Did Vladimir Putin really turn around Russia's economy?

January 18, 2008 2:34 AM

Did Vladimir Putin really turn around Russia's economy? Washington Post's Fred Hyatt attempts to refute the conventional wisdom that Putin was responsible for Russia's turnaround from the economic instability of the "disastrous" 90s by offering a thorough counter argument to prove that Putin's effect on the economy was just the reverse.

Hyatt believes that Russia's astonishing economic recovery should not be credited to Putin, but in fact to the fiscal solvency brought about by the reforms that were carried out in the late 90s by Yeltsin's prime minister Yevgeny Primakov.*1. Furthermore, he argues that Putin's crackdown on the free press and on independent businesses has had a disastrous impact on the economy by discouraging foreign investment. The result was stalled economic growth whose rate has dropped far behind that of the other former Soviet republics despite enormous growth in oil revenues. *2

*Primakov served as Yeltsin's prime minister in 1998-1999.
*Russia's rate of growth used to be the 2nd best out of all former 15 Soviet republics when Putin took power in 2000, but dropped to 13th best by 2005. It can be argued that the Russian economy grew under Putin, but the rate of growth was highest just when he came to power and that his rule had the effect of dampening it.

posted by gregb1007 (26 comments total)

Nice, short article on the subject. It could have used a few more citations but really I prefer that he made his point quickly rather than go on and on as a more broadly supported argument would be inclined to.
posted by XMLicious at 2:48 AM on January 18, 2008

Shorter Fred Hyatt: "Oh nooooes, the Divine policies advocated by my Free Market Totalitarian friends couldn't have possibly failed, Russia didn't turn into a humongous kleptocracy, Putin didn't do anything good!"
posted by vivelame at 3:31 AM on January 18, 2008

So let me get this clear vivelame, you're so opposed to the free market that you support state suppression of media, state confiscation of all major business, a declining life expectancy, plummeting birth rates, abolition of democracy and increasing corruption?
posted by srboisvert at 3:49 AM on January 18, 2008

vivelame writes "Putin didn't do anything good!"

Exactly, that's the message. It's all Putin fault. Indeed in avanced democracies you don't raid television, you don't dispose of journalists and generally you don't need to present yourself as the next Zar ; what you do is you finance subservient idiotic media productions , aka circus, you put trustable idiots in position of power , you present yourself as the saviour from the threat of terrar, you didn't want all that power at all, you do it for the good of The Republic....ummhh..like a dude from Italy did some time ago, I guess he was called Caesar...or was it Berlusconi ? Damn.
posted by elpapacito at 4:00 AM on January 18, 2008

There's not much in the Hiatt article in the way of facts. Hiatt might be right-- I hope he is, because I prefer liberal democracy to authoritarianism-- but he hasn't made his case. The fact that Russia had the second-lowest growth rate among former Soviet republics in 2005 sounds like cherry picking.

On to the Foreign Affairs article he cites, I guess.
posted by ibmcginty at 4:06 AM on January 18, 2008

One would think that a "national greatness" conservative like Mr. Hiatt might understand that those nostalgic for the Soviet "good old days" would prefer the augmentation of Russian state power over an opportunity to watch YouTube debates between Putin and Kasparov.
posted by rdone at 5:21 AM on January 18, 2008

From the Foreign Policy article:

While weakening checks on presidential power, Putin and his team have tabled reforms that might have strengthened other branches of the government. The judicial system remains weak, and when major political issues are at stake, the courts serve as yet another tool of presidential power. . .

And why do I hear Bush, Cheney, Roberts, Alito, Scalia, and Thomas laughing?
posted by rdone at 5:28 AM on January 18, 2008

"...stalled economic growth despite enormous growth in oil revenues."

Isn't there usually an inverse relationship between the two, or has recent history just been one huge economic peculiarity?
posted by Bathtub Bobsled at 6:10 AM on January 18, 2008

Isn't there usually an inverse relationship between the two, or has recent history just been one huge economic peculiarity?

Not when you're the one selling it.

Ultimately though, this kind of second guessing kind of misses the point. As long as the average Russian is comfortable and feels secure, they're not going to complain. Growing revenue and life improvement is just gravy. If someone tells you that life could be even better if the country had gone in another direction, that isn't a compelling argument.
posted by delmoi at 6:22 AM on January 18, 2008

Isn't there usually an inverse relationship between the two, or has recent history just been one huge economic peculiarity?

Yes, having oil is generally bad for you - leads to corruption, poor investment, overvalued exchange rate mechanism. Report by the Norwegian Central Bank on the problem. Or just compare Japan (poor natural resources, dynamic high-employment advanced economy, free) with Saudi Arabia (huge natural resources, poor levels of employment and grown, backward economy, dictatorship)

I'm of the opinion that the City of London works like a similar oil bonanza in the United Kingdom. It insulates the elite from the effect of the continued failure of the UK economy outside of London in terms of investment, foreign competitiveness, appropriate monetary policy, poor education and so on.
posted by alasdair at 6:33 AM on January 18, 2008 [2 favorites]

exchange rate mechanism - guess I'm still smarting from Black Wednesday!
posted by alasdair at 6:34 AM on January 18, 2008

What ibmcginty said. There's no meat to this piece; it's just an unsubstantiated rant. I don't like Putin either, but attacking the conventional wisdom requires real analysis.
posted by languagehat at 6:44 AM on January 18, 2008

"...but attacking the conventional wisdom requires real analysis."

Conventional wisdom: We're awesome!
Real analysis: You have failed to take all things into consideration before you made such an erroneous statement. If you will look at the following charts and empirical data...
Conventional wisdom: *Puts radioactive material into RA's tiramisu*
posted by Bathtub Bobsled at 7:17 AM on January 18, 2008 [1 favorite]

I thought Bush was responsible for Russia's economic successs. They wouldn't have $100/barrel oil without him.
posted by CheeseDigestsAll at 7:40 AM on January 18, 2008 [1 favorite]

But did Fred Hyatt look into Putin's soul? I think not.
posted by Devils Rancher at 8:27 AM on January 18, 2008

srboisvert, oh, no. Free Markets are a good answer to some problems, but that doesn't make them the magic remedy that will cure all your ailments. For one, some regulations are necessary for a market to run efficiently (we're all going to witness the effects of Markets-Gone-Wild soon, and few will like it), even through those don't sit well with Free Markets Ayatollahs. Second, Free Markets don't work all that well in some contexts (healthcare, water and energy distribution come to mind), but that never stopped the afore-mentionned ayatollahs to peddle it everywhere they could. Economic liberalisation can product good results, if done gradually, carefully, while building regulatory bodies, legal frameworks and institutions. The US and Europe didn't get overnight where they now are, and yet that's what was tried in Russia, Africa, South America and let's not forget the CPA's Iraq. And it didn't/still doesn't work, except at creating massive unemployment and wealth disparities while dismantling the state along with all security nets.

And for the record, i quite dislike Putin and his autoritarian politics, and wouldn't like to live in a communist state, or wish for the russians to go back to a communist regime. That doesn't mean that i have to agree with Hiatt's "Putin was an impediment to the quick success of Shock Therapy": if anything, Putin is the result of these "robber barons" economic policies, their "success", in a way.
posted by vivelame at 8:32 AM on January 18, 2008

Those who are connoisseurs of the WaPo editorial page are familiar with the outright hostility that they have for Putin.

Hiatt and Foreign Affairs are doing a bit of straw-man reasoning-- they're claiming to shoot down the argument that "autocracy causes growth." No one was claiming that or claiming that Putin's success is rooted in his anti-democratic policies. Screwing over Kasparov isn't what helped Russia. What Putin accomplished was taking the power away from the oligarchs who had bought up Russia's state assets for themselves. Yeltsin allowed this situation to fester because it kept him in power and kept the Communists weak. Putin managed to take the power away from the oligarchs, and if he hadn't Russia wouldn't have been able to reap the benefits of rising oil prices in the first place.

However, the WaPo, like most of the beltway, as a bizarre affection for the Yeltsin years, in part because that was the "conventional wisdom" of the 90s and in part because they didn't have to live in Russia at the time. Insofar as Putin is popular, it's because Russians feel that they, not the IMF or the oligarchs, are in charge of their own country.
posted by deanc at 8:41 AM on January 18, 2008 [2 favorites]

The Washington Post defending the evil gangster-capitalism that stuck the world with a Russia that adores putin? I'm shocked.
posted by Artw at 8:43 AM on January 18, 2008

Slate Magazine made many of the same arguments when Time named him Man of the Year back in December, an argument fleshed out further by the author in Foreign Affairs.
posted by youarenothere at 9:11 AM on January 18, 2008

youarenotthere, thanks for the link to the Slate Article. It was a very informative read.
posted by gregb1007 at 9:45 AM on January 18, 2008

Ditto. Takeaway quote for anyone who doesn't feel like reading the whole thing:

Comparing Russia with Ukraine especially underscores the fallacy. Russia and Ukraine share hundreds of years of culture and history and endured the hardships of the 1990s. But today the two countries have two big differences: Russia has oil and gas, and Ukraine does not; Russia is an autocracy, Ukraine is not. Yet, despite these differences, democratic Ukraine has managed annual growth rates higher than autocratic Russia's, despite having to pay dearly for—rather than reaping profits from—higher energy prices. So, why was the erosion of democracy necessary for economic growth?

posted by languagehat at 10:57 AM on January 18, 2008 [1 favorite]

When people start talking about democracy as only a means to an end for prosperity, I start to worry.
posted by JHarris at 1:26 PM on January 18, 2008 [1 favorite]

I don't really think it's the "Putin is bad" part of their argument people are arguing with.
posted by Artw at 5:16 PM on January 18, 2008

So, why was the erosion of democracy necessary for economic growth?

I'd like to know who argues that, otherwise I call strawman.
posted by ersatz at 6:22 PM on January 18, 2008

I suspect that the issue is as follows:

When the wealth of a nation comes from natural resources, citizenry not directly involved with the extraction of that wealth is a threat -- a competing mouth, that can offer nothing of value.

When the wealth of a nation comes from human resources, every citizen is a potential resource to be tapped.

In that sense, it's simple investment: Do you invest in protecting the oil, or in educating the population? Depends what'll make you more money. Redefine "educating the population" as "democracy" and it would appear to make sense.

I'm not convinced this is how things work, but it's certainly plausible.
posted by effugas at 1:55 AM on January 20, 2008

I suppose it's a valid short-term view, but in the long term things will get ugly. Opting for a), I mean.
posted by ersatz at 2:23 PM on January 20, 2008