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#6
The Russia Journal
November 9-15, 2001
Putinís preliminary results
By OTTO LATSIS

Georgia is going through stormy times after Security Ministry officials tried to seize an independent TV station that criticized the state. Georgians took to the streets in response and the president dismissed the government.

In Russia, meanwhile, thereís been pressure on opposition media for two years now. The countryís largest opposition TV station has new owners and a more state-friendly line. An independent newspaper and an independent magazine were closed down. After secret-service provocations against journalists in Chechnya, there are no independent Russian journalists in the region today. And the only response in Moscow has been two not particularly big demonstrations that the authorities simply chose to ignore.

Does this mean that Georgians value their freedom of speech more than Russians? No, people everywhere value freedom of speech, but nowhere will people enter into full-scale confrontation with the authorities over freedom of speech alone. Georgians have been pushed to the limit by economic crises, poverty and massive corruption. The attack on the TV station that dared speak the truth about these things was the last straw for the Georgian public.

Russia, meanwhile, is into its third consecutive year of industrial growth. Measured by the current exchange rate, wages have risen to $120 a month from $60, and unemployment has dropped. People are increasingly able to solve their own problems. In this context, people wonít take to the barricades if freedom of speech is their only concern.

The public has gone from being sharply critical of the authorities at the end of the Yeltsin era to being calm today. This is probably President Vladimir Putinís biggest achievement, though itís hard to say exactly how much this is due to favorable circumstances and how much to the authorities themselves.

Of course, high oil and other raw-material-export prices have helped immensely. First, the exporters began to make money, and then their suppliers saw profits rise. This has cleaned up the economy by reducing debts and barter payments. But the increase in industrial output that reached a 30-year high in 2000-2001 is a consequence, above all, of the 1998 ruble devaluation.

The government canít be thanked for this. The devaluation reflected the failure of its economic policy. But at least the state realized in time the benefit that could be made of the situation and took care not to spoil it. The government and the Central Bank learned to manage the exchange rate so as to keep Russian companies competitive and go some way to offsetting the drop in living standards that accompanied the devaluation.

Putin put together a liberal team, headed by Deputy Prime Minister Alexei Kudrin, to look after the economy. This team proposed a reform plan, and the government adopted it. The plan is being implemented slowly, but at least for the first time in the last decade this work is being done in a spirit of cooperation rather than confrontation between the government and parliament. And despite the slowness, there are some results: lower taxes and a simpler tax system.

Russia has met all its debt commitments over the last two years without resorting to new borrowing. Again, raw-materials exports have helped here, but the government has also managed to keep the countryís appetite for budget money in check. Indexing of pensions and public-sector wages after the inflation jump in 1998-99 was probably insufficient. The military has seen wages rise, but teachers and health workers have not. This hasnít resulted in increased social tension, however, as the government has liquidated the considerable wage and pension arrears that had built up.

This all puts Putin in a firm position as he prepares for his first meeting with President George W. Bush in the United States. Not only is he managing the country better than any of his predecessors over the last 20 years, but he has also proposed cooperation in the anti-terrorist operation with the United States.

However, Russia only looks good today compared to its crisis state over the last 30 years. Now the situation has stabilized, but nobody can say whether this stabilization will last, or whether it will give way to new upheavals like the financial crisis of 1998. Many problems still remain to be solved.

The judicial reform that Putin proclaimed essential when he became president has stalled. There is so much resistance to it that even draft laws introduced by Putin himself have been recalled from the Duma. The powerless and corrupt legal system cannot adequately protect property rights, and this frightens off both foreign and Russian investors.

Capital flight continues Ė it was $10 billion in the first half of this year. Thereís been little real success in fighting corruption. Itís estimated that 30-40 percent of the population still lives below the poverty line, and crime remains rampant. Russia might now have fewer people in prison than in the United States, but Russian prisoners are kept in far worse conditions. The demographic situation is worsening Ė added to low birth rates and high death rates is a drop in the number of immigrants to Russia.

All these and other problems have accumulated over decades and will take decades to solve. The only question regarding Putin and his administration is, "Have they found a strategy that will enable them with time to resolve these problems, or are they just reaping the fruits of a short-term breathing space?" We will probably find an answer to this question only when the authorities have to face serious challenges of the kind they havenít yet encountered.

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