World Affairs

Vol. 3, Number 3 (Jul.–Sept. 1999)

 

Russia: A Lost Decade
By Felix N. Yurlov

 

The disorganised and uncoordinated nature of reforms in post-Soviet Russia has resulted in deep divisions within Russian society.

The present reforms in Russia have their historical pre-conditions. The first, and most important of them, was the crisis and later the downfall of the totalitarian system. Second was the defeat of the USSR in the cold war, while, third was the collapse of the Soviet Union. All of them were closely interlinked. The years of perestroika (1985-1991) played an essential role in the preparations of these changes in the USSR. Reforms had become the need of the hour. But the abortive coup d’etat of August 1991 and the later events were absolutely unexpected by the majority of the people who were not prepared for that kind of development.

The new ruling group which replaced the outlived and weak totalitarian regime, declared that a new, democratic revolution had begun. This revolution totally rejected not only the Soviet past, but also the historic experience of Russia before 1917. The radicalism of the post-communist leadership plunged the country into a new cycle of unpredictable events. The political changes were of a revolutionary character, not a reformist one. They were carried out from above without a proper debate and support from the society.

The leaders of this revolution promised to solve all economic problems on the basis of the neo-liberalism adopted by the ‘civilised’ countries. By ‘civilised’ they meant the Western rich states, while the rest of the world was considered ‘uncivilised’, though no one openly said so. From the very beginning of the reforms their leaders and promoters ignored the traditional cultural values of Russia, specially the basic ones which give priority to society and not to the individual. The individual first and foremost was a catch slogan of the reformers. And it did attract people after many decades of totalitarian rule and suppression of individual freedom. From this point of view it was not a small achievement. But an over-exaggerated attention to the problems of the individual, and almost a total neglect of the interests of society was followed by the destruction of cultural values, the emergence of moral crisis, and the rise of corruption and criminality. In the Russian sociocultural environment where collective work for the benefit of society was traditionally very highly valued, it resulted in a clash between the interests of society and a small group of individuals, created and protected by the new authorities.

 

Reforms or Destruction?

As in any revolution, at least in its early period, the Russian radicals had the upper hand in defining the immediate cause of action. They were very eager to smash the old system—lock, stock and barrel—and did so with great gusto. Therefore some people considered their actions as a kind of neo-Bolshevism with its total negation of the past. Their revolutionary fervour was manifested not only in their desire to demolish at any cost, and as quickly as possible, the old undemocratic system, but also in their efforts to prevent the return of the country to its totalitarian past. Clearly, this was quite understandable, but this ideological and political task was not supplemented by a clearly defined and articulated socioeconomic programme of reforms. In their political haste the new rulers did not take into account the transitory character of Russian society, totally ignoring the fact that any society in transition by definition is an unstable one, with great divides and cleavages, and often open to conflicts and ruptures. While, on the one hand, the Russians were willing to move forward to democracy, on the other, undergoing economic pressure, they sought solutions in their more familiar past. The new ruling group also failed to adjust to the Russian historical, cultural and psychological traditions, which very often play an important and decisive role in the process of development, sometimes even with unpredictable results. They also failed to correlate their actions with the current trends in society, and its ability to accept radical changes. They had no experience and knowledge of governing a state. And they were in a hurry to establish their own supremacy on the ruins of the collapsed system. They pronounced themselves as democrats in complete command of the affairs of the country, but there was a very wide gap between their words and their deeds.

The new ruling group came with promises to quickly build ‘a new happy life’ and solve all economic and political problems by adopting the model of Western liberalism. Needless to say, this concept was known in Russia only in its ideological garb, but not as a method of transforming of society. The Russian leaders lacked both sufficient knowledge of market economy and a good knowledge of the Soviet economy. In their ideological zeal and desire to discard everything that did not correspond to their understanding of liberal democracy and market economy, they ignored the very logic of historical and economic development of Russia and its cultural values.

Having announced liberal democracy as the only model of development, the new government grossly underestimated the economic legacy of socialism in the country. For purely ideological and political reasons the positive results of the economic development in the Soviet Union were passed over in silence. Suffice it to remind ourselves that by the end of the 80s the USSR had built up a very substantial economic potential. Noticeable success was achieved in education, in the promotion of knowledge and skills, in free medical service and social welfare. According to the UN Human Development Report, in the early 90s Russia was one of the developed countries as far as quality of life was concerned.

All these factors could have formed a solid foundation for the reforms, and the structural reconstruction of the economy by a reasonable application of market economy methods. But in the absence of normal institutions of market economy, the reforms were accompanied by massive criminalisation, which obstructed the economic resurrection of the country.

At the beginning of the reforms in Russia many politicians and observers toyed with the idea that market reforms would automatically lead to democracy. But when the reforms started to stumble, the same people began to preach that an authoritarian rule would be more suitable for Russia, provided it ensured development of market economy. They argued that market pluralism would inevitably trickle down to the political system and ultimately bring democracy, even within an authoritarian state. Some of them even talked of monarchy as a political instrument for Russia’s resurgence.

There was of course the idea of creating a middle class, that could support the reforms. But it ignored the existence of an already substantially large middle class in Russia—teachers, scientists, engineers and technicians, medical doctors and lawyers, and highly qualified workers. These categories represent the core of society in any developed country, as they represent the most important capital: knowledge and skills. These people play a very important role in any political system, especially at the time of reforms and modernisation of the economy.

But in post-communist Russia this very middle class, which originally supported the idea of reforms and which could have been its staunchest defender, was practically destroyed. Its buying capacity, its prestige and influence in society were thereby undermined. Nearly all of these groups were driven down to the low-income category.

Great damage was inflicted on science, education, and culture. The funding of scientific research was reduced by 15 to 20 times. It resulted in a drain of highly qualified cadres to such spheres of trade and economy which do not require high level of qualification and education. It was accompanied also by a ‘brain drain’ to developed countries of about half a million well-educated, young and energetic people. Consequently the severe blow struck to the old middle class boomeranged: the reformers lost the support of that very important social group.

But the efforts to build up a new middle class of entrepreneurs still brought some results. Many Russians embraced the idea of market reforms and eagerly started their own businesses hoping to build a better life by honest private enterprise. To the dismay of most of them, they encountered a total lack of state support, faced exorbitant taxes, confronted mafia interference and ran into insurmountable corruption of government officials. Thus the main outcome of the reforms was the formation of a meagre group of ‘new Russians’ and a still smaller group of ‘oligarchs’—about a dozen men who, as one of them admitted, gained control of over 50 per cent of the Russian economy.

The greatest redistribution of assets in world history took place, but this was in fact a transfer of public resources into private pockets by dubious means. All this came to be due to the creation of an economy of non-market distribution of benefits and privileges, which blocked the production of goods. A kind of paternalistic system was created, in which the successes of an entrepreneur depended not on his/her knowledge of the market, nor upon his/her skill and effectiveness, but rather on the relationship with the federal and regional authorities. Indeed, who would take the risk of starting a new enterprise in an unstable political climate when there was the possibility to distribute and consume the already existing resources? The new businessmen’s profits depended not on the quality and quantity of the goods and services produced, but on their belonging to a certain financial group which had access to such authorities. Thus phony capitalism, in its most vulgar and primitive form, was established in Russia. According to some estimates about 40-45 per cent of capital involved is of criminal origin.

It is not incidental that the real achievements of the Russian economy were limited only to the earlier undeveloped sector of services. It helped to meet the previously hidden consumer demand and thus decrease the deficit of goods. There was also a rise in construction of high quality dwelling houses and cottages. That happened due to the suppressed demand for them in the past. But very soon the construction boom stopped, as only a very limited number of people could afford to buy new properties.

At the same time one should not underestimate some achievements in the building of the foundations for democracy and freedom in Russia, the most important of which was the creation of an independent mass media, and the appearance of numerous political parties, movements and public organisations. Elections to parliament, regional legislative bodies, and municipalities brought a lot of welcome changes. Pluralism of opinion became a common feature of public life.

But Russia is still in the very early stages of democracy. Quite often the press and TV are dependent on those who rule the state or the regions, and on their owners, who promote their own vested interests through them. In many cases elections are rigged or manipulated. The opposition does not get adequate media coverage. In spite of the significant rise of NGOs, their present number is insufficient for a country with 150 million people. Public organisations at the grassroots level are practically absent. People in general are only learning the ABCs of democracy. Many of them are not at all sure that their participation in the political process could bring results and for that reason they simply refuse to go to the polls.

 

Left Out in the Cold

One very dangerous consequence of the reforms was the decline in the quality of life for the majority of the population. During the years of reforms real per capita income shrank 2.5 to 3 times. The decrease in births and rise in the mortality rate, as well as the reappearance of long-forgotten diseases such as tuberculosis and cholera, are a new phenomena. In addition, there has been an unprecedented growth in drug addiction, alcoholism, and mental disorders. The average life expectancy has fallen from 69.3 years in 1986 to 63.4 years in December 1994. For men this indicator stands at a terribly low and socially dangerous level of 57.6 years. Thus the crucial index of life quality has gone back to the early 1960s. As a result of all this, the population in Russia decreases by one million every year. In addition, today two million children are homeless (which by far exceeds the number of homeless children during the Civil War and World War II). Another two million children of school age do not attend school. There is a sharp rise in unemployment, non-payment of wages, and pensions. It is therefore not surprising that there has been a very steep increase in social polarisation. No more than 10 to 15 per cent of the population have substantially benefited from the reforms. At the same time more than 60 per cent became impoverished. A very sharp regional differentiation of incomes has also occurred. Only about 15 out of 89 administrative regions of Russia are self-reliant and act as donors for the depressed ones, with Moscow possessing more than 80 per cent of Russia’s financial capital.

In August 1998 a new wave of the crisis engulfed Russia. The government announced that it was not in a position to fulfil its obligations and pay its domestic and foreign debts. In effect Russia declared itself bankrupt. This new development was not entirely unexpected, but was rather a logical outcome of all the preceding events. By that time Russia had already lost more than half of its economy, while its agricultural production had fallen by 40 per cent. Food imports have risen to 50 per cent of Russia’s total food consumption, thereby aggravating Russia’s food insecurity.

 

Who Benefited from the Reforms?

After all these years of reforms the Russian economy is mired in a very severe crisis. The so-called liberal project has brought innumerable sufferings to the people. It has made Russia dependent on speculative investments from the West, as a result of which a major part of its economic independence has been lost. Under the present dispensation and existing conditions in the country and in the world, Russia has a very small chance to attract the much-needed investments for its economy.

Previously, whatever investments would come, they were controlled by a small group of people in league with corrupt Russian government officials. Nowadays, there is considerable talk in the West about corruption and criminalisation in Russia. And it is correct. But the crux of the matter is that this corruption and the mafia-type economy have come into existence with the help and assistance of dubious Western entrepreneurs.

According to the estimates of the Analytical Centre of Russian Academy of Sciences, 55 per cent of capital and 80 per cent of voting shares in the emerging private sector were bought by Russian and foreign criminal businessmen. As a result the underground, parallel economy is equal to 40 per cent of its Gross Domestic Product.

Those in power have committed all possible and impossible blunders. Had the economic reforms been carried in this manner elsewhere in the world, they would have brought total destruction to the country. But Russia with its well-developed socioeconomic infrastructure and economic might, which it inherited from the Soviet Union, is still struggling for survival.

After a decade of disastrous experiment it became clear that there was no other way to remedy the present mess but by changing the present economic and political course, as well as by removing those who had plunged the economy into a permanent devastating crisis.

It is important to understand who is responsible for such a destructive course in Russia and why. There were those who possessed power and were in a position to amass huge wealth, during the first years of privatisation of the state property built over decades of national effort. Nearly 85 per cent of that property was sold at a nominal price. One of these new rich, who admitted that he possessed $3 billion, said, “We have taken what did not belong to anybody,” ie, state property.

Broadly speaking, the ruling class of today’s Russia consists of the following groups. The first is represented by a part of the former communist party, Soviet and Komsomol activists and workers, as well as managers of state plants and enterprises. During the later years of perestroika they used their position in the Soviet regime to prepare the ground for their future political and entrepreneurial activities. In post-communist Russia they utilised it to their advantage and sliced the best parts of the state pie in their favour. It goes without saying that no moral criteria were applied during the exercise. Being an integral part of the former regime, they acted clandestinely to conceal their real intentions from the public. But they were not prepared to serve society. Their professional knowledge of management was used only for their own personal interests. They did not care for any ideology whatsoever. Their only aim was to use the prevailing public turmoil to pocket the maximum, as well as other benefits and privileges.

The second group consists of members of the underground, parallel economy, which mushroomed in the second half of the 80s during perestroika. They are the ones who in the Soviet period gained first-hand knowledge and experience of operating in an underground and hidden manner, using deceit, corruption and other criminal methods. They are the ones who laid the foundations for the new rich or, as they called themselves, ‘new Russians’. They symbolised costly apartments, villas in Russia and abroad, expensive foreign cars, a luxurious way of living and ability to evade laws, specially taxation. They are without scruples or moral values, their only aim being to seize the best part of state property and accumulate wealth as quickly as possible. They could be compared to conquistadors and colonisers but with a difference: they rob their own country. They are the very people who wage a constant criminal war with each other, and are ready to spare no one who stands in their way to new riches. Some of them were imprisoned in the Soviet Union for their illegal practices. Nowadays they have declared themselves as former ‘economic dissidents’ and demand a complete rehabilitation.

Other groups of people tried their luck in small business, mostly in trade and services, some of them quite successfully. But many have become victims of the criminals who demanded their share of the profits. Many businessmen could not stand the pressure and were forced to close down their businesses. This group of small entrepreneurs represent the most vulnerable section of business people. After the government’s August 1998 declaration of bankruptcy and the sharp devaluation of the rouble, many were compelled to go out of business.

Thus the former Soviet economy came to be monopolised by the first two groups. Possessing political power and capital, they struggle to retain the status quo. Using the mass media they manipulate public opinion, as was the case during the 1996 presidential elections, as well as the parliamentary and many municipal elections. Criminal elements are trying hard to increase their influence in politics. With this objective in mind they get elected to legislatures, corporations and municipalities.

At present Russia’s economy is divided into zones of control among different clans, factions, mafia, and other groups. They are waging wars between themselves but are united in their common vested interests, which have nothing to do with the interests of society. They pose as the most important part of society which will determine Russia’s future, with the borrowed slogan, “What is good for General Motors is good for America”, meaning what is good for them is good for Russia. But this gimmick does not and cannot work with the Russian people.

American economist, Geoffrey Sachs explained in his own way the causes of the present disastrous state of Russian economy. The main thing which let Russia down, he said, was the colossal gap between the rhetoric of the reformers and their real deeds. According to him, the Russian leadership surpassed the most fantastic ideas of Marxists about capitalists. They believed that the aim of the state was to serve the interests of a narrow circle of capitalists by pumping into their pockets as much money as possible, and as quickly as possible. It was a malicious, predetermined and very well planned strategy, aimed at the large-scale redistribution of wealth to a small group of people. Geoffrey Sachs must know the situation very well, as he served as the chief adviser to the Russian government in its early years.

 

Russian Reaction to the Reforms

Though the majority of Russians had longed for changes, the way they were carried out did not reflect the interests of society as a whole. The creation of a small group of new Russians consisting of the old and the new nomenclature and criminal elements has not advanced society on a civilized basis. The reforms, which undermined the social and economic rights of the majority of people, have discredited the very idea of reforms, and endangered the fate of democracy in Russia.

The results of many public opinion polls of the last two years have demonstrated that the majority of Russians are not satisfied with the outcome of the reforms. In the February 1997 public opinion poll only 8 per cent of respondents replied that they lived better than before the reforms. The polls have also shown that the reforms were followed by a serious destruction of motivation for creative and socially fruitful work. A significant number of the respondents considered that the main factors responsible for the well-being of reformers were: speculation (39 per cent), the stealing of state property (34 per cent), and the use of criminal money (17 per cent). The concept that there is a direct correlation between income and personal endeavours was confirmed by only 7 per cent of the respondents. These facts and conclusions are confirmed by the June 1998 sociological study, “Citizens of Russia: What they feel about themselves and in what society they would like to live,” conducted by the Russian Independent Institute of Social and National Problems.

The survey found that, regardless of age group, Russians perceived present-day Russia as a society with no ideals and spiritual values; a society of criminals and corruption. At the same time, while younger Russians were generally more pragmatic and cynical than their elders, the poll showed that their overall thinking and values were similar to those of their parents.

One of the questions put before the respondents was: “What are the qualities, which characterise different historical periods of Russia?” Four periods were mentioned: before the 1917 revolution, USSR under Stalin, USSR under Brezhnev (1964-83), and contemporary Russia. Though identification with the Brezhnev period was far greater in all age groups, the older groups were more in favour of the Brezhnev period and more negative in their evaluation of the present Russia. They were also less idealistic about Russia before the 1917 revolution. This survey demonstrated that in people’s understanding (which is not the same as the official ideology of the old communist party) the Soviet experience for many of them would serve as a yardstick in the foreseeable future. And all the main events and policies, all the leading political figures and socio-economic life would be judged by this yardstick.

Many of the respondents consider the present state of affairs in Russia as a kind of ‘forced’ development, which can be justified only if it results in ‘normal life’ for the people. The present wave of the crisis has only strengthened this opinion. It is also interesting to note that only 18.4 per cent of the respondents supported the opinion that “there is very little in the whole 70-year old history of the Soviet Union about which they can be proud”. As many as 75 per cent of those polled did not agree with this statement. The survey concluded that the ‘Soviet paradigm’ had not been demolished, and could not be easily erased from the mass conscience. At least for another ten years or so this paradigm will continue to determine the character of self-identification of the majority of Russians.

 

Russia and Globalisation

Sometimes it is argued that the Russian crisis is very closely related to the crisis in the Southeast Asian countries. No doubt, there are some similarities between the two; but the roots and nature of the crisis in Russia are quite different from the causes of the upheaval in the Southeast Asian countries. The latter were called ‘miracle makers’ as they had achieved their transformation in a very brief span of time. With their high rate of development up to 10 per cent annually during some 30 years, they were able to integrate into the world economy and finance, and become part of the world capitalist system.

But the new Russia falls into a different category. The Russian economy can hardly be called capitalistic, and its integration into the global economy is only marginal. Besides, a part of this integration is of a criminal character, with phony Russian capitalists making illegal transactions with some not very scrupulous foreign companies, hiding their capital abroad, avoiding payment of taxes, etc.

Russia’s ‘miracle’ is of a different sort. Instead of moving ahead in developing its economy and improving the lot of its people, it is sliding backwards, bringing insurmountable sufferings to its people and losing its position in the world as a partner.

The Russian reforms greatly differ from those in the Southeast Asian countries. While the latter are in the mature phase of their modernisation, Russia is undergoing a transformation not only of the command economy, but of its political structure as well. This dual task makes the transformation much more painful and problematic. Also it explains its difficulties. But due to its present inability to compete in the world market, Russia should cautiously open itself to the global economy. Its experience of the past few years has shown that the haste in pseudo-globalisation was detrimental to its economic health. It is more than obvious, now more than before, that Western support and aid cannot play a decisive role in Russia’s modernisation. Maurice R Greenberg, the Chairman of the American International Group, Inc., and the Vice-President of the Executive Committee of the Centre for Strategic and International Studies, is of the opinion that “the crumbs of the help” offered by the Western governments and international finance organisations, cannot dictate the tempo and the scope of the reforms in Russia. The Western assistance is but “a few drops in a pail of water”. (Maurice R Greenberg, “Privatising Western Assistance in Russia”, The Washington Quarterly, vol 17, No 4, Autumn 1994, pp 19-26.) The same view is shared by many other Western representatives and organisations. “Heritage Foundation” in its Index of Economic Freedom, analysing the situation in 142 countries, came to the conclusion that the “foreign aid did more harm than good”. Out of 34 countries which were receiving aid from the USA during 30 or more years, only eight improved their economy, 12 remained in the same position, and 14 became even poorer. (Bryan Johnson and Thomas Sheeny, “Foreign Aid Does More Harm than Good”, The Post-Dispatch, St Louis, USA, January 4, 1996.) Every year the aid, given by the rich countries to the poorer ones, is equal to only a quarter per cent of their total GNP, that is about $60 billion. A substantial part of this amount is used by the poorer countries to pay their debts to the IMF, the World Bank, and the rich countries. The ‘donors’ will not stop this assistance as they are afraid of a default on the old debts. The other side of the story is that this assistance is given in the form of credits tied up to a supply of products by the rich countries. Therefore more and more debts accumulate. A vicious circle!

Russia’s experience during the last seven years proved that the IMF programmes and loans could be useful, if at all, only as a local pain-killer, not as medicine for the whole state organism. In an unstable and unhealthy economy they failed to serve as a catalyst for investments from other foreign finance organisations. Those loans were also used as instruments of political pressure. As Stanley Fisher admitted on January 16, 1999, he regretted that the IMF had allocated so much money to the Russian government to fight the opposition in the country.

The net result of incompetent reforms and globalisation is reflected in Russia’s external debt. It has risen to $220-225 billion, out of which two- thirds have been accumulated after 1991. All this money was spent on budget deficits and payments of old debts. Thus, a kind of a ‘debt economy’ has been created. In 1999 Russia will have to pay $17.5 billion to the Western financial institutions, banks and governments, and in the next two years—another $232 billion. Today Russia’s currency reserve is only $12 billion. At the same time, according to different estimates, during the last seven years about $300-400 billion have been transferred from Russia to foreign banks.

Russia has to find a solution to the crisis by using its own genius, as well as the experience of other countries. From this point of view the Indian experience may be useful to Russia. India’s stability during the Southeast Asia economic crisis has shown that reasonable protectionism serves as an important safeguard against speculative foreign investments and quick withdrawals of money. It seems Russia could borrow some of India’s practices in dealing with foreign investors and creditors.

The Russian crisis and the crisis in Southeast Asia, and for that matter the crises in Mexico, Brazil, and elsewhere, have some other common features. They have demonstrated that market fundamentalism does not take into account specific cultural, social and political traditions and institutions of each country. These crises have also shown that the market is unable to regulate and stabilise the economy all by itself.

Professor D Rodrik of the John F Kennedy School of Management at Harvard University points out very correctly, that market fundamentalism has created a whole set of myths and half-truths. One of them refers to liberalisation of the international markets as the only way to global prosperity, and the free flow of capital as the only effective means to redistribute global resources. The market fundamentalists also claim that the international financial markets are able to make the governments carry out more reasonable finance and tax policies. And, that all these objectives can allegedly be achieved without inflicting social injustice on the people, without disturbing the existing social order.

The experiment with the reforms in Russia and the crisis in the Southeast Asian countries has demonstrated, once again, that the idea of global capitalism, as understood by the neo-liberals, is not basically viable. Capitalism is a national phenomenon, and there are different varieties of it in different countries, East or West. Therefore the real question is : how to create such a world, in which different national types of economy could peacefully co-exist and prosper side by side. And here we come to the problem of social justice with its global dimension: the prosperous ‘golden billion’, on the one side, and five poorer billions, on the other. Judging from this angle, the downfall of socialism in the Soviet Union sent a grave warning to those who thought that there would be a straight road to equality and social justice. It remains an open question how those five billion will be able to satisfy their urge for a better and dignified human life.

Thus the fall of communism resulted not in universal consensus and a fast globalisation of the economy, but in a global crisis of the spirit and ideology. Z Brzezinski suggests, that “a congested and intimate global political community, characterised by rising levels of political awareness is emerging in the context of continued and, in some respects, even widening socioeconomic disparities. As a consequence, these vast, newly politically activated masses are in the process of experiencing a compressed historical progression in the subtle relationship between political outlook and social condition” (Zbigniew Brzezinski, Out of Control: Global Turmoil on the Eve of the Twenty-First Century, New York, Maxwell Macmillan International, 1993, pp 51). We may add to it, that the global political and social awakening of the masses will make all the difference in the world in the not so distant future.

 

Conclusion

The reforms in Russia have mostly been ideological and political in character without any convincing, positive concept; that is, with no constructive idea about reform around which different social and political groups could be united. The slogan of the market reforms was not followed by concrete deeds and positive results in the interests of the majority of the population. This has led to a deep division within the society. Thus far, no political party has emerged which is strong enough, and determined enough to carry out the necessary reforms.

After so many years, a clear vision of Russia’s future has yet to be formulated. The crisis has revealed that during the seven years of the reforms not a single fundamental problem of economy and social life has been solved. The vast economic and intellectual resources of Russia have been spent in vain.

Russia is still faced with an unfulfilled task of finding its own path of development. It has to decide what is the right proportion between its cultural values and the modern ideas of development. The sooner it accomplishes it, the better. The present situation demands that Russia change its previous course of reforms. Unfortunately, its new starting position is not so advantageous as it was before the collapse of its economy and finance. Therefore, there is no other way but to concentrate its will and resources, to put an end to the robbery of its national wealth, to give a push to the real sectors of the economy and develop market institutions, and at the same time to limit its virtual bubble economy. Russia can do it, as it still has a very solid economic and intellectual potential, and vast human and natural resources. It produces 33 per cent of the world’s gas, 22 per cent of oil, 20 per cent of non-ferrous metals, 25 per cent of diamonds, and 40 per cent of timber. And most of all, Russia has the capacity to advance in high-tech. What it needs is reforms that will not only use international experience, but also take into account the specific features of Russia, its spiritual, and cultural traditions, and its ethnic pluralism. It has no other option but to solve the fundamental problems of democracy, including human rights, freedom and security of the individual, as well as social justice and social protection, along with the simultaneous introduction of market reforms.

There are no readymade solutions for that. But in any case the new reforms should be based on Russian experience and traditions, and carried out by the Russians to serve Russian interests.