The wheels have come off the Putin model

Dmitry Oreshkin
26 August 2009

Putin has been a different man at various stages of his years in power. The changes can be roughly divided into three stages. The first stage was mainly a continuation of the Yeltsin tradition, when his opportunities were still limited and he was accumulating political resources.  This lasted until approximately 2003-04. In the second stage he got into his stride and began serious work on monopolising political and economic resources. The third stage began around 2006-2007.  By this time he had spread his wings to their full extent and showed his real self.  This was a period of prosperity and decline:  the oil prices were rising fast and it went to people's heads.

An overall assessment of the last 10 years would allow that Putin has preserved the market economy, deformed and monopolised though it is. Secondly, he has strengthened the machinery of state. Thirdly, he has turned the results of the natural economic growth in new market conditions and with new incentives to his own advantage.  He has also managed to get his name associated with Russians' rapidly growing economic prosperity.

But we should consider the problems of these 10 years. The concentration and monopolisation of power has led on the one hand to the creation of a fairly powerful centre consolidating the country's resources. On the other hand it has meant that these resources are unable to develop anywhere but under the lead and control of the centre. In this way Putin eliminated any political opposition and turned himself into a political figure without any rivals.  He allowed a group of cronies access to the material resources of the market economy, which were considerable and growing, and he formed a new class which I will call "burness". "Burness" comes from "bureaucratic business". This is when bureaucrats are engaged in business and business buys up the bureaucracy.  A mutually beneficial economic model is created, guaranteeing them privileges in government and the economy. Putin simultaneously created a corrupt system to buy the loyalty of this burness, on the basis of which he organised what was called the Putin consensus of elites.

The problem is that the Putin consensus of elites is based on false, dysfunctional and unpromising principles of mutual corruption. The Centre allows regional burness representatives to receive corrupt revenue from the growing market economy that depends on it, and they in return guarantee the appearance of political loyalty to the Centre. There is no real economic and political competition and any political renewal is impossible: there can be no adjustments, corrections, fine tuning of policy or innovative economic developments.

This was all very well when the oil price was increasing. Now, when the support of  the burness is essential, it's not working, because there's no money left to pay for loyalty. If the Centre has run out of money, then regional burness no longer needs it and there is a real crisis of management. The model of Putin's consensus was supposed to last a long time, but there is no consensus.

This gives rise to a very serious problem. It turns out that the de facto political and economic life was not organised in the way that was claimed on the Putin propaganda banners. There is essentially no vertical of power.  What exists is a contractual relationship between the Centre and the regions:  we don't touch you, we let you steal, we even give you federal subsidies and allow you to steal them.  You pretend that you are loyal, and ensure falsified, but correct, election results, virtual implementation of orders from the Centre, and say the right things on television.

It is now becoming clear that the rhetoric has nothing to do with reality. We can see that no constitutional order has been established in Chechnya, or in the North Caucasus in general. On the contrary, the Chechen syndrome has spread all over the North Caucasus, at any rate over half of it. The Centre pays Chechnya, Ingushetia and Dagestan:  they are all subsidised regions, where federal grants form more than 80% of the budget. In exchange regional burness is unable to control the law-enforcement officers: someone is killed every day. These bandits don't even bother to take the officials to the john, in Putin's memorable words, to "stick their heads down the pan": they deal with them directly at their place of work.

It is not at all clear how the system can be changed, because replacing these people would be extremely difficult: they or their people would immediately respond by sabotaging the system, or, even worse, take to the mountains and resume partisan activities. Try and replace Ramzan Kadyrov: his troops will immediately go back to partisan activities and separatism. There is essentially no vertical at all, but only a completely corrupt loyalty between Moscow and Kadyrov. Kadyrov is irreplaceable regardless of whether he is effective or not, as his replacement would mean the symbolic defeat of Putin's policy in the Caucasus.

At the same time, the North Caucasus is de facto ceasing to be Russian territory. Wild horses wouldn't make Russian business or Russian citizens go voluntarily to the North Caucasus, as the proclaimed constitutional order simply doesn't exist. Order was imposed by force according to what Kadyrov wants. If Kadyrov likes you, he will allow you to operate there. If he doesn't, he won't.  And no law or law-enforcement bodies will protect you there, because they can't even protect themselves.

As far as economic policy is concerned, oil prices are falling and there is no alternative in Russia. Everything done by the corporations organised by Putin and run by his people only demonstrates their complete inefficiency.  Rostekhnologii, the corporation charged with the development of cutting edge engineering, received support of 24 billion rubles:  two months later it's all gone, with no improvements, no technical breakthroughs, and no new models, just the same old bangers.

Another super-corporation, Russian Railways, has for 10 years been talking about creating a transport corridor from South Korea to Hamburg, and changing the Russian rail gauge of 1,520 mm to the European gauge, so that transit trains can easily cross Russia to Europe from Asia and bring in revenue. None of this has happened. The gauge has not been changed, and there's no transport corridor.  Now this wonderful corporation is asking the federal government and the state budget for 100 billion rubles, once more for the maintenance of its installations. Not to build the corridor, no one is talking about that any more. Nor to change the rail gauge. None of this is going happen in the near future. There are also no new railways. The money has been spent. So loyalty to the Putin regime is the only end product, which has resulted from funds given to the monopoly known as the Russian Railways.

The same thing can be said of Gazprom. Gas production has not increased. More and more new loans are being taken out to build new pipelines, but it is unclear whether they will be built. One thing is clear: they will be built inefficiently and at twice or three times the price.

On top of all of this we are witnessing a growth in unemployment and inflation, or rather stagflation, when prices grow at the same time as the economy stagnates. And we can't see any prospects for improvement coming from Russia itself. The only thing we have is the hope that prices for raw materials on foreign markets will increase. In other words, we have de facto long since become a raw-material appendage far more than we were than during the Soviet period, but we don't say "raw-material appendage", now - we are an "energy empire".

Finally, the third aspect concerns the clear discrepancy between the grandiose slogans and real life. Over the last 10 years there has been no improvement in relations with any country of the former USSR.  In fact relations with Estonia and the other Baltic States, with Belarus, Ukraine and Georgia have become progressively worse. Now this will happen with Moldova too. Russia has acquired new trouble spots in the South Caucasus, which will have to be fed, be it South Ossetia, which has been promised 20 billion rubles, or Abkhazia, which has been promised a comparable sum.

These amounts have obviously been subtracted from development funds for internal Russian territories.  The budget of the republic of Gorny Altai comes to 9 billion rubles, for instance, so with the 20 billion rubles we have promised to South Ossetia we could double the budget of three regions like Gorny Altai, and these funds could help them to build roads, hospitals and factories, and pay salaries. On top of that Abkhazia has been promised the same amount. This means we are slowing down the development of internal territories: we are not building roads or infrastructure, not creating new housing, or carrying out the social programmes that were approved with so much pomp literally two years ago. Instead, we are once more spending money on expansion, and hanging these new millstones, or black holes, around our neck.

In 2006-2007 when Putin was grouping new political resources around himself and increasing his own political importance, he acted cautiously so as not to break informal agreements with former political elites. He used phrases like "further democratisation", "a clean sweep of oligarchs", "strengthening political parties", "increasing the importance of parliament" etc. Then we noticed (although it has to be said not everyone did) that parliament's role had been reduced, the political parties had been castrated, and all the real power was concentrated in the hands of a fairly small group, which we could call oligarchs, but I prefer to call them major burnessmen. They are essentially the same oligarchs as before, only even less controllable, because not even President Medvedev can conceal the lack of transparency in the state corporations, whether it be Russian Railways, Gazprom or Rosneft.

The bureaucracy has become stronger and business weaker.  The Yeltsin burness may have actually been more to do with business, but the Putin burness is more about bureaucracy and this is very revealing about both Putin and the role of state in society. Karl Marx said in his youth that the state is the private property of the bureaucracy and that's exactly what we've got. We have private property with many ramifications for a group of burnessmen, who naturally are not about to hand it over amicably to anyone. The horizons of peaceful, calm development in Russia have narrowed, because Putin's burness controls elections, and will not permit alternative political forces to come to power at these elections. It will not permit powerful competitors in the economy, who might reduce prices for road or housing construction, for example. For the same money that could be spent on building roads in a normal, competitive environment, roads can be built at twice or three times the price. The same applies to housing: for the same price twice as much housing could be built at half the cost.  But this is not in the interests of the burness controlling the situation.  This is what the Putin management model has achieved.

In broad terms, Putin exploited the extremely favourable economic and political situation, which resulted from changes in Russia during the difficult 1990s.  He used this time to strengthen his political position and his political clan, to remove opponents and monopolise both the government and the economy. The end result is that the political model of the state has become an unmanageable, ossified structure with no future.  It can no longer return to its former flexibility, as this would go against the interests of the people who represent it. The same thing happened to the economy: he narrowed it down to a small group of burnessmen, and to break this model the resistance of these burnessmen would have to be overcome.

There appears to be no way out of this situation in the near future. In my opinion, the foundations were laid under Putin for a relatively swift collapse of the wheels of state of the Russian Federation.  In addition the rational development of the Russian economy and polity has ground to a halt.

Putin has discredited parliament, the courts, elections and political parties, replacing them with puppet structures controlled by himself or his cronies.  From the historical point of view, he has made it impossible for Russia to react adequately to the challenges of time.
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