Russia needs help to be 'normal'

By Martin Wolf

Financial Times

Published: May 11 2005

Vladimir Putin's recent remark that the dissolution of the Soviet Union was "the greatest geopolitical catastrophe of the century" reminds us that Russia is not just another country in transition from the communist past. For many Russians, including the former secret policeman who is their president, the loss of their empire, their state and their ideology remains a source of resentment. Yet Russia will only be a normal country when its people welcome their freedom rather than regret their power.

The greatest catastrophe of the 20th century was not, in fact, the dissolution of the Soviet Union, but its creation. The Soviet party-state was the organisational model and negative inspiration for Hitler's National Socialism. The heroism of the people of the Soviet Union destroyed that vile regime. For that, humanity must remain eternally grateful. But we must also recognise that the psychopath who controlled the Soviet state made that war far more likely and more costly than it needed to be, not least for his own people. No less is it true that what came to those liberated by the Red Army was not freedom, but four and a half decades of imprisonment. As for the Soviet Union itself, the experiment resulted in the deaths of tens of millions and, in the end, destitution.

What then is the proper attitude of the west to contemporary Russia? It is one of admiration for the courage of the Russian people and of gratitude for their contribution to our culture. Yet it is also one of pleasure over the collapse of the Soviet regime and of hope for the emergence of a modern, prosperous and democratic Russia. Unfortunately, an unassuaged desire for a great power's role in the world, for imperial sway in the "near abroad" and for the concentration of power at home is a huge obstacle to that future.

Andrei Shleifer, the controversial Harvard economist, denies any reason for concern. Russia is, he insists, "a normal middle-income democracy".* Moreover, he continues, "that Russia today has largely broken free of its past, that it is no longer 'the evil empire' threatening both its own people and the rest of the world, is an amazing and admirable achievement."

Professor Shleifer is not altogether wrong. If we ignore Russia's brutal assault on Chechnya (as we should not), we can agree that the empire's dissolution has been astonishingly peaceful. We must admit, too, that Russia has largely accepted its loss of influence over the Baltic states and, more recently, over Georgia and Ukraine. Mr Putin is not a western democrat, but he is also no Stalin. Russia does not have a western market economy, but the centrally planned dinosaur is dead.

Yet Prof Shleifer is also not right. After a period of substantial, if limited, progress, there is now significant regress. The recent governance indicators from the World Bank show a marked deterioration in already low levels of "political voice and participation". The rule of law has, suggests the Bank, improved marginally since 2000, but is far below levels in central and eastern Europe (see charts). The onslaught on Yukos, the oil giant, however popular, puts the security of property into question. The concentration of power in the Kremlin similarly undermines the claim that Russia is a working democracy.

True, partly because of the past reforms and partly because of the devaluation of 1998, the economy has enjoyed a strong recovery. Measured real gross domestic product rose by 48 per cent between 1998 and 2004. Yet here again are worrying signs. As the latest survey from the Organisation for Economic Co-operation and Development points out, well over half the increase in industrial output since 1998 has been in the resource-intensive sectors. While trend economic growth was 6.6 per cent a year between 1998 and 2004, investment rates have been an unsustainably low 18 per cent. The overall current account surplus of around 10 per cent of GDP is insanely large. After a period of decline, capital flight is again on the rise (see chart).

According to the World Bank, Russia now resides between Venezuela and Egypt on voice and accountability. The deterioration since 1996 is similar to that in Myanmar. On all the World Bank's indicators of governance - accountability, stability and lack of violence, government effectiveness, regulatory quality, rule of law and control of corruption - Russia remains well below other big middle-income countries such as Brazil and Mexico, let alone central and eastern Europe and the Baltics. Russia is not a "normal" middle-income developing country. It is a vast Venezuela - with missiles.

Yet, even if it is no superpower, Russia remains a pivotal country. It has the capacity to destabilise not just the Eurasian land mass but, given its nuclear arsenal, even the world. The danger is that the increasingly arbitrary exactions of the "party of power" will, whether blessed by Mr Putin or not, further undermine the economy and, in the inevitable search for scapegoats, damage domestic property rights, and destabilise Russia's struggling neighbours.

Russia's inability to accept the mediocrity of its circumstances and treat the loss of its empire and its ideology as an opportunity, not a calamity, is a threat to itself and its neighbours. Yet an opportunity is what it is. It would be far better for the Russians themselves, let alone their neighbours, to live in a prosperous, stable and free society than to gnaw on the bones of lost grandeur.

The choice can only be made by the Russians themselves. But the west must try to help. It should make clear its determination to help the newly independent countries of the former Soviet Union choose their own path. It should insist on its belief in its own democratic values. And it should offer a free and democratic Russia full participation in the European economic area and the open world economy. Above all, it must remain united in dealing with Russia. Nothing could be more damaging, or more disgraceful, than an attempt by European powers to use an increasingly despotic Russia as an ally against the US superpower.

The west needs to oppose Russian abuses not out of hostility, but out of a desire to help the transition. The west cannot determine Russia's future. But it can raise the price of imperial nostalgia and increase the attraction of liberal reforms. That may not be enough. But it is the least we can do.

* A Normal Country: Russia after Communism (Harvard University Press, 2005).

martin.wolf@ft.com