A Strong, Rich & Democratic Russia

The G-8 will meet this weekend in St. Petersburg, Russia. The Russians economy does not really qualify for the rich club and its commitment to democracy is tenuous and slipping, but we still respect a former superpower that retains the ability to lay waste to much of the globe. It is tempting to consign Russia to has been status. That would be a mistake.

Russia has been through times of troubles before. During the 1990s, we heard serious speculation about Russia's breakup or even disintegration. No more. Vladimir Putin has reestablished Russia and we are seeing stability and the beginnings of wider prosperity. He was vastly helped by the big increases in the prices of the commodities Russia sells. Russia has a vast store of energy and other resources. Russia prospers when the prices of oil, gas and gold rises.

Russia's biggest challenge is its demographic crisis. Putin is trying to address the birth rate problem. If he succeeds, he will be the first major world leader to do so, but in terms of birth rates Russia is no worse off than Germany. The problem is death rates. Russia has a death rate of 14.65 per 1,000 people. For comparison an "old" country such as Germany has a rate of 10.6 and a robust country like the U.S. has only 8.2. It is true that the Russian health care system is very bad, but much of the Russian death rate is attributable to really bad habits. Russians drink, smoke and have horrible diets. Putin is very interesting guy. The KGB trained him well and he has effectively used the old network domestically and abroad. But this is a big challenge even for a guy like him. Some of these habits have been around since before the first Vladimir.

During the 1990s we naively thought Russia would evolve into a democracy, sort of like a big Poland. Western experts gave them a lot of bad advice about the economy and all sides underestimated the damage of communism. In our defense, the Soviet collapse surprised everybody and many of us (me too) thought that simple privatization would fix the problems of communism. But a free market is a lot more than private ownership. Russia lacked a free market infrastructure, a rule of law and even a basic moral system. Seventy years of communism had destroyed civil society and the societal morality that goes with it.

Well-connected Russians got control of the big economic entities and corruption was rampant. Firms were private, but there was no free market. We compared Russian oligarchs to our robber barons of the 19th Century. They were not. Whether or not you like Rockefeller or Carnegie, they built companies and created wealth. Their Russian counterparts took over existing companies and drained wealth. It was almost exactly the opposite.

The situation was unhealthy, but we (the West) felt more or less in the driver's seat. Russia needed us. Now that Russia is once again asserting its great (if not super) power status, we are not exactly sure what to do.

Russian under Putin is not anti-American; it is just pro-Russian. That means asserting and expanding Russian prerogatives, especially in former Soviet republics, but also throughout Eurasia. This will not always work against U.S. interests. The Russians share our interest in stopping terror. They recently killed Chechen rebel leader Shamil Basayev, who masterminded the Beslan school siege. We can all be glad this guy is dead and should congratulate the Russians. We could really use their cooperation and in this field have generally been getting it. But in other areas our interests are diverging. The Russians, for example, are less enthusiastic about a drop in the price of energy than we would be and democracy among their neighbors is not one of their priorities.

If we recognize Russia for what it is - not an enemy but also not an ally and certainly not a subordinate - we can develop a mutually beneficial relationship. It will not be smooth all the time. It is better if the bumps do not surprise us and make us act foolishly.

What does the U.S. want from Russia? Ideally, we want a country that would be a good place for our business, a firm ally against the forces of terror and chaos and a partner in global leadership. We would, in short, seek a strong, rich & democratic Russia; it looks like we may get two out of the three in the short and medium term. Let’s not give up on the whole troika. It is worth working for, but recognize that the end goal might be a ways off.

A couple of good references.
G8 Webpage
Russia Wrong Direction
Russia Leaves the West

Posted by Jack at July 10, 2006 9:21 PM
Comment #166488


Putin is too KGB for my tastes. He is, however, the consumate politician. Seems everytime he’s heard to speak while in the West he’s on good terms with GW or Blair. But, this is more like the real Putin who speaks in a nationalistic tone to his fellow Russians and former soviet satellites. Unless and until he allows the Russian people to pick his successor - via election, not as HE chooses - then the old guard KGB types will slowly erode any democratic reforms in Russia, and usher in a new “strongman” era of leadership. Let’s hope not.

Posted by: JR at July 11, 2006 2:26 AM
Comment #166490

How are we supposed to hate conservatives and especialy the evil Chimpy with a post like this to respond too?
This foriegn policy stuff makes my head hurt!

I have a better idea, lets all chant “Bush Lied, Kids Died!” one hundred times, and then digitially oscilate ourselves while dreaming of Clinton making a comeback (no pun, he prefers the front of dresses) in a historic third term!
we will all feel much better then.
BTW, my Russian fiance can’t wait until she get to America and can go Carlos Jr’s with me again. She’s afraid that Mother Russia is backsliding towards its ugly socialist/communist past and wants to make sure she is somewhere decent to live and raise kids.

Posted by: HardHatHarry at July 11, 2006 2:31 AM
Comment #166492


Good article, I mostly agree. I think that Harrington’s view of the clash of civilizations is a good way to measure Russia. Russia has a deep cultural mistrust/fascination with the West and China. One of our major goals should be to bring Russia closer to the West and alienate China, which is a growing threat with the potential to be a more powerful enemy than the Soviet Union ever was.

In order for us to bring Russia closer to us, we need to recognize that democracy in Russia si not going to be the same as it is in America and respect that. The Russian culture has a history of authoritarianism that won’t be lightly dismissed. We should stop badgering Russia about the progress of democracy and focus on the positives. They are a natural ally in the war on terror, more so than Western Europe. They also are in possession of the last great untapped treasure chest of natural resources in the world in Siberia.

I think we should focus on building their economy. This will help thier people to gain a higher standard of living and give them a greater stake in their democracy as it develops. The best way to do this is to help the Russians establish systems that will foster transparency and limit corruption, which is a rampant problem. We should also develop our ties to their military. As we develop greater trust between us, the suspicion bred of the Cold War will ease.

Within this framework, we should recognize that Russia has a legitimate interest in the former members of the Soviet Union. We should not allow Russia to ride roughshod over them, but niether should we be too assertive in former Soviet territories. Russia has a proud memory of defeating attacks from the West, be them from Napoleon or Hitler. Pressing claims in former Soviet territory will only further harden them against us. As a weaker power, it will also drive them into the arms of the Chinese, which we really don’t want.

As far as the Russian demographic crisis goes, my girlfriend and likely future wife is Russian, and I specifically asked her about this as I want children later in my life. According to her, most Russians do. The problem is the economic instability and hopelessness that has pervaded the country. Many couples simply cannot afford to have children. Beyond this, many are afraid to bring a child into the world because of the economic instability. As Russias economic fortunes improve, there’s a good chance their demographics will improve as well.

Posted by: 1LT B at July 11, 2006 2:35 AM
Comment #166493


Off topic a bit, but this is a telling piece. Russian media views, does it remind you of anything?

Posted by: JR at July 11, 2006 2:44 AM
Comment #166498


I can’t possibly see how Russia under Putin can be an trustworthy ally:

-U.S. hedge fund managers gaining too much influence? Ban them from Russia.
-Human rights abuses? Never mind
-Khodorkovsky and Yukos too big for Vladimir? Renationalize it.

Face it. They just happen to have significant natural resources leverage on us. That’s the big reason we’re even talking to them, apart from the geopolitical Middle-East situation. Nothing more, nothing less.

Posted by: Josh Grant at July 11, 2006 5:50 AM
Comment #166499

Jack, a well balanced and reasonable treatment of the topic. Implicit in it is the recognition that a one size American model does not fit all cultures and nations. Please send a memo to your President of this fact. I am not sure he has given up his Democracy Domino Model for Middle Eastern Reform. Though there are encouraging signs.

I had recently graduated from College when Reagan was rejoicing in the USSR collapse, and his proponents were exalting Reagan as the great liberator. But, it was clear from my philosophy of economics classes, that Russia was not going follow an American capitalist/socialist mixed economy model under an open democratic government system. It couldn’t. Such a system requires the full faith and credit of the nation’s people in that government for it to work. And that was obviously not going to be the case with the Russian people. Nor were they going to replace corrupt bureaucrats with experts dedicated to the people’s welfare in one generation.

It was obvious that for Russia to stabilize, it was going to have accomodate strong authoritarian leadership in combination with semi-free elections, and elevating itself from its national debt through a combination of state managed revenue generating national resources concurrently with opening of international trade and the growth of private enterprise.

Russia has decades to go yet before their economy and middle class are firmly established and stable. But, Putin does seem to be making a great many of the right moves on these fronts. The big question for the short and mid-term future is, can this progress continue under a Putin successor? That is not clear at all.

Posted by: David R. Remer at July 11, 2006 6:00 AM
Comment #166500

“I had recently graduated from College when Reagan was rejoicing in the USSR collapse, and his proponents were exalting Reagan as the great liberator. But, it was clear from my philosophy of economics classes, that Russia was not going follow an American capitalist/socialist mixed economy model under an open democratic government system. It couldn’t.”


In fact it was an overdose of free-market capitalism that ultimately had to lead to a Putin-style authoritarian regime. He will never make the same mistakes Jeltsin made in overplaying his hand.

To quote wikipedia exellent analysis: “Boris Yeltsin’s elevation to power in 1991 meant an acceleration of the market reforms started under Gorbachev, which created a dynamic business environment in Russia for entrepreneurs like Khodorkovsky. In fact, market reforms were conducted so rapidly that they resembled looting. Stocks of the formerly state-owned enterprises were issued, and these new publically traded companies were quickly handed to the members of nomenclatura. For example, the director of a factory during the Soviet regime would often become the owner of the same enterprise. During Gorbachev’s and Yeltsin’s rule corruption of government officials became an everyday rule of life. Under the government’s cover, outrageous financial manipulations were performed that enriched the lucky individuals at key positions of the business and government mafia. While the manipulations of Khodorkovsky and his partners became well known to the public because of later court proceedings, criminal actions of many others are still kept in secret and are allegedly protected by Putin’s government.”

Posted by: Josh Grant at July 11, 2006 6:14 AM
Comment #166510


I am going to give into temptation and consign Russia to has-been status.

They do of course have nukes, so that does command a certain respect. But they haven’t managed to translate that into economic power.

If you blame Communism, then what about China? Within ten years of Mao dying, they were back on track. There must be something in Russia’s national character that is holding it back.

By the way, I just discovered a funny fact. Did you know a major newspaper revealed the fact that we had decoded Japanese cables in WWII? It wasn’t the NYT, though, it was the Chicago Tribune. Those conservative journalists will stoop at nothing. ;)

Posted by: Woody Mena at July 11, 2006 8:07 AM
Comment #166514

Josh Grant, thanks, that is an insightful quote you presented. But it was only part of the failure. The main other part was that the people themselves were not ready, trained, nore educated to assume responsibility for their government and its decisions, nor had they developed the democratic tools of protest, demonstration, coalition building, and holding elected officials responsible at election time (this latter being a rapidly growing problem we have here today).

Posted by: David R. Remer at July 11, 2006 8:59 AM
Comment #166528


Trying to draw paralells between China and Russia based on the one shared trait 20th century communism is dangerous.

Both countries have a rich history and neither will completely forget that history as well as the communists in the middle of the 20th century tried. While communism informs the history to some degree, they were both different communisms. China became capitalist much more gradually than Russia did and was never fully there. Russia tried the “shock therapy” approach and it never quite held.

When talking about countries, I prefer to define them by their possible future relative to their historical heights rather than their curent or near past.

Posted by: Rob at July 11, 2006 10:55 AM
Comment #166530


“Russia tried the “shock therapy” approach and it never quite held.”

It never quite held because the Russian people’s first real view of “Western” capitalism was tainted by the over the top greed and corruption demonstrated by their former “bosses”, and the rise of the Russian mafia.
The only true difference between the totalitarian regime of the past and the “capitalist” regime of the present was the amount of money it took to be miserable.

Posted by: Rocky at July 11, 2006 11:33 AM
Comment #166533


There are obviously a lot of differences between the two countries. I mentioned China because it is a counterexample to the argument that Communism inflicts injuries that take decades to overcome. As you point out, China is still somewhat Communist (in addition to the superficial fact of being run by the “Communist” Party), but they are producing like gangbusters.

I do hope Russia gets their act together, but the present is not encouraging.

Posted by: Woody Mena at July 11, 2006 11:39 AM
Comment #166551


The malveasence was definitely a contributing factor, but shock therapy was a flawed strategy from the beginning.


Communist China probably did inflict injuries that it will take decades to overcome. They started repairing those injuries a full decade ahead of Russia and are producing well now, but if you consider that they should be the world’s largest economy and aren’t and won’t be anywhere close for quite a while, they are still in the healing process. Russia tried the wrong healing strategy in the beginning and are only now where China was when they began the Agrarian reforms in the early 90’s. Hopefully, we can see similar progress over the next 15 years in Russia.

Posted by: Rob at July 11, 2006 12:40 PM
Comment #166618

Russia is fake democracy where the elections aren’t real and the poor are trampled. They are not our friends, and their government isn’t a model any other country should adopt. Things were a lot clearer when we weren’t trying to co-opt our enemies and didn’t turn a blind eye to fake democracies.

Posted by: Max at July 11, 2006 5:32 PM
Comment #166689


Re Chicago Tribune - yes. It was exactly the same sort of situation where a media outlet let its dislike of the current president stand in the way of its duty to its country. The response was also very similar. Like the NYT, the Tribune stood up on its hind legs and claimed its rights and duties and like the current administration, Roosevelt had to live with their bad behavior. It was wrong (although maybe not illegal) for the Tribune and it is wrong (although maybe not illegal) for the Times. They are both bad actors and should be ashamed of themselves. I think the Tribune by now recognizes its error. I suppose the Times will after the current group of arrogant goons leaves.

Re Communism - Communism hurt both China and Russia. China managed to come out quicker and there may be some structural problem with Russia. It is just that historically people have counted Russia out several times and they have paid the price.

Rob, David & Woody

One of our goals in Russia is to persuade them to allow Western & American firms more participation (including management) of projects in Russia. China long ago embraced foreign investment to a much greater extent. The foreigners brought not only capital, but organizational and management expertise. China was also lucky to have swallowed Hong Kong, one of the most free market oriented places on the earth. Finally, China benefits from a large overseas Chinese community that understands how to do business in a free market way. It is really a different situation.

Communism harmed China a lot. As many as 50 million people died as a result of communist mismanagement and actual malevolence. That is harm. It is also very easy to over estimate China of today. It has lots of structural problems that need to be sorted out. IN addition, it is unlikely that China can continue along its present path for purely ecological reasons. Many industrial areas of China are becoming literally unlivable. This is not the small time pollution we beat our breast about in the U.S.

China made the good choice of encouraging foreign investment and allowing foreign management to run much of the economy. In many others ways, however, it did much as Stalin did in the Soviet Union of the 1930s. It just threw massive human, environmental and material resources into development. Even in the Soviet Union, this worked. But it does not allow natural development. Centralized decision making just is not flexible enough.

The Chinese seem to be learning this. For the sake of the future of human freedom and a livable planet, I hope they do. If they were able to continue along with an authoritarian system AND succeed in developing their economy, we would face a freedom problem. And if they continue as they are despoiling the environment, we will have an air and water problem.

Posted by: Jack at July 11, 2006 9:07 PM
Comment #166737

Josh Grant, thanks, that is an insightful quote you presented. But it was only part of the failure. The main other part was that the people themselves were not ready, trained, nore educated to assume responsibility for their government and its decisions, nor had they developed the democratic tools of protest, demonstration, coalition building, and holding elected officials responsible at election time (this latter being a rapidly growing problem we have here today).

Posted by: David R. Remer at July 11, 2006 08:59 AM


David, you are absolutely right. But even with checks & balances present in both public and administration any country in extreme political and social transformation would OD on the dose of neocapitalism Jeltsin’s government injected into Russia’s veins. China is doing it gradually in a much more controlled manner and is doing a much better job than anticipated given their one-party government, in spite of not having decent checks & balances either leading to corruption, human rights abuses, freedom of speech, etc. Quite understandable though when looking at the mess western capitalism-influenced Jeltsin left for Putin to rule over.

Posted by: Josh Grant at July 12, 2006 5:50 AM
Comment #166883

China has many challeges to face. Perhaps the most serious problem is its large population of 1.2 billion and steadily increasing. The vast majority of its populace are living in the countryside in very poor conditions. To industrialize, modernize, and to bring better economic conditions to the majority of its people would be a very very difficult task. There are serious financial environmental, political, and geographical challenges. Its one-child policy is only practiced in the cities, and even that is only partially successful. The communist government under Mao contributed to this population problem. The people were told and encouraged to multiply without bound so that China will be powerful in numbers.

As for Russia, it can do much better. The country has many challenges ahead. Its political and economic system take time adapt and evolve as well as its people. The rapid changes had brought forth much turmoil and breed social ills. First and foremost, Russia needs to focus domestically; its economy, its people, its infrastructure, its government, and so forth. The government under Putin has not focus adequately on these important issues. The increase in revenues from oils and natural resources provided added opportunities to address these problems. It should give up its world power ambition, at least for the time to strengthen its foundation domestically. Even during Soviet times, using 15-17% of their GNP on military spending was a drain their economy. To be called a superpower while your citizens are repressed and they have to wait in long lines for bread and potatoes is hardly justifiable. Russia was not a true superpower to begin with. It relied and depended on the west, much from the U.S., for their military and technological prowess. The U.S. and other western countries helped created this Soviet superpower. The chapters in the link below will more fully describe. Information which our government and establishments do not want us to know.


The U.S. should be very cautious when dealing with Russia and China in aiding them especially, technologically. We should also oversee the actions of our government more closely. What we are provided to them can be used or leveraged against us in the future. The mentality of the Russian government has not change much in such a in short time. After all, its leader is a former KGB, and its top government officials are also former KGBs.

Posted by: Daniel at July 12, 2006 5:46 PM
Comment #166989


While Russia may not have been a superpower in terms of its citizens’ well being, it definitely was militarily. Without any help from us or anyone else, they developed the T-34 and other tanks that were vastly superior to ours and they produced them in staggering numbers. In fact, until the advent of the M-1 Abrams, Russian tanks were consistenly qualitatively superior to ours.

I agree with your assessment of China. It is my belief that our long term foriegn policy should be to isolate China as much as possible. To do this, I recommend several courses of action. First should be to remove American owned manufacturing from China and relocate it. First priority should go to nations around China that are its enemies, such as Vietnam, Taiwan, and India. By enhancing their power and thier reliance on the US, we give ourselves a stronger hand. We should also focus on developing stronger economic ties with the rest of East Asia to give us a larger footing against the Chinese. Finally, we should be investing heavily into South and Central America. They could probably very easily produce much of the junk that we buy from China, and they are no threat to us. By building them up, we lower our reliance on China, decrease the amount of capital going to them that they are using to fund their military, and just might address the problem of poverty in South and Central America that’s at the heart of our own illegal immigration problem.

As this relates to Russia, it is vital that we move Russia further to the West and alienate them from China. With the US as the sole superpower, it is only natural for China and Russia to ally themselves to attempt to counterbalance the US. We should do everything in our power to bring Russia into the West as this would further alienate China and reduce their influence.

Posted by: 1LT B at July 13, 2006 2:49 AM
Comment #167059


The Soviet received much technological help from from the West, including the U.S., in the developement of the T-34. The U.S. also built their plants which manufacture their tanks and trucks.


I would recommend to read all the chapters I have given. A very interesting, and eye opening materials. For a more comprehensive exposure of how the West built up the Soviet, I recommend the 3 volumes written by Antony Sutton, “Western Technology and Soviet Economic Development” for those further interested. The technological and economic assistant was massive, more than many of us have imagined.

Posted by: Daniel at July 13, 2006 11:33 AM
Comment #167068

Soviet tanks are not vastly superior. Compared to the Sherman, maybe; but not the Pershing. The Sherman is a light tank designed for infantry support, reliable, fast mobility for offense, and mass transport accross the Atlantic. It is one of the best tank of WWII for what it was designed for. The U.S. philosophy at the time was using a separate specialized heavy armor tank-destroyer tank which eventually cancelled. By the way, the U.S. Pershing tank can hold its own against the T-34 during the Korea War.

Posted by: Daniel at July 13, 2006 11:58 AM
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