Russia After May 8

by Saleem Khan, Ph.D.

I first went to Moscow and Tashkent in October 1992 on a World Bank mission to introduce market economics teaching and curricula development in the leading economic and finance institutions in the former Soviet Union. The Finance Academy in Moscow and Tashkent University of Economics in Tashkent offered me the opportunity for subsequent visits that continue to date. The Finance Academy in Moscow holds an annual international conference on education where educators and scholars from all over Europe and the CIS countries gather to present their ideas and research on economics/business education reforms. I have been participating in these conferences regularly for the past fifteen years.

In my most recent visit to Moscow in March 2008 and meetings with the leading Russian educators in March 2008, the major topics of interest were Russian self-confidence and challenge of creating a friendly and hospitable global environment for peace and progress.  From my discussions with the academic community and observations of broad public opinion in Russia, I was impressed with the level of knowledge and degree of sophistication of this society.  The regaining of self-confidence among Russians in the creation of a strong economy, a more democratic government, and a more assertive role in international affairs is a valuable global asset which the west must utilize.  Statesmen and diplomats should tap this precious asset and create an orderly and equitable world order in the spirit of the 21st century.

Putin’s leadership, though much reviled in the western capitals and media, has won the Russian people’s trust and admiration by making Russia strong again and asserting control over national assets. The Russian people are ready to demonstrate their ability to make substantial contributions to global affairs, if only the global community has the patience and readiness to offer them the opportunity.  The election of Medvedev as President of the Russian Federation, according to them, is a significant and logical step to continue economic and political gains made under Putin.  They wish to strengthen their economy and show to the world their desire to be a responsible global power, especially in economic affairs.  This, they believe, is essential for advancing national goals and international agenda.

Russian academia’s’ view of tackling national and international challenges is both constructive and optimistic.  People are excited about the post-cold war period prospects of peace and prosperity.  The pace of change and its direction -- market-oriented economy, democratic institutions and rule of law -- to them is a welcome phenomenon.  There is much apprehension about massive bureaucracy, corruption, collusion between civil service and business, and post-election leadership arrangements between the offices of the Presidency and Prime Minister. There are also concerns about the domination by oligarchical control over Russian strategic assets and its effects on the national economy and social balance in society.  They are concerned about western posture and rhetoric that seek to exploit Russian weaknesses.  They wish to avoid such things as: a cold-war scenario, an arms race, economic confrontation or geo-political zero sum games.

The academic community’s account of progress and optimism is confirmed by a recent report in The Financial Times.  Neil Buckley, a respected columnist, writes that economic growth in Russia has averaged close to 7% during the past ten years.  Strategic economic decisions after the financial crises of 1998, of the ruble’s devaluation, and record energy and commodity prices have helped the economy.  Economic growth is being sustained by a boom in consumer and investment spending.  These factors, writes Buckley, have “produced an extraordinary six-fold increase in GDP in nominal dollar terms during Mr. Putin’s two terms $1,270 last year.  A country almost bankrupt has amassed five hundred billion in gold and foreign exchange reserves – the world’s third largest after China and Japan.  Average wages have jumped from $80 a month to about $640 now.  A growing consumer class is driving Fords, sipping Starbucks, holidaying in Turkey and shopping at mega-malls loaded with goods undreamt of in soviet times.”  Over 14,000 small and medium size new Russian enterprises have added to the vibrancy of the economy. Academicians give credit for this strong economic health and political stability to Putin. Consequently, economic activity and political participation are spreading across Russia beyond the fringes of Moscow and Saint Petersburg, thanks to new investment and democratic reform. These events have, indeed, contributed to confidence building especially among concerned people after their shock-therapy experience during the 1990s.

The bureaucratic machine was strong during the Soviet era, and it remains the same but now it contributes to both economic inefficiency and corruption.  The market-oriented system to which the country has switched was supposed to be progressive.  People’s expectations of open opportunities, healthy competition, and buyer-friendly markets have received a rude shock.  They are still shell-shocked by how national assets, under western patronage, were transferred to a few communist youth league members (Cosmosol).  The oligarchic capitalism they now experience is a far cry from the European style of democratic capitalism.  The current economic system displays the characteristics of political, economic, media control and oligarchic exploitation.  Where is the system of open opportunities, market-oriented democratic system with general prosperity that they were seeking?  Moscow alone has over 84 oligarchs, and the metropolis has become a captive market for western goods.  Many oligarchs, owners of ill-gotten national assets, have transferred their wealth to safe havens abroad, fearing accountability.

The current leadership arrangements are enigmatic at best.  The dual system of governance will face many difficult problems.  Academicians are waiting with their fingers crossed for May 8, 2008 when Medvedev will be inaugurated president and Putin will assume the responsibilities of premiership.  Nonetheless, people are generally optimistic about the future.  The leadership initiatives from Medvedev seem favorable.  This youthful leader, according to many, is highly intelligent, flexible, western-oriented, and more democratic.  Putin will support him in order to preserve his lasting legacy of remarkable political and economic achievement.

The general public is weary and disappointed by the western response to Gorbachev’s historic decision to dismantle the Soviet empire, the communist economic system and relinquish control over Eastern Europe and the Baltic states.  Academicians accuse the west of engaging in a new cold war posture by starting an arms race, an eastward expansion of NATO, and the U.S. plans for a missile defense shield in Eastern Europe – without offering Russia anything in return.  One Russian colleague bitterly spoke of poor trade-offs.  He while pointing at the Gorbachev Foundation building on Lenin Ave in the central district of Moscow said “this is what we got in return for giving away East Germany.”

In conclusion, the Russians dismiss any notion of a changed Russia after May 8, 2008.  One must respect the Russian academic’s sentiment of a more prosperous Russia and creating a peaceful and progressive world order.  Dealing with the tough and complicated issues of today a bold and visionary leadership is essential.  Mustering political will and commitment on the part of leadership to advance the agenda of peace and progress is needed now more than ever before.  The wages of inaction and business as usual mean the whole world will keep suffering.