Prospects for Modernization in Russia: Factors and Possibilities

IMGXYZ3019IMGZYXModernization is one of the Kremlin’s stated priorities. Aleksandr Auzan, a member of Russia’s Presidential Commission on Modernization and Technology who chairs the consultative group in charge of evaluating proposals submitted by the commission’s working groups and by the government, discussed the prospects for modernization in Russia. Carnegie’s Nikolay Petrov moderated.

Defining Modernization

• Modern vs. Traditional Society: When scholars refer to modernization, they are often describing the evolution of a traditional society into a modern one. Auzan explained that this definition does not apply to Russia, where traditional society disappeared with the Bolshevik Revolution. Instead, in Russia modernization refers to a political and economic process intended to promote domestic growth and stability and to aid the Russian Federation in remaining a strong power in the international arena.
   
• Practical Definition: Some of the chief aspects of modernization in Russia would include: decreasing the distance between the public and the government, making government and its work more accessible to the average citizen, and adopting a more long-term approach to domestic policy, Auzan said.
   
• Too Early to Say: It is too early to discuss whether the current modernization agenda has been successful, Auzan said, because the real work of modernization has yet to begin.

The Results of Failure

If the current drive for modernization fails, Russia will not experience a sudden catastrophe, Auzan predicted. Instead, the country will follow an “inertia trajectory,” a gradual degradation and Soviet-style stagnation similar to what occurred in the 1970s and 1980s. Auzan warned that, in some ways, Russia is already experiencing this gradual decline; he pointed to the fact that so many of Russia’s top university graduates are leaving to work abroad as evidence of stagnation.

How to Modernize

If Russia wishes to modernize successfully, Auzan said, the government should focus on the four “I”s—targets defined by President Dmitri Medvedev in early 2008: institutions, infrastructure, investment, and innovation.

• Obstacles: Russia faces several obstacles to modernization, including the vested interests in existing institutions and the barriers that unreformed institutions and corruption pose to investment. As an example of how political expediency can trump the need for modernization, Auzan pointed to the economic crisis, when the government chose to increase pensions rather than investing in infrastructure. This was a strategic choice: it strengthened Prime Minister Vladimir Putin’s support among pensioners, who constitute a sizeable portion of the electorate, while relieving some of the pressure from other groups clamoring for money.
   
• Chances for Modernization: Auzan estimated the likelihood of modernization at 25 percent, adding that these are respectable odds. He argued that in 2008, in the wake of the Georgia war, the probability of modernization appeared markedly lower.

Enabling Success or Failure

Auzan outlined some of the factors that could influence the probability of successful modernization:

• Outside Factors: The international situation matters. When oil prices were lower, the need for modernization was pressing. Now, with oil prices rising once again as a result of the conflict in Libya, the need for modernization, and thus the likelihood of it, is lower.
   
• Customs Union: The customs union established among Russia, Belarus, and Kazakhstan can be a positive force for modernization. Within the framework of the customs union, Russia cannot change business- and trade-related rules unilaterally, which will lead to greater consistency in the way that trade and business are carried out. A less arbitrary, more predictable framework improves the ease of doing business.
   
• WTO: Similarly, membership in the World Trade Organization (WTO) would help Russia to modernize. While proponents of modernization cannot depend on cheap oil to make modernization a priority, membership in organizations that require integrated economic and business processes, like the WTO, is more easily controlled. 
   
• Domestic Business and Political Cycles: The domestic business and political cycles are also important factors affecting modernization, Auzan said. As Russia exits the economic crisis, groups with economic power have an incentive to take control of their assets. These groups, which were content to allow the government to bear the burden of managing financial assets during the crisis, now stand to benefit from regaining control and bringing in a profit. The outcome of the upcoming parliamentary and presidential elections will also play a significant role in determining Russia’s chances of successful modernization. The mandate carried by the winner, and his outlook on the need for modernization, will shape Russian domestic and foreign policy in the years to come.
   
• Public Demand for Modernization: Auzan emphasized the lack of public demand for modernization as a key factor working against modernization. Driven by the negative experience of unsuccessful reforms and general instability in the 1990s, the wider public lacks a real desire for reforms. Even the politically active subset of the population is skeptical of successful modernization. Auzan suggested that more work needs to be done to place the modernization agenda on the public’s radar, such as facilitating discussions in various forums and increasing public demand for government accountability. Making the public more conscious of the income taxes they pay to the government—by addressing the way those taxes are collected—may help to accomplish this goal. Auzan added that it is important to secure public support not for Medvedev’s modernization position, but for modernization itself.