Flatline imposed over a photo of the Kremlin, Moscow.

Russian Power Under Putin: Up and Down and Flatline

August 22, 2018
Andrew Kuchins
This op-ed is part of a new debate from Russia Matters and is written in response to "Measuring National Power: Is Vladimir Putin’s Russia in Decline?" by Simon Saradzhyan and Nabi Abdullaev.

Measuring Russian power in international relations has always been tricky: German Chancellor Otto von Bismarck in the 19th century wisely observed that Russia is never as strong or as weak as it looks. For those trying to gauge whether the power of the state in contemporary Russia is rising or declining, Simon Saradzhyan and Nabi Abdullaev have contributed one of the most methodologically rigorous analyses available in their recent report “Measuring National Power: Is Vladimir Putin’s Russia in Decline?” Overall, the authors conclude that, since Putin’s ascent to the country’s top office in 1999, Russia has been rising in power relative to the West while declining relative to China and India. The report has three weaknesses, however, that cast some doubt on the claims about Russia’s rise: It underestimates the significance of Russia’s decade-long economic stagnation; it gives too much weight to a single measure of government effectiveness; and it does not find an adequate way to assess the extent to which technological innovation is, or is not, boosting national power.

A few years ago, I argued that Russia is rising and declining simultaneously and I stand by that view. While Moscow’s military power has grown considerably, especially with the reforms begun in 2008 and increased military spending, Putin has not created the conditions crucial for sustained economic growth and the development of new commercial technologies. Moreover, the data behind Abdullaev and Saradzhyan’s report suggest that the two aspects of Russian power that the authors credit as the main drivers of its relative growth—GDP and government effectiveness—have gone through two distinct stages under Putin: a steady rise, followed by protracted flatlining. It is much easier, then, to make the case that key elements of Russian power grew during Putin’s first two terms as president, from 2000 to 2008, but have relatively declined or stagnated at best for the past decade. In addition, I believe the authors fail to accurately capture the reasons behind Russia’s economic growth and stagnation, as well as the increased significance of technological innovation, whose pace has increased exponentially in the past 20 years and whose role in national power will continue to rapidly increase.

A Few Words on Methodology

In their analysis, Abdullaev and Saradzhyan employ three existing frameworks for measuring national power and devise a new one of their own to look at Russia in comparison to four groups of “comparands”: leading Western powers (the U.S., Great Britain, Germany and France), rising powers (China, India, Brazil and South Africa), post-Soviet states (except the Baltics) and states highly dependent on hydrocarbon revenues. Overall, the frameworks are quite sophisticated in measuring various economic, demographic, geographic, social and political factors and they reach fairly consistent conclusions about Russian power since 1999.   

Russian Economic Growth

One of the two main factors identified by the authors as driving the rise in Russia’s national power, as mentioned above, is economic growth. Indeed, whether measuring in nominal dollar terms or according to purchasing power parity, Russian GDP more than doubled from 1999 to 2016. But, while the authors acknowledge that “the growth in-between [of Russian power more broadly] was not continuous and appeared to be petering out toward the end of the research period,” they play down the significantly divergent trend lines in economic growth: Essentially, there was a period of rapid growth from 1999 to 2008, averaging 7 percent a year, that outpaced all other countries in the analysis with the exception of China and, since then, there has been nearly a decade of prolonged stagnation in which Russian economic growth has averaged less than 1 percent a year and underperformed almost every other country in the report. Rather than “petering out,” this is more akin to “a tale of two cities.” It is not incorrect thus to conclude that Russia’s relative power increased during the period under analysis, but had the research period started in 2008 or 2009 the trajectory would likely look quite different. Moreover, while Abdullaev and Saradzhyan’s report is concerned with the past, ongoing stagnation of arguably the most important long-term factor for national power, economic growth, is more problematic than the authors seem to suggest. 

This brings us to the second key factor named by Saradzhyan and Abdullaev, similarly problematic—namely, more than 100-percent growth, according to World Bank measurements, in “government effectiveness.” Like economic growth, this indicator has stagnated for at least the last 10 years, along with the other five that make up the World Bank’s broader metric of “governance” (“voice and accountability,” “political stability/absence of violence,” “regulatory quality,” “rule of law” and “control of corruption”)[1], which the report does not take into account. Of the six governance factors, “government effectiveness” did see the largest increase for Russia, up to the 46th percentile. But most of this increase took place between 2000 and 2006. For the other five indicators—all of which, like government effectiveness have an impact on economic growth—Russia’s comparative ranking has declined or remained stagnant with the average at 22 percent (i.e., 78 percent of nations rank higher). Even including the government effectiveness ranking, Russia averages a dismal 25.5 percent. This is considerably lower than other large emerging market economies including China, India, Brazil, Mexico and others, not to speak of OECD countries. Abdullaev and Saradzhan are correct in noting the symbiotic relationship between economic growth and governance or government effectiveness, but the World Bank data only reinforces the two-stage trend line described above—up, then flat—and the fact that for a decade now Russia’s ranking on the most fundamental assessments of power has declined relative to its Western and non-Western competitors.

While not directly affecting the authors’ findings, their explanation for the reasons behind Russian economic growth under Putin also gave me pause. In their conclusion, the authors note the importance of the 1998 devaluation of the ruble in initially catalyzing the Russian economy, after which “growth was further facilitated by a period of continuously rising oil prices.” They go on to state that “the country’s economic growth in the research period could not have been sustained for more than 10 years straight were it not for the economic reforms pursued by the Russian government during Putin’s first presidential term.” Putin’s economic reforms in 2000-2002, including tax, labor and land reform, did play a role in promoting growth, but probably a secondary role at best by comparison with the reforms of the 1990s. In a forthcoming book, former deputy head of the Russian Central Bank Sergey Aleksashenko argues that the 1990 reforms to liberalize and privatize the Russian economy set the foundation for growth to come. [2] He notes, for example, that private companies accounted for 80 percent of the increase in oil production from 1999 to 2003, providing a big boost to the economy.

The aspect of oil money that is most concerning for Moscow’s power on the international stage is that high global prices for Russia’s main export commodity have not led to sustained economic growth. Economists agree that the dramatic rise of the oil price in 2003-2008 and the ensuing windfall revenue from oil and gas sales were far more powerful in driving Russian economic growth from 1999 to 2008 than other factors. (Aleksashenko likewise notes the burst of foreign investment in 2006-2008 until the global financial crisis.) However, although global oil prices since 2009, albeit through major drops and spikes, have averaged more than $70 a barrel—a historically high price—Russian growth has stagnated. This is precisely what economists Sergei Guriev and Aleh Tsyvinsky predicted in 2010. In their prescient study, they argued that weak institutional foundations and an absence of reforms would undermine growth despite a relatively high oil price.

A Caveat on the Military

Russian military strength has increased even more dramatically than economic output thanks mainly to an increase in spending by a factor of more than 10 since 1999, as well as reforms and other measures resulting in greater power projection.  Granted, Russia’s military power grew more quickly than before precisely at the time when the Russian economy began growing far more slowly. This is due to the lessons drawn from the five-day war with Georgia in August 2008 that revealed a number of the Russian military’s technological and logistical shortcomings, inspiring both major reform as well as increased spending. Already Russia’s ambitious military spending goals have been curtailed because of stagnant growth. As growth is likely to remain stagnant for a prolonged period, Putin’s fourth term will increasingly feel the strains in Russia’s guns vs. butter dilemma.

The Technology and Innovation Conundrum

Abdullaev and Saradzhyan are correct that it is difficult to quantify the impact of technological innovation on national power and to find a good proxy for any such measure. Ultimately, they settled on the number of “triadic” patents (filed at three specific patent offices in Europe, Japan and the U.S.), which rose for Russia from 84.6 in 2000 to 87 in 2015, according to the OECD. This measurement seems to have some obvious limitations. The first concerns the question of quality vs. quantity: One patent among thousands could be the spark for a multi-billion-dollar commercial enterprise or could catalyze production of new goods that revolutionize economies and/or military weapons. And in many cases it is virtually impossible to evaluate the potential impact of any innovation in its early development. A second problem especially applies to technological innovation in military weaponry: This can be government-sponsored research for which there will be no patent desired in order to maintain secrecy.

Aside from notable achievements in the Soviet period in space and military technology, historically Russia has lagged in the fields of technology and innovation from the tsarist era to the present time, especially in commercializing technology and innovation. Russian leaders from Ivan the Terrible to Peter the Great to Stalin and now Putin have each called for Russia to catch up with its competitors in economic efficiency and technology or face falling from the realm of great powers. A renowned historian of science, Loren Graham, attributes this persistent weakness not to a lack of world-class scientists and engineers, but rather to deeply held societal attitudes and weak rule of law, especially property rights. Unfortunately, as Andrei Soldatov and Irene Borogan argue in their excellent book, “The Red Web,” Russian technology companies are today increasingly threatened by the predatory policies of their own government. Although there are a few areas where Russian companies have world-class information technologies, their barriers to growth are increasing rather than decreasing. Compare, for example the extraordinary growth of the leading five U.S. technology companies—Amazon, Apple, Alphabet/Google, Facebook, and Microsoft—which have become the five most valuable companies in the country, with Amazon and Apple being the two most highly valued companies in the world. That is not going to happen in Russia, where stock markets are likely to be dominated for a long time to come by energy and natural resource companies.

In most measurements of technological and innovation capacity, Russia ranks no higher than 30th in the world, and considerably lower in some of those rankings, including in investment into research and development. The state-dominated efforts begun about 10 years ago to jump start Russian technological development, like Skolkovo, RosNano and others, have not proven to be effective, and the poor investment climate and Western sanctions have kept investors away from promising private-sector companies.

In the early 1980s, some leading Russian military thinkers, such as then Chief of the General Staff Nikolai Ogarkov, feared that the Soviet Union was falling too far behind the United States in the information revolution and that this would ultimately constrain Soviet military technological development. This is why he and some military leaders were supportive, in principle, of economic reform. Technological development is moving even faster today, and we should expect its impact on economic growth as well as military capabilities to be even greater.

While difficult to measure, technology and innovation will likely increasingly dominate other more traditional factors of power like geography, demography, the military and others. Vladimir Putin said last year that whichever country dominates artificial intelligence will rule the world. Maybe he is right, maybe not. What is clear, however, is that his policies for nearly 20 years now have for the most part hurt rather than helped Russia’s technological competitiveness and prospects for long-term sustainable economic growth. If Abdullaev and Saradzhyan had started their analysis in 2008, their conclusions would be different, and I fear that if we conduct another similar exercise in 2028 the conclusion will be a relative decline in power for the Russian Federation.

Footnotes

[1] For the World Bank data on governance, see http://info.worldbank.org/governance/WGI/#reports.

[2] Sergei Aleksashenko, “Putin’s Counterrevolution” (forthcoming October 2018, Brookings Institution Press).

Author

Andrew Kuchins

Andrew Kuchins is a Senior Fellow at the Center for Eurasian, Russian, and East European Studies, Georgetown University.

Original photo by NVO shared under a CC BY-SA 3.0 license.