Opinion |

Under Putin, Russia Opts to Be a Sham Superpower

Putinomics is all about political stability. Russia isn’t Europe’s only underdeveloped economy, it’s the one with the poorest excuses

David Rosenberg
David Rosenberg
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Russian President Vladimir Putin speaks to supporters during a rally near the Kremlin in Moscow. March 18, 2018. He is wearing a coat with a fur collar and seems to be almost yelling into a microphone.
Putin speaks to supporters during a rally near the Kremlin in Moscow. March 18, 2018. Credit: Alexander Zemlianichenko/AP
David Rosenberg
David Rosenberg

Maybe the 77% of Russian voters who backed Vladimir Putin in Sunday’s election really believe his promises to do something about Russia's moribund economy. They probably didn’t, though.

In his annual State of the Union address, Putin said Russia should aim to be among the world's top five economies – thereby admitting it isn't one. He also laid out plans for high-paying jobs and even for more democracy.

Voters however were likely more impressed by the video that accompanied his speech, showing what Putin called a nuclear cruise missile he claimed is invulnerable to U.S. defenses.

“Russia remained a nuclear power, but no one wanted to speak to us. No one wanted to listen to us. Listen to us now,” he warned.

A guns kind of guy

He did actually did devote time to economic issues in his speech. If you were to take Putin at his word, he comes off as a progressive and informed leader, aware of the challenges Russia faces in a world where innovation drives economic growth, and is increasingly the source of political and military power.

But make no mistake about it, Putin is a guns kind of guy, not some buttery wimp.

He did undertake some economic reforms in the very early years of his regime – rationalizing the tax system, privatizing agricultural land and cutting the red tape that was stifling small business. But that all came to an abrupt halt in 2003, when the reformers were run out of the Kremlin and replaced by Putin’s St. Petersburg cronies.

Yukos – the best-run of Russia’s private sector energy companies – was illegally seized by the state and its boss, Mikhail Khodorkovsky, was hounded, arrested and eventually forced into exile.

The result is the creaky, corrupt rust bucket of an Russian economy we know today.

Some observers look back to those days and say that lurking deep inside Putin is a reformer struggling to get out. Maybe now, in what could his final term in office, he will do the things that he secretly yearns to but hasn't. But how likely is that?

Putinomics, such as they are, is all about political stability, not economic development. It relies on not offending key constituencies, like his allies in the state business sector, or the remaining oligarchs, or the masses working in inefficient factories, or the generals who have enjoyed big increases in defense spending.

What Putin didn't do

The early Putin years were probably more akin to the early Trump months, when a new and untried leader listens to his advisers (even if he doesn't necessarily heed them). As he gains confidence, he proceeds to ignore them and to rely more on people who think like he does, or at least say they do.

With Trump, America got tariffs. With Putin, the Russians got crony capitalism.

Credit: Evan Vucci/AP

Russia may well be the biggest waste of human resources in the world today. Russia has some very serious demographic problems, in an aging and shrinking population and a spotty record on entrepreneurship, but it also has a long history of scientific and technological advances (alas, most of it used for military purposes).

Putin could have used his two decades in power to transform the country into an economic and technology superpower. The Skolkovo Innovation Center near Moscow was supposed to become Russia’s Silicon Valley, but instead has become mired in the corruption and paranoia of Putin’s Kremlin.

Today Russia doesn’t have a single company in the old or tech economies that counts as a global power and/or brand. The Russian economy runs on exports of oil, guns and wheat. On the World Economic Forum’s Global Competitiveness Index, Russian ranks behind Azerbaijan. It’s the world’s sixth-largest market but only the 94th-largest exporter. In GDP per capita, it’s 71st in the world.

Russia isn’t Europe’s only underdeveloped economy, but it’s the one with the poorest excuses.

Putin isn’t going to change any of this, not because he’s corrupt and interested only in staying in power, but because he believes the system works.So apparently do a majority of Russians.

What he and the majority of Russian seem to want to do is fix the broken parts, but basically keep it intact. The dislocations of the 1990s are still fresh in the minds of too many people.

As autocrats go, Putin isn’t economically irresponsible. In response to the low oil prices and Western sanctions that hit Russia’s economy hard after 2013, he reduced Russia’s foreign debt, kept inflation low and devalued the ruble; Russia survived the trauma, albeit at the cost of anemic growth and a missed opportunity for economic reform.

Also, Putin seems to be a Russian patriot and genuinely wants what’s best for his country. But he (and it seems most of the Russian people) see "best for Russia" in terms of raw military power and the ability to withstand what they see as the ever-present threat of the West.

Russia perceives its adventures in Syria and manipulation of the American and other western elections as manifestations of that power more than the idea that it could or should have its own Google, Alibaba, Uber or Samsung.

Like China’s Xi Jinping, who made himself president for life, Putin sees centralization of control and the uncontested vision of the leader as the only way to ensure stability and pursue the nation’s best interests.

Putin is wrong. In the 21st century, global power is about innovation, the ability to respond to rapidly changing economic conditions and creating a solid middle class to give society a solid backbone of human capital. While Putin applies the brakes, Russia is watching the world pass it by.



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