Strong presidency, weak institutions. The problems of modernisation in the

Russian Federation

Presentation at the Aleksanteri Institute, Helsinki, 14 March 2012

Dr Nadir KinossianUniversity of Tromso, Norway

Contents

• The role of institutions in development• Programme articles by Putin• The Skolkovo case• The problems of modernisation

Acemoglu, D. and Robinson, J. (2012) Why Nations Fail

“Central to our theory is the link between inclusive economic and political institutions and prosperity. Inclusive economic institutions that enforce property rights, create a level playing field, and encourage investments in new technologies and skills are more conducive to economic growth than extractive economic institutions that are structured to extract resources from the many by the few and that fail to protect property rights or provide incentives for economic activity” (pp. 429-30).

Acemoglu, D. and Robinson, J. (2012) Why Nations Fail

• “growth under extractive institutions will not be sustained, for two key reasons. First, sustained economic growth requires innovation, and innovation cannot be decoupled from creative destruction, which replaces the old with the new in the economic realm and also destabilizes established power relations in politics.

• Second, the ability of those who dominate extractive institutions to benefit greatly at the expense of the rest of society implies that political power under extractive institutions is highly coveted, making many groups and individuals fight to obtain it. As a consequence, there will be powerful forces pushing societies under extractive institutions towards political instability” (p. 430).

Sakwa, R. (2011) The Crisis of Russian Democracy

• “a dual state has emerged in which the legal-normative system based on constitutional order is challenged by shadowy arbitrary arrangements, dubbed in this book the “administrative regime”, populated by various conflicting factions. The tension between the two is the defining feature of contemporary Russian politics” (p. viii).

• “these two blocs have become locked into stalemate, preventing a radical move towards a more genuinely open and competitive political system and a debureaucratised economy” (p. 44).

Sakwa, R. (2011) The Crisis of Russian Democracy

• “Factional activity is focused on state structures, exploiting weakly developed institutional frameworks to advance their interests... Factions are generated by the political system and shape the nature of the regime but cannot entirely subvert the normative state... Factions are mutually interested in maintaining balance; the instinct of self-preservation where politics within the administrative region is not a zero-sum game ensures that no single group entirely captures the state... Factional balance, however, was precarious, and hence all were united in ensuring a strong presidency that could act as arbiter; but by the same token, the factions inhibited the president from aligning unequivocally with any single faction” (p. 105)

Kononenko, V. & Moshes, A. Eds. (2011) Russia as a Network State

“a sort of symbiosis between informal groups and formal institutions of the state has emerged in the past decades in Russia in which the elite groups foster their own special interests by infiltrating institutions, in effect merging with the state, while at the same time maintaining their own position as unaccountable to these institutions. The state is thus chronically weak and subordinate to the networks, yet it is kept afloat as a sort of institutional carcass that the networks need... It is argued that during the years of its post-Soviet existence and particularly during the leadership of Vladimir Putin (2000–8), Russia has evolved into a type of state where governance is encapsulated within the symbiosis between networks and institutions.” (p. 5).

´Our tasks´ V. Putin (30.01.12)

• “there was a large-scale de-industrialisation, with a loss of quality and the structure of production becoming too simple, which explains our excessive dependence on the import of consumer goods, technology and complex products, as well as on the fluctuation of prices of our main export goods.”

• “We need a new economy with a competitive industry and infrastructure, a developed services sector and effective agriculture: an economy based on modern technology. We must develop an effective mechanism for modernising our economy and attract the huge material and personnel resources needed to achieve this goal.”

´Our tasks´ V. Putin (30.01.12)

“To regain technological leadership, we need to select priority sectors wisely. Candidates include the pharmaceuticals industry, high-tech chemistry, composite and non-metallic materials, aircraft manufacturing, information and communications technologies and nanotechnology. And Russia’s nuclear and aerospace industries have maintained their international leadership positions and technological advantages. This list is not closed; more industries may be added, depending on international market trends and, to a large extent, on the initiatives proposed by business owners and workers in these and other industries.”

´Our tasks´ V. Putin (30.01.12)

“The strategies of the large industrial holding companies were aimed at creating internationally competitive corporations, with high market capitalisation and stable or expanding niches on the global market. It is these corporations, engaged in versatile activities from the most advanced research and product design to manufacturing, supply and maintenance of their high-tech products, that control the global markets for aircraft, ships, computers, pharmaceuticals, medical equipment and other products. They provide the orders for small innovation companies and are taking over successful start-up businesses.”

´Our tasks´ V. Putin (30.01.12)

“We are losing in the competition of jurisdictions. Businesses operating in Russia often prefer to register property and transactions abroad. This has nothing to do with our tax regime, which is, in general, competitive. Nor does it have anything to do with the lack of legislation meeting modern requirements... However, the main problem is rooted in a lack of transparency in the work of state representatives from customs and tax services and their accountability to society. This is also true of the judicial and law enforcement systems. Calling things by their names, this amounts to system-wide corruption. Business expenses and the related payments may vary, depending on the “benevolence” of certain officials within the state machinery. In this case, business people find it more appropriate to seek out patrons and to come to some kind of agreement, rather than abiding by the law.”

´Our tasks´ V. Putin (30.01.12)

“We must alter our state, as well as our executive and judicial branches. We must do away with the accusatory bias of law enforcement, investigative, prosecutorial and judicial agencies. We must eliminate all vestiges and leftovers of Soviet-era law enforcement concepts and all legal snags that make it possible to open up a criminal case against any party involved in a commercial dispute. All economic cases must be tried by commercial courts, rather than by general jurisdiction courts. We must openly discuss and submit all the necessary specific proposals on this issue together with the expert community, judges and business people before the year is out. I am confident that State Duma deputies will support these amendments.”

´Democracy and the quality of government´, V. Putin (06.02.12)

• “Sustainable social development is impossible without a competent state, while genuine democracy is a fundamental condition for developing a state designed to serve public interests.”

• “Real democracy cannot be created overnight and cannot be a carbon copy of some external example. Society must be completely ready for using democratic mechanisms.”

´Democracy and the quality of government´ (06.02.12)

• To liberalise the legislation on political parties;• To have public involvement between elections;• To expand the electronic government;• To strengthen cities fiscal base;• To bring back elections of governors;• To severe ties between the authorities and property

ownership;• To defeat system-wide corruption;• To make justice available for all people

´Democracy and the quality of government´ (06.02.12)

the democracy campaign of the 1990s did not create a modern state but provoked an under-the-carpet power struggle among clans and a feudal system with officials eking a living from their posts. Instead of a new quality of life we were lumbered with huge social expenses, instead of a free and fair society, we got arbitrariness by self-appointed “elites,” who flagrantly disregarded the interests of common people. As a result, Russia’s transition to democracy and a market economy was “poisoned” by people’s steadfast distrust in these notions and an unwillingness to participate in the life of society.

´Democracy and the quality of government´ (06.02.12)

“I am confident that we have no need for buffoonery or a competition in making impossible promises. We do not need a situation where democracy is nothing but a front, where government by the people is reduced to a political entertainment show and a cast of candidates, in which substance is replaced by shocking statements and recriminations, while the real policy is made behind the scenes and deals and decisions are not discussed with the electorate at all. We must avoid this dead end, this temptation to “simplify politics” and to create a fictitious democracy to please the masses. Politics inevitably involves a degree of political strategising. But image makers and “billboard masters” must not be allowed to become the puppet masters of the politicians. I am convinced that the people will never again accept this.”

The Skolkovo Case

• Five presidential high-tech sectors” including energy, IT, telecommunication, biomedical and nuclear research;

• The Russian “Silicon Valley”;• Leading Western consultants;• Excellent conditions for work and life;• Development and commercialisation of new technologies

Plans for the “Skolkovo Innovation Centre”

Innovation Centre Skolkovo, Arup proposal (2010)

The problems of modernisation

• Inconsistency and incoherence in policy making (selection of the sectors, the site, conflict with existing research centres). Ad hoc, arbitrary, rather than systemic?

• Policy continuity. What will happen after Medvedev?• The exclusion of Skolkovo from the national legal framework

(special planning, fiscal and immigration arrangement).• Still a “catch-up” type of modernisation, superficially similar

to western examples;• Imitation of the western models;• State-run project. Similarities with the socialist model of the

“vedomstvennoe finansirovanie”.

Conclusion

• Inclusive economic and political institutions will not happen.• The preservation of the regime is the main priority.• Factions will exercise different level of influence on politics.• The elites use modernization in discursive terms to please

both the conservative an liberal part of the electorate as the idea seems to have some universal value.

References

Acemoglu, D. and Robinson, J. (2012) Why nations fail. The Origins of power, prosperity and powerty. London: Profile Books.

Kononenko, V. (2011) Introduction. In Kononenko, V. and Moshes, A. (Eds.) Russia as a network state. What works in Russia when state institutions do not? Houndmills: Palgrave Macmillan, pp. 1-19.

Putin, V. (2012) Our Economic Tasks. Available: http://premier.gov.ru/eng/events/news/17888/, Vedomisti, 30 January 2012.

Putin, V. (2012) Democracy and the quality of government. Available: http://premier.gov.ru/eng/events/news/18006/print/

Sakwa, R. (2011) The crisis of Russian democracy. Cambridge: Cambridge University Press.