Russian President Vladimir Putin’s national address last week grabbed headlines for its proclamations of new weapons systems, but as significant in his speech was its domestic policy implications ahead of a March 18 election, Gilbert Doctorow explains.
By Gilbert Doctorow
Several days ago, I wrote the first installment of my analysis of Vladimir Putin’s address to the two houses of Russia’s bicameral legislature on March 1. In that essay, I focused on the last third of the address in which the Russian President rolled out major nuclear weapons delivery systems which were notable for unparalleled technologies that may change the world power balance.
Putin claimed that Russia’s full parity with the United States in strategic weaponry has been restored. His blunt message to the United States to abandon its 16-year attempt to achieve a first strike capability and sit down for arms control talks drew the immediate attention of world media, even if the initial reading was confused.
In this second installment of my analysis of President Putin’s landmark speech, I will consider the address in its entirety within its other context, directed at the domestic audience and constituting his electoral platform for the election to be held on March 18.
The Russian President’s annual address is mandated by the Constitution. It resembles the State of the Union address in the United States. Normally it should have taken place more than a month ago, and Putin’s rescheduling it for this critical time in the midst of the campaign raised some eyebrows. The head of the liberal Yabloko party complained to the Central Electoral Commission last week about that very fact. However, such complaints were already dismissed previously by Commission director Ella Pamfilova as lacking merit since such speeches were said to be “standard practice in many nations around the world.”
Be that as it may, in actual fact the speech delivered by Vladimir Putin was not a simple summary of government activity in the year gone by and short term projection of future government plans. The speech took in a much longer time frame, looking back to the condition of Russia when Putin first took office in 2000 to highlight his administration’s achievements in social, medical, educational and other spheres till now and projecting forward six years, to the limit of the next presidential term, to set out in each domain of government activity what are the major objectives.
This was also the longest speech of its kind delivered by Putin in his three terms as President, exceeding by far his previous record of one hour forty minutes. For all these reasons it is entirely appropriate to call the speech his platform, or still better, as the British would call it with the stress on cogency of thinking processes behind the stated objectives, his “manifesto.”
In every way, the Address was a direct response to all the criticisms of his time in office that Putin has received from his seven challengers in the presidential race coming from across the political spectrum from nationalists and liberals on the right and Communists of various labels on the left. When compared with the first debate among those seven aired on the federal television network Pervy Kanal on the morning of the 28th, it leaves the whole field of challengers looking like squabbling toddlers in a kindergarten.
Putin and his advisers knew full well from the challengers’ prior position statements what are their joint and several lines of attack and his address was a direct, almost point for point response.
With the exception of Vladimir Zhirinovsky of the nationalist LDPR, who essentially supports Putin’s stress on strong foreign policy and strong military as his most important task as President and of the liberal Ksenia Sobchak, who totally rejects Putin’s foreign policy as detrimental to Russia’s interest in accommodation with the West for the sake of shared values and common civilization, all the other candidates have no interest in foreign policy as such and insist that the best foreign policy is a good domestic policy. That happens also to suit very well their own talents and experience, since the debates quickly revealed that none but Zhirinovsky has any relevant experience in international affairs.
The common position of five out of seven challengers is that a good foreign policy is possible only for a powerful state, and a powerful state is the product of a strong economy and prosperous people. One of the candidates, Grigory Yavlinsky of the liberal Yabloko party summed up the problem most efficiently: a country like Russia which only accounts for 2% of global GDP, a country which has a GDP and a military budget that are both only 10% of those of the United States, cannot compete on the world stage.
Six of the seven challengers to Putin are persuaded that the electorate has no questions about foreign and military policy, but has a great many questions about the domestic programs of the federal government, about poverty, inadequate public health care, bad roads, corruption and thieving officials, to name just the most salient concerns.
Accordingly, in his address to the Federal Assembly, Vladimir Putin devoted the first two thirds of his time on stage to domestic policy, setting out in detail specific targets to be reached by 2024 in many key areas of activity and financing by the federal government with a view to creating a prosperous society that is just and attractive to its members, that enjoys robust economic growth and values the human potential of its citizens above all.
However, in the last third of his speech devoted to military matters, he made the point that notwithstanding its still modest GDP and notwithstanding demographic and other problems confronting it, Russia has successfully countered US efforts to render useless Russia’s nuclear strike force. Ever since the United States abrogated the ABM Treaty in 2002, it has worked to encircle the Russian Federation with dual purpose anti-missile defense bases that will at some point confer on the United States a first strike capability.
The end result would be to deny to Russia its residual argument for holding its permanent seat in the UN Security Council and its prominent place in other international forums derived from the past glory of the Soviet Union.
In his speech, Putin said nuclear parity with the United States has been restored and will be indefinitely sustainable given the decade long technological lead his country now has in totally new and formidable strategic weapons systems that can defeat any ABM array. Russia is and will be a powerful state because it has an unequalled defense capability which provides physical security to its citizens, surely the first responsibility of any government. With physical security ensured, the government can create the infrastructures for a successful economy and successful civil society. In all of this, Putin turns the logic of his political opponents on its head.
Russia’s hard power justifies its aspirations to a strong foreign policy. Russia’s nuclear umbrella, which he said covers not only the Russian Federation but also its “allies,” will be the strongest element of attraction. Depending on how the term “allies” is eventually defined, it is possible to imagine a line of candidate “allies” from the developing world in particular seeking protection from what they see as US bullying and regime change politics. Russia’s hard power will clearly trump soft power, which is what Putin’s challengers are largely proposing to use in pursuit of an active foreign policy at some time in the future when the country is prosperous.
Moreover, the hard power can be used to fuel the Russian economy as a source of innovation which, we will see below, is key to his program for accelerating the growth rate. Russia’s military budget has an unusually high ratio of equipment procurement to manpower maintenance and operational costs, namely 1:1. Cutting edge and world beating technological advances in weapons systems can be a source of unique new materials, electronics, software and the like.
Over the course of several years, President Putin has encouraged the enterprises in the Russian military industrial complex to develop civilian applications for their scientific breakthroughs citing specifically the need to emulate U.S. practices. He has told factory management they must look to the civilian economy because the state will be cutting back on their funding as it completes its immediate acquisitions program.
Some commentators in the West have said that the defense part of Putin’s Address was meant to rouse the patriotic pride of his compatriots for the sake of success at the voting booths. However, I believe the calculation was more complex. The rollout of new, invincible military hardware spelling national security swept aside the specific arguments of Putin’s challengers in the race. It swept aside all the arguments from the past that he and his cronies have stolen the national wealth: the national wealth had instead been invested in saving the nation from its external competitors turned adversaries.
Another view that has been promoted among some Western commentators is that Putin was presenting a platform of “guns and butter.” No, the platform thinking is more subtle: that you get butter only if you have guns. This aligns with an argument that Putin has been making for years: that nations unavoidably pay for armed forces; the difference is only whether they are paying to support their own troops or to pay tribute, covering the costs of someone else’s troops dominating them.
There can be no question that electoral considerations drove the decision to present Russia’s new hardware precisely now. There are several occasions of major publicity value domestically when this could have been done. The last one was back in December during Putin’s annual press conference. Or, he could have chosen to break the news at a foreign venue of great moment, such as the Munich Security Conference in February, where Putin had first made waves globally with his speech of February 2007.
That instead Putin and his advisers chose to use the annual address to the Federal Assembly and to place that address in the middle of the electoral campaign shows the intent was to kill two birds with one stone: to overwhelm the presidential candidates challenging his next term in office, leaving them no time to formulate credible counter arguments, and to access the very large contingent of foreign correspondents who would be present for his annual speech to parliament.
If this was indeed his intent, he was only partly successful. Today’s latest televised debates of the candidates on the federal news network Pervy Kanal showed that one challenger was unperturbed and found an opportunity to make political capital from Putin’s address. Ksenia Sobchak has once again repositioned her campaign and adopted the slogan of Peace Candidate, casting Putin as the candidate of the War Party based on his rocket show.
‘Prosperity of Households’
Now let us look at the specific objectives Putin set out in his speech for making Russia prosperous and an enviable society in the coming six years. Then we will consider the tools he proposes to use to reach these often very ambitious objectives: Do they entail major structural reforms of the economy as many foreign and some Russian pro-market specialists have called for? Are they likely to require wholesale changes to the cabinet of ministers and personnel in the ministries after the elections, as some speculate? Or are they incremental, building upon the programs his government has already implemented often in pilot projects in one or another region of this enormous country?
“Quality of life” for its citizens and “prosperity of households” are set by Vladimir Putin as the ultimate objectives of his government’s domestic policies in a new term. This statement of purpose is indistinguishable from what his seven challengers are saying. Indeed, Putin has taken on board words and concepts that have in the past been the property of the opposition. We note this stress on the realization of each person’s talents, and his specific mention of the need to expand to the greatest extent the space for personal freedom. Putin’s program differs from those of the Right and the Left principally in the plans to achieve shared goals.
Instead of re-nationalization and re-distribution of wealth called for by the Left candidates or stress on sweeping personnel changes in the bureaucracy to root out corruption as well as total overhaul of the judiciary for the sake of better independence and professionalism called for by the Right candidates, Putin calls for a breakthrough in applying technology to “improve the people’s quality of life, modernize the economy, infrastructure and state governance and administration.”
The term breakthrough appears repeatedly in the text which follows and by itself would suggest disruption and new directions. He further says in the introductory section that it is “time to take a number of tough decisions that are long overdue.”
However, at the same time there is a counter-indication that Putin is not campaigning against himself. He insists that the foundation is already in place: “We have substantial experience implementing ambitious programs and social projects.”
In what follows, Vladimir Putin touches upon a great many separate social issues and on various sectors of the economy which will be central to any leap forward in global performance and creation of high quality and well- paying jobs at home. Let us begin with those headings to which he has attached specific quantitative goals.
Life expectancy – Putin identifies this as a gauge of well-being. It was 65 when he came to power in 2000, with male life expectancy below 60 at the time. Today it is 73. The new goal for 2030 is 80 plus, i.e., on a par with Japan, France and Germany. Though it exists as a value in and of itself, in the context of Russia’s poor demographics coming out of the depression of the 1990s, extending the productive lives of the citizenry, just as subsidizing young families to encourage more births, can be a major contributing factor to national output.
Housing – in 2017 three million Russian families moved into improved housing. The target is for five million to do so each year in the next presidential term. Housing supply, presently at 80 million square meters annually, must go to 120 million
Transport – make Russia the world’s key logistics and transport hub
Roads – over the next 6 years to nearly double the spending on road construction and repairs, going from 6.4 trillion rubles over the period 2012-17 to 11 trillion with spending concentrated on regional and local roads which are still deplorable and a matter of great concern to the citizenry
Rail – raise the throughput of major rail links to the Far East by 1.5 times, reduce transit time of containers from Vladivostok to Russia’s Western borders to just 7 days, more generally increase the volume of transit shipments between Europe and Asia 4 times.
Northern Sea Route – increase cargo traffic 10 times by 2025
Power generation – attract investment of 1.5 trillion rubles in private investment for modernizing the power generation sector. Shift the whole country’s power grid to digital technology.
Internet – by 2024 ensure the whole country has high speed internet. Fiber optic lines to most populated areas with more than 240 people
Healthcare – double healthcare spending to more than 4% of GDP over the period 2019-24.
Restore primary healthcare to localities where they were shut. By 2020 ensure each small town with a population of between 100 and 2,000 has a paramedic station and outpatient clinic. For very small villages, create mobile units.
Promotion of small businesses – by 2025 their contribution to GDP should approach 40%, taking in 25 million people, up from 19 million today.
Non-resource exports – In the coming 6 years to double the amount of non-resource and non-energy exports to reach $250 billion. Engineering exports to reach $50 billion; services, including education, healthcare, tourism and transport to reach $100 billion per year.
Other very important elements in the priorities for development in the next 6 year term are described directionally but not quantitatively. These include education, fundamental research, culture, agriculture.
Many of the metrics noted above imply very substantial government financing of infrastructures. Others assume public-private partnerships. And still others imply strictly private investment.
As regards the state, where is the money to come from? As regards private business, domestic and foreign, why would they decide now to invest in the government’s priorities for development?
The answer is found in an expanding economy, one placing bets on the newest technologies globally. An incoming tide raises all boats.
In terms of per-capita GDP, Putin says that in his coming mandate Russia should be counted among the five largest global economies, with per-capita GDP rising by 50% to 2025. This is a dramatic increase from the presently anemic 1.7% GDP growth per annum, which lags behind global growth by one percent. His plan assumes in particular increased labor productivity. He projects growth of at least 5% per year in medium sized and large enterprises of basic industries such as manufacturing, construction, transport, agriculture and trade to reach the level of leading world economies by 2030.
Rising productivity is a consequence of subsidies and other direct state support to priority industries to make competitive goods and a consequence of private investment of manufacturers on their own to upgrade and technologically reequip their own facilities.
Putin tells us that the first precondition for the virtuous cycle described above has been put in place: low inflation. Thanks to the efforts of the Bank of Russia these past couple of years, the inflation rate has been brought down to an historic low of 2% per annum.
Low inflation has made it possible to lower the mortgage rate to below 10%, with a 7% mortgage on the horizon within the coming several years. Mortgages already have reached an all-time peak of one million last year. Cheap credit will also enable project financing to housing construction, thereby passing from the consumer to developers the risks of non-completion of apartment buildings. This is not a small issue in the present campaign. The problem of defrauded apartment buyers has been seized upon by several of the presidential hopefuls as a stick to beat the present administration. Both mortgages on the demand side and project financing on the supply side will drive the housing boom that is presupposed in Putin’s electoral platform, raising the numbers of well-paid jobs.
Meanwhile, low inflation makes possible affordable credit to business of all scales, and for shared infrastructure investments, another fundamental driver of the economy in Putin’s economic model.
But there is more to the toolkit than Treasury funds and interest rate management. In his speech, Vladimir Putin described a whole array of legal, fiscal and administrative measures having the combined effect of improving the business climate in the country. He called attention in particular to the need to pass enabling legislation for introduction of cutting-edge technologies such as driverless vehicles, Artificial Intelligence and blockchain transactions in several industries so that the Russian economy can be a leader in the fastest growing vectors of the global economy.
Technical means to curb graft and thereby improve the business climate include further reduction of reporting and of on-site inspections of business by tax and other authorities with a shift to remote, i.e., digital exchange of information over the internet. Plans also call for greatly curtailing recourse to the Criminal Code to resolve commercial disputes. These types of technical solution to the seemingly intractable problem of day to day corruption already proved their worth at the very start of Putin’s time in power when he simplified the personal income tax to a flat 15%, thereby cutting all contact between the vast majority of the population and tax officers to “negotiate” exemptions and the like, while at the same time greatly increasing tax compliance.
The domestic portion of the Manifesto builds on real achievements over the past several years in steadying the economy during times of great outside stress. Though market oriented in most respects, it is also entails state-directed economic priorities to promote “national hero” industries as is practiced by France and other European countries. But this does not approach state capitalism. In his speech, Putin remarks that it will be an objective in his next term to reduce the share of the economy in state hands. This share has risen in the last several years as clean-up of the Russian banking industry resulted in failing banks being taken over by the state. Putin says these assets must now be sold off as quickly as possible.
The domestic policies are largely a continuation and acceleration of good trends already in place using a familiar tool kit. So where is the “breakthrough”? Likely it is to be found in the new technologies that Russia will welcome and facilitate through support to start-ups, enabling legislation, cheap credits and other technical means.
In this, we may see the steady influence on Putin’s thinking coming from some members of the liberal members of his entourage, including, for example Herman Gref, the chairman of Sberbank, and even his prime minister Dmitry Medvedev, who has been an avid promoter of digitalization to streamline all government services.
However one may regard the level of democracy in Russia, the connections drawn between freedom, innovation, the knowledge society and prosperity in Putin’s electoral Manifesto fit very well within liberal West European and U.S. thinking.
The thinking about balanced budgets and stress in domestic policy on the government’s role creating physical and legislative infrastructures for business to thrive fits well within conservatism of the pre-Reagan Republican Party in the United States. The fairly extensive social welfare dimension of Putin’s present domestic policy was not developed in this address though he did speak of the need to raise pensions, ensure equal access to quality education and expand health care to all citizens however remote. That falls into the tradition of Bismarckian conservatism that gave rise to the welfare states on the Continent.
The problems between Russia and the West arise not in the domestic programs of Vladimir Putin, present and future, but elsewhere in foreign and defense policy. At his and his country’s risk and peril, Vladimir Putin insists on its sovereignty and repudiates U.S. global hegemony. In this area, he enjoys the company of Russia’s patriotic Left parties and is scorned by the liberal Right.
This then is the unique synthesis of Left and Right notions that we find in Putin’s electoral Manifesto, which is nonetheless internally coherent.