“We can talk up Russia’s square-wheeled bicycle for as long as we like, but sooner or later we’ll have to admit that openness and competition represent our only chance to prosper.”
I gained my freedom one and a half years ago, but I still cannot return to the country of my birth. I would dearly love to see Moscow and St.Petersburg with my own two eyes, as well as other favourite places throughout Russia, in order to get a better sense of how the country has changed over the last ten years. I maintain links with my native land through family and friends and via the media, and I can see that the decade has brought colossal changes to the country — some of them for the better.
Living standards in Russia have improved significantly. It’s customary to declare that Russia’s citizens have never lived as well as they are now. We should not be misled by this supposed truth, for the country has barely even begun to realise its full potential.
I’ve been branded Enemy Number One by the regime. And yes, I’ve criticised its actions on numerous occasions and believe that we must strive for a regular change of government, but what I want to argue today is that the regime is not the sole problem faced by our country.
At its peak, Russia’s GDP was $14,000 per capita — and even that was approximately 2.5 times lower than the EU average. To achieve a level of comfort and quality of life approaching that of developed European countries, we’re going to need a competitive economy. And there are many obstacles to the creation of a competitive economy beyond those posed by Putin and his cronies.
Infrastructure is more important than resources
We have an abundance of natural resources, which is a plus, yet we’re peripheral to global transport flows, which is a serious drawback.
We’re hemmed into the interior of Eurasia: many of our cities and industries are hundreds, even thousands of kilometres from the coast. Russia isn’t technically a landlocked country, but the majority of its regions compare unfavourably in terms of their transport accessibility to formally landlocked nations such as Austria, Switzerland, and the Czech Republic. On a planet where almost two thirds of global GDP is generated in regions within 100km of the coast, that’s a serious problem.
Russian Railways trains transport freight at an average speed of 11kph, which is why Russia handles a mere 1–2% of all freight traffic between Europe and Asia, while our industries are faced with prohibitive transport costs. For Russia to feature once again on the transportational and industrial maps of the world, we need a much faster and more effective transport network. Under current conditions, wherein political and economic competition is proscribed, such a network is impossible to create — ultimately, Russian Railways will just receive yet another tranche of money from the National Wealth Fund.
We’re experiencing problems with infrastructure not only on a nationwide, but also on a city-specific scale. The absence of comfortable living environments precludes the full realisation of Russia’s human potential. Even in Moscow, our country’s wealthiest city, living and getting around is fraught with inconveniences. Moscow’s population density is triple that of Paris, Rome or London, while its inhabitants spend triple the time stuck in traffic jams. The city has five times less road and transportation infrastructure than it needs.
A typical big city in Russia is a human ant’s nest with a radius of 10–20km and zone upon zone of high-rise slab apartment buildings. This type of spatial configuration is in no way conducive to normal interpersonal engagement, or, for that matter, to the creation of added value. When and if these cities metamorphose into well-designed, low-rise territories with diameters of 150–200km and road networks that make it possible to get to the centre from any point within the hour, the economic potential of the urban population will double. Such cities will become global centres of the knowledge economy, attracting talented, enterprising people from all over the world.
People are more important than resources
The explosive economic growth of the 2000s was in large part facilitated by favourable demographics, when the Gorbachev-era baby-boom generation entered the market.
In 2007, the number of working-age people exceeded the number of those unfit to work by almost twofold, the highest such figure in the history of the country. By this time, liberal institutions created during the post-Soviet reforms were in full force. Many private businesses were now able to process the incoming flow of petrodollars and channel it into chain retail, real estate, car manufacturing, and the service sector. At the same time, competition improved the efficiency of industries created back in the Soviet era. After the privatisation of the oil industry, production costs shrank threefold, while production and reserves increased by 70% and 30% respectively.
Then the liquidation of democratic institutions began. Political and, subsequently, economic competition was destroyed. Yet again, we decided to fall into a familiar historical trap — namely, to verify how efficacious state monopolies are. Answer — not very. If the privatised oil sector saw increased production, the reverse is true of state-run Rosneft. Bad management has led to a situation where the company’s debt exceeds its market capitalisation, leading it to ask for ever greater government aid, time and time again.
Oil prices have fallen, while institutions that ensured economic flexibility have been swept aside. The situation is exacerbated by the fact that we’re falling headlong into a demographic hole; by 2025 we’ll be in the thick of the crisis. The regime recognises this, too, but is attempting to solve our demographic problems by creating societal ones. The maternity capital programme hasn’t lived up to expectations, and some of the worst ideas from bygone eras have resurfaced: regulation of abortion, discussions about polygamy, and so forth.
You want people to have more children? Well, how about providing them with housing first?
Russians are crammed into less that 20 square metres of living space per capita, as compared to 55–60m2 in Western Europe and 80m2 in the US.
In the States, construction projects are greenlighted within an average of 70 days; in Russia, you’ll be traipsing from office to office and genuflecting to bureaucrats for over a year. The result is insufficient housing, and inordinate prices. For the situation to improve, the housing construction system has to be completely overhauled. But how is this to be done when property represents a primary income source for an out-of-control and irremovable bureaucracy?
Creating actual affordable housing — and not just an affordable housing programme — is hardly an unachievable goal. We have to get rid of redundant approval processes, make auctions for construction sites transparent, and de-monopolise the road construction market. Further, we mustn’t be afraid of losing the support of regional chiefs, who live off property development and predetermine the elections, or that of our businessmen friends, who have monopolised road construction.
But as long as the current logic of government power remains in place, we’ll be rushing headlong into a brick wall. The years 2016–2018 will witness an abrupt intensification of the strain on the pension system. Pension indexation will necessitate serious increases in transfers to the Pension Fund over the next three years: by 1.1. trillion roubles in 2016, 1.2 trillion in 2017, and 1.7 trillion in 2018. This isn’t quite a brick wall yet, it’s a speed bump. The brick wall awaits us close to 2025, when the country will be deep in the demographic hole. If, at the peak of economic growth in 2007, every individual incapable of work was sustained by almost two people of working age, this ratio will be almost 1:1 by 2025.
The regime has bitten its own tail. It cannot allow economic and political competition — that would be contrary to its nature. As a result, the economy is contracting while budget revenues are falling. The government is finding it ever more difficult to fulfil its societal duties, and to buy the popular support that guarantees its monopoly power. Either the system will need to undergo serious liberalisation before 2025, or it will cease to exist — not, I very much hope, along with the country itself.
Technologies instead of migration
The sweeping aside of institutions, the curtailing of property rights, the destruction of major independent media — all this has already brought about economic decline.
Capital flight over the last five years has totalled an insane $383 billion. With the emigration of our most qualified and enterprising citizens, the pressure on remaining workers is growing.
The shrinkage of the working population will need to be offset by migration into Russia. According to various estimates, an inflow of between 300,000 and half a million migrants will be required per year. Given the current state of the institutions, we must expect a mass migration of unskilled labour from neighbouring countries with different social, cultural, and religious structures. Typically, migrant workers live in squalid conditions (there is insufficient housing even for locals) and experience the full brunt of all the negative aspects of the degraded legal system.
Throw in the lack of any meaningful discussion around the problems of assimilation, and, in combination with the federal centre’s warped attitudes to the North Caucasus regions, you end up with inter-ethnic tensions. The growth of xenophobia, hatred and extremism has taken the place of economic growth.
There is a way to maintain economic growth despite a shrinking working-age population — we have to make a technological leap. Only a sharp increase in workforce productivity will enable new generations to support an aging population. For a country as large as Russia, the only way to achieve a high standard of living is to become a centre of technological development. Plot the world’s countries onto a scatter graph of GDP versus population and it becomes apparent that only global technological leaders are able to support a large population while maintaining a high standard of living. These are the G7 countries plus South Korea. These countries are united by a common set of characteristics: changeability of government, strong local self-administration, and integration into the world system. They all play a part in international cooperation and are on good terms with each other.
We can talk up Russia’s square-wheeled bicycle for as long as we like, but sooner or later we’ll have to admit that openness and competition represent our only chance to prosper. Sooner is better: it’s naive to sit around and wait while oil prices rise again. We should have recognised a long time ago that Russia is no petrostate. Irrespective of prices, oil revenues alone will never suffice to ensure a prosperous future for our citizens or to make our cities comfortable living environments. The Norwegians, for example, put away $857 billion into their fund for future generations — a highly disciplined move. Divide $857 billion between each of the country’s five million inhabitants and you get a figure of $167,000. The contrast with Russia couldn’t be starker. There’s $77 billion in our National Wealth Fund, which, divided by 146 million citizens, comes to $527 per capita. That sort of money won’t build you a future.
Ruthless doesn’t mean strong
In developed countries the trend is to weaken the role of the state, and its role in society is being accordingly reduced.
Governments are losing their monopoly on information storage, and it’s becoming clear in the wake of this development that NGOs are much better equipped to solve a whole series of social problems. In 1990 there were 6000 NGOs worldwide — a number that, in 2015, has risen to 67,000. Private capital comprises 80% of aid from developed to developing countries — only 20% is government-funded. As recently as the late twentieth century, it was a fifty-fifty split.
Governments are forced to react. Some create an environment conducive to the development of NGOs and the strengthening of horizontal linkages, while others attempt, by hook or by crook, to preserve the status quo, persecuting even those NGOs that fund science and education.
Our government has accumulated funds but isn’t meeting its obligations. The average Russian citizen parts with around a third of his or her income in the form of direct or indirect taxes. Your money contributes three times as much as natural resource revenues to the national budget. Yet the government is too weak and poorly organised to commit that money to the
provision of adequate public goods. Almost 70% of the population are unhappy with the state of public health services, while 60% are displeased with the education system.
The government is compensating for its weaknesses and inability to fulfil its obligations by resorting to ruthless means. It’s seeking out external and internal enemies, and allocating ever more money to ‘fighting’ them, while reducing investment in human capital. In the first quarter of this year, military expenditure accounted for an incredible 9% of GDP.
The country is falling into a vicious cycle, and the only way we can escape it is by mobilising the organised efforts of several million citizens who aren’t indifferent to what’s going on.
What is to be done?
Every one of the problems I’ve outlined here stems from the irremovability of the regime. It would be easy to insist in this situation that Putin is the source of all our problems, and that we need to get rid of him as quickly as possible.
In actual fact, the challenge facing us is much more complex. We’ll have to create a political system that will not allow a single individual to concentrate unlimited power in his hands. And such a system can be constructed only within the framework of a developed civil society. Which is why I’m engaged in social activism rather than politics. I regard this as my mission, and will do what I can to further these goals.
Our Programme: Opposition forces at the moment lack a clear programme for change. So far, they have focused all their efforts on trying to get into power or overthrowing the regime, but what they lack is a plan for running the country after a change at the top. It’s clear to anyone who’s ever been in charge of large-scale processes that the decision to “employ honest people to work in government and defeat corruption” is unlikely to be effective.
The regime, too, is reactive. It doesn’t know what to do tomorrow — something it has in common with the opposition. A non-existent tomorrow — or a non-existent desire to envisage one — represents a serious problem for the entire Russian mindscape. We might not see the future, or believe in it, but it will arrive regardless. And our task must be to design a future in which we’d all want to live. The more people share our vision, the faster we’ll be able to implement it.
The theoretical construction of the future is one of Open Russia’s principal projects. We’re planning to enlist leading experts from Russia and worldwide as contributors to the development of our programme. Throughout this summer and autumn we’ll be organising a series of working groups where we’ll thrash out potential approaches to constitutional and law enforcement reform, and discuss ways of rebooting the economy, making provision for technological leadership, and solving transport issues.
In two years’ time we’ll present a fully-fledged programme of transformation and development.
All reforms involve a transition phase that requires careful groundwork — a minimum of two to three years of intense efforts, during which period we must take care to avoid mistakes made in the 1990s: how to conduct a de-monopolisation, and involve the majority of the population in the market via small businesses, insurance, and pension funds; what to do with the shares of companies that have fallen into private hands through corruption; how to transfer real power to local authorities.
If a maximally large circle of citizens become beneficiaries of the reforms, we’ll be able to avoid yet another backslide.
I know that numerous experts and analysts feel unfulfilled under the current system, where decisions are taken by a narrow circle of people, without regard to any assessments or analyses of the situation. I hope that many of them will be able to invest their knowledge, skills and expertise in the country’s future together with us.
Elections: It’s here that we will come into closest contact with politics. But Open Russia is not a political party. We’ve no plans to field candidates of our own. At the same time, we do want change, and are prepared to take upon ourselves the creation of infrastructure that would rectify distortions in the electoral system. We will organise a monitoring system that will not only report but prevent fraud. We will also offer candidates expert support, helping them formulate regional programmes, collect signatures and overcome prohibitive barriers. All this will serve to equalise the prospects of ruling party candidates with those of their rivals.
Education and Outreach: We will not wash our hands of societal and educational challenges, and will devote particular attention to the humanities. The state of technical and scientific education in Russia is tolerable, although its quality is falling sharply. Tech experts and scientists continue to leave the country, which testifies to the fact that their expertise is still rated worldwide. But when it comes to the humanities, we’ve serious problems to contend with. Archives are shut, topics of discussion are being made taboo, and there’s no fully-fledged public debate.
A single view of reality is being imposed on the country. Accordingly, we will endeavour to lay emphasis on the development of critical thinking. Life is ceaseless: you can’t bring it to a halt or shackle it with dogma. On the contrary, we need to stimulate forward momentum. The regime wants to create a large, unified, monolithic majority. I, in contrast, see Russia as an assemblage of minorities — numerous, disparate, each with its own worldview. Which is precisely why each of them can become a new engine of development.
Human Rights Advocacy: We recognise that, given the massive scale of the country, the number of political prisoners is comparatively small at present. Assisting them, however, is of fundamental importance, for political prisoners demonstrate to the law enforcement system that the rules can be broken — and in so doing they extrapolate this practice to the population at large.
No public organisation can take on these challenges alone — and especially not Open Russia, constantly hounded as we are by the authorities.
We are therefore looking to put together the best possible teams of people to support us, help us implement projects we’ve already devised, or put forward their own, more effective ideas.
If you have a good command of facts and figures; if you understand the workings of your industry and have an idea of how to restructure them, write to us on email@example.com and tell us about yourself. We need people like you to develop our programme of change.