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Sergey Guriev: “Regions Should Have More Money and More Powers”

Will Russia become a democratic and thriving country in our lifetime? In an interview with ReForum, economist Sergei Guriev discusses federalism, sustainable democracy, and models of government. Guriev is a Professor of Economics at the Instituts d’études politiques in Paris, former chief economist at the European Bank for Reconstruction and Development, and former Rector at the New Economic School in Moscow.

ReForum: What is sustainable democracy in your view? What elements does it consist of?

Guriev: Democracy is a system where the government is accountable to the people, where there are mechanisms for a transfer of power, where elections are held regularly, and that these elections are sufficiently fair and competitive. What does “sufficiently fair” mean? That’s a rather difficult question. Political scientists say elections are sufficiently fair when all candidates have equal access to the resources needed for campaigning and winning in the elections. Also, elected officials should be the ones who actually run the country. Some countries have elected parliaments and presidents, but in reality, they’re controlled by Ayatollahs, a council of elders, general secretaries, or national leaders.

Regarding sustainable democracy: we’ve seen that many countries where democratic systems formed can experience democratic backsliding. As a matter of fact, there’s no perfect recipe we can give to all countries that want to avoid a breakdown in democratic institutions. Since 2016, there’s been an ongoing discussion about how even developed countries in the west face the risk of sliding into authoritarianism. Political scientists have written a number of bestsellers, including How Democracies Die (Steven Levitsky and Daniel Ziblatt, Crown 2018) and How Democracy Ends (David Runciman, Profile Books 2018). The authors of these books talk about the difficulty of stopping democratic backsliding, even in western nations where democracy has been around for hundreds of years.

ReForum: Arethereany kind of indicators that can help us determine whether or not a country today is at risk of turning into an authoritarian regime?

Guriev: Absolutely. There are risks connected to the fact that the head of a state can erode systems of checks and balances. Usually, a transition from democracy to authoritarianism – or to anyother non-democratic form of government – happens with the appearance of a so-called “strong leader,” whose monopoly on power allows him to destroy checks and balances, both formal – like the division of powers –andinformal, such as civil society and the media. There are real dangers of democratic backsliding in acountrywherea “strong leader” manages to counteract these formal and informal checks and balances.

Under which circumstances do “strong leaders” appear? At the moment, there’s an ongoing discussion in the west about how the surge of populism maylead to a demand on “strong leaders.” When a society looks for solutions to problems which for years or decades liberal democratic politicians haven’t solved, then a “strong leader” appears and says that all of the so-called “political institutions” and “checks and balances” don’t work to the benefit of “ordinary people.” In this case, there’s an obvious risk associated with the appearance of a “strong leader” who can destroy checks and balances with the support of the population.

ReForum: How does Russia today stand up to the ideal version of a sustainable democracy?

Guriev: Russia isn’t a democracy. If we take a look at various expert opinions, then we see that Russia isn’t considered a democratic regime. The term “regime” in political science can be understood in everyday parlance as the “rules of the game.” The apolitical regime describes how a leader is chosen, as well as how decisions concerning socio-economic, domestic, and foreign policies are made.

We know how the regime in Russia is structured. Vladimir Putin is the leader of the regime and plans to stay in that position. Vladimir Putin makes all of the decisions, which certainly has no relation to democracy.

Therefore, it’s not surprising that Vladimir Putin proposed and then signed constitutional amendments that legitimize his control over all branches of power, including the judicial system. These amendments give Vladimir Putin the power to dismiss high court judges not just for reasons described in the law, but also “for other reasons.” That means that Russia’s Constitutional Court is essentially subordinate to the president. These amendments also refer to the subordination of municipal authorities to the central government, as well as to the ability to violate international obligations.

What does all of this mean in practice? It means that we have a “strong leader” who is unrestrained in his powers. It means no checks and balances. Besides that, numerous instances of election violations point to the fact that, while there are elections in Russia, they’re not fair. And if we look at the state of affairs with freedom of speech, freedom of the media, internet censorship, and civil society, then, of course, we see that in Russia today there are essentially no institutions that could prevent one person from seizing power.

ReForum: What do you think the ideal form of government is for Russia?

Guriev: The main issues here are federalism and the separation of powers between the president and parliament. Russia is a diverse nation that needs federalism. Russia is in serious need of both political and economic decentralization. Its regions should have more money and more power. Municipalities should have more money and more power. Russia needs to become a more federative state in order to remain a united country. This can certainly be achieved. Throughout the world, there are many federal states, and there are also unitary states. France, for example, is a unitary state. Germany is a federation. But Russia is a very diverse country where more federalism is definitely needed.

Even Vladimir Putin, who has spent the past 20 years building a centralized state, acknowledged the fact that Russia needs decentralized decision-making when the country faces serious challenges. Every region is structured differently and each has its own priorities, therefore, they should have the powers and resources needed for developing their own strategies in handling the coronavirus epidemic.

Another issue is the separation of powers between the president and parliament. Among democratic countries, there are just two presidential republics: The United States and France. Although, France is considered to be a semi-presidential republic since it has a prime minister (America has no prime minister). The Prime Minister of France can be independent of the President and can even represent a different political party. Thishasbeenthecase even in recent times. In this sense, the experience of developed countries has largely been an experience of parliamentary democracy. I believe that Russia should become more of parliamentary democracy. There’s a way to make this change happen. It’s spelled out in the Russian Constitution and is called the “Constitutional Assembly.” The Assembly needs to be convened, and then we can see what kind of constitution it’s able to develop.

Regardless of how we’re addressing the issues of federalization and the redistribution of powers from the president to parliament, we should have the rule of law, an independent and effective judiciary, free and competitive media, freedom of assembly, and NGOs. All of those things are self-explanatory. The first step any new government should take is to roll back many of the measures which its predecessors enacted, especially what has been enacted over the past ten years.

ReForum: How much of a problem does excessive centralization pose for the growth of Russia’s economy? Moscow has everything, whereas other cities have nothing in comparison. The economic disparities between the capital and regions are catastrophic, and many are forced to move to Moscow to find work, regardless of whether or not they want to.

Guriev: Russia definitely faces massive disparities between Moscow and other cities and regions. This isn’t surprising. A well-known professor from Harvard, Edward Glaeser, who studies urban economies, recently wrote that capitols in authoritarian countries are unproportionally developed. This happens because authorities know that revolutions erupt in capital cities. It’s for this reason that, since 2013, Russian authorities have spent large sums of money on improving the standard of living in Moscow at the expense of the rest of the country.

As soon as Russia becomes a more democratic country, other regions will start to see improvement, and so too will other cities. Russia will become a modernized country, meaning that it will be a much more urbanized country. Economic activity won’t be concentrated just in Moscow but will spread to other major cities. 10-20 of the largest cities will be leaders of economic growth. That doesn’t mean the standard of living in small cities and villages will remain low. It also doesn’t mean that decentralization can’t work to the benefit of small municipalities. Germany is an example of a federal republic where many small and medium-sized cities are thriving. The same is possible in Russia. There are very clear economic solutions that can ensure the redistribution of revenues – such as those from oil – to the benefit of other urban and rural municipalities.

You can’t achieve economic growth and development without decentralization. Modern economies grow thanks to competition and decentralization. Russia is at a stage in its development where it’s impossible to create centers of growth from just one office. It’s impossible to imagine that some kind of super-genius is sitting in the Kremlin, dictating were to build this or that factory or bridge, where to channel massive budgets. There’s this misconception in Russia that the country can be managed from one office, but modern economic growth requires decentralization. In this case, federalism doesn’t hinder economic growth but rather exists as its necessary condition. 

ReForum: Can the economic situation in Russia be fixed and improved without touching the political system, without solving political problems?

Guriev: If you want to create a society with high-income levels – in other words, if you want to catch up to developed countries in terms of living standards and GDP per capita, then the answer is quite simple: no. History provides us with almost no examples of non-democratic countries that were able to achieve high levels of income. There are two exceptions to this rule. The first is oil-rich countries in the Middle East, where you find more oil per capita than in Russia. So, for Russia, going that route isn’t possible. The second exception is Singapore, the only oil-producing country which has managed to build a rich and thriving economy without making a transition to democracy.

Singapore is an important exception. Autocratic leaders constantly reference it as a way of saying “we don’t need democracy – first we need to create a thriving economy.” But Singapore differs from Russia in many respects. First, it’s a very small country. Second, it’s a country that has witnessed exceptional leadership, a leader devoted to building a prosperous country at any cost, even if that means fighting corruption among his inner circle. Besides that, Singapore has a very open economy. It’s forced to attract foreign investment, forced to import and export everything that it buys, sells, and produces. That means the country goes up against the international competition. In this sense, Singapore has always had feedback. If you make mistake in creating your investment climate, then foreign investors won’t come, and you’ll immediately see that economic growth slows.

Therefore, Singapore is an absolute exception which Russia can hardly use an example.

Your question was whether or not achieving a high standard of living is possible without undertaking political changes. We can look at this question another way: “Can we at least start to get on track towards quick economic growth without democratic changes?” Maybe sometime-later democratic changes will occur? This kind of question is much more complex. There are countries with levels of economic development similar to those in Russia that were once non-democratic but nevertheless experienced rather quick economic growth. Until recently, China was one of these countries. South Korea in the 1980s was also one of those countries. Many countries similar to Russia in their level of development have progressed rather quickly being non-democratic states.

So, in theory, it’s possible. But what needs to happen in practice? You need to correctly set your priorities. These priorities should be the following: fight corruption, create an investment climate that attracts investors, pursue a policy of openness, and become integrated into the global economy.

We see that Russian authorities talk about how they would like to incomes to grow. But in reality, they’re not pursuing this, and for obvious reasons. Therefore, we absolutely need a change of power. We need leaders who, when talking about raising the level of income, don’t just talk the talk, but also walk the walk.

ReForum: You say that high-income levels in authoritarian societies are possible only when there’s a lot of oil. Russia doesn’t have enough oil for something like that. But other than oil, there isn’t anything else. What can be done in order to make Russia less dependent on natural resources?

Guriev: For the past 20 years Vladimir Putin has faced the issue of diversifying Russia’s economy. He always says that he’s looking to diversify the economy. And he acknowledges the fact that the progress being made in diversification, to put it mildly, not very great. When oil prices fall, the share of GDP made up by oil exports decreases slightly. As that happens, Russian authorities announce that they’re making headway in diversifying the economy. But that’s not actual progress. When looking at objective measurements, we see right away that oil makes up a massive share of Russia’s exports, representing about half of the country’s budget. With that in mind, Russia hasn’t achieved diversification of its economy. 

Does the potential exist for diversifying Russia’s economy? Without a doubt, yes. Russia is a highly educated country. The reforms Russia needs so as to ensure that it has a modern economy, instead of one based only on natural resources, are those connected with the development of human capital, such as investing in education and innovation. These kinds of reforms have been discussed time and again over the past two decades. But since 2014, efforts in passing these reforms have been mostly forgotten since they require resources and integration into the world economy. Research, education, and innovation are all but impossible in a country that closes off its borders.

What does Russia need in order to develop industries that rely on knowledge and expertise? It definitely needs a modern financial system. For that, you have to foster competition in financial services, which includes banking. Right now, nine out of the ten major banks in Russia belong to the state. So, unfortunately, there’s no competition. State banks know that if they go bankrupt the government will bail them out. Whereas private banks don’t have those kinds of guarantees, and so they’re in a disadvantaged position. Also, given the current state of property rights protection, and the judicial system overall, there’s no way to develop non-banking financial services, venture financing, direct investment funds, and other financial institutions.

In order to get an idea of just how slowly innovative business in Russia is developing, we need only look at the Baring Vostok case (on February 16, 2019, Moscow’s Basmanny District Court ordered the detention of five top managers at Baring Vostok and Vostochny Bank, along with the founder of the Baring Vostok private equity group, Michael Calvey, on suspicion of stealing 2.5 billion rubles from Vostochny Bank – ReForum). The custody, and now arrest, of Michael Calvey and his associates sends an important message. It’s institutions like Baring Vostok Capital Partners that are crucial to the development of new industries like those which rely on knowledge and expertise, and not just natural resources. The fact that investors working in this sector don’t feel safe is a serious problem.

The key reforms needed for diversifying Russia’s economy aren’t actually economic, but political and legal. As opposition leader Alexei Navalny would say, “The main thing is to not lie and steal.” The main this is to reform the so-called “law enforcement” agencies and the courts. They’re the ones responsible for Russia’s terrible investment climate. They’re the ones in need of reform. They’re the ones who should be protecting business owners so that Russia’s non-resource based businesses can develop more quickly.

Of course, a second necessary condition for Russia to come out of isolation, to remove counter-sanctions, to work on removing western sanctions, to attract foreign investors, and to create opportunities for exports besides raw materials.

ReForum: You said that Russia is a fairly educated country. And yet, very educated people are… I’m sitting in Barcelona right now, you’re in Paris, Alexei Navalny’s daughter goes to school in the United States, not in Russia. The list could probably go on for a while. In your opinion, how serious of a problem is Russia’s “brain drain”? What can be done in order to stop it?

Guriev: It’s a huge problem. We don’t even know the scale of the problem. For instance, if we look at official records, then we’ll see that I still live in Moscow. So, we still don’t have the full picture of Russia’s brain drain.

But the problem is real and very serious. In all likelihood, just by looking at citation statistics, Russian scientists working abroad today produce more research than scientists living in Russia.

So the question is how to attract these people back to Russia? Again, political changes are extremely important. Why? If you’re a scientist or business owner who’s considering a return to Russia, let’s say from Silicon Valley, then you start to ask yourself questions: will my business be protected? The example of Michael Calvey says not necessarily. Will my children be able to live in Russia? Will they need to leave the country in the event of some kind of political turbulence? The answer: Vladimir Putin’s regime will end one way or another. But will it go out easily, democratically, or will it end in turbulence? Nobody knows. That’s one of the main differences between so-called “stable regimes,” where the same leader has ruled for decades, and democratic regimes. In democratic regimes, it’s impossible to predict who will be the president in ten years, but the system doesn’t depend on the personality of the president. In regimes similar to Russia, you can reasonably predict that in the near future the president will be the same person. But as for when the president leaves – you can’t predict that.

The Arab Spring showed us a number of scenarios for leadership change. There were many leaders in North African and Middle Eastern countries that had ruled for decades. Life in those countries was dangerous. Why? Because regime change could have gone about either peacefully or violently. In Tunisia, regime change happened rather peacefully. In Libya, it ended in civil war. The situation in Egypt was also, to put it mildly, not so peaceful. Hundreds of people died and a new regime was establishment, one which still isn’t very attractive to the well-educated. You can list country after country, that is, real examples, and see how the longer someone stays in power, the less predictable is regime change.

Even in democratic countries, economic growth might not be so high, or there might be problems with inequality. But at least in democratic countries, it’s difficult to imagine civil war breaking out.

ReForum: When talking about émigrés returning to Russia, it’s not just the economy that has importance, but also social life, as well as societal values. Interesting statistics have come out which show the relationship between gender and emigration. In Barcelona, for example, immigrants from developing countries are 75% male and 25% female. In Italy and France, it’s 50/50. Meanwhile, 75% of Russian immigrants living in Barcelona are female, whereas 25% are male. Women are leaving Russia in much greater numbers than men. And that trend persists throughout European countries. There are also more women from Russia living in Berlin and London. Young women are leaving Russia because of the country’s appalling gender inequalities. In your opinion, how much does the social situation influence politics? How much does it influence the country’s economy? How important and necessary are social reforms?

Guriev: That’s a great question. Without a doubt, serious gender inequalities exist in Russia. For example, during the #MeToo movement a member of the Russian State Duma was proven to have behaved inappropriately. But he retained his position and received the full support of the Duma. That’s an important sign as to how the Russian establishment treats women, and it’s very disturbing.

But generally speaking, values in Moscow – and probably in all major Russian cities – are changing rather quickly.

When we talk about people coming back to Russia, the two processes of democratization and modernization are interconnected. According to research conducted by Ronald Inglehart (American sociologist and political scientist, creator of postmaterialist theory, and founder of the World Values Survey, a research project which studies values and their effect on social and cultural life. From 1981 to 2014, WVS conducted research in 97 countries containing 90 percent of the world’s population – ReForum) throughout the world the values of new generations differ from the values of their parents. Younger groups are more likely to recognize equal rights for women, more likely to defend the rights of minorities, and so on. In the United States, this phenomenon is called the “silent revolution.” 

For new generations of Russians, the current regime is absolutely out of touch with the modern world. It’s not just that Vladimir Putin laughs when talking about sexual harassment or rape (such was the case in 2006 when he spoke about the Israeli President who has been accused of harassment and rape) but also that Vladimir Putin doesn’t fully understand the extent to which young people today, including those in Russia, think differently. Byhisownadmission, he never uses the internet, and so he doesn’t know how social media works. When the majority of people realize how outdated the regime is, then he’ll leave. Today the situation with gender inequality is terrible, but it’s improving quickly. As soon as the situation improves, and the country becomes freer, then those who have left will want to return.

ReForum: It’s definitely obvious – and you said it yourself – that the values of Vladimir Putin and his administration don’t alight with the values of the younger generation, and the country’s leadership isn’t doing anything to change the situation. So where do the values of the younger generation come from? Why are these values different from those of the state? After all, in school children are taught what the government wants them to be taught.

Guriev: The internet is relatively open in Russia today. Russian authorities are doing a lot to combat internet freedom (and it’s quite possible that they’ll ultimately succeed in this). Internet freedom represents a key threat to the Russian authorities. Russia’s regime is what I and my co-author, Daniel Treisman (Professor of Political Science at the University of California in Los Angeles – ReForum) call an “information autocracy.” Russian autocracy will be defeated in the information field. It’s in this information field that the battle for freedom in Russia is being waged, and the authorities understand that quite well.

As we speak right now, the main problem for the Russian authorities is clearly YouTube. The authorities want to end freedom of speech on YouTube, but they know that YouTube isn’t just a political space, but also a space for entertainment. Blocking YouTube completely isn’t possible because it would cause an uproar among average Russian citizens.

ReForum: So young people are acquiring new values and changing because of the internet. At the same time, one of the pillars of stability in Vladimir Putin’s regime is the genuine support that he receives from those who lived in small cities in the USSR. These are people who experienced problems with work and money in the 1990s. They’re ready to vote for Putin just because they’ll get a paycheck, albeit a meager paycheck. They have an income of 15 thousand rubles, but they get that 15 thousand ruble. Whereas in the 1990s, they were unsure as to when they’d get their paycheck. Because of this, these people are ready to put up with a lot of other things. How, if possible, can their way of thinking be changed? For them, freedom of speech and human rights don’t represent values comparable to economic stability. Can their thinking change to where they’ll begin to support reform?

Guriev: The issue is rather simple. These people aren’t really given freedom of discussion. They don’t receive honest answers about the connections between human rights, democracy, the rule of law, and income growth. Vladimir Putin created a system of information control so that a significant proportion of Russian citizens don’t have the ability to freely discuss these issues. To some extent or another, freedom of discussion exists on the internet. But people who watch television get different information. Therefore, the main arena in the fight for change is the media. Unfortunately, right now that’s happening on the internet, not on television. As people see Russia lag behind the rest of the world, as incomes fail to increase, they’ll start asking the question “Why is this happening?” If they search for answers to this question, and if they realize that answers can be found on the internet, rather than on television, then they’ll turn to the internet.

In 2012, that process began. When Vladimir Putin returned to the post of president, he understood that economic growth was slowing, and so he began searching for some other kind of base for his legitimacy. At first, this was a mad search for conservative staples, like homophobia and going after minorities. Obviously, it didn’t work out so well since Putin’s ratings continued to fall. In 2014, however, he managed to find a new solution, a solution that worked much better than anyone had expected. I think that even Vladimir Putin wasn’t expecting his popularity to skyrocket as it did.

But in the six years since 2014, the rally around the flag effect brought on by the annexation of Crimea has faded. Today, Vladimir Putin needs to find new ideas and new solutions. His ratings are falling. More and more, people are going to search for explanations as to why there isn’t any economic growth, as to why incomes aren’t going up. And it’s the open discussion of these issues that will ultimately lead to political change.

ReForum: Given the circumstances, wasn’t it a mistake for Vladimir Putin to hold the 2018 World Cup in Russia? People believe what they see on television, and television tells them that “in Europe everyone hates Russia, horrible people live there,” and so on and so forth. During the World Cup, hundreds of thousands of people from all over the world visited Russia, but they turned out to be friendly, definitely not horrible. For people who have lived in cities shut off from the outside world, there was this moment when the outside world came to them. And for me, it seems that at that moment people started to ask questions, such as what’s going on in our country, and why do we see something which doesn’t match up with what we’re being shown on television? Wasn’t that a mistake?

Guriev: I think that both the 2014 Winter Olympics and the 2018 World Cup were personally important for Vladimir Putin, being a person who genuinely loves sport. In some sense, the opportunity to host the World Cup isthe reason why he wants to be president.

But the World Cup was also important for domestic political purposes since Putin had to show off the Russian people, to show how Russia is a great country, that Russia isn’t in isolation, and that Russia can host a great World Cup.

Everything that my friends and colleagues who went to the World Cup told me was extremely positive. The World Cup was fantastically organized and Russian people were incredibly welcoming. That actually raises a lot of hope about the future of Russia following political changes. In Russia, including in the wings of government, it’s often said that there’s something wrong with Russian people, that they’ll never support democratic change, and that they’re afraid of foreigners. But 2018 showed us that as soon as Russian television turns off its propaganda machine against the West and the rest of the world – for just one month! – in order for the World Cup to run smoothly, then it becomes clear that Russians are ordinary people. They’re welcoming and open to people from other countries. They see that other people are completely ordinary and normal just like them. And that raises hopes about Russia becoming a democratic and thriving country in our lifetime.

Translated by Mackenzie Tubridy

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