THE FUTURE OF BUSINESS IN RUSSIA
1. Guest contributor: Leonid Khotin Is there light at the end of the tunnel?
2. Evolution toward legality?
3. Fast-growing firms
SOCIETY
4. In defense of Russian men
5. Pension reform
POLITICS
6. Official "anti-fascism"
7. Putin's gubernatorial appointments
FOREIGN POLICY
8. Russian public opinion on nuclear relations with Iran
HISTORY
9. Was Stalin a Russian nationalist?
10. The impact of Khrushchev's de-Stalinization on China
FEEDBACK
11. End of Russia's trade surplus?

THE FUTURE OF BUSINESS IN RUSSIA

1. IS THERE LIGHT AT THE END OF THE TUNNEL?

Guest contributor: Leonid Khotin (University of California at Berkeley)

Introductory note: The last issue (RAS 39 item 3) contained a summary of the book "The Russian Model of Management" by A. P. Prokhorov (RAS 39 item 3). Prokhorov's book also provides the starting point for the following reflections from Dr. Khotin. -- SDS

The latest events in Russia seem to confirm the pessimism of A. P. Prokhorov, author of "The Russian Model of Management," regarding the invariable return of the administrative system to the centralized model. On July 11, 2007 the liberal radio station "Echo of Moscow" broadcast a commentary under the title "Confiscation of Private Companies in Favor of the State." Two days later, the second greatest of the Russian oligarchs, Oleg Deripaska, declared that if the state so wished he would "return to the state" the big aluminum company RUSAL.

And yet only a year ago Oleg Deripaska said in an interview: "Right now the Russian authorities -- that is, the people capable of taking decisions -- are taking them in such a way as to set up a system of administering the state apparatus, the mass media, and the other elements of control over the masses. No one now stands in our way. And we have found good managers for this." The interviewer asked: "When you say 'we,' you mean big business?" To which the oligarch replied: "I mean the real Russian authorities." (1) It appears that now, in 2007, big business is ready to give up its share in power to the president of Russia. The tradition of the Russian model of management is triumphant.

Starting with Klyuchevsky, many Russian historians and philosophers have supposed that Russia's fate is determined by such unchanging factors as its size, geographical position, climate, and long distances. In their opinion, it is precisely these factors that to a great extent have shaped the Russian mentality or Russian culture, which in turn generates a corresponding model of management.

Prokhorov's book is about the power of managerial traditions in Russia, which may prove ruinous for the country. In his opinion, one such tradition is that the path to stabilization in Russia lies in strengthening centralization and subordinating business to the state. Prokhorov considers that successful development of the country is impossible unless this tradition is changed. On page 315 of the book he cites the following quotation:

"Catching-up reforms, basically coercive in nature, the conduct of which requires at least temporary strengthening of the despotic foundations of state power, lead in the final reckoning to the long-term consolidation of despotism. The slowdown of development due to the despotic regime in turn demands new reforms. And the cycle is repeated. Thus, diverging from the usual historical pattern, Russia hews its special path" (V. Krivorotov). (2)

The present-day authorities in Russia share the view that the Russian mentality is unchangeable, judging by the address of their ideologist Vladislav Surkov at the Russian Academy of Sciences on June 8, 2007. (3) Surkov asserts that "however the state design may change, for all the uncertainty, the basic matrix is preserved of a consciousness [in which] synthesis predominates over analysis, intuition over reason, gathering things together and not dividing them." Hence, according to Surkov, three basic features of the Russian mentality: "the striving for political wholeness and centralized power, the idealization of goals, and the personification of politics."

The authorities use the idea of a special Russian mentality in order to explain the special nature of Russian "sovereign democracy" ­ the "power vertical," the consolidation of finance, the subordination of business to the state, and the restriction of freedom. Putin's high rating in the context of the insignificant ratings of all other Russian politicians is an illustration of the prevailing personification of politics.

Westernizing Russian liberals do not agree with the idea of a special Russian mentality or special Russian path of development. They declare that Russia had been a European country since ancient times and turned into an Oriental despotism only in the 1560s, under Ivan the Terrible. In 1700, under Peter the Great, Russia again looked to Europe. After 1917 it turned away from Europe once more and tried to return again in 1991. Nevertheless, the Westernizing reformers of the Yeltsin era, many of whom still work in the current Russian government, are unable to resist the movement of the economy toward centralization, the return to the Russian model of management.

In explaining the peculiarities of "sovereign democracy" the Russian authorities rely to a considerable extent on national-patriotic and anti-Western or anti-American forces whose ideas can be traced back to the nineteenth-century Slavophiles. Thus, Konstantin Leontiev wrote: "Russia must completely break with European ways and choose a wholly new path that will place it at the head of the intellectual and social life of mankind." Another Russian philosopher, Vladimir Solovyov, called this "national self-deification" and pointed out the abyss "between the requirements of true patriotism, which wants to make Russia as good as possible, and the false claims of nationalism, which declares that Russia is already better than any other country."

Prokhorov writes: "The conviction that everything that takes place in Russia is of world-historical significance permeates the whole of Russian culture and even everyday consciousness." Recently Pavel Gusev, liberal chief editor of the popular newspaper "Moskovsky Komsomolets," speaking on the "Special Opinion" program of the "Echo of Moscow" radio station, declared: "We (Russia) have not been accustomed to equality (with other countries). I would like -- because we are so big, because we have such a lot, and there are so few of us -- that all the same we should be reckoned with. That everyone should recognize our might. And so we cannot join the European Union. Because the sense of our ego is superior to any agreements and superior to any alliances."

Prokhorov also writes: "The Russian state always made inordinate demands not only of its subjects but also of itself. Far-reaching claims on the part of the state were always the chief motor of Russia's development. The world first learned of this in the sixteenth century when Ivan the Terrible proclaimed himself tsar and Moscow the Third Rome. There have already been periods in Russian history when claims had to be scaled down. After its defeat in the Crimean war Russia ceased to be the gendarme of Europe, and the reduced ambitions of the state enabled Alexander II to carry out his reforms ­ to soften the internal regime and be less exacting to his subjects. But age-old traditions and the national mentality prevented the country from joining Europe. A similar situation has emerged now, after defeat in the Cold War. But for how long?" (p. 311 et seq.).

Prokhorov wrote his book in 2001. As we see, his analysis of Russian traditions enabled him to foresee in 2001 the restoration of state ambitions toward the end of Putin's second term. And this is the same Putin who just a year ago, in the words of Russian oligarch Deripaska, was "our top manager, who never exceeds his powers."

It appears that Putin sees only two ways of strengthening Russia ­ building up its military-technological might and increasing the West's dependence on Russian energy supplies. It is quite likely that, come what may, British Petroleum will follow the French company Total in offering to invest money and equipment in the Shtokman deposit. (4) It will take at least 15 years to develop an alternative fuel to oil and gas, and in the meantime the West will have to reckon with Russia.

In recent years there has been a sharp rise in the number of publications in Russia that blame the West, and above all the US, for all Russia's current ills. The huge publishing group ACT has put out more than 30 books in its series "Great Confrontations," devoted to unmasking American plots against Russia. Let me cite a few illustrative titles: "The Global Empire of Evil," "Why America is on the Offensive (America versus Russia)," "On the Self-Important West and Russia on its Own." From these books the reader may learn that the US started perestroika in order to weaken and fragment Russia, that Russia did not lose the Cold War but was stabbed in the back by its traitorous leaders, and so on. Even many Russian liberals believe that the US really wants to drive a wedge between Russia and Europe ­ one of them being Alexander Privalov, scientific editor of the magazine "Expert" and author of the foreword to Prokhorov's book. (5)

In October 2006, a report of the Trilateral Commission entitled "Interacting with Russia: The Next Phase" was presented at the Higher School of Economics and at the Council for Russian Foreign and Defense Policy. The Trilateral Commission was established in the mid-1970s as an informal club that brought together the most prominent business, media, and NGO leaders from the US, Western Europe, and Japan to seek an agreed strategic course for these three centers of power. Russian political scientist Sergei Karaganov, who was involved in discussion of the report, writes that its authors call upon the West "not to dramatize the situation in Russia . and to respond to what is happening in Russia with understanding and patience. Unlike those who think that we have finally embarked on an authoritarian, state-capitalist path, the authors insist that all paths remain open and that in view of the inevitable succession of generations Russia is probably feeling out the route to modernization that suits it best." (6)

As for the violation of human rights, it seems that Putin is following the example of Napoleon, who once said: "I swear that if I do not give France more freedom that is only because I do not think it would be to France's benefit." Quite a large proportion of Russians agree today that the West wants to weaken Russia, but that now a true national leader has emerged who is prepared to uphold Russia's interests as a great power at any price and "everything is fine with us." Consolidating his power, Putin is acting consistently to restrict all freedoms, using for this purpose an obedient Duma, increasing pressure on all independent NGOs and at the same time supporting and encouraging patriotic youth organizations created and financed by the government.

Nevertheless, judging by the quotations and footnotes in Prokhorov's book, and also by the reviews it has received, many authors in Russia share his opinion that we can extract ourselves from the vicious circle of the Russian model of management only by our own efforts at the firm level, not counting on the authorities. At his seminars Prokhorov studies the peculiarities of this model and proposes methods of neutralizing its defects and activating its merits.

According to Alexander Auzan, an economist and professor at Moscow State University, as business is further subordinated to the state the development of the country's economy will slow down. Only a mature civil society can protect business against the state. Despite everything, he argues, a civil society is taking shape in Russia, albeit slowly and painfully. The only way of supporting democracy in Russia is therefore to assist by all means the process of establishing a civil society there.

POSTSCRIPT (mid-October 2007)

A new period is beginning in Russia's history. Putin himself calls it a "breakthrough," while the journalist and Kremlin troubadour Mikhail Leontyev refers to it as "modernization," which coincides with Prokhorov's terminology (see p. 322 of his book). We may, perhaps, call 1987 ­ 1999 the period of failed modernization and 2000 ­ 2008 the period of stabilization. The cautious Putin declares that stability was achieved in the country, preparing the ground for "breakthrough," only after he agreed to be Russia's supreme leader. It is already clear how he understands "modernization" ­ above all, as the transfer of all big business to state control. The next candidates for expropriation are Bogdanov (Surgutneftegaz) and Alekperov (Lukoil), who as yet have not dared express aloud any doubt regarding the rationality of these decisions.

What has Putin already done to retain the full panoply of power, even should a future president himself wish to govern?

1. Judging by the polls, he has persuaded the overwhelming majority of the people to support him as a guarantor of stability. The cult of Putin's personality is growing stronger: a striking parody of Stalin's congresses was the speech of a woman textile worker who begged Putin to stay in power. (7) The well-known journalist and historian Leonid Mlechin said of this event: "Do you really seriously think that this speech was not approved in advance?" Expressing the will of the majority, this woman declared with tears in her eyes that laws could be changed for the sake of preventing a beloved president from abandoning his people.

2. Putin has assumed leadership of the United Russia party, which by virtue of its constitutional majority can at any time impeach a president not to Putin's liking.

3. He has created a Committee for Youth Affairs, to be headed by the leader of the pro-Putin movement Nashi. The committee's job will be to unite all pro-Putin youth movements into some sort of VPKSM (All-Russia Putinist Union of Youth) (8, which will draw in thousands of young people from the provinces, where unemployment and hopelessness reign. In case of necessity, an oprichnina (9) can be recruited from this VPKSM.

4. He has taken steps to gain the backing of the armed forces. It is no coincidence that on his 55th birthday Putin invited all senior military commanders from throughout Russia. Such appeals to the military are not typical in Russian history.

5. Putin has drawn the Russian Orthodox Church into participation in state affairs on the side of the authorities. At the same time, he has given active assistance in uniting the ROC with the Orthodox Church Abroad.

6. He has declared a crusade against corruption. As all Russian officials from top to bottom are mired in corruption, this will obviously provide a cover for any purge of the apparatus that he may need to conduct.

Only now is it becoming clear how carefully and in what deep secrecy these plans and preparations have been made. Nevertheless, Putin may have some new surprises in store for us.

Putin has demonstrated that he will do anything in order to remain the supreme ruler of Russia. He has called his strategy "a breakthrough" and "modernization." Prokhorov points to two examples of modernization in Russian history ­ the era of Peter the Great and the era of Stalin. It is well known that Peter is one of Putin's favorite heroes. Nor has he ever said a bad word about Stalin, and recently he approved a school history textbook in which Stalin's crimes are justified as historically necessary.

NOTES

(1) "Znanie ­ vlast!" No. 25[294], July 2006, p. 7 (http://www.lebed.com/2006/art4517.htm)

(2) "Znanie ­ sila," 1990, No. 9, p. 35.

(3) http://www.polit.ru/analytics/2007/06/14/online140607.html

(4) A huge deposit of natural gas on the shelf of the Barents Sea. American and Norwegian companies are also in the running. See: http://www.russiajournal.com/node/19912 (SDS)

(5) On the program "Special Opinion" on "Echo of Moscow," July 17, 2007.

(6) http://www.ej.ru/comments/entry/4999/

(7) Under Stalin the staged expression of ostensible popular feeling was typically placed in the mouth of a woman textile worker.

(8) A play on acronyms: the Young Communist League of Soviet times was the VLKSM (All-Union Leninist Communist Union of Youth). The resemblance between the two acronyms is even closer because the Cyrillic letters for L and P look quite similar.

(9) The elite punitive corps of Ivan the Terrible.

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THE FUTURE OF BUSINESS IN RUSSIA

2. EVOLUTION TOWARD LEGALITY?

Source. A. Kireyev, "Reiderstvo na rynke korporativnogo kontrolia: rezultat evoliutsii silovogo predprinimatelstva" [Raiding on the Market for Corporate Control: A Result of the Evolution of Strong-Arm Entrepreneurship], Voprosy ekonomiki, 2007, no. 8, pp. 80 ­ 92

"Raiders" are business groups that specialize in taking over firms for the purpose of immediate profit. Both government and public opinion in Russia, from Putin on down, are hostile to such activity, viewing it as seriously disruptive of the economy.

Raiding is a threat even to firms that are doing well, as raiders use many tricks of dubious legality. In 1999, for example, bankruptcy proceedings were initiated against several large Moscow department stores on the grounds that they had failed to pay for goods supplied. The suppliers, who were fronting for the company Rosbilding, had closed their bank accounts and made new secret banking arrangements immediately after delivering their goods, so that the stores would be unable to pay for them!

The author, a graduate student at the New Russian University, argues that raiding is nonetheless a step forward in the evolution of Russian business toward legality. It reflects the decline of "strong-arm entrepreneurship" ­ the protection rackets that ruled the roost in the 1990s and extracted tribute and seized assets by means of the threat and use of violence. As law enforcement has improved the calculus of risk and gain has changed in favor of less illegal (if not as yet clearly legal) methods. Strong-arm entrepreneurs have learnt that they can achieve the same ends at less risk by less violent means.

Raiding, Kireyev admits, can have positive consequences at the micro level. Some firms become more profitable after changing owners. Positive effects, however, are overridden by negative effects at the macro level. The business milieu is oriented toward short-term schemes. Firms invest funds in measures to guard against takeover and in short-term financial instruments instead of in production. They also avoid external financing as a possible source of danger.

Nevertheless, the author does not think that government action against raiding is necessary. The phenomenon can be expected gradually to disappear as the social and economic situation evolves further.

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THE FUTURE OF BUSINESS IN RUSSIA

3. FAST-GROWING FIRMS

Source. A. Yudanov, "Bystrye" firmy i evoliutsiia rossiiskoi ekonomiki, Voprosy ekonomiki, 2007, no. 2, pp. 85 ­ 100

The author, who teaches at the government Financial Academy, starts by surveying the American literature that focuses on a small minority of fast-growing small firms that make a disproportionate contribution to innovation and economic growth. Do such "gazelles" (1) also exist in Russia today?

In 2003 ­ 2006 the Financial Academy conducted a study of competition in Russia, focusing on the pharmaceutical, confectionery, and banking sectors and on four firms that "symbolize" particular lines of business. (2) The activity of over 50 successful firms in other branches of the economy was also analyzed.

Most of the firms surveyed remain in a difficult situation, but some firms have grown rapidly over the last few years. Some show "phenomenally rapid" exponential growth. Moreover, these firms have succeeded not through corruption or financial manipulation, but by honestly meeting previously unmet needs.

Thus, the new Russian Standard Bank (RSB) is the first to offer easy access to consumer credit, for which there was enormous unsatisfied demand. (3) Another "gazelle" in the financial field is the National Factoring Company, which offers firms credit without collateral.

In the pharmaceuticals industry, firms such as Evalar (4) have cashed in on the huge demand for biologically active additives, which are bought by people who cannot afford the medicines recommended by physicians. In confectionery, the A. Korkunov company did well producing candies that catered to Russian tastes (5) ­ until they were bought out earlier this year by the Wrigley Company (of chewing gum fame).

Dielectric Cable Systems met the need for commutators for cables connecting office equipment, displacing imported products with high freight charges. (6) SPSR ­ Express became a national leader in express postal services because it was the only firm willing to deliver valuable items in small parcels.

A whole group of firms have grown rapidly by targeting consumers of relatively modest means. This enabled Ralf Ringer to expand its output of footwear by a factor of 100 over a decade while other Russian footwear producers were collapsing under pressure from imported goods. A similar case is Gloria Jeans. These firms arguably herald a broader shift to production for the mass market of Russians with middling incomes (the "sub-middle class").

In all, the author and his colleagues discovered more than 50 firms whose sales have grown by at least 30 percent a year over several years. Given the selective nature of their survey, they suspect that this is merely the tip of the iceberg.

So not only does Russia have fast-growing firms, but they are now playing an even more crucial role in economic development than their Western counterparts. A young market economy is especially rich in vacant niches awaiting exploitation. The rise of the Russian "gazelles" suggests to me that the Russian economy may at last be starting to overcome the transitional distortions that long held back its progress (corrupt crony capitalism, strong-arm entrepreneurship, etc.). (6)

NOTES

(1) The name given these firms by the economist D. Birch. He called ordinary small firms "mice" and big companies "elephants."

(2) Vimm-Bill (food products), Baltika (beer), Integra (oilfield services), and A4Vision (software).

(3) Consumer credit could be obtained from the Savings Bank of the RF (Sberbank), but applicants had to go through extremely complicated procedures. RSB uses a simple questionnaire to assess an applicant's solvency, without demanding documentary evidence.

(4) Between 1998 and 2005 Evalar's sales rose by a factor of 42.

(5) Between 2000 and 2005 A. Korkunov increased sales by a factor of 11.

(6) See previous item.

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SOCIETY

4. IN DEFENSE OF RUSSIAN MEN

Source. Rebecca Kay, Men in Contemporary Russia: The Fallen Heroes of Post-Soviet Change? (Burlington, VT: Ashgate, 2006)

Professor Kay (University of Glasgow) has also written a book on the position of women in post-Soviet Russia. (1) Now she turns her attention to the position of men, using a similarly broad range of sources, including in-depth interviewing and participant observation.

Russian men are commonly perceived as a "problem" due to their high mortality. Usually this is attributed mainly to alcoholism, and this in turn tends to be blamed on the failure of men (in contrast to women) to adapt to new post-Soviet conditions: "the image of the self-pitying drunk spiraling into an early grave" (p. 1). The author shows that this "overwhelmingly negative portrayal of Russian men" bears little relation to a much more complex reality. In particular, she argues that high male mortality has many causes. Not least among them are the stress, overwork, and family disruption from which many men suffer as they strive against the odds to meet their obligations.

Men in post-Soviet Russia find themselves between a rock and a hard place. On the one hand, they are, like women, now subjected to a stream of propaganda calling for the restoration of traditional sex roles. Men, they are told by the media, should now be the sole breadwinners for their families. This propaganda is totally divorced from the real lives of the great majority of Russians, but it still has a certain effect. (2) On the other hand, the opportunities for men to earn enough money to support a family ­ and, above all, to do it without killing themselves in the process ­ are even more restricted in the new labor markets than they were in the much-maligned Soviet past, when at least some kind of paid work was guaranteed.

A large section of the book is devoted to a sympathetic study of the situation faced by divorced men who seek custody of their children and if successful look after them alone. Such men, who defy the sex role propaganda in their lives if not at the level of ideas, (3) are (as in other countries) a minority, but a surprisingly numerous minority. They face widespread suspicion and lack of understanding from state agencies as well as the general public. (4) Professor Kay provides a fascinating case study of the innovative Altai Regional Crisis Center for Men, which is trying to tackle this (as well as other) problems involving men.

NOTES

(1) Russian Women and their Organizations: Gender, Discrimination and Grassroots Women's Organizations, 1991 ­ 96 (Macmillan, 2000).

(2) At least in confusing people. When asked in opinion polls whether they agree with the "breadwinner / housewife" model a majority say yes. When asked whether they agree with the idea that husband and wife should share these functions, again a majority again say yes (p. 169). Perhaps the main conclusion to be drawn is that respondents in polls are anxious to please interviewers.

(3) Although many interviewees were distressed by certain consequences of sex roles, apparently none of them expressed clear opposition to the latter. See, for example, the chapter on men's attitudes to military service.

(4) A curious linguistic reflection of prevailing attitudes is that when male single parents are praised for their efforts, by others or even by themselves, they are called not "good fathers" but "good mothers"! The words "father" and "mother" are associated with the types of parenting assigned to the respective sex roles; whether the person referred to is a man or a woman is not relevant.

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SOCIETY

5. PENSION REFORM

Source. E. Gurvich, "Perspektivy rossiiskoi pensionnoi sistemy" [The Future of the Russian Pension System], Voprosy ekonomiki, 2007, no. 9, pp. 46 ­ 71.

The author, who heads the Economics Experts Group, constructs a mathematical model to forecast the likely development of Russia's pension system up to 2050 and uses it to identify the main problems and assess policy proposals for tackling them.

The problems arise in part from the decline and aging of the population. Support of the elderly places an increasing burden on a contracting workforce. Many other countries, of course, face a similar situation. Russia, however, has to cope at the same time with a radical reform of its pension system initiated in 2002.

The goal of the reform is to ensure the long-term financial stability of the pension system. To this end, the "distribution principle" ­ the direct distribution to pensioners of funds from current insurance contributions (plus supplementary transfers from the federal budget) ­ is being partly replaced by the "accumulation principle," involving the investment of contributions to pay the pensions of current employees when they retire.

One problem is that the new system will need a lot of time to accumulate sufficient funds to raise payments significantly. People who retire in the 2030s and 2040s should benefit, but this will be at the expense of today's elderly because part of the pensions they would have received under the old system is being diverted to accumulate funds for future pensioners.

From this point of view, the suggestion made by Putin (1) that employees should be encouraged to make additional voluntary contributions by providing matching funds from the state budget is irrelevant. It "scratches where it doesn't itch." Such a scheme would further improve the position of later generations of pensioners while doing nothing for the present generation. If the government has money to spare for improving pensions, (2) it should be used "to ensure an acceptable level of pensions over the next few years without increasing the tax burden."

In fact, even the favorable effects of the reform forecast for the long term depend on action to improve the management of pension funds. At present the bulk of the funds (3) are controlled on behalf of the government by Vneshekonombank, (4) which has them all invested in state bonds at a negative real rate of interest. If this situation is allowed to continue, the whole pension reform is senseless. One of the assumptions on which the author's forecasts are based is that pension funds are about to be profitably invested in shares. Not a very safe assumption, I suspect.

Another problem with the reform is its impact on women pensioners. Women on average earn less than men and have lower seniority, so their total contributions are smaller than men's. But they also retire earlier and live longer than men ­ that is, they draw pensions over a longer period. So under an accumulation-based system the level of pensions is bound to be considerably lower for women than for men. Under the old system funds were redirected to narrow the gender gap in pensions, but this arrangement is now being phased out.

The author concludes that "the problems of the pension system are too fundamental to be solved by any single measure." His recommendations include:

-- developing private pension insurance;

-- shifting to more selective criteria of pension provision. Only the least well-off should receive the currently guaranteed basic pension. Others should rely on the contribution-based pension. (5)

-- raising the pension age to 62 years for both sexes.

NOTES

(1) In his April 2007 missive to the Federal Assembly.

(2) Former PM Yegor Gaidar has suggested using proceeds from the privatization of companies still in state ownership for this purpose.

(3) 97 percent as at end of 2006.

(4) The foreign trade bank. Hard to believe, but there you are.

(5) But many people do not make pension contributions.

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POLITICS

6. OFFICIAL "ANTI-FASCISM"

Source. Galina Kozhevnikova, Radical Nationalism in Russia and Efforts to Counteract it in 2005 / 2006, ed. Alexander Verkhovsky (Moscow: SOVA Center for Information and Analysis, 2006 / 2007)

I have paid considerable attention in RAS to developments on the radical nationalist wing of Russian politics, drawing heavily on the information and analysis produced by the team of specialists at SOVA. (1) In the annual reports of SOVA for 2005 and 2006 a new section appears entitled "Excessive and Unfounded Actions Against Extremism." This marks quite a new departure, because SOVA has always complained (and still does) that there is not enough action against extremism. Now, it seems, they complain that there is too much! Is there any satisfying these people?

A closer reading shows that the complaint is not exactly that there is too much action, rather that a lot of the action is of the wrong kind. For instance, on some occasions the police have used excessive violence in breaking up unauthorized but nonviolent nationalist demonstrations. Some "antifa" groups (as they are known) have also initiated violent clashes ­ for instance, attacking audiences at skinhead concerts. Doesn't this put the fascists and their opponents on the same level and alienate public opinion? (2)

The main concern, however, is with the way in which the state is "fighting fascism and extremism." On the one hand, the relevant laws are being strengthened and more widely applied (especially in cases of hate crimes). More people are being prosecuted and jailed, more periodicals closed down for incitement to ethnic and religious hatred. On the other hand, legal and police measures are used selectively against opponents of the Putin regime, however weak the case against them may be. In other words, "anti-fascism" and "anti-extremism" serve as covers for undermining civil liberties and consolidating a monopolistic power structure. (3)

A striking example is that of the National-Bolshevik Party (NBP) and National-Bolshevik Front (NBF). The NBP, led by the writer Edward Limonov, has evolved in recent years away from fascism. (4) Recently a group of NBP members who were dissatisfied with this evolution split off to form the NBF. The NBP has been treated much more harshly by the authorities than the NBF, despite the fact that the NBF is clearly fascist while the NBP is no longer so. The NBF, however, supports Putin while the NBP maintains an oppositional stance.

In the "ethnic" republics "anti-extremist" charges have been brought against prominent activists critical of regional power structures, whether they be ethnic Russians, such as the journalist Viktor Shmakov in Bashkortostan, or members of ethnic minorities, such as the Mari priest Viktor Tanakov. (5)

People who publicly sympathize with the Chechen insurgents have also been prosecuted as "extremists." One well-known case is that of Boris Stomakhin, who got five years, solely for expressing unacceptable opinions concerning Chechnya. (6)

In January 2006, United Russia initiated the "Anti-Fascist Pact," ostensibly an agreement among political parties to oppose nationalism, xenophobia, and religious intolerance. However, the signatories included Zhirinovsky's LDPR, which supports Putin, while opposition parties were not invited to join. This was shortly after the LDPR proposed a law to prohibit mixed marriages between Russian women and foreigners.

NOTES

(1) And formerly at PANORAMA. Efforts are underway to make more of this work available in English. For my most recent coverage, see RAS 39, items 4 ­ 6.

(2) And yet, in some places at least, violent tactics against skinheads have worked; see RAS 39 item 5.

(3) In my opinion, the word "extremist" is out of place in a legal context because it cannot be defined clearly and therefore invites abuse.

(4) How far the NBP has moved in this direction is open to argument, but I don't think it can be denied that appreciable movement has occurred. The NBP website gives the impression of a rather moderate, albeit idiosyncratic, left-wing reform party, although Limonov is still called "vozhd" (like Stalin). I analyzed the NBP at an earlier point in its evolution in Ch. 7 of my book "Russian Fascism: Traditions, Tendencies, Movements" (NY: M.E. Sharpe, 2001). A book on the NBP by Andrei Rogatchevski is forthcoming in English from ibidem-Verlag.

(5) A priest of the old Mari "pagan" religion, not Christianity.

(6) See the Wikipedia article on Stomakhin.

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POLITICS

7. PUTIN'S GUBERNATORIAL APPOINTMENTS

Source. J. Paul Goode, "The Puzzle of Putin's Gubernatorial Appointments," Europe-Asia Studies, May 2007, v. 59, no. 3, pp. 365 ­ 99

Putin announced his proposal to replace the election of regional governors (1) by presidential appointments in September 2004, in the wake of the Beslan hostage crisis. Within three months the proposal had been implemented. The author finds "the speed and apparent ease with which regional electoral institutions were dismantled" puzzling. What incentives and sanctions could have made the governors "capitulate and even embrace" the change? Why should they have been so willing to sacrifice their electoral mandates and the autonomy of their regions?

Professor Goode (University of Oklahoma) tackles these questions by analyzing (among other sources) the Duma debates on Putin's proposal and by examining how Putin used his new power to appoint governors. In fact, Putin did not replace many governors: of 27 appointments from January to July 2005, 23 were incumbents. So governors may have realized that the risk of being removed by Putin was at least no greater (and perhaps smaller) than that of getting defeated in an election, especially as the legal issue of term limits has disappeared from the agenda.

The author observes that even in the period preceding the abolition of gubernatorial elections the Kremlin had been on the whole quite successful in achieving the results it wanted in such elections, despite a few high-profile defeats of favored candidates. The step was not a defensive reaction to any serious challenge from regional governors.

Governors may also have judged that the legitimacy derived from appointment by a popular president was no less valuable than that bestowed by an electoral mandate.

Some observers expected that Putin would use his powers of appointment to try to change certain types of regional power regime or influence regions' fiscal performance ­ that is, their status as donor or debtor regions with regard to the federal budget. In fact, there is no clear indication that either of these factors has influenced his decisions.

There was another important consideration for many governors. While dependence on presidential appointment made them more vulnerable to pressure from the federal center, it actually strengthened their position in relation to other actors at the regional level. In particular, it weakened regional legislative assemblies and enhanced governors' control over lower levels of government (cities, counties, etc.). The principle of appointment from above in a single "power vertical" legitimizes not only presidential appointment of governors, but also gubernatorial appointment of mayors and other heads of local administrations.

Presidential appointment equips governors to lobby for regional interests more effectively at the federal level, giving them privileged access to the Presidential Administration.

Finally, the author attributes the speed with which governors complied with Putin's wishes in part to the institutional legacies of the Soviet period.

NOTE

(1) In the broad sense of heads of regional executive branches, including those called "presidents," "heads of administration," etc..

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FOREIGN POLICY

8. RUSSIAN PUBLIC OPINION ON NUCLEAR RELATIONS WITH IRAN

Source. Russian Analytical Digest No. 30, November 6 (http://www.res.ethz.ch/analysis/rad)

Should Russia continue or cease nuclear cooperation with Iran?

Continue 38 percent Cease 28 percent Don't know 34 percent

What is your opinion on possible "precision strikes" against nuclear installations or camps of the Iranian Revolutionary Guard in Iran?

Positive 8 percent Negative 70 percent Don't know 22 percent

The source also contains an analysis of Russia's "schizophrenic" policy with regard to nuclear nonproliferation, rooted in conflicting strategic and commercial considerations.

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HISTORY

9. WAS STALIN A RUSSIAN NATIONALIST?

Source. Veljko Vujacic, "Stalinism and Russian Nationalism," Post-Soviet Affairs, April ­ June 2007, v. 23, no. 2, pp. 156 ­ 83.

Stalin is often portrayed as a Russian nationalist. (1) Stalinism is contrasted with the "internationalism" of the early years of the Bolshevik regime, when non-Russian nationalities received preferential treatment (the policy of "indigenization"). There is plenty of evidence that seems to point to this interpretation ­ in particular, the rehabilitation of Russia's imperial past, with its glorification of Ivan the Terrible and Peter the Great as precursors of Stalin, the reintroduction of army ranks, and the revival of traditional attitudes and practices concerning sex, marriage, the family, and education (the cult of motherhood, school uniforms, sex-segregated schooling, etc.).

In the author's view this interpretation is nonetheless simplistic and misleading. He emphasizes the need to make a sharp distinction between the old Russian nationalism of the tsarist regime, which drew its symbols mainly from peasant life and Russian Orthodoxy, and a new "Soviet-Russian" nationalism created in the 1930s. This new nationalism arose only after the destruction of the social base of the old nationalism was completed with collectivization. "Once rendered politically harmless, select Russian symbols and traditions could be assimilated to a new Soviet-Russian identity," creating an illusion of continuity with the tsarist past.

The author argues that in 1941 there spontaneously arose a third kind of "civic" Russian nationalism, distinct both from the nationalism of Old Russia and from the official Soviet-Russian nationalism. This civic nationalism was accepted as an effective way to mobilize popular resistance to the Nazi invasion in the early period of the war, but it was never a true reflection of regime goals and was suppressed with increasing rigor from 1943 onward.

The persistence of the Soviet-Russian identity has impeded attempts in post-Soviet Russia to forge a new identity independent of the Soviet past. A reluctance to deprive of meaning the only past that remains within living memory helps explain "the ambivalence of many Russians toward the Soviet (and even Stalinist) experience."

The author draws an intriguing parallel between the way that Stalin dealt with the heritage of the tsarist past and the way that Putin is currently dealing with the heritage of the Soviet (including Stalinist) past. Again it is a case of "the selective rehabilitation of the past and the incorporation of some of its elements into state symbolism." Again the desired effect is the illusion of continuity: Putin is a Stalinist in exactly the same sense that Stalin was a tsarist. Now the illusory continuity stretches back past not one but two regime changes as one magician builds on the achievements of the other.

NOTES

(1) Stalin (originally Dzhugashvili) himself was an ethnic Georgian.

(2) A striking example: keeping the tune but not the words of the Soviet national anthem.

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HISTORY

10. THE IMPACT OF KHRUSHCHEV'S DE-STALINIZATION ON CHINA

Source. Talk at symposium on Khrushchev at Brown University's Watson Institute for International Studies, October 27, 2007

The topic of Khrushchev's impact on China is situated at the intersection between Soviet and Chinese Studies and therefore neglected by both disciplines. For instance, one standard political science text on China under the CCP mentions that at the Third Plenum of the Eighth Central Committee in September ­ October 1957 it was decided to decentralize economic power to the regions. (1) What the author fails to note is that this was shortly after the announcement in July 1957 of the reform that devolved economic power to the regional Councils of National Economy (sovnarkhozy) in the Soviet Union. While no doubt other factors were also involved, this can hardly have been a coincidence given that at this date the USSR was still regarded as a model for emulation.

But let me focus on de-Stalinization in the narrow sense ­ the process set in motion by Khrushchev's "secret speech" to the Twentieth CPSU Congress in February 1956. The Sino-Soviet split that started to develop at the end of the 1950s and the rewriting of history that accompanied it have obscured the fact that in 1956 and 1957 the official position of the CCP was wholly supportive of Khrushchev's attack on Stalin. This position was set out at length in two pamphlets: "On the Historical Experience of the Dictatorship of the Proletariat" (April 1956) and "More on the Historical Experience of the Dictatorship of the Proletariat" (December 1956). It is clearly reflected in the Political Report of the CC to the Eighth CCP Congress, delivered by Liu Shaoqi in August 1956, and is reaffirmed in a speech delivered by Mao himself in November 1957.

In these and other documents we find all the key themes of Khrushchev's de-Stalinization: condemnation of the "cult of personality" (or "cult of the individual"), the "principle of collective leadership," the "healthy development of socialist democracy," and also "peaceful coexistence between countries with different social systems."

A very important point at the theoretical level is the agreement with Khrushchev's rejection of Stalin's thesis concerning the intensification of the "class struggle" under socialism. This thesis "broadens the scope of the suppression of counter-revolution" to include people who have honest disagreements with the leadership but are not actually enemies of the system. And here Mao makes his own theoretical contribution to de-Stalinization ­ the text entitled "On the Correct Handling of Contradictions Among the People" (February 1957), with its exhortations not to mistake "contradictions among the people" for "contradictions between ourselves and the enemy."

Nevertheless, it is clear that Mao was not enthusiastic about condemning personality cults. He could not fail to be aware that when Liu Shaoqi, for instance, condemned the personality cult his real target was not the dead Stalin but the pretensions of the very much living Mao. For those Chinese leaders who wanted in any case to constrain Mao, Khrushchev's de-Stalinization was a heaven-sent gift of legitimacy. True, their success in clipping Mao's wings proved temporary, but without Khrushchev they might not have managed it at all.

The first and crucial reversal suffered by de-Stalinization in China came in the summer of 1957, when the Hundred Flowers Campaign abruptly gave way to the sweeping repression of the "anti-rightist" purge. Many people think that the Hundred Flowers, in which the CCP leadership invited criticism of itself, was no more than a provocation, a trick to get dissenters to expose themselves in order then to crush them. This rationale was adopted retrospectively, but initially the Hundred Flowers may have been a genuine attempt by the leaders to break out of their self-imposed isolation and change their "bureaucratic style of work." They were shocked to discover that many critics wanted not to help them do their job better but to throw them out. For their part, Chinese intellectuals were still new to the system; lacking the experience of their Soviet counterparts, they were not skilled at expressing criticism within acceptable limits.

In 1958 Mao broke free of the constraints of "collective leadership" and launched the so-called Great Leap Forward. This meant rejecting the Soviet model of economic development, Soviet tutelage in general, and de-Stalinization in particular. At a CC meeting in Chengdu he declared that personality cults were OK provided that they involved worship of the right kind of people ­ "men like Marx, Engels, Lenin, and Stalin." Mao explained that Stalin had been 70 percent good and only 30 percent bad (a ratio later applied to Mao himself by his successors!). Of course, it was not until the "Cultural Revolution" of 1967 that Mao finally squared accounts with "China's Khrushchev," Liu Shaoqi.

But that was not the end of Khrushchev's impact on China. When Deng Xiaoping launched his reforms in 1978, they were couched in the "de-Stalinizing" language of 1956 ­ 57, revived after a hiatus of two decades.

These connections between Soviet and Chinese politics are encapsulated in the life story of Liu Binyan. (2) Fluent in Russian and a communist since his student days, he began visiting the Soviet Union and escorting Soviet visitors to China in the early 1950s as an interpreter for the Chinese Youth League. He was greatly influenced by his friendship with Valentin Ovechkin, a writer on rural life whose work also appealed to Khrushchev. (3)

Later, as a reform-minded journalist, Liu Binyan played an important role both in the first thaw of the mid-1950s, when he worked on China Youth News, and especially in the second thaw at the end of the 1970s, when he worked on the People's Daily, winning fame for "A Higher Kind of Loyalty" and other path-breaking articles. As for the twenty years in between, he spent them undergoing labor reform as a "rightist."

NOTES

(1) Tony Saich, Governance and Politics of China (NY: Palgrave, 2001), p. 35.

(2) See: Liu Binyan, A Higher Kind of Loyalty: A Memoir by China's Foremost Journalist (NY: Random House, 1990)

(3) Anatoly Strelyany tells us that Khrushchev's aide on agriculture, Andrei Stepanovich Shevchenko, used to read aloud to him in the evenings from Ovechkin's novel "Life as Usual in the County" (1952) (Memoirs of Nikita Khrushchev, ed. Sergei Khrushchev, Vol. 2 (Pennsylvania State University Press, 2006), p. 571.

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FEEDBACK

11. END OF RUSSIA'S TRADE SURPLUS?

Akio Kawato sent the following response to Clifford Gaddy's analysis of the state of the Russian economy (summarized in RAS 39 item 2):

"I was in Moscow last week and was astounded by the high prices. As I thought, the effect of the high oil prices will soon be negated by high prices and high wages. Experts told me that their trade surplus will disappear toward 2008 and they will have to depend upon capital inflow."

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