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How Putin can become a moderniser

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A majority of Russians – and not all of them opponents of Putin – demand modernisation. Yet the predominance of the bureaucratic classes and importance of informal favours in Putin’s Russia makes that a near impossible task. Paradoxically, the only way out for Putin may be to absorb his bureaucrats even further into the running of the country’s business affairs, argues Alexei Levinson.

Alexei Levinson
27 February 2012

Horizontal government and vertical power

Since Putin came to power in 2000, Russia has acquired what in Russian is called a ‘stroi’ (literally ‘structure’ – trans), or what may be less flatteringly referred to as a ‘system’. This construction is only partly the result of focused efforts of Putin and his circle. We must give these efforts their due. While talking about developing a ‘middle class’, their real achievement was to create an unusually large and economically powerful upper class, operating at the highest federal level. This is the realm of Putin’s own henchmen and those of his closest associates. The same ‘classes’ exist at regional level, but on a lower financial scale and with a more limited range of powers. These are ‘second level’ people – not direct appointees of the top dogs themselves, but vassals of vassals.

‘The system of feudal appropriation of unearned income must be, and can be, transformed into a system of capitalist generation of profit.’

The system then continues further, to lower and lower levels. At this stage it becomes subject to strong influence from local forces and factors. One thing our research has shown is that, just as the core elements of everyday life and of corruption are practically identical in most areas of the Russian Federation, so are the real power structures very similar at local level. It is always a question of collaboration between those who hold economic power, those who hold political power and those in charge of the forces of law and order. Informal aspects (ties of family and friendship, networks of corruption etc.) of these relationships are as important as formal ones (position, power, responsibilities etc.), and coercive power (whether emanating from official or criminal structures) as important as financial.   

One could, if one wished, label these structural layers, repeated from the bottom to the top and vice versa, as a ‘vertical’. But it is not a vertical of power in the sense that it carries out any and every order received form the Kremlin. A multilayered construction like this is in fact very difficult to control. It can deal with certain simple vertical functions, such as tax collection and protection payments, and it can follow instructions on producing the necessary voters at election time. It can receive and pass on transfers and orders. But otherwise the various levels of the system live an independent existence and their ‘horizontal’ operation is the real process of power and rule in Russia. Moreover, the predominance of horizontal connections over vertical is not in any way a weakness in the machine: it is, on the contrary, its strength and a guarantee of its stability.

The barriers to change

At a moment of demands for change and for greater dynamism in the whole socioeconomic and cultural complex known as Russia, it is this stability that will be the chief obstacle to change.

The widely debated question of Russia’s situation as an ‘oil junkie’, dependent almost entirely on the sale of hydrocarbons and other primary commodities, does not go to the heart of the matter. It is less a question of what the country sells, as how the income from these sales is distributed. And it is only to a limited degree (we do not know to what degree; all we can say is that it is insufficient) that it is distributed as business income and profit. To a great extent (and again, all we can say is that it is too great an extent in terms of the political economy of the social process in Russia) it is distributed in the form of unearned income. This is how the ‘oil money’ flows through the capillaries of society. The top dogs become super-rich, while those at the bottom subsist on survival rations. But the main thing isn’t the uneven distribution, but the fact that it creates a culture of ‘payday’, bonuses and benefits, rather than ‘wages’ and ‘income’.

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Outgoing Russian president Dmitry Medvedev tried to portray himself as a moderniser; Vladimir Putin on the contrary wants to be seen as guarantor of stability. But perhaps Putin can do both — modernise while ensuring stability — by transforming the system of feudal appropriation of unearned income, into a system of capitalist generation of profit (Photo: www.premier.gov.ru)

The thinkers of the past, reflecting on the irrigation systems of the ancient civilisations of the East, saw in their construction the rationale for the despotic-bureaucratic regimes that ruled there.

This tangled web of domination on all levels that we describe here is bad not because of its corrupt and conservative character, but because it is at the heart of the system for the distribution of unearned wealth. This may not be national wealth from the oils and gas industry; it may be local, connected to coal mining, caviar, gold, drugs, imported and Russian made cars, and so on. Anyone who extracts a surplus product from the production of these goods immediately loses most of its value (even if it is a large business, it usually subsists on survival rations). The money, whether seized or handed over voluntarily, is then distributed high and low as unearned interest.    

‘The widely debated question of Russia’s situation as an ‘oil junkie’ does not go to the heart of the matter. It is less a question of what the country sells, as how the income from these sales is distributed.’

As president, Vladimir Putin will be at once the overlord and the slave of this system. It will, naturally, demand that he preserve and protect it. He, naturally, will always be able to draw on it for funds in an emergency. The regime’s stability was built on this symbiosis, and its beneficiaries were generally happy with it.

Understanding the nature of discontent

And now this universal satisfaction is suddenly falling apart. At present it is the discontent of the group who have been dubbed ‘the middle class’ (those who go to protest rallies in the centre of Russia’s centre) that is most evident. As for ‘the masses’, it is generally imagined that they have not been affected by this ‘anti-Putin’ mood. To some extent this is true, but research carried out by the Levada Centre in autumn 2011 indicated that a demand for reform had actually arisen in the mass of the population rather earlier than on the streets of Moscow. And here we are referring to the very lowest socio-economic groups – lowest, that is, in the hierarchy of distribution of the oil money. For now it’s a request, not a protest. And it is detectable only through opinion polls, for this group – the vast majority of the population – have no institutions or channels for making their feelings known (the only channels that reach them are one-way – bringing them their wages and pensions and TV programmes from the top down). Their demands have not yet taken any political form. They therefore cannot in any way be considered anti-Putin (if one discounts supporters of the Communist Party, A Just Russia and to some extent the Liberal Democrats).

These demands, indeed, are addressed to Putin himself. They come from a group that can’t yet imagine any alternative to the current presidential system and to the man who will occupy that post. For these voters – as opposed to many ‘angry urbanites’ – Medvedev was never an alternative. In other words, these people do not want to replace Putin with anyone else (and they will vote for him), but they expect him to change.

A counter-intuitive solution?

We cannot expect a demand for change from such a wide population base to be clear, well-defined and well-articulated. Inevitably there will be populist-fundamentalist and soviet-nostalgic elements. But these factors are trivial and of little importance today. What is not trivial is that such a demand should have arisen at all, after a decade of desire for, or at least compliance with, stability and a general feeling of ‘let it just not get any worse’. And what is even less trivial is the pro-modernisation, and in this internal Russian context pro-western, thrust of the opinions voiced in the poll. The factors behind this demand for change are bound to be complex; we cannot define them as purely psychological or purely economic, but we shall not attempt to analyse them further here. All we can say is that they were most probably triggered by Medvedev’s public statements about the need for modernisation. Amazingly, these statements evoked no direct reaction at the time from any population group, including those masses that we are now discussing. Given the startlingly radical nature of Medvedev’s proposals, the very fact of this silence may suggest that they had an immediate and profound effect on public consciousness. From whence they have re-emerged, assimilated and disconnected from the spark that ignited them.

‘The bureaucracy, sitting pretty amid their power and corruption, is indestructible. Their elimination is both technically and politically impossible. But in the current state of Russia’s development something else is possible. If we cannot separate our political rulers from the world of business, we should absorb them into it.’

The research showed, however, that more prosperous population groups, with greater access to unearned income, were more favourably disposed to the infamous ‘stability’, which suggests that not all of the middle classes will initially be behind the ‘angry urbanites’. 

So we have a minority yelling at the tops of their voices about the need for political modernisation, and a majority inclined towards change. There is a power structure, and there is a man who will occupy its summit. Supposing that man were to hear ‘the cry of his times’? What could he do with this power structure? Not much, in fact there is only one thing he could do. The nationalisation, the introduction of state control over this and that, as desired by many, will only lead to the further growth of the system of bureaucratic appropriation of unearned income.

Our analysis shows that something different is needed. The bureaucracy, sitting pretty amid their power and corruption, is indestructible. Their elimination is both technically and politically impossible. But in the current state of Russia’s development something else is possible. The system of feudal appropriation of unearned income must be, and can be, transformed into a system of capitalist generation of profit. The description of the bureaucracy as the owners of our primary resources needs to acquire a new meaning. Instead of trying to force business owners out of business, as they do now, the bureaucrats need to be drawn into business as responsible entrepreneurs whose profits depend on the business decisions they take. If we cannot separate our political rulers from the world of business, we should absorb them into it. Let this new entrepreneurial class rewrite the laws for their own benefit, removing the restrictions and obstacles they themselves created. This new group will not confine their interest to oil – it’s too crowded a sector. The country’s other resources, including its intellectual resources, will also be brought into play.

I believe that this is the only way for Putin to hold onto his presidential seat and satisfy the demands of both the silent (for the moment) masses and the cries of ‘Go! Go!’ on the streets.

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