Club ignores these themes. Both groups call for judicial reform and the reform of law enforcement, but they downplay the details. The Center for Strategic Research has serious proposals on how to fight corruption, but it does not emphasize them. Titov responded to Kudrin’s demands for institutional reforms that “maybe somewhere, some day, when the conditions are right, the ‘institutions’ will improve, but here and now, everyone will just keep on stealing and taking the riches abroad.” Instead, Titov called for a partial rollback of the flexible exchange rate, a looser monetary policy, and subsi
dized corporate loans.37
In one area, they agree, namely on the need for a streamlining and simplification of administrative controls of enterprises, and here Russia has been successful. In his decree on economic policy of May 7, 2012, Putin called for an improvement of “Russia’s ranking in the World Bank’s ease of doing business index from 120th place in 2011 to 50th place in 2015 and 20th place in 2018.” Russia has performed quite well in this regard, rising to the rank of 36 in 2015. This was a measurable variable that did not intrude on the interests of Putin or his cronies but in fact facilitated their enrichment.38
The range of discussion has narrowed. Titov’s moderate calls for quantitative easing have replaced Glaziev’s massive monetary expansion, hard-core nationalism, and statism, while the liberals have become more cautious in their advocacy of democracy and the freedom of political discourse. The murder of Boris Nemtsov on February 27, 2015, taught everyone the danger of criticizing Putin outright. His political preference for the Stolypin Club was made obvious when Titov and his Party of Growth were allowed to participate in the Duma elections in September 2016; Kudrin scarcely dared to ask for such a favor.
Putin has gone through the motions of opening up a public debate, but this discussion has been of little interest to the public. The differences are too small, and the caution is too great. Nobody has stood up against the corruption and for democracy, the two fundamental concerns. This debate has not appeared serious. Presumably Putin wished to render the government policy more credible. He might also have wanted to keep an updated reform program and reform team ready in case the economic situation turned really bad.
Corruption has been a constant concern, but its nature has changed. In the early 1990s, Russia suffered from what Andrei Shleifer and Robert Vishny call disorganized corruption. Anyone anywhere could demand bribes but did not necessarily deliver the services the bribe payer had purchased.39
Over time, the number of bribes has declined while the size of the average bribe has increased and the total volume of bribes has grown, as Transparency International and Georgy Satarov’s INDEM Foundation have shown in multiple surveys. Corruption has become concentrated among ever fewer people at the top of the Russian society.40
Although surveys have been many and are publicly available, for a surprisingly long time corruption did not catch on as a political theme. No major political figures focused on corruption as their main political plank. The Russian elite is so permeated with corruption that few want to throw stones because they are painfully aware of living in glass houses. Putin has responded by accusing opposition activists, such as Khodorkovsky and former prime minister Mikhail Kasyanov, of corruption. In addition, honest people have corrupt friends, whom they do not wish to embarrass. Nor do they want to irritate their funders. Many liberals, moreover, consider it populist to criticize corruption, fearing that it may result in arrests of the innocent and Soviet-style repression. Last, many anticorruption activists and journalists have been murdered, showing the dangers of public criticism of corruption.
In 2008, the booklet Putin and Gazprom, by the opposition activists Boris Nemtsov and Vladimir Milov, broke the mold. It showed in considerable detail how Putin and his friends enriched themselves. It attained an extraordinary circulation. Nemtsov told me that it was downloaded 1.5 million times. Nemtsov and Milov followed up with other devastating booklets about corruption in Putin’s inner circle. They led street protests, but society was not ready, and in February 2015, Nemtsov was brazenly murdered outside the Kremlin wall.41
Around 2010, a new opposition star emerged, the anticorruption lawyer and blogger Alexei Navalny. He made corruption the main argument against Putin and his regime. Navalny bought shares in state companies to receive information, targeting their corrupt practices. His big breakthrough was the revelation that the management of Transneft, the state oil pipeline company, had stolen $4 billion while building the Eastern Siberia–Pacific Ocean oil pipeline. Transneft’s former CEO Semen Vainshtok, who had been sacked and emigrated to Israel, was blamed. Putin’s friend from the KGB in Dresden Nikolai Tokarev took over, but the case was never brought to court.42
During the popular protests against election fraud from November 2011 to May 2012, Navalny surged as Russia’s foremost opposition leader and was arrested repeatedly. He called the ruling United Russia party the “Party of Swindlers and Thieves,” a label that stuck in the public conscience. In September 2013, Navalny cemented his position as opposition leader by gathering an official vote count of 27 percent in the mayoral election in Moscow despite a media blockade and massive harassment.
To eliminate Navalny, the Russian authorities convicted him and his brother in December 2014 of money laundering and defrauding their business partners. Navalny received a suspended sentence of three and a half years, while his brother, Oleg, got a real prison sentence of the same length. This was a pure kangaroo court. The brothers Navalny complained to the European Court of Human Rights (ECHR) and won against the Russian Federation in October 2017. The court declared the verdict against the Navalny brothers “arbitrary and manifestly unreasonable” and ordered the Russian government to pay them compensation, which the government did. Even so, the government kept Oleg Navalny in prison for his full sentence of three and a half years.43
In another case, a Russian court found Navalny guilty of embezzlement in a timber firm called Kirovles and gave him a five-year suspended jail sentence. The ECHR had already rejected that verdict and ordered a retrial. Navalny considered that the aim of this trial was to block his participation in the presidential election in March 2018.44
After the authorities quelled the popular unrest, Navalny continued to focus on corruption. He founded a small nongovernmental organization, the Anti-Corruption Foundation (Fond bor’by s korruptsiei, FBK), which has developed great skill with social media. Navalny produces weekly programs on Google-owned YouTube, exposing high-level corruption. He concludes each program with the refrain: “Here we tell the truth.”45
Two of Navalny’s investigative documentaries have attracted extraordinary popular attention. In December 2015, Navalny aired the film Chaika, about Russia’s prosecutor general Yuri Chaika’s two sons, whom he revealed as filthy-rich organized criminals, the older son even being a billionaire. No fewer than seven million people have viewed this film on YouTube, and the authorities did nothing to block it. Chaika himself dismissed the film as garbage. Curiously, nothing happened either to him or to Navalny. In his annual big press conference on December 17, 2015, Putin responded lamely to a question about Chaika’s sons that if they had done something wrong, the relevant authorities would investigate them.46
In December 2016, the United States adopted the Global Magnitsky Human Rights Accountability Act. It envisioned sanctions for people all over the world responsible for “extrajudicial killings, torture, or other gross violations of internationally recognized human rights” or complicit in “acts of significant corruption.” The elder son, Artem Chaika, was one of the first people to be sanctioned on the Global Magnitsky list.47
On March 2, 2017, Navalny launched an even more outstanding documentary, “Do Not Call Him Dimon” (diminutive for Dmitry) about the alleged corruption of Prime Minister Dmitri Medvedev. It suggests that the seemingly powerless and diminutive prime minister is a major crook. Twenty-five million have seen this video on YouTube, as have a few million on the Russian social network Odnoklassniki. With meticulous documentation, Navalny shows six estates, two vineyards (one in Tuscany), and two yachts, all belonging to Medvedev, through nongovernmental organizations set up for the sole purpose of benefiting Medvedev and his wife. These NGOs have boards and managers who are friends of Medvedev.48
Navalny states that Medvedev’s fortune has been financed through $1.2 billion of bribes, with the two biggest contributors being the Russian multibillionaires Alisher Usmanov and Leonid Mikhelson. Usmanov made his fortune by privatizing Gazprom’s steelworks in the 1990s, whereas Mikhelson is the leading pa
rtner with Timchenko in Novatek and has also made his fortune on Gazprom. Both are among the wealthiest men in Russia.
The official resistance against the Navalny film about Medvedev was surprisingly timid. Not all too convincingly, Medvedev defended himself that Navalny was “a sentenced criminal” who had “political ambitions.” He asked: “Who benefits from this?” After one month, Usmanov started attacking Navalny on the Internet quite viciously but not very convincingly. He sued Navalny in a Moscow court for libel, which he of course won.49
On March 26, 2017, Navalny called for national protests against corruption and attracted an estimated sixty thousand protesters, many of them teenagers, in more than eighty cities all over Russia. The main slogans targeted Medvedev, but a second prominent slogan was “Putin is a thief” (Putin vor). Navalny repeated these protests on an even larger scale in almost two hundred cities on June 12. These protests were the largest since May 2012, and the size of the March protest came as a general surprise.
Navalny is currently the most interesting political leader in Russia, although he barely registers in the opinion polls. After a political trial-and-error process, he has concentrated on top-level corruption, pursuing investigative reporting at its best. He hangs out one top culprit after another in well-documented films. He uses drones to film the properties of the affluent and retrieves documents from official registers, showing the nature and scale of Russia’s corruption, though he does not discuss the cure. Navalny uses crowdsourcing, avoiding funding from rich Russian businessmen or foreigners. He works skillfully with social media, targeting the young and the provinces. Navalny long avoided attacking Putin himself for larceny, but now he also scourges Putin for major corruption. Navalny has been arrested many times, seriously harassed, injured, and sentenced to prison, but he has proven his courage. Given the political situation in Russia, it is remarkable that he is alive and can operate there.
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