By Mikhail Rostovsky
The outgoing Year of the Rat, according to the Chinese Zodiac, was generally considered worse than any other leap year. As for the upcoming Year of the Ox, political astrologists say it will be even worse. The Russian elite has never been so pessimistic in the last 15 years. Russia remains hostage to the West even after Putin and Medvedev threw down the gauntlet to it. What is an economic chill to Europe and the United States is a bad flu to Russia.
The crucial question is in what state Russia will be in at the end of the global economic crisis. The answer largely depends on what the Russian authorities will do in 2009. We will either forever become the West's and China's raw material appendage or emerge out of the crisis with a modernised economy. There is no third way.
Carpets and parrots
The Russian White House, the federal Government building, is drab and shabby with threadbare carpets along its corridors. Those working in the building look just as drab and miserable. Two sections of the building shine in contrast-the newly redecorated prime-ministerial working area and the office of First Deputy Prime Minister Igor Shuvalov, Vladimir Putin's right-hand economist.
Shuvalov's private office is striking with a huge carpet of beauty untold. Government employees say he has bought it for several tens of thousands of euro from his own pocket. The room is decorated in an Oriental style, with small tables and fancy divans. The offices for Shuvalov's assistants are exotic with huge black lampshades, mirrors all around, vases on the floor, and parrot photos on the walls-more like a nightclub than a Government office.
Let us excuse this extravagant setting. The Government economists are doing numerous unsolvable equations in all unknowns. Their task is urgent, and millions of people will pay for their error. Worse still, what appears to be a tough but justified decision at first glance may be recognised as erroneous when it is too late to set anything right.
Everyone is coming down on the Government for its refusal to drastically devalue the rouble. That is right-the support of the rouble costs the country billions in hard currency so necessary to the nation. But then, the collapse of the rouble might provoke public unrest. "The country will see the greatest social danger if the crisis sends too many into panic. The crisis will get even worse then," chief Kremlin sociologist Alexander Oslon wrote in a recent report.
"For many, the strong rouble symbolised Russian revival. Mr Putin called the public to make savings in roubles quite recently. If the rouble collapses, the population will no longer trust in the authorities," renowned expert Yevgeny Gontmakher says.
There are more aspects to the problem. The slow but steady fall of the rouble has heightened instability and uncertainty. No one in the world can say for sure how long the global crisis will last. So we cannot say how long our reserves will suffice.
If the forecasts for a long crisis are true, we will be sorry for every dollar sacrificed on the altar of the rouble. Many experts think that ambitious government-financed infrastructural projects are the only remedy now.
There is an old saying about Russia's two worst troubles-fools and roads. Any Russian who has ever been to America knows there are no fewer fools there than in Russia. Roads are quite different. In 1919, young army officer Dwight Eisenhower, the future US President, was in a military lorry convoy travelling from Washington to San Francisco. The trip took 62 days. Today, two drivers working in shifts cover the distance in no more than a few days.
American roads began to improve during the Great Depression, at a time when millions were left without means of subsistence. Public works on Franklin Roosevelt's New Deal gathered eight million unemployed to pave and repair 450,000 kilometres of highways. 29,000 bridges and more than 4,000 schools were built, and workers survived to see another economic boom.
Russian infrastructural projects also promise to kill two birds with one stone. They have to meet another challenge, too. If they fail, Russia, rising from her knees, will remain her leaders' wishful thinking.
Ruslan Grinberg, Director of the Economics Institute of the Russian Academy of Sciences, put the matter into a nutshell in a recent public address: "The Russian economy is getting ever more primitive. We export 97% of our nickel-which means we don't want to produce anything for ourselves!"
A man prominent in the circles of the Russian elite was even harsher as we together discussed the situation: "We should not rescue the mummy of our old economy from the ruins of the crisis. What we need is an economy with quite a different structure-an up-to-date, competitive economy."
Will we ever have such an economy? What we have now is evident regress. A major federal official well versed in information technological trends and issues says that up to a half of IT experts have lost their jobs in the Moscow Region. They will either emigrate (but where will they be welcome?) or retrain in a new profession and thus degrade professionally. When an economic boom comes at last, Russia will have an even scantier personnel for economic innovations than now.
"Let us see who the crisis will strike the hardest," Mr Gontmakher said to me. "Pensioners have comparatively reliable social protection. Public salaries have been raised by a third. Certain regions are laying off their public sector employees but those who stay have their salaries raised by the same third. Jobless, unskilled workers will most probably stick to their household plots and make a living on homemade pickles. The so-called New Class will suffer the worst."
Meanwhile, the top ranked government officials are shrugging off the dreams of economic modernisation as idle chatter. If it were not the case, the Government would hardly be so tough on the entire nation to preserve the mummified Russian automotive industry. "The decision might be unpopular-I don't care. It is ineffective, that's what makes me worry. I don't think anyone in the Government is serious about structural reforms," one of the most influential members of the Russian elite told me.
True, when a house is on fire, the first thing to do is to extinguish the flames. No one would think about replacing the roof beams at such a time. But then, there are days when all problems blend into one huge problem, and there is no way to deal with them piecemeal. That's what makes a crisis a crisis.
The end of the Putin Pact
"We have bartered liberty for stability; we had been living on that pattern for eight years before the crisis severed this informal contract between the authorities and the public," the prominent Russian expert Alexander Auzan recently wrote.
Certain political scientists hope the top will give us more elbow room in politics once it faces a formidable economic threat. After all, even Joseph Stalin addressed the nation as "brothers and sisters" in 1941. However, our ruling elite dislikes the very notion of concessions.
"What do you liberals want? Freedom of speech on the telly? Wait for another twenty years!" a major official ideologist snapped at me in the carefree summer of 2008, before the onset of the crisis.
Today, the top is even more loath to lend us freedom. "If Greece had no free media the riots would be far smaller. A country goes through a crisis much easier with the media under control," a prominent member of the Russian elite told me.
The top is good on its word. Directives for television for 2009 provide more entertainment and violence. Evidently, the authorities will deal with protesters by stick and carrot. They will try to appease some, bribe others with grants, and set riot police on still others. At the same time, scapegoats are being chosen in the corridors of power. For instance, steeled Government officers see the ambiguity of Igor Shuvalov's appointment as head of the Government anti-crisis commission. "They are trying to save Prime Minister Putin from responsibility for unsolved problems. Putin will make all the crucial decisions as before, and Shuvalov will be the whipping boy," a bigwig told me.
The member of the elite I have quoted above is sure the top will get out of the crisis unscathed: "Doomsday did not come even in the 1990s, when the economy was at a standstill. Besides, governors cannot openly say Moscow is the culprit any longer, unlike in the previous decade."
He may be right, and he may not. After all, Russia went through the hard times of Boris Yeltsin's presidency with the doors of liberty wide open. The top-down command structure was looser and the media more free. Though Putin's presidency was much tougher, his political system did not undergo a test of crisis.
Many are apprehensive. Anders Aslund, the famous economics expert, compared contemporary Russia to Indonesia of 1998 in a recent interview with Moskovsky Komsomolets. An economic crisis swept the regime of President Suharto, the reputed father of the Indonesian economic miracle, and overthrew his two successors. One might say Professor Aslund is biased. It is hard to say the same about Anatoly Chubais, who stood at the cradle of contemporary Russian policies, now heads a state corporation, and is known for circumspection. Chubais describes the chance for the present-day political system to survive as fifty-fifty.
Be that as it may, even greater political uncertainty awaits Russia. Stability depends on sheer luck and competence at the top.
"No one at the top wants the Novocherkassk riot [of Khrushchev's time] re-enacted-but from time to time paranoia might take the upper hand. Why not batter those demonstrators protesting against the regime, especially if they are rumoured to be paid to stand and demonstrate? The men at the top treat Dissidents' Marches as personal abuse. They see every protester as a miniature Kasyanov or Kasparov, who are to them traitors and the West's flunkeys," a man who knows Russian rulers told me.
Not to care about adequacy and efficiency is only affordable in years of prosperity. When lean years come, one pays a higher cost for bungles. Does the top realise this? To all appearances, it does not, judging by the latest events in the Russian Far East.
* * *
A group of Moscow anarchists climbed the roof of the high-rise Hotel Ukraine in the early hours of November 7 to make a laser picture of the skull and crossbones on the façade of the Cabinet of Ministers across the Moskva River.
Does their mischievous act predict a dire future to come? It is hard to say for sure that the present Government will be a failure. After all, not every measure of Roosevelt's New Deal was immediate success-but Roosevelt had an instinct to tell what was working and what wasn't, and he wisely adjusted his policy to the given situation.
Russian trouble-shooters will probably also choose the trial and error method. However, the Government has less elbow room with every passing day. National interests demand the right road mapped even in 2009. Finance Minister Alexei Kudrin has just announced that the country will have to take 2.5 trillion roubles from its Reserve Fund next year. Our prosperity-pampered Government will soon have no spare kopeck-and there is small hope for foreign loans. Who will trust a country that has squandered record-setting currency reserves at an unprecedented pace?
The conclusion might sound banal-but it is the only possible one. Russia can no longer afford squandering what it has. Paradoxically, we return from economics to politics here. As he was listing the weak points of the Russian economy, Ruslan Grinberg highlighted the two worst troubles apart from "primitivisation": the monstrous unevenness of income distribution, and the absence of genuine political competition. The two problems might appear distant from each other, yet in truth they are closely interlinked. The absence of political competition rules out competition of anti-crisis remedies, so the chance of bungle bloats spectacularly.
In short, next year will show what the top-down command structure is really worth-but we will pay dearly for that knowledge.