Source: International Affairs
In the autumn of 2009, 18 months after his inauguration, Russian President Dmitry Medvedev put forward a thesis about the need for the modernization of Russia. The word ‘modernization’ may best encapsulate what Russia needs to do to address all the problems it faces today and will face for the next decade. This huge country needs to escape from its semi-archaic state, in which elements of the nineteenth, twentieth and twenty-first centuries are curiously intertwined. Russia needs to become a country moving confidently along with the flow of global evolution. The basic danger is that it may lag behind other countries, get stuck in a bog of obsolete values and find itself on the periphery of the modern world.
There are solutions to these problems. Many countries have faced them and have found ways and means to overcome them. But history provides no guarantee that Russia during Vladimir Putin’s next presidential term can find adequate answers to the challenges it faces. The new/old Russian President cannot point to a reassuring track record in economic policy. His team is stagnating: it has not attracted newcomers for a long time, and existing essential staff, it seems, have exhausted their mental potential and political will to undertake reforms. All politicians know that the initiation of any reform (unless the situation is so severe that the necessity of change is recognized by the whole of society) leads to a decline in popularity that in democratic countries may result in electoral defeat, and in authoritarian countries may undermine the stability of power structures. Thus Putin’s desire (and the desire of those closest to him) to keep power in their own hands indefinitely is the main obstacle to any reform measures in Russia, to any rational decisions in the field of economic policy, and to real modernization of the country.
This article considers the role of Russia in the world economy and its slow recovery from the deep recession of 2008–2009. It examines the economic challenges facing the country over Putin’s next presidential term, with particular focus on demographics, dependence on the oil price, and the impact of that dependence on monetary policy, the budget and the balance of payments.
This article first appeared in International Affairs (London), Volume 88, Number 1, January 2012, pp. 31-48, and is reproduced with permission.