Russian "Democracy" in Decline

Freedom House has released its 2006 report “Nations in Transit” and Russia’s score for democratization has fallen from 5.61 in 2005 to 5.75 this year (a perfectly bad score is a 7, best is a zero indicating absence of anti-democratic influences), a drop of of 0.14 points. Ratings fell in a range of categories: national governance, the electoral process, corruption, and civil society. As relayed by Radio Free Europe, Freedom House says: “We are quite concerned about Russia, in that what we are seeing of course is energy that is continuing to improve the economic situation, but the political institutions are becoming more and more fragile.” The report argues that the Russian government has failed to adopt effective policies for easing conflict and tension in the North Caucasus. It has also shown itself unable to reform the military and the police, all of which has fed growing growing extremism. The report says there has been an “onslaught” against media freedoms, and the “near obliteration” of nongovernmental organizations. There has also been harassment of the opposition and legal moves making it more difficult to monitor elections independently.

Thanks for reading La Russophobe !

75% of Russians Clueless on Freedom, Just Happy for an Excuse to do Nothing and get Wasted

The St. Petersburg Times reports that more than three-quarters of Russians have no idea why they are celebrating on their national holiday to commemorate emergence from the Soviet slave empire:

As the country celebrated Russia Day on Monday with its citizens enjoying an extra day-off, only 23 percent of the people were able to correctly identify the holiday, according to a poll organized by the Moscow-based Yury Levada Analytical Center this week.

Fifteen percent of respondents said they had no idea what the holiday is all about, while the vast majority of those polled by the Levada Center experts, called the June 12 holiday “Independence Day.” Only every fourth participant of the poll knew accurate information about the background of the holiday.

The holiday, widely known as Russia Day, has been celebrated annually since June 12, 1990, when Russia adopted a sovereignty declaration seeking more independence from the collapsing U.S.S.R. Its official title is the Day of the Passage of the Declaration of State Sovereignty of Russia.

On June 12, 1991, Boris Yeltsin was elected as president of the Russian Federation, and later that year the Soviet Union ceased to exist.

“Because we have made that choice, we now live and work in a democratic state, in a liberated society, where an individual and their free spirit are of the highest value,” President Vladimir Putin was reported by Interfax news agency as saying on Thursday at a reception to mark Russia Day.

The origin of the holiday lies in a 2 1/2-page declaration by the first Congress of People’s Deputies of the Russian Soviet Federal Socialist Republic that spells out the democratic goals of Russia within the framework of the Soviet Union.

Called the Declaration of State Sovereignty, it was adopted on June 12, 1990, by a vote of 907 for, 13 against.
The 1990 document formed an important ground for the country’s post-Soviet development, though many of the goals set out in the declaration have yet to be achieved.

The declaration states that the country’s goal is to ensure “the inalienable right of every individual to a worthy life.” It also declares the intention of creating a democratic, law-based government based on the rule of law.

In St. Petersburg on Monday a group of over 150 protesters from left-wing opposition movements gathered on St. Isaac’s Square to speak up against corruption, arbitrary rule imposed by civil servants and human rights violations during the army drafts. The protesters countered Putin’s positive speech with local stories of being mistreated and abused by state officials at various levels.

According to the Levada Center, 62 percent of Russians regard the Russia Day as nothing more than an extra day-off, and ignore its ideological background. Only 12 percent of the poll’s participants feel that independence has helped positive developments in the country’s economy. Twenty percent of respondents said “independence” (from the Soviet Union) has won Russia recognition as an internationally influential state.

The same poll shows that 22 percent of Russians are proud to hold a Russian passport and live in the country, the figure having doubled since 2003 when the agency asked the same question in a similar poll.
Among the other points covered, the 1990 declaration recognizes the norms of international law concerning human rights and provides guarantees of political, economic, ethnic and cultural rights for all nationalities in the Russian Federation.

It affirms the public’s ownership and right to exploit and dispose of the country’s natural wealth. The declaration affirms political pluralism and guarantees the equal rights of individuals, political parties, social organizations, mass movements and religious bodies to participate in political and social life.
The declaration also affirms the separation of political power among the legislative, executive and judicial branches as the basic principle of the Russian government.

Two myths conveniently blown to bits at one stroke: First that the Russian population is highly erudite and informed, and second that the Russian population favors democracy and freedom.

Thanks for reading La Russophobe !

Russian Stock Market Tanks (Again)

Bloomberg reports that a few whispers from the United States can bring the Russian stock market to its knees. La Russophobe dares to wonder what the Russian market would do if America decided to start shouting …

June 13 (Bloomberg) — Emerging-market stocks dropped to a six-month low after a seventh Federal Reserve official in as many days hinted U.S. interest rates will rise, prompting investors to dump riskier assets. Shares in Russia and Poland led the slide. The Morgan Stanley Capital International Emerging Markets Index, a measure of stocks in 25 developing countries, fell 4.1 percent to 666.65 as of 1:15 p.m. in London, poised for the lowest close since Nov. 29. The measure has plunged 24 percent since peaking on May 8. The dollar-denominated Russian Trading System Index lost 7.1 percent, and Poland’s WIG20 Index slumped 6.8 percent. Turkey’s ISE National 100 Index tumbled 6.5 percent, while India’s Sensitive Index was Asia’s biggest loser, slumping 4.4 percent. “Everyone is spooked by rate increases in the U.S.,” said Nitin Jain, who helps manage about $563 million at Kotak Mahindra Asset Management Co. in Mumbai. “We will see tightening credit on the back of such rate increases.” Central banks around the world, including those in the euro region, India, South Africa and South Korea, have increased interest rates this month to quell inflation, feeding concerns that global economic growth will slow. Fed officials in the past week have also signaled they may be forced to boost borrowing costs further, after 16 increases since June 2004. Fed Bank of Cleveland President Sandra Pianalto said yesterday inflation exceeds her “comfort level,” echoing remarks by Fed Chairman Ben S. Bernanke last week, who said recent increases in inflation measures “are unwelcome.”

The Moscow Times added more explanation:

Investors in Hermitage Capital Management have pulled out $500 million from the country since it was made public that CEO William Browder had been barred from Russia.

In an interview late Monday, Browder said the pullout was partly due to his troubles with Russian authorities.

Hermitage is the largest portfolio investor in the Russian stock market.

The pullouts, or redemptions, took place over the last three months and make up 11 percent of the fund’s total portfolio, Browder said.

Browder, who has gained a reputation as a crusader for shareholder rights in Russia, has been barred from entering the country since last November, when an order was issued branding him a threat to national security.

Browder has recently battled with state-controlled Gazprom over corporate-governance abuses and inefficiency. He also attacked Kremlin-connected oil major Surgutneftegaz over its murky ownership schemes.

Browder’s comments Monday came in response to figures in a weekly report by a fund that tracks money movements in emerging markets.

The fund, Emerging Portfolio.com Fund Research, reported that Hermitage had lost $529 million in the past week — nearly one-third of the total losses racked up by emerging markets over the seven-day period. It was one of the worst weeks since the 1998 Asian crisis.

The fund found that $1.3 billion had been lost from emerging markets across the globe last week. Of that, $545 million came from Russia.

The report sparked speculation among investors that a major force behind the losses was investors seeking to exit Browder’s fund because of the Kremlin’s decision to bar him.

The Kremlin has declined to comment on the affair.

When reached for comment about the independent report, Browder, who is now running the fund from London, said that while the $529 million figure was more or less correct, the redemptions had been made over the last three months and not in the space of a week.

He said the redemptions were recorded last week because that was when the funds were returned to investors.

“Most of this was sold more than two months ago,” he said.

He added: “About half of it had to do with my visa, and about half of it had to do with profit-taking.”

No one could be reached for comment late Monday at Emerging Portfolio.com Fund Research.

When news broke in late March that Browder had been barred, Hermitage had $2.9 billion under management and $1.9 billion in other accounts, according to fund data made available to The Moscow Times. That included the Russian portion of an HSBC BRIC fund.

As of June, Hermitage had $2.4 billion under management as well as $1.7 billion under separate management, according to the company data.

British officials, from the Foreign Office to the London Stock Exchange, have criticized Russian authorities for arbitrarily barring Browder from the country, saying it could dissuade further investment in the country.

Browder said he was still optimistic that his visa problems would be resolved. Despite acknowledging that his conflict with Russian authorities had prompted investors to pull out of the country, Browder insisted they remained confident in Hermitage.

“I’m still growing along with the Russian market,” Browder said.

La Russophobe notes that it could be that some of Browder’s “optimism” stems from the fact that his father was Earl Browder, an ardent communist and general secretary of the Communist Party in America during the Stalin years.

Thanks for reading La Russophobe !

Making the World Safe for Unmitigated Atomic Disaster

Well, nobody can say that Vladimir Putin doesn’t have his priorities straight, that ‘s for sure. His country is facing the loss of 1 million people per year to disease of every kind and an average wage of $300 per month. But never fear! Super Vladimir is here! He knows just what to do.

First, Russians were going to build a residential mining colony on the moon. Now, they’re going to . . . wait for it . . . build a floating nuclear power station. RIA Novosti reports:

MOSCOW, June 13 (RIA Novosti) – Russia will construct the world’s first floating nuclear power plant by the end of 2010, the head of the federal NPP construction agency said Tuesday. The NPP will mainly provide power supplies for Sevmash shipyard company, which won a tender in May to build a floating reactor for a low-power thermal and electric power plant that will sell one fifth of its energy to the energy-hungry Asia-Pacific region. Sergei Obozov of Rosenergoatom said that an agreement on construction of the plant would be signed Wednesday by federal nuclear agency head Sergei Kiriyenko on a visit to Sevmash. “The project will cost 9.1 billion rubles [$337 million] and will be commissioned in October 2010,” Obozov said.

Thanks for reading La Russophobe !

Drink up to your Health, Russians!

Up to half of the alcohol consumed in Russia is thought to be fake or sold under the counter. Illegal producers use forged labels and custom stamps to imitate respected foreign imports. Counterfeit wine is often made from cheap grapes or alcohol produced with other fruits and dyed with food coloring.

In April, 38 Russian alcohol importers published an open letter to President Vladimir Putin in national newspapers urging him to end the “catastrophic situation” [he created by banning the import of Georgian wine in an act of wanton, childish, pathetic Neo-Soviet retaliation aimed at the Georgian infant democracy]. They estimated Russian businesses could lose $700 million as a result of the embargo.

— The Boston Globe

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A Neo-Soviet in Queen Elizabeth’s Court

In a Moscow Times op-ed piece, Alexey Bessudnov, a doctoral student in sociology at St. Antony’s College, University of Oxford, states:

A few months ago, I attended a lecture given at St. Antony’s College, University of Oxford, by Irina Yasina, the deputy chair of the Open Russia foundation, whose mission is to support nongovernmental agencies in Russia. Yasina was talking about civil society and the Putin regime. Her main argument was anything but new. She claimed that President Vladimir Putin’s Russia was moving toward authoritarianism, that Putin was suspicious of civil society, and so trying to get rid of it, and that the Leviathan, led by former KGB officers, was regaining its power and was not going to tolerate competitors.

He responds to Yasina in classic Neo-Soviet fashion, as follows:

Social scientists have long studied the problem of collective action, which was first formulated by Mancur Olson, an American economist. Olson’s simple argument merely described the behavior of a rational actor. First, people or firms do not tend to create organizations to solve their problems if they can solve them individually. Second, even if there is a collective interest that requires joint action, people in large groups will not act to achieve their common goals in the absence of coercion or individual interests. In fact, the impact of each member of a large group would be so small that a rational individual does not have any incentive to contribute to the common cause, even if the members know that final success ultimately depends on their joint efforts. Most people in Moscow, for example, would prefer to live in a clean city, but they continue to throw garbage on the streets. To get people to act collectively, you need to use compulsion (often applied by the state) or create additional membership rewards (to paraphrase a popular Russian novel, the beer has to be for union members only if the union is to continue to exist).

So, instead of complaining that civil society does not exist, it might be more reasonable to ask why it should. Russians have invented a lot of ways to cope with inefficient institutions in order to solve their everyday problems. Businesspeople dealing with rank-and-file tax officials do not need to act through business associations to avoid excessive tax payments. They know from past experience what tax officers want from them. There are many ways to be exempted from military service without joining civil rights organizations or campaigning for changes in conscription rules. Every driver knows it is easier to pay a small bribe to a cop and keep breaking traffic regulations than to join with other drivers to pressure the authorities to tackle the traffic problem. There is no need for civic organizations when you can easily find an informal way to deal with your problems.

Simon Kordonsky, former head of the expert department in Putin’s administration, argued in a recent article in Otechestvenniye Zapiski magazine that informal networks and the patronage system (read: corruption) represent a specific Russian type of civil society. There is no way to introduce Western-type civic associations in Russia, Kordonsky claims, because they would be artificial.

The problem with this argument is that our corrupt version of civil society is inefficient. First, it does not produce public goods, since everyone looks for an informal solution that deals only with their own, individual problems. People with sufficient financial resources or connections are usually able to get their problem fixed, whereas the poor and disadvantaged, who still constitute the majority of Russians, often fail to overcome their difficulties. Second, informal solutions are costly in terms of the time and effort required. Third, in many cases this is simply harmful to society. People do have to pay taxes and comply with traffic regulations instead of bribing tax officers and traffic cops. At the end of the day, the informal civil society increases transaction costs in the economy and impedes economic growth.

Is the transition from corrupt, informal social structures to the proper institutions of civil society possible? The answer is yes, but the role of the state will be crucial in this development. It may sound paradoxical, but a strong state is a prerequisite for an efficient civil society. A strong state, though, does not mean aggressive, statist rhetoric or bureaucratic omnipotence but, instead, the rule of law and the ability on the part of the government to control its own officials. If corruption was eliminated — or at least reduced — people would have an incentive to tackle social problems in an organized way rather than look for individual solutions.

According to Olson’s argument, even then people will still need separate incentives to join large organizations. The creation of these incentives for the formation of trade unions, consumer associations and other types of civic organizations will to a large extent depend on legislation and state policy toward them. Thus, contrary to popular wisdom, the state not only can, but must play an important role in the creation of civil society in Russia.

Notice the absurd fallacy: Nobody would say that the state “not only can but must play an important role” in civilizing Russia if they assumed that the state itself was more corrupt than the society it sought to regulate, in fact a group of genocidal maniacs who, like Stalin, would kill more Russians than any foreign enemy. So to make this argument, Bessudnov must assume that the State is less corrupt – yet try as you may, search his article from top to bottom, you will not find one single shred of evidence to establish that this is so. Bessudnov’s argument could have been — and in fact, it was — advanced to justify the policies of Josef Stalin and his continuation in power.

In other words, here we go again. What Russia needs is not its umpteenth Stalin but its first Gandhi. Russia has never existed, not for one single second in a thousand years, without a powerful centralized state. And for every single one of those years, it has been in decline. Yet, not even a Western-educated neo-Soviet man can conceive of the possibility that Russia may need LESS government power, not more. And so it goes in doomed Russia.

UPDATE: See La Russophobe’s published letter in the Moscow Times based on this post. If La Russophobe were Mike Averko, she’d now be a “published analyst.” Luckily for her, she isn’t.

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