economic development. But many of its oil
and gas fields are quite mature, implying that
sustaining very high levels of production will
require enormous investments along with the
application of sophisticated Western technol-
ogy. Meanwhile, the Kremlin's lack of respect
for the rule of law and willingness to use nat-
ural gas exports for geopolitical leverage has
alienated foreign investors and led Europe to
rethink its dependence on Russian energy.
hole from the Soviet era: hopelessly ineffi-
cient manufacturing and distribution sys-
tems, an environmental toxin load that
threatens public health, and a managerial cul-
ture out of touch with modern business prac-
tices. More generally, it lacks many of the in-
tangible cultural assets found in rapidly
developing economies, not least of which is
confidence that hard work and investment in
human capital will lead to a better world for
the next generation.
Russia (and the rest of the world) would be a
retreat to ultranationalism along with a drive
for autarky that insulates the ruling interests
from economic failure and manages internal
discontent with a mix of authoritarianism
and the distractions of a pugnacious foreign
policy. Arguably, a more likely scenario, at
least in the medium run, is another try at Pu-
tin's Russia Inc. model. In its most optimistic
incarnation, the state would enhance its role
in social protection, prop up compliant enter-
prises and invest heavily in modernizing in-
dustrial capacity while keeping the lid on cor-
ruption and the grossest abuses of state power
that alienate foreign partners. Perhaps this
would allow Russia to muddle through, pro-
serting his own technocratic instincts. The
president has called for more political com-
petition, tougher measures to combat cor-
ruption and limits on the centralization of
economic power, while openly acknowledg-
ing that "we haven't done anything in the last
bad cop, giving the Kremlin a convenient way
to tack toward liberalism when foreign inves-
tors or unhappy domestic interests must be
pacified. But cynical or not, it suggests a prag-
matic flexibility, offering hope that when
Russia Inc. fails, the ruling elite will shift to-
ward decentralized markets and political plu-
ralism rather than retreating toward Russia's
familiar authoritarianism.
form of the overnight adoption of the trap-
pings of pluralism and capitalism free elec-
tions, wholesale privatization would quickly
yield fruit. With hindsight, it now seems
naïve that we ever expected Russia to erase
stagnation so easily. But, by the same token,
the fact that the dream was largely unfulfilled
doesn't imply that incremental progress is
impossible.
and decades of economic
stagnation so easily.