Russia paralysed by pragmatism

Officially, the Russian government is above politics. While this stance worked well during the boom years, since the financial crisis it has been paralysing government. Reform is urgently needed. But how can these be pushed through without recourse to politics? Russia’s non-political period is drawing to a close, Dmitry Butrin reckons.

Party politics

For a long time, since the end of the 90s, the Russian government has ostentatiously refused to engage in public party politics. But change is now inevitable. A feature which served to reassure foreign investors about the nature of Russian sovereign risk, which used to insure the government against the unexpected has become a key risk factor.

'Deng Xiaoping’s portrait may not hang in the Kremlin or the White House, but those in the know keep on saying: 'the colour of the cat doesn't matter, as long as it catches the mice'.

In Moscow’s White House this year discussion of the country's upcoming economic trajectory seems to have been dogged by problems for precisely this reason: no one involved can be seen to be allied with any particular ideological position or political grouping. Decisions arrived at in a situation like this are bound to be eclectic, which only further complicates matters. The risks attendant on President Putin's ‘pragmatic’ agenda are growing.

As far back as 2005, 'United Russia' wanted to know why Finance Minister Aleksey Kudrin refused to join the party, although he was carrying out the political decisions of the party's 'political leader'. At the time, United Russia still enjoyed the real, if not unconditional, support of most of the Russian electorate. Kudrin's position was that he had no intention of joining the party because the Russian government doesn't engage in party politics. Since he enjoyed the support of the 'non-party leader', Vladimir Putin, his position became the norm. For a long time 'United Russia' would loftily declare that the time had come for it, as the ruling party, to form a government run on party lines. Until, that is, these declarations started working against the party. For the executive had demonstrated only too well that the 'ruling party' was just a metaphor: the government had no desire to be constrained by an ideological framework so it hid behind rhetoric about 'the exigencies of power'.

Ever since then prime ministers and presidents (bear in mind that these are just two players swopping places) have made no attempt to challenge this argument about the ‘exigencies of power'. Elements of ideology could be detected in the actions of parties operating in government and in the circles of power. But these were amorphous even by comparison with the ideological underpinning of the 'parties' of renaissance Florence. Analysts did their best to label the White House cast of characters as ‘liberals’, militarists and imperial revanchists. But the Russian government's stance on any issue is rarely governed by adherence to any particular flag or colours. Two examples: in 2001, Anatoliy Chubais, one of the leaders of the notionally liberal party behind Putin declared that the war in Chechnya would considerably increase the power of the Russian armed forces. Similarly, in 2003, Aleksey Kudrin pointedly refused to come out publicly with a political statement on the YUKOS case.

But the best example of this ostentatious pragmatism was the behaviour of the Economic Development Minister Elvira Nabiullina. For years, her ministry kept making the strangest, patently anti-liberal alliances on a whole range of issues, including economic policy. Free market policies geared to the protection of private property, deregulation, privatisation and the rule of law seem to have gripped Russia from the mid- 90s on. Even Yevgeny Primakov’s notionally left-wing government (1998-9) couldn’t resist them completely. 

By the end of the 00s Industries Minister Viktor Khristenko was probably the only left liberal trying to remain true to his principles. But he left the White House in 2011 to become head of the Customs Union between Russia, Belarus and Kazakhstan. Other technocrats remained just that, abandoning their ideological convictions when required.  By 2012 there was really only one party left in the government’s orbit, the Russian Union of Industrialists and Entrepreneurs. But it was always more of a satellite of government than part of it.

Since May 2012, the Medvedev government has been operating on the same principles: whenever it gets serious, realpolitik edges out ideology. Deng Xiaoping’s portrait may not hang in the Kremlin or the White House, but those in the know keep on saying: 'the colour of the cat doesn't matter, as long as it catches the mice'.

However, the cat’s colour is exactly what is threatening the very existence of the government. For since summer 2012 the government has been de-ideologised and this complicates reaching a consensus on any important decision.

As the global financial crisis which began in 2007 shows ever more clearly, social issues dominate domestic politics these days: issues of public health, personal income tax, pensions and national insurance, employment and the labour market. Obama won his 2008 election under the banner of health reforms; Hollande won his by calling for progressive taxes for the rich. The Russian government may have won the 2012 election without slogans, but the main problems facing the government of former President Medvedev are domestic: reform of education, the pension system, property taxes, public expenditure to support jobs in the public sector and defence, plus the regulation of financial markets.

This is where technocracy and pragmatism, anti-ideology and the denial of ideology, fall down. For most of the main decisions which need to be taken are rooted in ideology.

It is only once you’ve taken decisions based on one or other ideological doctrine that you can get to grips with implementing those decisions.

What’s more, to the astonishment, even irritation, of the pragmatists, any decision will have ideological implications. It will increase the popularity of one or other ideology and reinforce the need for an ideological approach to life. Likewise, any compromise decision will prove less effective than a 'political' solution. In other words, whatever the problem, the solution is precisely the one that they will do their utmost to avoid making.

Reforms

This conflict is most evident in the current discussion on the reform of the pension system. The free-marketeers in the White House and the new government have come up against well-organised opposition in the shape of the:

- Health Ministry 

- Labour Ministry

  • - Deputy Prime Minister for Social Questions, Olga Golodets
  • - officials grouped round the former Minister for Health and Social Development, Tatyana Golikova, in the Presidential Administration
  • - team of economists which was engaged (2010-11) in correcting the programme for the long term social and economic development in Russia until 2020.

This group are pragmatists too, in a sense. The goals they’ve set themselves are liberal economic ones. They want to increase employer contributions to social funds and increase pension payments. They want to use the pension system to roll back poverty in the older age groups, and to reduce social inequality.

When it comes to financing the State Pension Fund, they support the theory of civic social responsibility. They propose that the government should fund the shortfall; that business should bear more of the social burden and that the pension age in Russia should be set low. Their attitude to pension reform is not unlike the pilot projects of Western European social democratic governments in the 80s and 90s. Its opponents, concentrated around the economic ministries of the Medvedev government, would be more inclined to defend the Eastern European, British and American free-market model. Particularly the priority of funded pension systems over unfunded, increasing the pension age, protecting business from increased quasi-tax payments and making the individual, who is the client of the pension system, more responsible for choosing his own form of pension insurance and personal long-term financial insurance.

Clearly, any solution will involve a move to the right or left from the centrist position currently held by the White House. On this particular issue the government and the Kremlin will be more inclined to move to the left i.e. a decision in the spirit of social democracy. If that were the only choice! Almost the same team is insisting on a sharp increase in the currently fairly low-level expenditure from the consolidated budget on secondary education, health care, health promotion and the social infrastructure, while at the same time maintaining support for popular social democrat ideas on the development of local government and decentralisation.

For opponents of the White House who have become accustomed to its increasingly centralised government and centralised free-market reforms this situation is extremely unexpected. But from the point of view of officialdom, the White House's official free-market ideology needs to be represented as a technocratic, pragmatic, non-political solution. The problem is that without recourse to ideology, it is impossible to demonstrate that the free-market view of pension reform strategy is more acceptable. For the reforms needed are so enormous that they could not be implemented without substantial change to people’s lives.

White House pragmatism presents another problem: the reforms are interconnected. To the formally non-ideological 'social democrat bloc' in and close to government this is fairly clear: their initiatives relate to the labour market, labour migration, the higher education system and the reform of the budget network. They all flow fairly organically from the proposals already described. 

However, pressure on the Russian budget from the military-industrial complex lobbyists and the network of budget institutions considerably complicates the situation. The increasing cost of direct and indirect labour costs in these sectors is an ongoing concern for President Putin, who understands his populist policies pretty well. Add to this a general discussion about the need for EU-style budget consolidation,  government spending cuts (the Finance Ministry position) or the Keynesian policy of increasing internal demand by increasing public spending (the Economics Ministry position).

Current problems

Traditionally, Russian politics make few efforts to set up within the White House permanent 'parties', which could combine all the proposed reforms in a substantive ideology: parties are more likely to arise out of a given situation and the selection of officials to defend one or other 'right' or 'left' decision is almost always different. The decisions too are different, though it is now clear that Dmitry Medvedev's team has only two alternatives. They can either make decisions that are fragmented and mutually conflicting from an ideological point of view, which will reduce the effectiveness of the economic policy overall. Or they can make decisions which are determined by ideology.

'The dramatic growth of the opposition in 2011 can be explained by the lack of ideologically coherent decisions in the preceding years.'

At this point the White House grinds to a halt. The ideology implied by these decisions will not only restrict their freedom to correct economic policy in future. More importantly, from a personal point of view, the Prime Minister will be placing constraints on his own freedom to take ideologically contradictory decisions in future eg if he supports social-democratic educational reforms he will be depriving himself of any room for manoeuvre when it comes to reforming public health, for instance, or controlling the cost of government orders in the defence sector.

So if the pragmatism of the Russian government worked so well for more than a decade, why has it now become untenable? There are many answers to this question. For a start, the financial crisis has put paid to the inconclusive decision-making based on compromise which became a habit during the boom years 2002-8. The price of compromise has become a lot higher than it was five years ago. Also, a new generation of officials is now in government. This younger generation sees all too clearly what the problems are with a pragmatism which belongs in the late ‘90s. and the problems of those policies are very clear to the next generation of officials.

The presence of a new democratic opposition outside the system is another significant factor. The dramatic growth of this opposition in 2011 can largely be explained by the lack of ideologically coherent decisions in the preceding years. As long as it remains constrained by this exclusively centrist trajectory, society will be unable to move forward, as Putin, Medvedev and their team would have liked. Lacking the scope for a real political struggle, for any left- or right-wing movements, this impetus will spill over into protest. The opposition is a natural resistance to the 'freezing' of society in the 00s. However strong the social barriers isolating those in power from society may be, Russia’s leaders are still part of that society. If society demands ideology, the White House will never be able to keep out the influence of politics, without compromising their ability to work in the process.

If the collapse of technocracy in the Russian government is likely, how will it take place? There is no telling. For when the ideological parting of the ways does take place things could develop in too many ways. But it is fairly clear that the ideological arguments within the White House will explode and that Dmitry Medvedev's ministers will undergo surprising political transformations.

Russia’s 'non-political' period of government in Russia is almost certainly drawing to a close. 

About the author

Dmitry Butrin is a Moscow based journalist. He is the head of the economic policy section at the 'Kommersant' daily.