27 May 2004
For the fourth year in succession, President Vladimir Putin has given a marvelous state of the nation address. Clear, reform-focused, liberal and structured -- the speech contained much of the blueprint for a liberal, market-based Russia. The trouble is, so did all the others.
There seems to be something of a disconnect between what Putin says and what Putin does. Publicly, Putin aims at growing the economy and reducing poverty through an ambitious reform agenda to create a diversified economy and a set of stable institutions capable of protecting democracy and civil society. In practice, Putin seems at least partly focused on centralizing authority and diversifying the economy through controlling the natural resource sector and funneling its finances elsewhere.
Four years ago, in his first state of the nation address, Putin defined his agenda as tax reform, administrative reform, Chechnya, establishing stable property rights, reform of the military, improving the social infrastructure and freeing the media from the grip of business. Most of this has been repeated in one form or another in every year since, including in Wednesday's address. The positive spin, then, is that the underlying strategic goals of the Putin administration remain largely unchanged; at the very least, you've got to admire his consistency.
But the actual policies implemented over the past four years have only roughly corresponded to those outlined. His two main policy themes of last year -- further centralization of authority and forcing a closer cooperation between the state and the natural resource sector -- were not mentioned in the speech. Similarly, two of the most controversial ongoing issues in Russia -- post-Akhmad Kadyrov Chechnya and the Yukos affair -- were largely ignored.
This is not to say that Putin and his administration have not been successful at implementing policy. Given the decrepit institutional framework that Putin inherited, his administration has a remarkable track record on reforming Russia. Tax reform, land reform, reform of the customs system, budget stability, a viable stabilization fund and the initial stages of pension reform, banking reform and utility sector reform are all notable successes.
Equally, muzzling the media, undermining first the political and later the economic power of the oligarchs, reconfiguring the Federation Council, ending the independence of regional governors and managing the election of a docile State Duma have radically changed the face of Russia. The reward for his policy success is a stable Russia that is attracting the domestic investment and consumption which are now the main drivers of economic recovery.
A number of Putin's policy successes conform to the aims described in his annual address, but equally many do not. It is hard to escape the conclusion that Putin has one set of objectives for public consumption, and a rather different one that he is actually implementing. Sometimes they coincide -- sometimes they don't.
There are two possible explanations for this disconnect between stated aims and actual policy. First, that Putin's government is simply unable to implement large parts of its agenda. Tax reform is not particularly contentious in theory and fairly straightforward in practice. Military and housing reform, on the other hand, face much stiffer opposition and depend on a determined bureaucracy for implementation -- something that Russia blatantly lacks. According to this view, the most important indicator of Putin's future success is administrative reform: If Putin can get that right, then implementation of the rest of the reform agenda should follow.
But it is equally plausible that Putin has never had any intention of implementing much of what he claims in his annual speech. Liberalism, the rule of law, private property and a free media sound great from the podium. In practice, however, they can be an annoying inconvenience to the rule of an ambitious government. By definition, they limit and scrutinize the rule of the Kremlin. Generating consensus on policy and opening up to the criticism of a free media is both time-consuming and risky -- much better to get on with the business of government and worry about liberalism later.
A number of the more concrete proposals in this year's speech were encouraging. The development of a viable mortgage market will both make it easier to move away from the more economically depressed regions and encourage the development of a stable middle class. Similarly, hearing the president make some reasonably detailed commitments to expand Russia's oil export capacity will be taken well by the investor community. Mentioning competition in the provision of education and the extension of toll roads is an indication that some of the more reformist elements in the administration are still writing Putin's speeches. But, unfortunately, much of the rest of Putin's admirable speech must be treated with caution: Look to what Putin does, not what Putin says.
The state of the nation address has become a formulaic, feel-good speech that is reformist enough to play well to an international audience and populist enough to go down well domestically. Each year, as opposition to Putin becomes more muted, the speech is met with greater applause. The audience has certain expectations and, like any good performer, Putin delivers. Meanwhile, the market will focus on the fate of Yukos, the bureaucracy will defend its privileges, the oligarchs will fear a knock at the door, the private sector will go on restructuring, and Russians will continue to enjoy their recently acquired relative prosperity.