By Arun Srivastava
The political leadership of the capitalist countries and their policymakers are in a state of utter slipup on how Putin got massive mandate and also how to deal with Russia and its economy under him. While slapping sanction the Western world had visualised that Putin would come to his knees and abide by their dictates. But it did not happen.
What was shocking for them was after introducing economic sanctions in 2014, Putin emerged as the strongest leader Russia has produced in recent times and resuscitating the lost pride of the country. Significantly the western countries and their allies were consistently under pressure from their business communities to lessen sanctions or else risk losing markets to Chinese and other Asian companies.
The rightist forces and the capitalist political leaders along with some of their Asian friends were sure of their understanding that Putin would lose the mandate. They have been consistently hatching plans to discredit him in the eyes of Russians. But unfortunately for them their machinations did not succeed.
Now the latest development, Russians voting by a landslide to pass constitutional changes that will allow Vladimir Putin to run for president twice more, potentially extending his rule until 2036 has unnerved the capitalist countries. Questioned are being raised over the feasibility and ethics of his getting the mandate. The western block has started the move to bracketing him with the Chinese president Xi Jinping.
Constitutional amendments allow Russian president to run two more consecutive times. Around 78 percent voted yes to the amendments, versus 21 percent against. Turnout was about 65 percent. He has already led Russia for more than two decades, as either president or prime minister. By the time of the 2036 election, Putin would be 83.
Putin is also being accused of rigging the election. But the rightist forces are apparently scared to raise this issue publically. The capitalist countries are intrigued at this achievement more for the reason that it would alter the global balance of power. In fact the western countries and their buddies in Asia are busy trying to find out the reasons for this massive mandate.
Putin’s career in the KGB gave him an aura of determination and strength. At the same time, Putin boasted some liberal credentials. He has not been an ardent follower and believer of Marxism and had described communism as “a blind alley, far away from the mainstream of civilization.” It is interesting to note that the western world is yet not willing to accept that he is a non-believer of Marxism. They view him with some amount of suspicion.
Though his determination to restore the prestige of Russia and impel it as the strongest country won him the appreciation of the Russians, it was his economic policy that established him as an unenviable mass leader.
Under Putin’s leadership the Russian economy has shifted from crony capitalism to state capitalism, which is an economic system where the means of production are privately owned, but the state has considerable control over the allocation of credit and investment. Marxist literature defines state capitalism as a social system combining capitalism with ownership or control by a state. By this definition, a state capitalist country is one where the government controls the economy and essentially acts like a single huge corporation, extracting the surplus value from the workforce in order to invest it in further production.
Though Putin pushed the economy towards state capitalism, he did not follow the western capitalist line of reforms. It is really something amazing that the share of extreme wealth in the Russian economy has risen, with 111 Russians on the 2014 Forbes World’s Billionaires list, up from 42 a decade earlier. These billionaires may account for as much as a third of the country’s wealth (Credit Suisse 2014). Large infrastructure projects like the Sochi 2014 Olympics, the 2018 World Cup, and the Kerch Strait Bridge linking Russia with Crimea, are entrusted to a group of billionaires with close links to Putin.
A closer look at the economic policies being pursued by Narendra Modi may look like a copy of Putin’s policies. But there is large disparity. Putin has resuscitated part of the Soviet Union economic space under the new Eurasian Economic Union that came into force in January 2015. Its ambition is to integrate Russia with former Soviet republics—Armenia, Belarus, Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan—and form an economic bridge to Asia.
Vladimir Putin’s most enduring legacy will be his strongman’s attitude towards running Russia. By mid-2015, about 55 percent of the Russian economy was in state hands, with 20 million workers directly employed by the government, equal to 28 percent of the workforce. This is the highest share in 20 years, after the two privatization waves in the early and mid-1990s. In comparison, 22 percent of the workforce was employed by the government in 1996.
Since the start of Putin’s term in power, the share of extreme wealth in the private sector has been steadily increasing. There are more billionaires residing in Moscow than in any other city in the world.
The Eurasian Economic Union serves a dual purpose—it advances Putin’s imperial ambitions across the former Soviet Union and also serves as a bridge towards economic cooperation with Asia. During the past year, economic union has been increasingly used to substitute American and European financing for Russian companies with financing from China.
Putin has also used the Eurasian Economic Union as a tool to increase trade with East Asia. The Eurasian Economic Union is similarly active in China’s “New Silk Road” project, with a number of infrastructure investments linking China to Europe through member countries signed or under way. For example, China is investing $5.8 billion in the construction of the Moscow-Kazan high-speed railway and another $8.2 billion on infrastructure projects in Kazakhstan. Today the two countries are the best friends.
The concentration of political and economic power in Putin’s hands has led to an increasingly assertive foreign policy. After economic sanctions were imposed on Russia, the Eurasian Economic Union has also been a means of bringing Chinese money into the Russian economy to substitute for lost American and European financing.
The watershed moment in the reversal from crony capitalism towards increased state ownership of the Russian economy occurred when billionaire Mikhail Khodorkovsky was arrested and charged with fraud in October 2003. The government also nationalized the shares of his oil company Yukos, citing tax evasion.
Russia had no reformers as there was absence of political competition; there is no incentive to implement unpopular reforms. Reformers are elected to implement structural transformations in the economy in hard times. But if reformers cannot win elections, as has been shown repeatedly in Russia, then the desire to be a reformer is not present either. (IPA Service)