No More Fat in This Land

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Prime Minister Vladimir Putin's speech Wednesday at the World Economic Forum in Davos was noteworthy for two reasons. First, it did not contain the inflammatory anti-Western rhetoric that we have grown accustomed to hearing from Putin in past years. Second, it might have been the first time we heard a clear admission that Russia is no longer capable of being a "island of stability" in a global economic crisis.

Putin's critics would probably say that his proposals for managing the global crisis are too ambiguous. The more spiteful critics would point out that a country that has been denied membership in the World Trade Organization for the last decade and that is not even a member of the Organization for Economic Cooperation and Development could hardly be taken seriously when its prime minister delivers a lecture on how the world's economy should be structured.

Putin's foes will also claim that Russia has no right to participate in making serious decisions on a global level after the crash in oil prices bounced the country off the ranking of the world's top 10 largest economies.

For Russians, the most important part of Putin's speech was his comments regarding the country's economy. Although the global economy seems obscure and confusing to most Russians, the government's domestic anti-crisis measures have a direct impact on every Russian.

Putin hit the nail on the head when he said the weakness of Russia's economy is caused by its dependency on raw materials, too little competition in the economy and an underdeveloped financial market. He also described Russia's need for diversifying its economy by developing high-tech and other innovative sectors and for more efficient use of government spending.

But we have heard all of this before. Looking back at his speeches since he became president in 2000, these themes come up again and again. And we don't particularly need Putin to remind us of Russia's dependence on natural resource exports, low productivity, bloated state bureaucracy and monopolistic control of big business. These problems are just as obvious to Russians today as they were eight years ago.

If Russia has been unable to make significant progress on resolving its fundamental economic problems during the past eight years of growth, how can it tackle them during the next couple of years of sharp decline? Obviously, there will be drastically fewer resources available for supporting small businesses or developing high-tech industries.

During the boom years, the government and the people thought the good times would last forever, and they were caught unprepared when it all came to a crashing halt last fall. But could Putin be right that there is a silver lining to all of this -- that the crisis is an excellent opportunity to restructure and modernize the economy? Or is Putin simply repeating the same old catch phrases?

If Putin does have a substantive strategy for a future course, it should include a critical analysis of what went wrong with the old strategy. For example, it should address the following questions: Why was Russia unable to diversify its economy during the past decade? Why do small and medium-sized business barely survive under the burden of government bureaucracy, which has increased significantly since 2000? Why has corruption gotten worse under Putin while his so-called administrative reforms have gotten nowhere?

The Kremlin can't blame these problems on the inertia of the population or failed policies of the Boris Yeltsin era. This might have worked in 2000, but they will not hold water in 2009. Putin must acknowledge that the previous economic and political models no longer work, and all of the ambitious speeches about an innovative economy, support for small businesses and attracting foreign investment will help only if Russia is able to change the fundamental way the authorities relate to citizens.

Of course, these changes won't come easy for those who have grown accustomed to living off the fat of the land. They will have to adjust to the new, harsh reality. During these kinds of crises we are able to separate the country's real leaders and from its imposters.

Andrei Kortunov is president of the New Eurasia Foundation in Moscow.