MOSCOW — There’s never an obvious roadmap in economics. That goes for Russia too. You could say that opening the world to a market-based economy comes with terrible consequences, but all of the other options are even worse. Everything else will end in a dreadful impasse, from the Juche in North Korea to the bankrupt USSR.
Russian liberals fought for that simple idea, but in vain. In all of Russian history, the country has never truly completed a single liberal reform. The tragic death of Boris Nemtsov is yet another step backwards, even though Nemtsov was more a symbol of liberalism than a liberal in practice. You could say the same, for example, about the recently deceased Russo-Georgian businessman and politician Kakha Bendukidze. The ranks are thinning.
Nonetheless, liberal reforms in Russia don’t fail due to the shortcomings of liberal politicians. A market economy works in tandem with a democracy. That hasn’t really worked out for our country: Since 1991, Russia has not passed the “democratic transition” test. That would simply mean an election in which the opposition won.
Reformers like Nemtsov were relatively quiet about the questionable elections in 1996. If the opposition had won then, perhaps history would have followed an entirely different course. Let’s imagine: The Communists would have totally destroyed the economy, and a liberal would have won the 2000 elections. Then Russia would have developed the tradition of a peaceful, democratic power transition. On the other hand, it’s easy to blame reformers for their lack of foresight now that we are looking back — and it’s also probably unfair. No one can predict the future.
The Singapore example
People might object to this line of thinking, noting that economic liberalism can sometimes coexist with political authoritarianism. That is true. But in those cases, the democratic controls on politicians must to be substituted by the personal control of the autocrat. Singapore’s Prime Minister Lee Kuan Yew was a liberal autocrat who would put thieving politicians in jail. His advice on fighting corruption: “Start by jailing three of your friends. You know for what, and they also know for what.”
General Park Chung-hee, president of South Korea from 1963 to 1979, personally met with each minister before the beginning of each year to discuss the next year’s goals, and a year later, they met again to analyze the work done. Anyone who failed to meet at least 80% of their target was fired, not to mention any bribe-takers. After Park died, Korea became a democracy anyway.
Russian officials have not been treated this way. And without democratic — or at least meritocratic — controls on government officials and a separation of government powers, economic liberalism is pure fantasy. Entrepreneurial activity is often combined with an attempt to get closer to government business. Without independence, the courts rot away. Parliament becomes a word devoid of meaning.
March 3 Memorial service for Nemtsov in Moscow — Photo: Pavel Bednyakov/Xinhua/ZUMA
Even political and economic liberalism doesn’t always lead to success. The American political scientist Adam Przeworski noted that the primary factor in the failure of many Latin American countries was a high level of inequality. The logic is simple: The larger the gap between rich and poor, the more advantageous it is for the poor to follow a strategy of redistribution (economic populism, handouts) rather than to pursue economic growth for all. At the same time, for the rich, it makes more sense to become more autonomous, to avoid taxes and to create private armies and privately controlled territory. That dynamic has often led to a serious weakening of government institutions.
That is exactly the situation that Ukraine came to. Kakha Bendukidze, when asked what to do with the utterly corrupt Ukrainian courts, said that the best option might be to take away their sovereignty, and make the court of last instance the Crown’s Court in London. It is a straightforward calculation: If you want foreign investment, (without which growth is almost impossible), you have to give investors the ability to resolve disagreements in courts that they trust.
In Russia, the period of a weak central government, autonomous oligarchs and private armed forces took place in the 1990s. We managed to avoid falling into economic populism. But we also never got to true liberalism. It has become difficult to convince people of the importance of free trade and the respect of private property — especially when that private property could be taken away at any moment.
In Russia, over the past 15 years, people more or less liked the idea of the market and of freedom, in part because it was fed by the energy markets. But it looks like the party is over, and the liberals right now have very little to be hopeful about.
