The Myth of the Authoritarian Model

How Putin's Crackdown Holds Russia Back

Michael McFaul and Kathryn Stoner-Weiss

From Foreign Affairs, January/February 2008

Summary:  A growing conventional wisdom holds that Vladimir Putin's attack on democracy has brought Russia stability and prosperity -- providing a new model of successful market authoritarianism. But the correlation between autocracy and economic growth is spurious. Autocracy's effects in Russia have in fact been negative. Whatever the gains under Putin, they would have been greater under a democratic regime.

MICHAEL MCFAUL is a Hoover Fellow, Professor of Political Science, and Director of the Center on Democracy, Development, and the Rule of Law at Stanford University. KATHRYN STONER-WEISS is Associate Director for Research and Senior Research Scholar at the Center on Democracy, Development, and the Rule of Law at Stanford University

The Russian state under Putin is certainly bigger than it was before. The number of state employees has doubled to roughly 1.5 million. The Russian military has more capacity to fight the war in Chechnya today, and the coercive branches of the government -- the police, the tax authorities, the intelligence services -- have bigger budgets than they did a decade ago. In some spheres, such as paying pensions and government salaries on time, road building, or educational spending, the state is performing better now than during the 1990s. Yet given the growth in its size and resources, what is striking is how poorly the Russian state still performs. In terms of public safety, health, corruption, and the security of property rights, Russians are actually worse off today than they were a decade ago.

Security, the most basic public good a state can provide for its population, is a central element in the myth of Putinism. In fact, the frequency of terrorist attacks in Russia has increased under Putin. The two biggest terrorist attacks in Russia's history -- the Nord-Ost incident at a theater in Moscow in 2002, in which an estimated 300 Russians died, and the Beslan school hostage crisis, in which as many as 500 died -- occurred under Putin's autocracy, not Yeltsin's democracy. The number of deaths of both military personnel and civilians in the second Chechen war -- now in its eighth year -- is substantially higher than during the first Chechen war, which lasted from 1994 to 1996. (Conflict inside Chechnya appears to be subsiding, but conflict in the region is spreading.) The murder rate has also increased under Putin, according to data from Russia's Federal State Statistics Service. In the "anarchic" years of 1995-99, the average annual number of murders was 30,200; in the "orderly" years of 2000-2004, the number was 32,200. The death rate from fires is around 40 a day in Russia, roughly ten times the average rate in western Europe.

Nor has public health improved in the last eight years. Despite all the money in the Kremlin's coffers, health spending averaged 6 percent of GDP from 2000 to 2005, compared with 6.4 percent from 1996 to 1999. Russia's population has been shrinking since 1990, thanks to decreasing fertility and increasing mortality rates, but the decline has worsened since 1998. Noncommunicable diseases have become the leading cause of death (cardiovascular disease accounts for 52 percent of deaths, three times the figure for the United States), and alcoholism now accounts for 18 percent of deaths for men between the ages of 25 and 54. At the end of the 1990s, annual alcohol consumption per adult was 10.7 liters (compared with 8.6 liters in the United States and 9.7 in the United Kingdom); in 2004, this figure had increased to 14.5 liters. An estimated 0.9 percent of the Russian population is now infected with HIV, and rates of infection in Russia are now the highest of any country outside Africa, at least partly as a result of inadequate or harmful legal and policy responses and a decrepit health-care system. Life expectancy in Russia rose between 1995 and 1998. Since 1999, however, it has declined to 59 years for Russian men and 72 for Russian women.

At the same time that Russian society has become less secure and less healthy under Putin, Russia's international rankings for economic competitiveness, business friendliness, and transparency and corruption all have fallen. The Russian think tank INDEM estimates that corruption has skyrocketed in the last six years. In 2006, Transparency International ranked Russia at an all-time worst of 121st out of 163 countries on corruption, putting it between the Philippines and Rwanda. Russia ranked 62nd out of 125 on the World Economic Forum's Global Competitiveness Index in 2006, representing a fall of nine places in a year. On the World Bank's 2006 "ease of doing business" index, Russia ranked 96th out of 175, also an all-time worst.

Property rights have also been undermined. Putin and his Kremlin associates have used their unconstrained political powers to redistribute some of Russia's most valuable properties. The seizure and then reselling of Yukos' assets to the state-owned oil company Rosneft was the most egregious case, not only diminishing the value of Russia's most profitable oil company but also slowing investment (both foreign and domestic) and sparking capital flight. State pressure also compelled the owners of the private Russian oil company Sibneft to sell their stakes to the state-owned Gazprom and Royal Dutch/Shell to sell a majority share in its Sakhalin-2 project (in Siberia) to Gazprom. Such transfers have transformed a once private and thriving energy sector into a state-dominated and less efficient part of the Russian economy. The remaining three private oil producers -- Lukoil, TNK-BP, and Surgutneftegaz -- all face varying degrees of pressure to sell out to Putin loyalists. Under the banner of a program called "National Champions," Putin's regime has done the same in the aerospace, automobile, and heavy-machinery industries. The state has further discouraged investment by arbitrarily enforcing environmental regulations against foreign oil investors, shutting out foreign partners in the development of the Shtokman gas field, and denying a visa to the largest portfolio investor in Russia, the British citizen William Browder. Most World Bank governance indicators, on issues such as the rule of law and control of corruption, have been flat or negative under Putin. Those on which Russia has shown some improvement in the last decade, especially regulatory quality and government effectiveness, started to increase well before the Putin era began.

In short, the data simply do not support the popular notion that by erecting autocracy Putin has built an orderly and highly capable state that is addressing and overcoming Russia's rather formidable development problems. Putin's failures in this regard are all the more striking given the tremendous growth of the Russian economy every year since 1999: even with money coursing through the economy, Putin's government has done no better and sometimes worse of a job of providing basic public goods and services than Yeltsin's government did during the deep economic decline of the 1990s.

A EURASIAN TIGER?

The second supposed justification for Putin's autocratic ways is that they have paved the way for Russia's spectacular economic growth. As Putin has consolidated his authority, growth has averaged 6.7 percent -- especially impressive against the backdrop of the depression in the early 1990s. The last eight years have also seen budget surpluses, the eradication of foreign debt and the accumulation of massive hard-currency reserves, and modest inflation. The stock market is booming, and foreign direct investment, although still low compared to in other emerging markets, is growing rapidly. And it is not just the oligarchs who are benefiting from Russia's economic upturn. Since 2000, real disposable income has increased by more than 10 percent a year, consumer spending has skyrocketed, unemployment has fallen from 12 percent in 1999 to 6 percent in 2006, and poverty, according to one measure, has declined from 41 percent in 1999 to 14 percent in 2006. Russians are richer today than ever before.

The correlations between democracy and economic decline in the 1990s and autocracy and economic growth in this decade provide a seemingly powerful excuse for shutting down independent television stations, canceling gubernatorial elections, and eliminating pesky human rights groups. These correlations, however, are mostly spurious.