Russia’s post-Soviet transition after twenty years of Putinism

Andrew Foxall,
Dr, Director of Research,
Director, Russia and Eurasia Studies Centre,
Henry Jackson Society,

When Vladimir Putin became president of Russia, 20 years ago, the country was reeling from the aftershocks of the fall of the Soviet Union and the 1998 financial crisis. Over the course of the previous decade, the country’s economy had almost halved in size, shrinking to be only the 21st largest globally. Poverty had soared, as life expectancy and incomes plummeted. Russia’s enfeebled military had lost a war in tiny Chechnya.

Two decades on, Russia’s economy is the 11th largest globally. Per capita income has nearly doubled in hard currency terms, from less than US$ 6,000 to almost US$12,000 today. Life expectancy has increased to 72.4 years, just below the world average. The country has joined the World Trade Organisation, and hosted a G8 summit, a Winter Olympic Games, and a World Cup.

But that is not the whole story. An increase in global energy prices, rather than astute policymaking, has been responsible for economic growth; between 1998 and 2008, oil prices increased six-fold. Russia is now more isolated than at any period since 1991, as a result of its foreign policy follies in Ukraine and Syria. Incomes have declined for five straight years. Rosstat, the state statistics service, said last year that 79.5 per cent of families had difficulties making ends meet.

Putin came to power promising to raise Russia from its knees. In his first speech as acting president, he vowed to “protect freedom of speech, freedom of conscience, freedom of the mass media, ownership rights, these fundamental elements of a civilized society”. In reality he has created an authoritarian system in which elections and political institutions have been hollowed, civil and political rights have been eroded, and critical journalists and political opponents are killed.

This system is based on massive predation. In 2017, the Association of Chartered Certified Accountants, the global professional body for accountants, estimated that the “shadow economy” represented more than one-third of Russia’s gross domestic product (GDP), or around US$615 billion. This is greater than the entire GDP of Poland. Such predation is not a flaw in Putin’s system, but is the basis of the system itself.

Yet there are signs that this system is starting to come apart. Economic stagnation over the past half-a-decade has been accompanied by political turmoil over recent years.

Despite draconian restrictions on freedom of assembly, last year saw widespread anti-government protests in all-but-two of Russia’s regions. The political opposition is increasingly resilient. Grass-roots activism is on the rise. Russians now take to the streets to voice grievances about deteriorating public services. And the situation could get worse: one in four Russians is prepared to take part in mass protests over falling incomes, according to an opinion poll by the Levada Centre.

Putin’s approval ratings received a boost after Russia’s annexation of Crimea in 2014 and the launch of a subsequent ‘rally-round-the-flag’ campaign, reaching an all-time high of 87% in August 2014. But the long-term trend does not bode well for the president. Upon his re-election as president in 2018, Putin’s approval rating stood at 80% — the highest for any presidential candidate in Russia’s post-Soviet history. Last year, this figure fell to 68%. More importantly, Putin’s level of public trust fell to just 31% last year – its lowest level since 2006.

Putin’s two decades in power provided him with almost unlimited financial and political resources with which to modernise the country. Instead, he built a grotesque kleptocracy. Russia is now the world’s most unequal society. It is a country in which, according to a recent report by Credit Suisse, the richest 1% of the population controls almost 60% of the country’s wealth. There are 110 billionaires in Russia and their combined wealth is greater than the entire population’s savings.

Putin has spoken regularly over the last two years about the need to return Russia to economic growth. But the next four years of Putin’s second second-term in office are likely to be characterised by greater stagnation and decline. He has implemented a highly ambitious six-year programme through to 2024, of state-led and state-financed ‘national projects’. But these have run into difficulties. Bureaucratic and top-down, the individual projects provide plenty of opportunities for predation.

In reality, in order to achieve meaningful change and economic growth in Russia, it would be necessary to undertake systemic reform. This is the same situation Putin faced when he came to power, on the turn of the millennium. But now, as then, such widespread reform is seen as a threat to the county’s stability and Putin’s hold on power, and so it is out of the question.

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