Thursday, January 10, 2008

From Russia With Love

In my last post I briefly mentioned my concerns over Russia and its actions in the Middle East, I would like to take this space to comment on my growing concern over Russia's actions and political developments. When the Cold War ended almost two decades ago, it seemed that the USSR under Gorbachev and then Russia under Yeltsin would be able to slowly re-integrate itself to the expanding global economy. Gorbachev started the trend toward real economic development and integration with the glasnost and perestroika policies, gradually pulling his government away from state domination of the internal markets, allowing for foreign competition, and releasing the communist strangle hold on civil liberties. With the demise of the Soviet Union and the election of Boris Yeltsin as the first ever popularly elected leader of Russia, the country continued to attempt a decentralization of economic power and the privatization of corporations. Unfortunately, much of the corruption present under communist rule remained in place and derailed the planned economic development, centralizing it once again. After Yeltsin's resignation, Putin was elected by the people to contain the corruption and expand economic freedom. Here is where Russia's progress becomes cloudy.

Putin has led an interesting life, and I think it offers insight into the man's leadership style and goals. He has a history of combining state positions, but only to consolidate his own power. Beyond that he has ballooned the size of the bureaucracy (11-17% in 2005 alone) and nationalized corporations in an attempt to regulate and control economic growth. By statistical standards, he has succeeded in leaps and bounds with an economic growth rate of 6.7%, compared to the US's rate of 2.9%. Growth in personal incomes has been approximately 12% per year. While these figures are good, there are some problems. The most well known problem in Russia's economy is the well-publicised corruption and organized crime network, both of which act as a funnel for wealth away from the Russian labor force. Also, there is the problem of not having a diverse basis of exportable products. The majority (80%) of exports consists of market driven commodities, such as oil, natural gas, metals, and timber. With any sort of global downturn in the market, or even a recession within one of Russia's major trading partners, a major source of income could vanish. As I mentioned in the last post, much of the state's exports in industrial goods comes in the form of military technology and equipment. Lastly, while productivity and income are up, they still lag far behind the rest of the developed world. Russia's work force is about half of that of the United states and the total GDP is one thirteenth of ours. Russia's GDP per capita in 2006 was just over $12,000, as compared to the United States GDP per capita of around $43,000. None of that can sit well with the world's only former-superpower.

In addition to the economic troubles, some of Russia's policies are disconcerting as well. Putin has developed such a cult-of-personality (his 2000 election was with a 56% majority vote, followed by the 2004 election by over 70% of the vote, along with a high approval rate) that he can organize the wildly popular youth movement, the Nashi, and even name his successor, Dmitri Medvedev. Putin's nationalistic youth movement indoctrinates the next generation of leaders to state (read: Vladimir Putin) approved ways of thinking and revisionist history, glorifying the exploits of the USSR. The group is strikingly reminiscent of the Hilter-Jugend in the 1930's, even being accused of silencing dissenting voices within the country. Also, Russia's handling of the situation with Chechnya demonstrates the lessons in diplomacy Putin learned during his time in the KGB. Finally, Putin's ability to virtually assure Medvedev's election this year tells me that the former state security officer become president will continue to be a major player in the formation of policy and diplomatic affairs.

Let us not forget, Putin is a man who was trained by one if the best propaganda machines the world has ever seen, the KGB. Win the hearts and minds of the people, or beat them into agreement, all is fair in the secretive and brutal world of the secret police.

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