The Dangers of Russia's Statism

There are two certainties in today’s Russia under Vladimir Putin’s government: the country’s economy will likely implode before long, and a major confrontation with the United States and Europe may occur even sooner.

I write this without any malice towards the Russian people, whose nation I admire in many ways. Culturally, Russians defy most conventions. In literature, music, the arts and most other intellectual pursuits, they would be at the top of the world. But in many of the areas that define modernity, they trail badly. Their democratic institutions are grossly underdeveloped, and the Russians’ faith in them is nonexistent. The economy operates at the same level as Bangladesh, and its public discourse is just above Nigeria’s and below Zimbabwe’s. That’s the ranking Transparency International gives Russia, in measuring the country’s tendency toward corruption.

Vladimir Putin has brought in a new form of totalitarianism that I call “political statism.” This is not quite the same as “political messianism,” a term the historian Michael Walzer uses to define totalitarian movements like Nazism, fascism, and, of course, Communism – each of which offered visions of utopia, and in practice were far from it. Rather, they were systems to coerce universal obedience. Straying from orthodoxy was treason, punishable by banishment or worse.

Putin’s Russia does not quite measure up to such grandiose, albeit destructive, illusions, but it has many of the associated trimmings, including an intense re-centralization of power and the creation of an oligarchic political and financial elite with interlocking branches. What the system lacks in ideological and moral authority it fills with the exercising of unbridled power. The silencing of opponents or bothersome people is real and has happened repeatedly: witness the recent murders of journalist Anna Politkovskaya and banking regulator Andrei Koslov. Even more important is the belief, now held universally in the country, that would-be opponents will be crushed. The manipulation of the nation’s wealth and resources is so complete and so blatant that some of its practitioners have even abandoned all pretexts.

Oil and gas have led the way in this push toward statism and the run-up in oil prices since 2000 has contributed greatly to the regime’s success and impunity. But statism is far more concerned about power and far less worried about economic prosperity. It has little interest in long-term investments and the development of democratic institutions, laws, and regulations. Russia had the chance to develop after the Soviet collapse. It tried spasmodically, only to experience a giant retrogression under Putin.

As long as the government can provide the bare essentials for its citizens, power will continue to be aggregated by Putin and his cronies. The mafia, a word with wide applications in Russia, is now rampant. The rule of law has become a mockery and the judicial system, far from being independent, is used by the power elite as yet another tool of statism and intimidation. Poll after poll suggest that the police are the last place an aggrieved Russian would go to bring a complaint.

In the oil and gas industry, the voracious devouring of their rivals by Gazprom and Rosneft , and moves for further business captures deprive the country of the most obvious potential source of economic multipliers that would derive from a free market, namely risk capital and technologies. Marginal fields and difficult reserves are not likely to attract the state monopolies.

Of course, in its current situation, Russia can ill afford the loss or even the reduction of its only real income, oil revenues. A sustained decline in the price of oil would be devastating to the economy, and Putin has done little to re-invest those oil revenues and diversify the economy. The history of modern oil is rife with examples of nations that never recovered from their oil-generated profligacy that began in the mid-1970s, and ended with their ignominious falls during the price collapse of 1984. But Venezuela, Nigeria, and Indonesia are not nuclear-armed superpowers like Russia.

A cornered Russia whose system has recently been intoxicated with power and fueled by oil money is likely to lash out. It could be about Iran, or competition from and re-alignment with former satellite countries, or foreign business investments, or just simply not getting the respect it thinks it deserves.

Those who have written off Russia as merely a thorn in the side of the United States and the West may find themselves praying for higher oil prices.