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29.01.09
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Everyone’s Best Friend
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By Roland Oliphant
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Prime Minister Vladimir Putin yesterday took center stage at the World Economic forum in Davos as he delivered the opening address to the gathering of the world’s most influential policy makers, economists and businessmen. There was only one topic this year’s forum could be about, and which Putin could address: the global economic crisis. Matching the mood of the forum, he called for global cooperation to overcome the world’s difficulties, and warned against the dangers of protectionism and excessive state interference in industry. But are his words backed up by actions?
It has been a while since Vladimir Putin has had the opportunity to show off his credentials as an advocate of liberal market economics. Once a staple of the Putin image machine, the Russian prime minister’s name-checking of market principles, the dangers of state interference in the economy and the importance of private enterprise have of late been overshadowed by his hard-line stance over the Ukrainian gas dispute, the war in Georgia, and his ability to destroy a company’s share price with a few well-chosen words.
It never went away, of course. Putin, who is reputed to have a startlingly adept grasp of economics, has always found time to back up liberal economics in word, if not in deed. At times he displays an economic savvy equaled only perhaps by Britain’s Gordon Brown (who is rumored to have saved world finance). So Wednesday night’s performance in Davos was not so much a change of direction but a return to form. Friendly, reconciliatory, and apparently eminently sensible – with only the very slightest hint of Schadenfreude.
“In the last few months, virtually every speech on this subject started with criticism of the United States. This time, however, I will do nothing of the kind,” he reasonably began. The unspoken, but unmistakable footnote behind that self-conscious maturity was “because I don’t have to.” He went on, in his Vladimir Greenspan guise, to warn against the childish policies that other, less mature, leaders might fall into. We must not, he warned, be led astray by the temptations of “isolationism and unrestrained economic egotism.” He regretted the rise in protectionism, a vice he said was understandable but that should be indulged only with “a sense of proportion.” And he assumed once again his practiced role as the reformed addict who knows the dangers of dependency through hard experience. “Excessive intervention in economic activity and blind faith in the state’s omnipotence is another possible mistake,” he said. “The Soviet Union made the state’s role absolute. In the long run, this made the Soviet economy totally uncompetitive. The lesson cost us dearly, and I am sure nobody wants to see it repeated.”
All of this is, of course, utterly sensible. And his prescriptions for the global economic system – write off bad debts, more scrutiny of “exaggerated reports and dubious ratings,” creation of several strong reserve currencies (as opposed to excessive reliance on the dollar) and more open monetary policies in the countries that issue them – are similarly difficult to argue with. Economists now almost unanimously agree that one of the major causes of the crisis was excessive money supply. In crude terms, that means the U.S. Federal Reserve printing too many dollars. In that context his call for more transparent and responsible policies from central banks is more than reasonable: it is necessary.
But his account of Russia’s own situation is as disingenuous as his global account was reasonable. Just as his appeal to reason, restraint, and faith in free markets (or at least wariness of state intervention) recall the Putin of old, his portrayal of Russia’s situation and its attempts to deal with the crisis evoke old habits: in particular, a willingness to admit Russia’s economic shortcomings, and a frank explanation of what needs to be done about it.
“The crisis has made the problems we have more evident,” he said. “They concern the excessive emphasis on raw materials in exports and the economy in general and a weak financial market. The need to develop a number of fundamental institutions, above all a competitive environment, has become more acute.” Again, that’s clearly true. He said he and his government were “aware of these problems and seeking to address them gradually.”
Very gradually. Typical of Putin’s discourse on this issue during his presidency was his assurance to a meeting of American businessmen that “the Russian economy is firmly set on a course of considerable diversification.” That was in June of 2005. If the course to diversification was so “firmly set” four years ago, one might be surprised to hear that it is still suffers from “excessive emphasis” on commodities exports today.
All of the priorities Putin mentioned - the “creation of a business friendly environment,” establishment of a “stable lending system” and “implementation of transportation and other infrastructure projects,” are things that he has been talking about almost since he became president nine years ago. They are not red herrings – Russia sorely needs to improve its transport infrastructure, and the burden of corruption and excessive red tape on business, particularly small and medium sized enterprises, can be crippling. But the fact that Putin is talking about them now belies the fact that for all his impressive free market credentials, he either could not, or would not, translate that insight into action.
The friend of business is a role Putin plays with rare ease. It has seduced and reassured business leaders in the past. But he may find that the effect wears off with time. Two of the causes of the crisis that he singled out were “failure to duly heed tremendous risks,” and “excessive expectations.” That could well describe his promises to those U.S. businessmen, and their willingness to accept them. |
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