The Putin Paradox

Since becoming Russia’s President in 2000, Vladimir Putin has simultaneously pushed forward a positive agenda of economic reform and a negative agenda of political repression. It’s a sad story of one step forward, two steps back, and if it continues it will threaten the existence of a free Russian society.

After his party’s landslide victory in parliamentary elections in December 2003 and his own re-election in March 2004, many experts hoped Putin would ease up on his rollback of democracy. Instead, since March he has pushed harder to threaten and sideline even the most marginal of his critics.

Putin’s supporters in Russia and the West can no longer justify this erosion of democracy as a necessary step to advancing economic reform. On the contrary, the lack of democracy is already beginning to infringe upon Russia’s economic growth. If current trends continue, full-blown dictatorship in Russia is a very real possibility – a development that would be disastrous for the country’s economy (not to mention its fledgling democracy).

Many of Putin’s economic reforms are impressive. Since becoming president, he and the pro-Putin Duma have passed into law a series of fundamental reforms, including a flat income tax of 13 percent, a reduced profits tax, and new land and legal codes. Under Putin, the Russian government has balanced the budget several years in a row and now no longer relies on Western loans for support.

In parallel with these reforms, Russia’s economy has boomed. Sparked by the devaluation of the ruble in 1998 and then rising oil prices, the economy has grown every year since 1999. Foreign direct investment hit an all time high in 2003, hard currency reserves are bursting, inflation is modest and real per capita incomes have grown by more than a third in four years.

But these very positive indicators of economic reform have been accompanied by a personal drive to constrain. Russian’s freedoms and make their society less pluralistic= Although Putin did not inherit a consolidated democracy from Boris Yeltsin, in his first term as president he did nothing to strengthen an open Russian society; in fact, in many cases he severely weakened it.

The list of Putin’s attacks on democracy is striking in both its range and depth. He has conducted an inhumane war in Chechnya, seized control of all national television networks, emasculated the power of the Federation Council, tamed regional barons who once served as a powerful balance to Yeltsin’s presidential rule, arbitrarily used the law to jail or chase away political foes, removed candidates from electoral ballots, harassed and arrested NGO leaders and weakened Russia’s independent political parties. International election observers concluded that the parliamentary vote in December 2003 and the presidential vote in 2004 were the least fair in Russia’s post-Soviet history.

Since winning re-election, Putin and his administration have not slowed their assault against pluralism. Investors had hoped that the Kremlin might cut a deal with jailed Yukos head Mikhail Khodorkovsky, Russia’s richest man, who has been imprisoned on trumped up charges of fraud and embezzlement. Instead, Putin seems intent on using all means necessary to keep Khodorkovsky – a primary source of funding for Putin’s political opposition – in jail while he transfers ownership of Yukos to more Kremlin-friendly hands. Russia’s parliament, which is now completely in Putin’s pocket, has floated several anti-democratic pieces of legislation, including a very restrictive law to limit public demonstrations and a bill that would make it nearly impossible to hold national referenda.

Putin has also tightened the noose on independent media. The most notable recent example of this occurred when Leonid Parfenov, one of Russia’s most famous television personalities, was fired from his job for publicly revealing a censorship request from his bosses. In addition, western NGOs working inside Russia continue to be harassed by authorities, who claim that these non-profit organizations are actually fronts for business operations. In his State of the Nation address, Putin revived Soviet-era paranoia when he suggested Russian NGOs who take money from Western foundations should be considered enemies of the state.

Some argue that these steps by Putin and his administration are necessary for achieving positive economic growth. These apologists cite successful autocratic reformers in South Korea and Chile in the recent past and China today as positive analogies for Putin’s Russia.

But developing economies need functioning states to reform and grow. Lawless states or regimes captured by oligarchs do not provide the necessary conditions for this growth. Nor do dictatorships. On the contrary, for every autocrat who pushes through reform, attracts investment and spurs growth, there are more who block reform, steal assets and impede economic development. For every South Korea there is a Myanmar, a Pakistan and an Angola.

The experience in the post-communist world is clear – the fastest democratizers are also the fastest and most successful economic reformers (Poland didn’t need an iron hand to spur economic growth). The lack of a connection between authoritarianism and long-term economic growth is no longer the subject of debate. In Russia’s case the health of its economy depends as much on human rights and a free media as it does on its balance of trade payments and GDP.

There is no doubt that Russia’s short-term economic growth is impressive and that Putin is at least partially responsible for it. But it has come simultaneously with the destruction of free media, threats to civil society and an unmitigated corruption of justice. Should this dual path continue, there is no doubt that a nontransparent, unaccountable Russian state will eventually become a corrupt state, unable to sustain long-term and diversified economic growth.

Michael McFaul is an associate professor of political science and a Hoover Fellow at Stanford University. He is also a non-resident senior associate at the Carnegie Endowment for International Peace.