Brighter economy forecastwith Putin at Russian helm

March 26, 2000|By Rafik Kurbanov

MOSCOW -- While few observers doubt Vladimir Putin's victory in the Russian presidential election today, the future Russian president has not presented the voters with any formal economic program.

In comparison, his main opponent, Communist Party leader Gennady Zyuganov, has offered a detailed account of the economic policy he would pursue as president. However, voters have not been impressed. Mr. Zyuganov's second defeat in a presidential poll may well send the Communist Party into oblivion.

Russians seem to pay more attention to the leadership skills of the pragmatic Mr. Putin, who may, indeed, provide the drastic turnaround needed by an extremely corrupt and stagnant Russian economy dominated by uncontrolled business tycoons.

Confident in his victory, Mr. Putin's camp has promised that a detailed economic program will be presented in May. However, even now it is evident that his approach to the economy will likely include an increased role for the federal government, an anti-corruption campaign, a crackdown on organized crime and lower taxes.

Mr. Putin has indicated that increased government intervention does not necessarily mean interference in the markets, but rather constitutes government protection of legal businesses against crime and corruption.

Importantly, Mr. Putin has emphasized that the current level of taxation is far too high and that "we need low taxes, which we need to support fair courts of justice and uncorrupt bureaucracy."

Another aspect of increasing the role of central government, importantly, is that the regulatory powers of Russia's regional and local authorities over the economy will likely be curbed. This may be positive news for foreign investors in Russia, who often complain about the great difficulties of operating in a labyrinth of regulations.

The power of regional governments has so increased that the country has been almost ungovernable in some cases. This began with President Boris Yeltsin's policy of allowing the regions to take "as much sovereignty as you can." As the chaotic Yeltsin era comes to an end, the Russian federal government is emerging as a principal political and economic center.

In a recent example of this, Mr. Putin indicated his serious displeasure with the rather too-independent governor of the Primorsky region in the Russian Far East, Yevgeny Nazdratenko, who may well lose his position after the presidential election.

Russia's development may follow the Chinese or Turkish model of market transformation, where strong authoritarian central government provides internal political stability, while encouraging private initiative in the marketplace.

With all its shortcomings, this scenario provides for substantial foreign investment and strong economic growth. However, until then, Russia still must rely on oil exports to support its economy. Current high oil prices will provide the new Russian government with sufficient revenues as a cushion, as it implements the changes Russia badly needs.

Rafik Kurbanov is a senior researcher in the Institute of Philosophy at the Russian Academy of Sciences, Moscow. He wrote this article for Bridge News.

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