DEVELOPMENT: ‘Russian Revolution’ Essential to Stop Decline

By IPS Correspondents Reprint | | Print |

Sergei Blagov

MOSCOW, Jul 22 1999 (IPS) - Russia is a world power whose key indicators dropped in just nine years to the levels of the globe’s poorest nations. Whether the country is set to be the west’s permanent “poor cousin” is today’s most burning political issue.

Some are proposing a new “Russian Revolution,” a populist movement against the monopolies of corrupt officials, trading conglomerates andorganised crime.

But former Finance minister and current deputy prime minister Alexander Livshits – president Boris Yeltsin’s envoy in charge of links with the Group of Seven most industrialised countries – quickly dismisses Russia’s “poor cousin” nickname.

” ‘Poor’ is temporary, but ‘cousin’ is forever,” he told IPS. “Fears of Russia becoming a third world country are obviously exaggerated – we are not going to drop into irrelevance.”

With an immense industrial base and one of the world’s best educated societies, Russia could be doing better, some argue. A present, however, Russia’s only convincing argument in world affairs seems to be its nuclear arsenal.

The reasons for Russia’s decline are to be found within its own political system, argues Georgia Derluguian, an expert on Russia at Chicago’s Northwestern University. “In its early days, Yeltsin’s regime tried to establish itself on a neo-Liberal (economic) ground, but these attempts ended up in an ideological suicide,” he says.

Later, Yeltsin “smugly endorsed the insider corporate privatisations, and the scandalous appearance of ‘crony capitalism’ and a new class of Nouveau Russians,” he added.

“Russia does not have economic problems, it has only political issues,” he concluded.

The ominous signs of a downfall into underdevelopment are not groundless: the 1999 federal budget amounts to just some 17 billion dollars and the official minimal monthly wage is an equivalent of just 3.5 dollars, not exactly the figures of a well- to-do industrial economy.

The country’s gross domestic product contracted by 3 percent in the first quarter of 1999, according to preliminary official figures. Last year, August’s financial meltdown sent gross domestic product to a six percent decline.

The 2000 draft federal budget unveiled last week sets ambitious targets of 1.5 percent economic growth, 18 percent inflation, and a budget deficit of just 1.5 percent of gross domestic product.

The dramatic rise in world oil prices in recent weeks was excellent news for Russia, the third largest oil producer in the world. Like most developing countries, it is heavily dependent on energy and commodities exports to keep its shaky economy afloat.

As yet another sign of structural problems, Russia’s population has shrunk this year by some 300,000 or 0.2 percent, to roughly 146 million, according to official statistics.

Experts say that deteriorating living standards and the national health care system added to the psychological strain caused by post-Soviet economic reforms have badly harmed the health of millions.

The official statistics put the average number of children born to each Russian woman at 1.3, while experts believe the figure must be at least 2.15 to maintain a stable population balance.

The ratio of births to deaths reversed between 1989 and 1995, with deaths rising annually from 1.6 million to 2.2 million, compared with a drop in births, from 2.2 million to 1.4 million. The number of deaths now exceeds births by an average 1.6 times, and by 2.7 times in some regions.

Furthermore, Russia’s debt payment problems have grown since it sank deeper into the economic crisis last August. Its total foreign debt bill is about 150 billion dollars and it faces debt service payments of about 17 billion in 1999.

Creditors have warned that debt-restructuring talks can begin only after Russia reaches a framework agreement with the International Monetary Fund (IMF), whose experts are not entirely alien to the country’s economic policies of the decade.

Russia no longer plans to ask its foreign creditors for a total write-off or partial debt reduction, Livshits announced. “The word ‘write-off’ is excluded from the country’s vocabulary as there is no need for it, and there will be no second default like August 17, 1998,” he said.

However, independent experts do not subscribe to such optimistic views.

“Russia simply does not have any relevant investment instruments, and the country is unable to create them,” said Mikhail Delyagin, director of the Institute of Globalisation Issues, a Moscow-based think tank., who forecasts yet another devaluation within a year.

The dramatic stand-off between anti-reform communists and nationalists and the Yeltsin’s economic team ended up in August 1998 financial crisis.

The economic collapse produced a somewhat unexpected by- product: the revitalisation of a third force, led by veteran politician Yevgeny Primakov. Some argue that with the rise of relatively neutral Primakov, the emergence of a new “social contract” is in sight.

However, the question of who is going to steer Russia into the next century remains unanswered. Ailing president Yeltsin, unwilling to be written off as an invalid, recently dismissed popular prime minister Primakov and built a new cabinet in ‘a la Caligula’ style, presumably in favour of his so-called inner circle.

Primakov’s crusade against corruption seems to have been one of the causes for his dismissal.

“These days the Kremlin seems to be able to tackle only tactical problems, while the country needs to solve strategic issues,” Delyagin says. “Any viable long-term strategy seems to be feasible only in the aftermath of Yeltsin’s regime demise.”

Despite the setback, Primakov now is widely seen to hold the most important political chip in the big game. His comeback is expected before the end of summer – notably due to the support of Moscow Mayor Yury Luzhkov – once a Yeltsin ally.

So far, however, Yeltsin’s opponents both in the left and the right have been remarkably unsuccessful in advancing realistic strategic and ideological alternatives, Derluguian says.

Such an alternative appears to be in the making. Such a programme “would require a substantially revamped state and the rule of law – which makes it revolutionary as well,” he says.