Russia Modernizes — the Old-Fashioned Way

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We can all breathe a sigh of relief. The economic crisis in Russia is over. Vladimir Putin says so.

In his annual report to Russia’s State Duma late last month, the former president and current prime minister informed members that the government’s wise measures have pulled the economy out of a severe slump caused by the global slowdown. Last year Russia’s GDP plunged nearly 8 percent. Now, by contrast, Putin boasted of a high trade surplus and the lowest inflation in 18 years. He pointed out that Russia has the world’s third-largest gold and foreign currency reserves. Just for good measure, he said that Russians are having babies again, finally reversing the country’s long demographic decline. “All of this enables us to say that the recession is over in our economy,” he declared. “More importantly, we have very good starting conditions for further progress.”

Yet perhaps the most interesting thing about this speech is what it didn’t say. Leaving aside for the moment the question of how accurate the prime minister’s economic diagnosis actually was, missing from Putin’s presentation was a word that had, until recently, stood at the center of discussions about the country’s future course. That word is “modernization.”

It’s a word that has become widely associated with President Dmitry Medvedev, the young and energetic head of state chosen by Putin to succeed him in the job in 2008. Last September, Medvedev published an essay — memorably titled “Go, Russia!” — that set out an ambitious agenda for reform. Medvedev declared that his country could no longer rely solely on the extraction of natural resources — foremost, its vast holdings of oil and natural gas — to fuel its economic and moral renewal. He pleaded, instead, for a revitalization strategy that would use technological know-how and innovation to boost efficiency and undercut graft. It’s a vision that has already inspired high-flying plans for a new innovation center called Skolkovo, said to be the Kremlin’s answer to Silicon Valley. French President Nicolas Sarkozy praised Medvedev’s ideas during a visit to Moscow in March and pledged France’s support for plans “aimed against corruption and toward the development of a legal state.” And just this weekend, Medvedev commemorated the Soviet Union’s victory over Nazi Germany in 1945 by watching soldiers from the United States and Britain march across Red Square together with Russian troops — the sort of inclusive gesture that archnationalists presumably found hard to swallow.

Medvedev’s sally struck a nerve at home, too. His plans triggered an enormous amount of discussion among Russian elites — everyone from Kremlin-allied ideologues to ex-oil tycoon Mikhail Khodorkovsky, now languishing in prison in Siberia. Two big questions loom. The first is whether the president’s notion of modernization actually entails the sort of reforms — in economics, politics, and society — that Russia urgently needs. Critics contend that Russia’s economy is still dangerously dependent on oil and gas, leaving it little else to depend on when global demand plummets — as it did during the crisis, with predictably devastating results. That reliance on natural resources has fostered a political culture in which well-connected tycoons siphon the national wealth into their pockets while public goods — including infrastructure, health care, and education — continue to languish.

One antidote might be to open the system to genuine competition — both economically and politically. Yet while Medvedev insists that his plans are based on “democratic values,” some skeptics wonder. They note that Peter the Great and Joseph Stalin exploited technology as part of brutal, top-down campaigns to push the country into the modern age regardless of the human cost. In this tradition, “modernization” served the ends of autocracy, centralization, and military conquest.

But Medvedev’s modernization plans imply a potentially transformative critique of the modern-day Russian state as it has evolved out of the 1990s’ post-Soviet turmoil — a state that has reconcentrated central power in the Kremlin at the expense of elected representatives and regional institutions, that has institutionalized rent-seeking behavior at the cost of efficiency, and that has suppressed the expression of divergent opinions in the name of “social stability.” And that, in turn, suggests a challenge to the man who is this system’s chief architect and guarantor — Vladimir Putin.

Nor is this a strictly academic argument. Russia is already heading into a new election cycle. The next round of parliamentary elections is scheduled for December 2011, with the presidential election due the year after. Speculation is rife that Putin — who stepped down from the top job last time around in conformity with a constitutional rule that the president may not serve more than two consecutive terms — might be reconsidering another bid for the presidency in 2012.

If he decides he wants to run, it might be hard to stop him. Putin still enjoys immense political clout — not least through the siloviki, his vast network of fellow ex-KGB men who now occupy most of the major positions in the government and the economy. By comparison, Medvedev remains something of a lightweight, which might be one reason why he has been trying to boost his status by positioning himself as the candidate of the next generation.

Some of Medvedev’s critics contend that he has been careful to formulate his ideas in terms that don’t imply any challenge to the existing order. But they might be underestimating the resonance of his argument — even among those who are close to the top. “When Medvedev talks about modernization, he’s saying: We’re a backward country,” the influential Moscow political consultant Gleb Pavlovsky put it in an interview last year. “Modernization is for those who are behind.” Yet the man who’s talking is someone who has long been a Kremlin confidant. Nikolai Petrov, an analyst at the Carnegie Moscow Center think tank, notes: “Pavlovsky has even said that the great president and great leader should move aside and give the next leader Medvedev the chance to govern.”

Petrov says that Pavlovsky could be expressing the views of a substantial constituency, both within the Russian political elite and outside it, that genuinely wants to see a new wave of urgently needed reform after the years of Putin-style consolidation. Another example might be the liberal economist Yevgeny Yasin, who dismissed Putin’s report to the Duma as an exercise in cooked statistics and reckless optimism. He worries that the government has been playing fast and loose with its economic methodology, that Russia’s state spending remains dangerously undisciplined, and that there is little evidence that the country’s long demographic decline has stopped.

The ranks of the restless include everyone from entrepreneurs who are fed up with the Russian petrostate’s seemingly endemic corruption, to professionals and intellectuals frustrated by the lack of free speech and the heavy hand of the security apparatus. For them, “modernization” isn’t an empty word — nor an entirely harmless one. It’s some of the people in this category who have been signing, in surprising numbers, an online petition calling for Putin’s resignation from the premiership — something that would have been virtually unthinkable just a few years ago. (The petition, launched two months ago, has as of this writing collected 42,497 signatures — not bad, actually, for a country where opponents of the government are not always tolerated.)

And that, says Carnegie’s Petrov, is indicative of a much more entrenched problem that confronts would-be modernizers in today’s Russia. “There is a lack of normal channels for communicating with the government” — and not only for individual citizens, but also for many major economic and regional interest groups. “If you look at big government decisions, they tend to be at first announced, then reviewed or postponed because there isn’t a mechanism that would allow balanced decisions.” He says that the existing system suffers from a serious and potentially crippling lack of means to channel legitimate discontent. Although the numbers aren’t huge by the standards of some countries, Russia has been seeing a notable uptick in protests recently, with many of the demonstrators assailing economic conditions as much as political ones.

Can that change? If recent events are any indication, Medvedev’s modernization talk might be losing steam. By all appearances, Putin is once again firmly on center stage in Russian politics; Medvedev has been largely absent from the scene. In the early years of their joint rule, both men enjoyed roughly equivalent TV exposure; lately, Petrov contends, the coverage seems to be tilting in Putin’s favor. And though the Constitution gives primacy to the president in all matters of foreign policy, for example, it was Putin who traveled to Ukraine recently to celebrate that country’s signing of a treaty that extends the presence of Russian naval forces at the Black Sea port of Sevastopol. In short — just like the good old days.

Wish Medvedev luck. He’ll need it.