NOTE: This is the eighth and final part of a serialized translation of Boris Nemtsov’s white paper critiquing the Putin years. It includes crucial conclusions offered by the authors and a statement on their individual backgrounds. Part 1 (introduction and chapter one) appeared on Monday, Part 2 (chapter two) on Wednesday, Part 3 (chapters three and four) appeared on Friday, Part 4 (chapters five and six) appeared on Sunday, Part 5 (chapters seven and eight) appeared on Monday, Part 6 (chapter nine) appeared on Wednesday and Part 7 (chapters ten and eleven) appeared on Friday. You can display all the parts in reverse sequence on a single web page by simply clicking the “nemtsov white paper” link at the bottom of this post. The entire translated white paper document, including the final sections not yet published here as HTML, is now available as PDF (this link is now also permanently in our sidebar).
Putin: the Bottom Line
by Boris Nemtsov
First Deputy Prime Minister of the Russian Federation, 1997-1998
Deputy Minister of Energy, 2002
Translated from the Russian by Dave Essel
Conclusion: The Alternative
The picture we have painted of developments in Russia today is a fairly gloomy one. Sadly, it presents the truth. This can be seen by anyone who does not allow “hip-hip-hurrah” patriotic incantations about “reborn” Russia “rising from its knees” and “gaining strength” to taint a sober analysis of current events.
The potent anesthetic of 100-dollar oil will wear off and the serious illnesses from which our country continues to suffer will make themselves felt again. We will then come to understand that the corrupt state-monopoly capitalism à la Latin America built up by Putin has enabled only the oligarchs close to Putin to flourish and driven the rest of us into the third world. Being intoxicated, Russian society does not comprehend. But once the rush has passed, only this banal truth will be left.
Might we not try to avoid the pains of going cold turkey and make a start now at building a free and democratic Russia in which citizens will feel secure and have real freedom to live and build their lives? A Russia standing on foundations of law and order and not of Putinite “quiet agreements” and corruption? A modern and efficient economy instead of a bubble full of petrodollars?
Maybe it’s time to wake up and get on with things?
Of course there is an alternative to Putin’s winter sleep. First and foremost, we need to understand what sort of Russia we need and want. We deserve to have a very different country – modern, with a stable economy, well-developed infrastructure, and well-off entrepreneurial citizens engaged for the most part in small and midsize businesses. We need to have rich folk in Russia but not just billionaires with ties to the seats of power. We need as many people as possible to be well off. We would like all those who want to work and make money to be able to do so with let or hindrance.
We need a healthy Russia whose citizens have the right to a healthy lifestyle and quality medical care. We need an educated Russia whose children have the right to a decent education and to apply for places in any college without paying bribes and without being dunned for sub-rosa fees in the form of “private tuition”. We need a safe Russia where we do not live in fear, where the odds are low that we we die at the hands of a killer or in a car crash. We need decent roads. We need a decent government which doesn’t rule the people but serves them. These things have already been achieved in dozens of countries that have chosen the liberal democratic path – Europe, for example. Russia needs at last to become what it has the right to be: a successful European country in which its people have decent lives.
How one goes about building a society of this kind is perfectly clear. First and foremost, the police state has to be dismantled and human dignity returned to the people. We need to bring back into our lives the rule of law, freedom of speech, and the genuine right to elect and be elected. Russia needs an independent judiciary in order to provide the law’s protection to all, both ordinary members of the public and entrepreneurs. We need to restore federalism by returning to the regions political power in the form of governors elected by direct suffrage and allowing them the funds they need to implement social programmes and to improve their infrastructures. Doing this will change the atmosphere in the country, take away the apathy and the fear, and lead the people to take civic and business initiatives.
We to to breathe new life into the reforms started in 1997, some of which continued until 2000. These – macro-economic stabilisation, resolution of the debt problem, tax reduction, revitalisation of the law – were the reforms which would have normalised life in the country. But catastrophically little was done and the small amount which was positive was discredited by the crushing of democracy, of the law, of the independence of the judiciary following after which further damage was done when the reforms were halted, when the “state rackets” took hold on a large scale, and when entrepreneurs were deprived of their property.
These reforms need to be taken to the end. We need to do this fast, while we have the money to do so. The prospect that there will be a world recession means that we have very little time in which to carry out reforms during a favourable period. Most importantly, we must spend more – while the state’s financial situation is still healthy – not on the government apparatus, the special services, and payments to Abramovich, as Putin has been doing, but on public health, education, the army, and the roads. We can reduce spending on officialdom and commercial projects to double the funding for public health and education. The whole structure of state spending needs to be reviewed and reorganised.
One must, however, spend sensibly: we do not want the systematic embezzlement of state funding to continue. Furthermore, we should spend not so much on current needs but rather on the long-term infrastructure for the future and on profound transformations. We need to reform the military and the public health system (above all by the creation of an efficient compulsory medical health insurance system to provide the people with a basic standard of quality health care).
Reforming the pension system is also urgent and vital. This will mean cleaning out stables of Aegean proportions left to us by Putin. First and foremost, we need to set up a universal pension fund and allocate to it the state’s shareholdings in major companies and the surplus income from oil exports and the privatisation of state property. Investment income from these funds will then be used to pay pensions. The next stage will be to go over decisively to a competitive pensions savings schemes. These measures will enable Russia to create an effective pensions system which will provide people with a decent pension of around 40% of their average wage.
Russia needs a modern, compact, action-ready, and well-equipped army. We have already listed what needs to be done if that is to come about – dismantle the corrupt and opaque arms and equipment purchasing system and replace it with a new, efficient, competitive one. We need to buy arms and equipment for our own army first, not sell to other countries. Russia’s military-industrial complex must be made to pull itself together. We need to man our army with contract soldiers. They should be paid a decent wage and officers with families should be provided with housing.
Russia needs a modern economy built, on the one hand, by private enterprise and private investment, and on the other by efficient government involvement in the provision of government regulation, particularly with regard to controlling monopolies and preventing them from cornering markets. In short, we need capitalism and capitalist competition. As yet, the Russian people have not had the opportunity to experience for themselves one of the main benefits that capitalism has to offer – competition. There have been a few examples: for instance, in the early 2000s, we were all able to reap the benefits of the vicious competition between the various cellphone operators when prices fell rapidly and service quality rose.
The same could be happening in all sorts of others areas. However, competition levels in the Russian economy remain unacceptably low because large monopolistic companies (with, as a rule, links to the government and/or particular officials) dominate everywhere. The state should get out of business and leave it to the private sector. The latter has already proved that it knows how to invest and make the economy grow: between 1999 and 2007 over 90% of economic growth derived from private companies.
The state should provide business with reasonable conditions in which to operate by protecting property rights and reducing bureaucratic and monopolistic barriers to market entry. Business should be provided with a set of operable and predictable laws that can be fairly defended in independent courts of law.
We need to create the conditions needed for small and midsize businesses to grow and create more jobs, making as many people as possible active. The right of each and every person to work to enrich himself and his near ones must be made real. We do not need a poor and unequal Russia but a rich one so that we can at last have a middle class, a large swathe of the population earning a decent living.
The non-market sector of the economy that is still left over from the post-Soviet years and continues to be a burden on the economy should be brought into order on market principles. This refers in the first instance to such infrastructural monopolies as energy supply, gas, and the railways which all get billions in subsidies from the state. Public housing is another sector. Together, they are acting as the main brake to a faster-growing economy. It is time the unholy alliance between these monopolies and corrupt officialdom was terminated.
Privatisation must be made honest and transparent.
The income from privatisation should in the main be allocated to the universal pension fund. Assets recently embezzled from the state (Gazprombank, Gazprom-Media, Sogaz, Gazprom shares) should be recovered through the courts and returned to state ownership.
We do not want to speculate about “resource dependency”, an issue that began to be raised as far back as when there still was a CPSU. Too much talk on this issue has created the false impression that natural resources are a curse when in fact their careful exploitation can lead to a flourishing economy – as may be seen from the examples of Australia, Canada and Norway.
The problem is not that the natural resources sector is too developed in Russia. It’s all to the good that it is there and that it works. The problem is that other sectors of the economy are not developing enough. We are not referring so much here to the processing industries (we need to change our outlook and think about a post-industrial economy) but rather to technological and other white-collar industries. Russia needs to put a stop to its brain drain if these sectors are to develop. Pouring money into nanotechnologies is not the answer. We need talented people to stay in Russia, not go off to become nerdy billionaires somewhere in the West. And for that to happen, it must become safe to live it Russia. In a country where one can buy databases of personal incomes from vendors on street corners and where these databases can and do get into the hands of criminals, capable people will of course prefer to leave the country.
We need to keep good brains in the country if we want to build a white-collar economy in Russia. To stop the brain drain, the government must turn to the people and become nicer.
Russia needs a reform of its bureaucracy. And not just another ministerial reshuffle but a real qualitative transformation: the motivation of civil servants must change (the standard must be results), and a massive change of staff – new people without links to business and not infected with the virus of the previous bureaucratic mentality must take over. We need to conquer corruption once and for all (and have described above how to set about this). It is vital that the deals done under Putin should be fully investigated and that those guilty of this unprecedented looting of the state should be punished.
We need to resume normal relations with the rest of the world. A return to policies of cooperation instead of confrontation and aggression will be massively to our country’s advantage. Fields in which Russia will be able to exert its influence will increase greatly. Barriers will cease to be erected against us. Russians will be able to travel freely around the world.
The world needs to see another Russia: not an aggressive and underdeveloped country but the clever and modern one it has every right to be. And we can do this. The government could have done a lot of what was needed for this between 2000 and 2007. It is precisely for having missed these favourable opportunities that we condemn the Putin régime.
The situation can be put right. But the government we have in Russia today – irresponsible, unprofessional, dishonest – is not the one to do it. The current state of affairs in Russia will change under only one condition – if Russians take the fate of their country into their own hands. If, as in Viktor Tsoi’s lyrics, “we do it ourselves from now”.
About the Authors
Boris Nemtsov is one of Russia’s best-known democratic politicians. Fame, however, is not the point: Boris is rightly considered one of the most sincere and concerned politicians in our country and someone who is not afraid to opine openly about what is happening in Russia.
Before taking up politics, Boris, who graduated from the radio-physics faculty of the Lobachevsky State University in Gorky, worked in the field of theoretical physics and astrophysics, studying the physics of plasma and investigating acoustics and hydrodynamics. He began his active political career in the 1980s when he campaigned against the plan to build a nuclear power station in Nizhny Novgorod. He was elected to the Supreme Soviet of the RSFSR in 1990.
Boris Nemtsov has a unique grounding in government and public politics. In the 1990s he was an effective governor with proven public support; he was re-elected four times by a considerable majority of votes. In 1997-98, he was made deputy prime-minister and minister of fuel and energy. It was then that he began his important systemic reforms of the economy, in particular of the infrastructural monopolies and of public housing management. He was the author of important legislation regarding state purchasing and programmes on housing for service personnel and management training in foreign countries. He proposed many reforms to transform Russia into a modern democratic state with an efficient economy. These were later, in 2000, to form the basis of the country’ssocioeconomic reform programme, the implementation of which was later derailed by president Putin.
In 1997 Nemtsov defended Gazprom from incursions by Vyakhirev and Berezovsky and prevented it from being privatised for a pittance. His other achievements also include: drawing up (jointly with Irina Khakamada) a simplified tax code for small business and the establishment of rules for equal access to Gazprom’s pipelines by independent gas producers.
In 2000 – 2003, Nemtsov headed the Union of Right Forces democratic party and fraction of the same name in the State Duma. He left politics in 2004, after not having become a member of the Duma, but made a noisy return in 2007 as one of the leaders of the pre-electoral lists of the Union of Right Forces. The true things that he was able to say on state television’s long-stifled channels about the current situation in Putin’s Russia came as a breath of fresh air for many of the more concerned citizens of our country.
Vladimir Milov is a representative of the new generation of Russian liberal politicians. At just 35 years of age, he has already had serious experience of government. Between 1997-2002, he worked in the federal executive starting as a senior specialist in the Federal Commission for Energy although he was rapidly promoted to Deputy Minister of Energy. V. Milov was one of the main authors of the Russian energy reforms aimed at increasing efficiency in that field.
In 2002, V. Milov authored the conception for the reform of Gazprom, the aim of which was to overcome the growing gas deficit and put a stop to spiraling prices for Russian consumers. This conception was rejected out of hand by president Putin with the result that these shortages are getting rapidly worse and prices are rocketing ever closer to European levels. Milov was also lead author of the 2003 parcel of legislation on Russian electric energy which for the first time created a legal basis for the development and reform Russia electricity industry.
After he left government voluntarily in late 2002, he became one of Russia’s leading independent experts in the energetics fields and is widely known abroad. More recently, V. Milov has become known as a political author. His sharply critical articles in such Russian publications as Vedomosti, Gazeta.ru, and The New Times have earned him the reputation of a brave, honest, and well-qualified politician.
The authors’ paths have frequently intersected in the course of their work. Both came to work in the federal government in 1997 when the new stage of Russia’s reforms – the move away from chaotic change to systematic ones – was beginning. Both have been professionally involved in the energy field, a key one for a resources-rich country: in 1997 B. Nemtsov was minister of fuel and energy; in 2002 V. Milov was promoted to the rank of deputy minister. Both are responsible politicians with no links to corruption. Both actively fought against it during the time in government service.