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Illiberal stagnation

NEW YORK • A quarter-century after the Cold War's end, the West and Russia are again at odds. This time, however, at least on one side, the dispute is more transparently about geopolitical power, not ideology. The West has supported in a variety of ways democratic movements in the post-Soviet region, hardly hiding its enthusiasm for the various "colour" revolutions that have replaced longstanding dictators with more responsive leaders - although not all have turned out to be the committed democrats they pretended to be.

Too many countries of the former Soviet bloc remain under the control of authoritarian leaders, including some, like Russian President Vladimir Putin, who have learnt how to maintain a more convincing facade of elections than their communist predecessors. They sell their system of "illiberal democracy" on the basis of pragmatism, not some universal theory of history. These leaders claim that they are simply more effective at getting things done.

That is certainly true when it comes to stirring nationalist sentiment and stifling dissent. They have been less effective, however, in nurturing long-term economic growth. Russia was once one of the world's two superpowers, but its gross domestic product (GDP) is now about 40 per cent of Germany's and just over 50 per cent of France's. Life expectancy at birth ranks 153rd in the world, putting Russia just behind Honduras and Kazakhstan.

In terms of per capita income, Russia now ranks 73rd (when it comes to purchasing power parity) - well below the Soviet Union's former satellites in Central and Eastern Europe. The country has de-industrialised: The vast majority of its exports now come from natural resources. It has not evolved into a "normal" market economy, but rather into a peculiar form of crony-state capitalism.

Yes, Russia still punches above its weight in some areas, like nuclear weapons. And it retains veto power at the United Nations. As the recent hacking of the Democratic Party in the United States shows, it has cyber capacities that enable it to be enormously meddlesome in Western elections.

There is every reason to believe that such intrusions will continue. Given US President Donald Trump's deep ties with unsavoury Russian characters (themselves closely linked to Mr Putin), Americans are deeply concerned about potential Russian influences in the US - matters that might be clarified by ongoing investigations.


Moscow's Red Square, with St Basil's Cathedral in the background. On the economic front, Russia's post-communist transition has not lived up to expectations, possibly because privatisation was carried out too rapidly without creating the institutional framework needed to make a market economy work, says the writer. PHOTO: REUTERS

Many had much higher hopes for Russia, and the former Soviet Union more broadly, when the Iron Curtain fell. After seven decades of communism, the transition to a democratic market economy would not be easy. Yet, given the obvious advantages of democratic market capitalism to the system that had just fallen apart, it was assumed that the economy would flourish, and citizens would demand a greater voice.

What went wrong? Who, if anyone, is to blame? Could Russia's post-communist transition have been managed better?

We can never answer such questions definitively: History cannot be re-run. But I believe what we are confronting is partly the legacy of the flawed Washington Consensus that shaped Russia's transition. This framework's influences were reflected in the tremendous emphasis that reformers placed on privatisation, no matter how it was done, with speed taking precedence over everything else, including creating the institutional infrastructure needed to make a market economy work.

Fifteen years ago, when I wrote Globalisation And Its Discontents, I argued that this "shock therapy" approach to economic reform was a dismal failure. But defenders of that doctrine cautioned patience: One could make such judgments only with a longer-run perspective.

Today, more than a quarter-century since the onset of transition, those earlier results have been confirmed, and those who argued that private property rights, once created, would give rise to broader demands for the rule of law have been proven wrong. Russia and many of the other transition countries are lagging further behind the advanced economies than ever. GDP in some transition countries is below the level at the beginning of the transition.

Many in Russia believe that the US Treasury pushed Washington Consensus policies to weaken their country. The deep corruption of the Harvard University team chosen to "help" Russia in its transition, described in a detailed account published in 2006 by Institutional Investor, reinforced these beliefs.

I believe the explanation was less sinister: Flawed ideas, even with the best of intentions, can have serious consequences. And the opportunities for self-interested greed offered by Russia were simply too great for some to resist. Clearly, democratisation in Russia required efforts aimed at ensuring shared prosperity, not policies that led to the creation of an oligarchy.

The West's failures then should not undermine its resolve now to work to create democratic states respecting human rights and international law. The US is struggling to prevent the Trump administration's extremism - whether it's a travel ban aimed at Muslims, science-denying environmental policies, or threats to ignore international trade commitments - from being normalised. But other countries' violations of international law, such as Russia's actions in Ukraine, cannot be "normalised" either.

PROJECT SYNDICATE


  • The writer, a Nobel laureate in economics, is University Professor at Columbia University and Chief Economist at the Roosevelt Institute. His most recent book is The Euro: How A Common Currency Threatens The Future Of Europe.
A version of this article appeared in the print edition of The Straits Times on April 18, 2017, with the headline 'Illiberal stagnation'. Print Edition | Subscribe