False Economy - Alan Beattie [140]
The same, sadly, could not be said for Russia. It often shows little more desire to learn from Western institutions than it did during the centuries of tsarism. It has little history of market economics to draw on. A story detailing this used to be told around the Bank of England. The bank has a valuable but little-known unit that runs training courses from central bankers around the world. It was particularly busy in the early 1990s, when streams of officials arrived from the Soviet bloc with training in nothing but Marxist economics. When one such group came for their course, so the tale goes, they professed to understand perfectly the way that prices were set in a market economy by the intersection of supply and demand. But they still expressed disbelief that no government bureaucrat was required to actually post the price. How could prices just emerge without the state saying so? Eventually, according to the story, the officials were taken to Smithfield meat market in the City of London to show them the magic at work.
Even after the initial shock of transition wore off, Russia has lurched from boom to crisis. It defaulted on its government debt in 1998, sending shock waves around a world still being battered by the Asian financial crisis that did in Suharto. Its economy was run for a while by a group of "oligarchs" who, by exploiting weaknesses in the market system, enriched themselves enormously. The oligarchs have their defenders, and some may have done some valuable work in turning around crippled Soviet-era industries. But their disproportionate control over the economy, not to mention the corners that some cut to make their wealth, as well as their intermittent interventions in politics, invited a backlash against the whole idea of free market economies and democracy.
That backlash has duly arrived in the shape of the policies implemented by Vladimir Putin, Russia's prime minister and former president.
Just as Muscovy went in a different direction from Western Europe, so Russia has parted company with its former satellites. Central and Eastern European countries are mainly striving to become liberal democracies, but Russia has systematically sucked power back from independent institutions into the state. The press has been muzzled, bought off, or intimidated into quiescence; nongovernmental organizations have been hamstrung by rules strictly limiting their activities and their funding; provincial governors, who formerly enjoyed a lot of freedom to tax and run their regions, have been brought under the control of Moscow; the Duma, through electoral manipulation and constitutional maneuvering, has been reduced to little more than a rubber stamp.
Sound familiar? Not for nothing has Putin been compared to tsars of centuries past. A favorite comparison is to the hardline Nicholas I, who ruled in the first half of the nineteenth century. Putin himself has unashamedly claimed a Russian exceptionalism. He wrote in 2000: "From the very beginning, Russia was created as a super-centralized state. That's practically laid down in its genetic code, its traditions, and the mentality of its people."
Meanwhile, though incomes grew rapidly in recent years, much of the rise was linked to the run-up in energy prices that made Russia's huge oil and gas deposits much more valuable and bailed out its formerly bankrupt government. Some of the oil and gas money was recycled into other parts of the economy. But rises in income ran well ahead of productivity growth, suggesting that much of Russia's newfound prosperity rested on oil derricks and gas pipelines and was vulnerable to renewed weakness in energy prices. Even the oil and gas sector itself underperformed, and foreign companies that might have helped improve productivity were driven out. And as we saw in the chapter on oil and diamonds, the combination of a powerful unaccountable state and an abundant mineral