An Update on Russian Domestic Politics

Over the past four months, Russian citizens have lost three constitutional rights: to live in a social, federalist, and democratic state. First, the social reforms transferred responsibility for the social sphere from the federal to the regional level. The areas of education, healthcare, and culture are now to be financed by the regional governments despite a major decrease over the past five years in the their share of the total tax collection. With increased obligations and decreased funding, regional governments will be unable to effectively run social programs. Also, wide disparities exist between regional budgets. For example, Moscow’s expenditure per capita is five times higher than the region to its south, and 50 times higher than per capita expenditures in the Northern Caucasus. The Kremlin’s decision to ignore this social variance and withdraw from the social sphere contradicts the constitutional principles of a social state.

Secondly, the recently introduced political reforms demonstrate the collapse of federalism in Russia. No political force exists to oppose the center’s attempt to consolidate power and both the governors and the State Duma will soon be permanently under Kremlin’s control. Furthermore, when combined with the social reforms these political reforms promote irresponsible governing—for the prior absolves the Kremlin from social governance responsibility, while the latter grants the Kremlin full control over it.

Thirdly, the proposed political reforms bring an end to democracy in Russia. Governors will be appointed by the President, and with only party-list voting the Kremlin gains permanent control of the State Duma, since the administration controls both party registration and access to mass media. Only the President remains directly elected, but since he appoints the governors he is assured control over these elections. Even under the present system the anti-democratic consequences of presidential power over the governors are evident. During the past presidential election, a political examination of governor loyalty required the delivery of 70% of the vote for Vladimir Putin. Most governors passed, making it clear that the Kremlin can control presidential elections when the governors are dependent on the administration.

With regard to the economy, Russia has become a monopoly control market without competition. There are no anti-monopoly policies for corporations close to the bureaucracy. For instance, metallurgy corporations doubled prices this year, and the government ignored the price inflation. Such relations between the oligarchs and the bureaucrats are transforming Russia into a feudal society, for a market without competition has no mechanism for development. Russia’s current economic growth is locked into the raw material sector. If the oil prices drop, all growth will disappear.

Unfortunately, neither the parliament nor political parties can reverse these trends. The parliament is dead. With 70% of its members controlled by the administration, this is the first parliament where debates no longer occur. As for political parties, the Kremlin has successfully transformed existing ones into puppet institutions by gaining control over their leaders, while preventing new opposition by denying party status to emerging coalitions. For instance, the Communist Party, once considered to be the government’s strongest opponent, after a Kremlin engineered internal schism, has fallen under its control. Similar tactics were used by the Kremlin to break Sergey Glazyev’s Rodina Party. Assembled to fill the socio-democratic niche, this three-party coalition succeeded in gaining mass popular support before collapsing during the presidential elections, when the Kremlin lured away one of the bloc’s parties together with the Rodina name. The remainder of the Rodina bloc (renamed Coalition for a Worthy Life) has been marginalized by the Ministry of Justice, which has prevented the coalition from registering as a party.

The only remaining means to curtail Kremlin’s reforms is to mobilize grass-root’s resistance. A referendum, the only form of social action with legal results, must be conducted to protect the social, political and human rights of citizens. The agenda of the referendum needs to include four topics: first, the restoration of social benefits to the federal level; second, an increase in the tax burden of the natural resource monopolies; third, the protection of the right to direct gubernatorial elections; forth, the protection of the right to direct the parliamentary elections.

Sergey Glazyev’s Coalition for a Worthy Life has began to organize the referendum. The requirements include a 240-day bureaucratic procedure and two million signatures. The possibility remains that the Kremlin will block the referendum despite the completion of the democratic criteria. Therefore, it would be preferable to gather 10 million signatures; then the administration would be unable to contain the level of public outrage resulting from any interference. The Coalition’s 100,000 members have begun gathering signatures. Unfortunately, both the Yabloko and the Communist Party are too afraid of the administration to join the effort. Question and Answer Session

The government is trying to implement liberal economic policies in the social sphere. They want to reform education and health care system through commercialization, but with an average wage of less than $200 a month, few will be able to afford these necessary services. The federal government ignores this reality by dumping the responsibility onto the regional level, while accumulating a budgetary surplus that has reached 3% of the GDP. This surplus is held in a stabilization fund, a quarter is used for debt and the rest just sits in a Central Bank account, which is used by the government to control inflation. This policy is primitive, and while the government reports inflation to be 10% a year, the people on the streets believe it to be 20% a year. In a year when prices for metals have doubled, and the prices of goods such as sugar and gas grown by more than 30%, the later sounds more credible. Especially since the statistical office is now a department in the Ministry of Economy with a clear incentive to underestimate inflation and overestimate growth. Not surprisingly, when official growth numbers are adjusted by perceived inflation net growth equals zero.

To control inflation, the government should focus on improving the weak banking system. The main problem in Russia is the lack of a mechanism for long term investment due to the absence of banking capital—the sum of all Russian banks is less than that of one American bank. The Central Bank needs to be much more flexible in monetary policy. Through several well known schemes, the central bank, with the help of the government’s development bank, and the security and financial markets, can create channels for long term credit. Then, inflation would be controlled, as industries currently unable to finance capital modernization, such as agriculture, manufacturing, and construction, would borrow to do so.

Putin launched the social and political reforms, because he believes a country should be managed like an army--simply and efficiently. However, without elections there is no responsibility. Unchecked, the bureaucracy will continue to centralize power and maximize personal profits, leading to a brain drain, capital flight, and further social inequalities. The people understand these consequences--ordinary people do not want to loose their rights, and entrepreneurs do not want an uncompetitive market without rule of law. A referendum would mobilize present social resistance and force Putin to respect the law.

Proper policy for the West should focus on maintaining open information channels in Russia. The Internet alone is not enough; direct relationships between international agencies and citizens are needed to prevent the alienation of Russia. Direct public pressure from the West, however, can be dangerous. Putin has chosen to centralize personal power. To prove he is right, the threat of a domestic enemy is being created from the terrorist attacks. Similarly, to prevent the growth of democratic resistance, a conspiracy theory can be used to transform the West into an external threat. Although today the people have become used to living in a global society, and the Kremlin can not simply close Russia’s borders, direct pressure from west might further Kremlin’s drive to do so.