Guriev on Russia’s Corruption and Territorial Expansion

Sergei Guriev, the respected economist from Moscow’s New Economic School who was forced into exile last year, has published a new article in the Financial Times examining the relationship between Russia’s pervasive corruption and President Vladimir Putin’s recent interest in expanding and swallowing up neighboring territories.

In Russia, the social compact of the 2000s was based on economic growth of 7 per cent a year. Citizens were happy with a government that provided substantial material benefits, even if it curtailed democratic freedoms. This was supposed to last. When Vladimir Putin took up the presidency for the second time in 2012, he promised to increase government spending – pledges that were premised on projected growth of between 5 and 6 per cent a year.

But this social compact is no longer feasible. Last year growth slowed to 1.3 per cent. Independent forecasters expect the economy to shrink in the first two quarters of 2014, as does the World Bank. (…)

Recession means Russia’s government can no longer use money to buy public acceptance. Repression and propaganda have to take up the slack. In these circumstances, nothing could be more helpful than a small and victorious military adventure. Tangible victories – no matter how small or how costly – boost the ruler’s popularity. It is not surprising that Mr Putin’s approval ratings now stand at 80 per cent.

Scary stuff. A small group of corrupt elites willing to risk the lives of millions to protect what they have stolen. Welcome to modern Russia.