Russia’s Future Depends on 'Good Governance'

The political and economic community and experts are well aware that Medvedev is, willingly or unwillingly, one of the top-ranking officials in Putin’s vertical of power. His political future depends more on Vladimir Putin and less on himself, and, of course, the most important factor is the political, economic and social atmosphere in Russia over the next five years. interview with Sergey Aleksashenko, Macroeconomic Research Director, State University – Higher School of Economics (since 2008), member of the Valdai Discussion Club.

Prime Minister Dmitry Medvedev’s address at the International Economic Forum in Davos evoked a mixed reaction from the Russian and international media, with negative estimates prevailing. The Russian press bristled with headlines screaming “Medvedev Bungles his Davos Mission,” “How Did Medvedev Upset Forum Participants?”, “Dreamers in High Places,” “Davos Doesn’t See Eye to Eye with Dmitry Medvedev,” etc. But was Medvedev’s address really a failure from the perspective of potential foreign investors and their expectations? 

It wasn’t exactly a failure, but it left the public indifferent. The audience was mostly Russian, padded with resident foreign businessmen, so the audience’s focus was primarily on domestic issues. There was nothing new in the prime minister’s speech. He failed to address the most pressing issues of Russia’s current economic, political and social life. Nor did he dwell on key aspects of the Russian economy or make any firm, coherent and clear promises. Davos is generally a forum for either world economic and political leaders, who share their views on world affairs, or for leaders of developing countries like Russia, who make promises and comment on national economic and political development plans. But Dmitry Medvedev came up with a ritual speech unrelated to the interests of the audience … and duly received the press that he got. But we don’t even know what his Davos mission was. It could be that his aim was simply to put the Russian economy on the agenda on the very first day. In this sense, he bungled nothing and could even be said to have achieved some success.

Asked by Bloomberg TV, “What should investors think about ‘the persecution of Sergei Magnitsky?’”, Medvedev replied that Magnitsky wasn’t “a champion of the truth;” he was “a corporate lawyer who defended the interests of his employers.” How would you comment this Medvedev's statement?

It’s true that Sergei Magnitsky was a hired manager and lawyer. He was hired by an investment fund, Hermitage Capital, to keep accounts and defend his employer’s interests, among other things. He was not a politician, leader of a parliamentary group in the State Duma, legislator, human rights activist or someone fighting corruption. But in the course of his work he came across a swindle that was funneling money from the federal budget and, being an honest man, he reported the crime.

Dmitry Medvedev knows that Magnitsky was killed in a Russian prison, but instead of acknowledging this fact and promising on behalf of Russia that an unbiased investigation will be conducted and the culprits punished, he could think of nothing better than to accuse Magnitsky of having been paid for doing his job, thus making himself into a laughing stock.

According to the billionaire George Soros, the Russian economy is in a sorry state. One of his allegations is that it is a collapsing economy which Putin is leading in the wrong direction and that the best investors can do is not to invest in Russia at all. Do you agree with Mr. Soros? Could his verdict affect the plans of potential investors? Could it possibly scare them away?

It’s hard to argue with Mr. Soros. After all, it’s his personal view and judgment. But he makes some fair points as well. For example, it’s true that President Putin is the sole authority steering this country’s economic development. It is also clear that Mr. Putin is in favor of state capitalism and an enhanced role for the center, even though modern global experience suggests that this is wrong. The state will never be an efficient manager. Where Mr. Soros has hit the nail on the head is that the Russian economy is “collapsing” because of corruption and racketeering. It’s a completely realistic description. But this doesn’t mean that the Russian economy will collapse in the next two days. However, no excessive economic growth can be expected within the next two months either.

As far as his possible influence on investors is concerned, I don’t think that people who have done business in Russia for many years will withdraw, particularly companies that need raw materials and strategic products. Russia is rich in both. But it’s also clear that his view will not make potential investors overoptimistic, given that there are up-and-coming rivals like India, China, Brazil, Mexico and others.

There was no interest in Russia shown by foreign investors at the World Economic Forum in 2012 or 2011 either. A Russia where nothing new happens, which gives nothing useful to the world economy, which doesn’t play an active role in the world community, this Russia proved uninteresting for the forum participants. During the last couple of years, world leaders have not mentioned Russia either. I mean that Mr. Obama and Mr. Romney said practically nothing about Russia during their election campaign. Mr. Soros’ pronouncements, therefore, are in keeping with the general trend.

In Davos, the World Economic Forum presented a report entitled Scenarios for the Russian Federation, where all three scenarios were rather pessimistic. What scenario, in your view, is more probable for this country? The Prime Minister said that “none of these scenarios will be played out”. What future, as you see it, lies in store for the Russian economy?

This report has produced a somewhat odd impression on me from the point of view of its methodology. It was compiled by employees of an organization known as the World Economic Forum, and you cannot accuse them of being unprofessional. They have visited Russia on several occasions and interviewed 350 businessmen, politicians and experts. Three basic scenarios for developments in Russia if the authorities failed to implement deep-rooted political and economic reforms were drawn up on the basis of these interviews. Moreover, the experts made no secret of the fact, either in their report or in their addresses in Davos, that they saw no reason to think that these reforms were being planned or were expected. And this is their main conclusion: the majority of experts don’t see a good scenario for Russia regardless of how the situation in the world economy develops. A telltale fact is that almost 78% of the audience backed the report and its authors, expressing the view that Russia’s future depended on “good governance” (government efforts in fighting corruption and in instigating institutional reforms). I can only regret that Prime Minister Medvedev voted with the minority.

Was Mr. Medvedev able to convince the Western political and economic community that he was not a lame duck, as the media are calling him, and that he has a real political future?

It’s wrong to call Dmitry Medvedev a lame duck. First, a lame duck is an outgoing official who has lost an election. Dmitry Medvedev is not an elected official and he did not lose an election. Second, no one knows when he will leave his post – a month or a year from now.

The political and economic community and experts are well aware that Medvedev is, willingly or unwillingly, one of the top-ranking officials in Putin’s vertical of power. His political future depends more on Vladimir Putin and less on himself, and, of course, the most important factor is the political, economic and social atmosphere in Russia over the next five years.

Dmitry Medvedev does not come across as a leader capable of firing up the masses with an idea and getting them to follow him. But for all that he may enjoy a long-term political future. Leonid Brezhnev, incidentally, wasn’t much of a charismatic leader either.

Views expressed are of individual Members and Contributors, rather than the Club's, unless explicitly stated otherwise.