In late 2014, a headline “Putin Watches Russian Economy Collapse Along with His Stature,” blared in Time magazine. Yet three years have passed since the price of oil crashed in 2014, halving the value of the commodity that once funded half of Russia’s government budget. That same year, the Western countries imposed harsh economic sanctions on Russia’s banks, energy firms, and defense sector, cutting off Russia’s largest firms from international capital markets and high-tech oil drilling gear. Many analysts, both in Russia as well as abroad, thought that economic crisis might threaten President Vladimir Putin’s hold on power.
Today, IMF and World Bank report revealed that Russia’s economy has stabilised, inflation is at historic lows, the budget is nearly balanced, and President Putin is coasting toward reelection on 18 March 2018, positioning him for a fourth term as president of Russia. Russian media highlighted that fact that President Putin has recently overtaken Soviet leader Leonid Brezhnev as the longest-serving Russian leader since Joseph Stalin. They also reported that economic stability has underwritten an approval rating of President Putin that hovers around 80 percent. Chris Miller, noted Russian expert, stated that “Putinomics” made it possible for Russia’s president to survive repeated financial and political shocks. Here, the most important question is, how did he do it?
Chris Miller noted that Russia survived the twin challenges of the oil price crash and Western sanctions thanks to a three-pronged economic strategy. First, it focused on macroeconomic stability, keeping debt levels and inflation low above all else. Second, it prevented popular discontent by guaranteeing low unemployment and steady pensions, even at the expense of higher wages or economic growth. Third, it let the private sector improve efficiency, but only where it did not conflict with political goals. This strategy will not make Russia rich, but it has kept the country stable and kept the ruling elite in power.
That said, the other question worth mentioning is that, does President Putin really have an economic strategy? According to Chris Miller, a common explanation of President Putin’s longevity is that he survives because Russia’s oil revenues keeps the country afloat. A number of economic analysts adamantly argued that Russia’s economy is known more for corruption than for capable economic management. But the Russian government could have adopted different economic policies and some of the alternatives would have made it harder for President Putin to sustain his hold on power. They might also have left Russians worse off. Consider what Russia looked like in 1999 when Vladimir Putin first became President: a middle-income country in which oil rents constituted a sizeable share of GDP. A country led by a young lieutenant colonel KGB officer committed to using the security services to bolster his power. A president who claimed the mantle of democratic legitimacy in part based on his ability to force big business and oligarchs to follow his rules, whether by fair or foul means.
A Russian economist, Anatoly Gregor explained that this could well describe Chavista Venezuela, still governed by an autocratic regime, still dependent on declining oil revenues, and still failing to build an economy based on rules rather than political whim. The difference is that Venezuela’s Chavistas spent recklessly during the oil boom while presiding over a mismanagement-induced collapse in oil production and, now, painful shortages of consumer goods created by poorly conceived price controls. According to World Bank estimates, Venezuela was wealthier on a per person basis than Russia in 1999. No longer now.
Willie Buster of Leeds University stated that the Russian government’s skill in mustering and distributing resources explains why the Russian elite has maintained power for nearly two decades and how it has deployed power abroad with some success. According to Willie Buster, many oil-fueled dictatorships squander their oil revenues on luxury goods like Ferraris and Fendi handbags. Russia’s ostentatious oligarchs have certainly accumulated their share of British football teams and hundred-million-dollar yachts armed with missile defense systems. But unlike its own spendthrift 1990s, Russia during the 2000s saved hundreds of billions of dollars during the good years, stowing resources in reserve funds for use when oil prices fell.
President Putin’s aim in economic policy has not been to maximize GDP or household incomes. Such a goal would have required a very different set of policies. But for President Putin’s objectives of retaining power at home and retaining the flexibility to deploy it abroad, the three-pronged strategy of Putinomics, macroeconomic stability, labor market stability, and limiting state control to strategically important sectors, has worked.
To understand Putinomics much better, let’s start with macroeconomic stability. Alexander Potonin of Warsaw University stated that Russia is a relatively rare kleptocracy that gets high marks from the IMF for its economic management. Why? Since the beginning of Vladimir Putin’s time in office, he and the Russian elite more generally have prioritized paying down debt, keeping deficits low, and limiting inflation. According to Alexander Potonin, having lived through devastating economic crashes in 1991 and 1998, Russia’s leaders know that budget crises and debt defaults can destroy a president’s popularity and even topple a regime, as Boris Yeltsin and Mikhail Gorbachev both discovered.
Willie Buster explained that when Vladimir Putin first took power, he devoted much of Russia’s oil earnings to paying back the country’s foreign debt ahead of schedule. In the current crisis, Russia has slashed spending on social services to ensure that the budget remains close to balance. In 2014, oil and gas earnings constituted around half of Russia’s government budget. Today, it is widely reported that oil trades at half the 2014 level, but thanks to harsh budget cuts, Russia’s deficit is around one percent of GDP which is far lower than in most Western countries. To ensure macroeconomic stability, President Putin has implemented a harsh austerity program since 2014, but there have been few complaints.
The second prong of President Putin’s economic strategy has been to guarantee jobs and pensions, even at the expense of wages and efficiency. During the economic shock of the 1990s, Russian wages and government pensions often went unpaid, causing protests and a collapse in President Boris Yeltsin’s popularity. When the recent crisis hit, therefore, the Kremlin opted for a strategy of wage cuts rather than allowing unemployment to rise.
The third prong of Putinomics is to let private firms operate freely only where they do not compromise the President Putin’s political strategy. The large role that oligarch-dominated state-owned firms play in certain key sectors is justified in part by their willingness to support President Putin in managing the populace by keeping unemployment low, media outlets docile, and political opposition marginalized. Alexander Potonin noted that the energy industry, for example, is crucial to the government’s finances, so private firms have either been expropriated or wholly subordinated to the state.
Putinomics-101
RETHINKING THE CRITICAL ISSUES-I
The current crisis in Ethiopia is forcing many a concerned citizen to rethink the founding principles and related issues that underlie the country’s governance system. In today’s installment, we will look at the judiciary or what it is supposed to deliver-justice. Ethiopia’s reigning federalism has put, amongst other things, the administration of justice, almost exclusively, in the hands of political appointees. Semantics aside, Ethiopia’s regional states are ethnically based and tend to be biased against ‘the others’. Nonetheless, the current political leadership in Ethiopia where EPRDF and affiliated political entities hold absolute power is being shaken to its core. Unintended consequences can potentially result in dislocating existing institutional setup!
Theoretically, justice is supposed to be impartial or blind to many outside factors that can potentially influence court rulings. The rule of law, facts, independence, ethics, integrity, morality and the likes, are important elements on which judgments are based. In our federal system, where the preponderance of ethnic politics is unavoidable, the delivery of justice had been significantly tainted, putting it mildly! With such undesirable interferences, some of the long established traditions associated with Ethiopia’s revered judiciary started to fade. The ‘Mafiosi State’ that operates clandestinely and leverages everything under the sky, manipulated court cases to satisfy its wanton desires. Such malpractices effectively removed the very glue that was holding Ethiopia’s diverse communities together, namely, trust & confidence in the judiciary! Consequently, the legitimacy of the court system and by implication the state itself, began to corrode. Without faith on the justice system, the subtle social compact developed through time and gave rise to relative peace between the diverse communities started to wane. Whether we like it or not, this, in a nutshell, is what happened in Ethiopia during the last quarter of a century. To recall: by the ‘Mafiosi State’, we mean the state that operates behind the formal state with immense political power leveraging all the institutions of government/ruling party. Its partners in crime are the famous oligarchs (foreign/local) under the tutelage of ‘godfathers’ of the ‘Mafiosi State’!
At the federal level, justice was also massively influenced by the ‘Mafiosi State.’ Again there are many blatant cases to illustrate the point. Ethiopia’s celebrated legal minds with tradition of fairness and erudition, found this degenerate behavior of the power that be absolutely repugnant and intentionally withdrew from the judiciary and related endeavors. In recent years, all rounded degeneration of justice delivery accelerated and the ‘Mafiosi State’ became the law onto itself! In the hands of the Mafiosi, justice became a political weapon to disfranchise and criminalize independently minded individuals and entities. At the federal level where ethnic politics is somewhat subdued (very mixed communities) and grievances can be conveniently hidden and ignored, the abuse of justice became frightening! Results are now clearly visible across this land of diversity. One of the rallying cries of the ongoing uprising is the resolute demand for justice! Mincing words in this late hour, we believe, only adds to confusion and mistrust. It is time to call a spade a spade. What is amazing in our twisted world is how many people are shocked by honesty and how few by deceit. (Noël Coward)!
“We can no longer afford to worship the god of hate or bow before the altar of retaliation. The oceans of history are made turbulent by the ever-rising tides of hate. History is cluttered with the wreckage of nations and individuals that pursued this self-defeating path of hate. As Arnold Toynbee says : “Love is the ultimate force that makes for the saving choice of life and good against the damning choice of death and evil. Therefore the first hope in our inventory must be the hope that love is going to have the last word. Now let us begin. Now let us rededicate ourselves to the long and bitter – but beautiful – struggle for a new world.” Rev. Martin Luther King. Good Day!
PM Hailemariam resigns amidst turmoil
PM Hailemariam Desalegn who served as Prime Minister for over five years unexpectedly announced his resignation to be ‘part of the solution’ for the current crisis in the country.
Over the last few years political instability has occurred in two major regions. The government declared a state of emergency in October 2016 that lasted ten months. The situation appeared to be calm for a while. However protests and violence continued to rock the country.
The major problem since the beginning of the Ethiopian New Year has been the conflict between the Ethiopia Somali Special Forces along the border area of the Oromia region, the biggest ethnic group in the country followed by revolts in some parts of Oromia. There have also been smaller protests in other parts of the country.
The outgoing PM submitted his resignation to the Southern Ethiopia Peoples’ Democratic Movement (SEPDM), a party that included different ethnic groups in the southern region, on Wednesday February 15. In his announcement on Thursday afternoon Hailemariam said that his resignation has been accepted by the executive committees of his party and the coalition front EPRDF.
“The main reason I have submitted my resignation is because I hold the firm belief that it was necessary for me to tender it as part of a solution aimed at ensuring lasting peace and guaranteeing democracy in our country going forward,” he said during his seven minute statement. He added that he was resigning because the many questions and grievances that have been raised by the public require and demand answers.
“Going forward, once the peaceful transition of power receives a final endorsement by the House of Peoples Representatives, I will provide a further statement on that occasion,” he said.
Recently the four party leaders of EPRDF talked about reforms that included releasing political prisoners. At the same time the protests occurred in the Oromia region that forced the government to release more political prisoners, including Merera Gudina (PhD) and some other opposition political figures a few weeks ago.
“On my part, in an effort to fulfill my responsibilities as a party to these reforms, I have officially tendered, of my own volition, my resignation from the leadership of both the EPRDF and the government,” the outgoing PM said.
Hailemariam’s resignation occurs immediately after the protests and instability in Oromia followed by the release of another group of Oromo opposition members and journalists and other opposition figures.
The resignation of the PM is expected to be ratified by the parliament. He said he would continue in his role until he is replaced.
“The situation of our country currently is a cause for concern but in order to alleviate these concerns, I call on the public-at-large to maintain the togetherness of our society as has been practiced across generations and to continue to play their part in the development of our country,” Hailemariam said to the public during his speech.
A day after the PM announced his resignation, the Council of Ministers held a meeting that took them over six hours to discuss the implementation of the state of emergency. Journalists filled the PM’s office to attend a press briefing scheduled for that afternoon but the meeting went on into the evening hours and the press briefing was canceled. That night several reports circulated online and on local media indicating that some prominent opposition figures from Amhara were freed from prison.
Six month state of emergency returns
Siraj rules out transitional government
Minister of Defence Siraj Fegessa said during a press conference held at Defence Force Club on Saturday February 17, that there would be no transitional government or military takeover because the current government was democratically elected. Some analysts entertained this idea to alleviate concerns after several significant events including Thursday’s surprise resignation of Prime Minister Hailemariam Desalegn led to the announcement on state media Friday of a new state of emergency.
Siraj Fegessa said protests and group gatherings are banned and that security fources would be instructed to take action against people disturbing the peace. A special court has been set up to prosecute people who incite violence as well.
The parliment is expected to approve the state of emergency within 15 days.
Some political commentators have recommended a national reconciliation committee, the formation of a commission, fresh elections and improving human rights in order to foster a more open political climate in the country.
In a recent statement the ruling coalition EPRDF stated that it would apply moves to improve the political situation. Political prisoners were freed including many last week which led to celebrations among protests.
Siraj was expected to provide details about the state of emergency in the press conference, however, he failed to provide specifics only stating it would be six months with an option to extend another four months, a tribunal would be set up and that protests and group gatherings were banned. Internet shutdowns were also discussed as an option if the situation worsened. The previous state of emergency lasted for ten months, ending in August 2017.
A statement that circulated via state media said more details would come via relevant security heads.
Siraj said that violent gestures (protest gestures) were not allowed, public violence, civil demonstrations and group gatherings were banned.
Ethiopia’s Council of Ministers on Friday cited deaths, ethnic attacks and mass displacement as reasons for the latest state of emergency. The announcement followed protests in towns across the Oromia region on Monday and Tuesday that called for reforms and tension along the Oromia Somali border.
Similar protests have taken place across Ethiopia since 2015, leading the government to declare a state of emergency in October 2016 after hundreds of people if not thousands were reportedly killed.
