Academic journal article Demokratizatsiya

Russia: Its Place in the Twenty-First Century and the Implications for the United States

Academic journal article Demokratizatsiya

Russia: Its Place in the Twenty-First Century and the Implications for the United States

Article excerpt

As Vladimir Putin takes office as Russia's president, Russia's well-being and the security of the world will depend on whether he can give Russia what it needs most, moral leadership and the rule of law.

Contrary to a widespread impression in the West, Russia is in danger of political and economic disintegration not because many aspects of the economic reform program were unwise but because reform in Russia was carried out in a moral vacuum, leading to an economy in which the animating factor was not productivity but theft.

The first great act of theft was the destruction of the Russian people's savings as a result of the hyperinflation after the uncontrolled freeing of prices in January 1992. Money that had been saved for decades by millions of people disappeared overnight. The effective confiscation of personal savings was followed by privatization in which enterprises created by the common efforts of the entire population were "sold" to criminal business syndicates at giveaway prices. And, in a final act of theft, the government "empowered" banks to handle its accounts. By appropriating interest, the banks made huge fortunes on the state's money.

The result of a reform process run for the benefit of well-connected insiders was that the Russian economy suffered a collapse unprecedented in the country's postwar history. In the last eight years, the gross domestic product declined by half. This did not occur even under Nazi occupation. Factory directors stripped the assets of their enterprises, government officials at all levels demanded bribes for making any economic decision, criminal syndicates extended their control over entire regions, and all of these people formed political clans whose struggle for wealth and influence eventually determined the policies of the state.

At the same time, money is being sent out of Russia in enormous quantities. Russia's newly rich, having acquired their wealth illegally, live in fear that it will be confiscated and, at the first opportunity, move it out of the country. Estimates as to how much money left Russia illegally during the Yeltsin era range from $220 billion to $450 billion. According to the Russian prosecutor general, Russian citizens have set up sixty thousand offshore companies to hide illegally transferred wealth. As an indication of the seriousness of the situation, it was reported recently that in 1998, $70 billion was transferred from Russia to offshore banks in the Republic of Naura, a coral island in the Pacific Ocean.

Under these conditions, it is pointless to speak of market institutions and the creation of wealth. What exists is a form of organized looting that makes normal economic activity virtually impossible.

Only policies aimed at enforcing the rule of law and creating equal conditions for all economic actors can put a stop to the pillaging and give to Russia the preconditions for political and economic stability. The question in Russia today is whether Putin is the man who can give Russia the framework of law that is an essential prerequisite for economic progress.


No definitive judgments about Putin and his intentions are possible at the present time, but indications are that Putin has no real commitment to a law-based state and that, on the contrary, his accession to power may mark the beginning of a drift toward authoritarianism and the methods of a police state.

Unlimited War. The second Chechen war, although ostensibly an "antiterrorist operation," is being fought with complete disregard for civilian casualties. Aerial bombardments have destroyed entire cities, and because of the scale of the bombing and its indiscriminate nature, an estimated 220,000 persons have fled Chechnya, effectively depopulating the region. Putin has also authorized the use in Chechnya of TOS-1 rockets, which cause aerosol explosions on impact and are forbidden by the 1980 Geneva Protocol, and Tochka-U ballistic missiles, which can cover up to seven hectares with cluster shrapnel on impact. …

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