How Putin Got His Groove Back
In recent months, you could tell just how nervous Vladimir Putin was about the upcoming Russian presidential election based on the vitriolic threats and doomsday scenarios being spouted on Russian citizens at every turn. Not (re)electing the cultish strongman would lead to destabilization, national ruin, and complete subordination to the whims of Russia’s soon-to-be American overlords, they were told.
But, anti-government protestors had shown no signs of subsiding since December and were literally battling the elements to show their anger towards the Putinist regime.
And Putin’s fear was palpable.
Then, suddenly, that sense of boring, dreaded predictability swept back over Russia. The same sense that first depressed much of the world back in September when Putin and Medvedev first declared that they were trading places. Polls are in favor of Putin once again, showing that he is comfortably in the lead across the country and virtually guaranteed of a first-round victory this upcoming Sunday.
So what happened? How did the judoka pin down the electorate and silence that pesty opposition?
Well, promises of money of course. Loads of them. Given the breadth of this spending spree, it’s nearly impossible for the average “Sergei” or “Olga” not to feel their pockets slightly bulging with a well-timed injection from the Putin machine. The list is exhausting, but let’s have a short crack at it (primary source):
Teachers: Salary increases to above regional averages
Doctors: Salary increases to above regional averages
Electricity and Fuel: Freeze on prices until after the elections
Students: Increased stipends
Defense Sector: New weaponry and housing guarantees
College Professors: Potential doubling of salaries
Scientists: 25 million new jobs over the next 10-15 years, higher salaries
Birthing incentives: Bonuses given to families having three or more children
Police officers: Salaries indexed to inflation, with increased benefits for family members
Veterans: Large housing allowances
Investors: Buying back of shares from 105,000 investors in VTB
Pensioners: Increase in benefits
Estimated Total: 23.2-27.8 trillion rubles (45-51% of annual GDP or roughly $160 billion)
Now, political business cycles (spending timed to build support among the population just before elections) are by no means new, limited to non-democracies or ineffect
The real problem is that this type of campaign approach may wreak havoc on Russia’s economy quicker than myopic public officials seem to think. Citibank estimates that oil will need to reach $150 to balance the next couple years of budgets, a risky gamble if I’ve ever heard one. Just last month, Russia posted its first monthly budget deficit since 2002 (when the Putin era was in its infancy); one could easily point to pre-parliamentary spending and wastefulness in installing web-cameras as partial culprits. Can you taste the desperation? Regrettably the early 1990s crisis did not scare the inflationary daylights out of Russian policymakers like post-WWI did for the Germans. The target remains at just about 6 percent for 2012, but cannot stay there for long. Lastly, short-term fiscal infusions do nothing to cure the plagues of Russia’s business environment and, in regions where bureaucracies are especially corrupt, may actually exacerbate malfeasance and “corruption.” In sum, the inevitable macroeconomic instability from this populist streak may undo much of the tangible growth that Russia has enjoyed over the last decade.
What has actually astonished me is that alongside these spending proposals, there has been a concerted push to squeeze out taxes and fees from industry and businesses. For those who doubt the future of liberal Russian economists after the ouster of the former finance minister, Alexei Kudrin, the current Putinist team has been quite forward to presenting “solutions” to balancing the budget and keeping the economy in check. The financial punishment of those who profited from the ill-gotten gains of 1990s-era privatization was put on the table. An increased mineral extraction rate has been suggested, mainly to be leveled at the massive state-owned corporations. In classic fashion, Putin is orchestrating large-scale redistribution from the outrageously rich to the lower middle class, all conceivably to ensure that wealthy elite can continue to prosper and secure their gains over the next decade. Unfortunately, a large part of the electorate will fall for this duplicity.
And this money could be spent so much more productively! Russian infrastructure is literally crumbing, and parts of the country are rendered as inaccessible as some post-conflict zones. The deplorable state of the education system is driving thousands of talented scientists and researchers abroad, more or less permanently. Circumspect state investments and public-private partnerships could be used to resuscitate and restructure numerous critical industries, upon which a large section of the population depends on for employment. If the cash can be raised so easily for securing access to the throne, then nothing suggests that it can’t be spent on something actually helpful for achieving the avowed aims of a diversified economy and consistent and equal growth for all.
Finally, we should note that this type of ramped up spending is extremely unlikely to placate those already taking to the streets in protest. Much ink has been spilled about the demographics of the “hipster revolution,” with the verdict emerging that those rising up are actually individuals who have benefited greatly from Putin-era economic policies. Their anger and frustration stem not from welfare concerns, but instead from what have been referred to as post-materialist demands: free elections, accountability, transparency, a greater role for civil society. This group will continue to grow as Russia inevitably grows wealthier, stripping political campaigns of the “buy-off” option for more and more of the electorate. The interesting thing to watch for is whether electioneering in Russia will ever rise to the level of sophistication and maturation that the electorate itself seems destined to achieve.