Russia's Economic Crisis and the Ruling Elite
"The current crisis in Russia is a systemic collapse not a sign of renewal," remarked Donald Jensen at a Kennan Institute lecture on 16 November 1998. Jensen, Associate Director of Broadcasting, Radio Free Europe/Radio Liberty, Prague, noted that Russia needs good governance, the rule of law, and the values of good citizenship.
Jensen gave both proximate and larger causes for the crisis. According to Jensen, the proximate causes are: financial aspects such as the decline in oil prices and other commodities and continued poor tax collection; the confidence problem brought by the Asian financial difficulty and the misuse of the IMF's July 1998 loan installment; and the political results of Yeltsin's erratic leadership, health problems, and the personality-driven policy making of the past few years.
One of the broader causes for the current crisis is the failure to implement sustainable economic reform policies that had adequate domestic support. The recent policies emphasizing macroeconomic stabilization and control of inflation have not worked. The stabilization that had been the center of Russian economic achieve-ment is now gone. The speed at which the crisis unfolded indicates the broader problem of how Russia was trying to govern itself and implement reform.
The Russian state has become even weaker and is unable to implement many policies or stop capital flow outward. The result, Jensen stipulated, is a fragmentation of power, from the center to the regions and from the so-called official government institutions to interest groups and quasi-state institutions. This fragmentation--sharpened by the impending presidential succession struggle--is the fundamental problem confronting Prime Minister Yevgeny Primakov and any future Russian president.
Jensen then turned to a discussion of Primakov and the role of the oligarchs. According to the speaker, Primakov's government, with its representatives from industrial, regional, financial, and social groups, constitutes an elite consensus that seeks to keep Russia away from the political, social, and economic abyss and somehow hold out hope for a future government and presidential administration by buying domestic stability and managing the decline.
Primakov is thus far managing to balance the main interest groups in the society, much as Yeltsin did. The problem, Jensen noted, is that Primakov lacks the legitimacy that Yeltsin had as an elected president. If he begins to act in a more "presidential" manner, he risks losing credibility as a neutral arbiter--which is his appeal right now.
The fundamental truth in current Russian politics goes beyond the oligarchs, Jensen noted. Elites govern the country. Much of politics is informal not formal--formally portrayed in constitutions and laws. Power is highly personalized and often money is the currency of political power. The distinction between public and private power is blurred. This, combined with weak institutions, creates a system ripe for the influence of strong interest groups.
The oligarchs are rearranging themselves because, Jensen noted, the system is fundamentally elitist and arguably anti-democratic. There are no intermediating government institutions to balance the demands for a civil society as the West understands it. Some oligarchs such as natural resource exporters like Gazprom and Lukoil are better positioned economically to take advantage of the current situation than others.
What is Russia's future? Jensen discussed three possible scenarios. One is a slow economic and political recovery focusing on the institutionalization of democratic processes, repatriation of money from abroad, and reform of the tax system. The second is continued degeneration and decline until Russia somehow reaches equilibrium. Third would be an authoritarian variant under a leader like Krasnoyarsk oblast governor and former National Security Chief, Aleksandr Lebed, in an attempt to restore order under authoritarian means. Jensen remarked that the second scenario is the most likely.
The upcoming legislative and presidential elections will be accompanied by a radical rewriting of the constitution in a way that diminishes the power of the presidency and probably increases the power of the Duma and the Council of Ministers, Jensen remarked. This is a systemic crisis of governance as well as the exhaustion of the powers of a particular president. The programs of the three leading presidential candidates--Lebed, Moscow Mayor Yuri Luzhkov, and Communist Party head Genadii Zyuganov--are more assertive, nationalistic, and advocate a greater state role in the economy.
The regime needs legitimacy, Jensen concluded. Russia has not just undergone economic collapse. Building on a statement made by Alan Greenspan, Jensen noted that culture matters, but so does good leadership and good policy. Russia seems to lack all of the above.
About the Author
The Kennan Institute is the premier U.S. center for advanced research on Russia and Eurasia and the oldest and largest regional program at the Woodrow Wilson International Center for Scholars. The Kennan Institute is committed to improving American expertise and knowledge of Russia, Ukraine, and the region. Through its residential fellowship programs, public lectures, workshops, and publications, the Institute strives to attract, publicize, and integrate new research into the policy community. Read more