Moscow Times
April 20, 2009
The New Kremlin Dreamers
By Michael Bohm
Michael Bohm is the opinion page editor of The Moscow Times.
Several weeks ago in Voronezh, First Deputy Prime Minister Igor Shuvalov said the ambitious goals for "Strategy 2020" remain in place despite the economic crisis. He also said Russia has every chance of becoming the world's most desirable place to live by 2020. "This is no fairy tale," Shuvalov added, but if you examine the strategy closely, it certainly looks like one.
Consider the four main goals of Strategy 2020:
1.Increase per capita GDP to $30,000 from its current $15,800 based on purchasing-power parity. Although it is difficult to compare developed economies with developing ones, it took Canada 28 years, Britain 24 years, Japan 27 years and the United States 35 years to double their per capita GDPs. How will Russia do it in only 11 years?
2.Increase life expectancy to 75 years. This doesn't require any doubling, but it still requires a 13.6 percent increase over current life expectancy of 66 years. The only way this goal can be reached is if Russia is able to bring its health care system up to Western standards by 2020 and if the majority of Russians are able to change their unhealthy lifestyles.
3.Increase the middle class to 60 percent of the population. This is a tricky one since it depends on how you define "middle class." Russia often uses a monthly income of 15,000 rubles ($454) as a starting point. True, every country has its own definition of a "middle-class lifestyle," but 15,000 rubles is a stretch any way you look at it, particularly considering Russia's chronically high inflation.
4.Jump to the No. 5 spot from its 2008 ranking of No. 8 in the world in terms of nominal gross domestic product. Let's look at who occupied that spot in 2008 -- France, whose nominal GDP is roughly 70 percent larger than Russia's according to the CIA World Factbook. Since Russia is so dependent on natural resource exports for its GDP growth, its economy can grow only if the economies of the leading oil and gas importers -- mainly the Group of Seven nations and China -- grow. If these countries decline, so does Russia, as the current crisis clearly shows. Of course, nanotechnology, commercial space and other high-tech sectors could be the silver bullet that propels Russia to the No. 5 spot, but the logical question is: Even if Russia becomes a high-tech leader, who is going to buy all of that wonderful technology if the world's leading economies are in decline?
Once the crisis passes, what would it take for Russia to replace France in the No. 5 spot? If France's economy grows at a modest 2.5 percent annually, Russia's economy would need to grow by 9 percent per year to close the gap. But even in the oil-boom years from 2004 to 2008, Russia's GDP growth averaged only about 7 percent annually.
But the most important ranking is not mentioned in Strategy 2020 at all -- the Transparency International's corruption index, in which Russia ranks 147 out of 180 countries in 2008. Corruption is particularly onerous for Russia's struggling small and medium-size businesses, which make up only 10 percent to 15 percent of the country's GDP. In the United States, small and medium-size businesses are the engine of economic growth, comprising roughly 50 percent of the country's private GDP and creating about two-thirds of net new jobs annually.
As long as Russian bureaucrats (and competitors) are free to terrorize businesses by creating "administrative barriers," extorting bribes and raiding, economic growth in the real sector will always be insignificant. To his credit, President Dmitry Medvedev is backing a new law to assist small businesses, which will, among other things, limit the number of government inspections of businesses. Most likely, however, these limitations will be easily sidestepped when bureaucrats simply extort a larger amount of money per inspection.
To be sure, many Russians already consider Russia to be a very desirable place -- without Shuvalov's help. And this is also true for foreigners, including the editors and reporters of this newspaper, who voluntarily choose to live and work in this country. But for those who don't believe this to be true, even the most advanced Kremlin propaganda will do little to make Russia more desirable. To rephrase a Russian expression, no matter how many times the Kremlin PR machine repeats the word "halva," it won't make Russia any sweeter.
Kremlin myth-making has a rich tradition, dating back to the very beginning of the Soviet Union. When British writer George Wells visited Lenin in 1920 and learned of his utopian 10-year plan to create wonders out of a country very much still in ruins in the aftermath of the Bolshevik Revolution, he called Lenin "The Kremlin Dreamer."
Shuvalov's vision of Russia 2020 is also eerily reminiscent of Nikita Khrushchev's grandiose promise that he made at the 1961 Communist Party congress: that full-blown communism -- defined roughly in terms of a U.S.-style middle-class standard of living for every Soviet citizen -- would be achieved in 1980. As the old joke went, instead of communism in 1980, the Soviet people got the Olympic Games for two weeks and the Afghanistan war for nine more years.
After the global economic crisis blows over, Russia has a lot of potential to grow by 2020 -- particularly if it can develop what Prime Minister Vladimir Putin calls its wealth of "human capital." But for this to happen, business people, scientists and other innovators must be free to be creative and innovative -- above all, they must be free from administrative barriers and corruption.
United Russia and the government should adjust Strategy 2020 to make it more realistic and less heroic in the Soviet Stakhanovite tradition. Perhaps U.S. President Barack Obama could serve as a good example. He has done a lot to modify U.S. ambitions after the disastrous mistakes of President George W. Bush and after the humbling impact that the financial crisis has had on U.S. hubris. And Obama was able to do this with dignity.
The Kremlin should try to do the same, and it can start by cutting every Strategy 2020 goal in half. This should have been done before the crisis, but it is ever more compelling now. Even the notoriously pessimistic Finance Minister Alexei Kudrin, who has warned about a long and difficult recovery, has not called for Strategy 2020 to be reviewed.
In addition, a new crucial goal should be added: to improve Russia's corruption ranking to 100 from 147 by 2020. To be sure, this would be no easy task. No Russian tsar, general secretary or president has been able to significantly curb corruption, but perhaps Medvedev's anti-corruption program has the teeth to do the job.
Although Russians often say that it doesn't hurt to dream, feeding people myths is just as dangerous now as it was during the Soviet period. It is hard to believe that after 73 years of Soviet utopian slogans, superheroic five- and 10-year plans and empty promises, the Kremlin has essentially returned to spinning the same fairy tales again. The Kremlin should remind itself that the ridiculous Soviet myths and unfulfilled promises, which made Soviet leaders the laughing stock of the world, did more to discredit and ultimately bury the Communist Party than a million dissidents could ever do.
When Shuvalov was a young teenager in the late Brezhnev years, he, like every other young Soviet citizen, listened to the Communist patriotic song about heroic Soviet achievements -- " , " ("We were born to turn fairy tales into reality"). It was a national favorite on radio airwaves and sung at summer camps and during holidays. Although that was 30 years ago, I have a secret suspicion that Shuvalov still hums this tune on his way to work.
Fairy tales are wonderful, but they should be read to children. They have no place in Strategy 2020.
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