Economic malaise has a way of eroding legitimacy
Whether sociopathic strongman or messiah, depends upon which side of the Russian border you lie on. Putin’s dramatic rise to power is the stuff of legends. An ex-KGB colonel, who a few years before his ascension as the president of Russia was a person unknown outside a small community of politicians and bureaucrats, was suddenly catapulted to Russia’s premiership in 1999. Now in his third presidency and with enviable approval ratings, Putin has shown little inclination of giving up power. The recent slowdown in economic growth, however, could potentially turn the tide against the incumbent.
Putin came at the helm at a particularly raw and sensitive time in Russia. Here was a country that was barely a whisper of its former self, the USSR. Where the USSR had been one of two countries at the top of the international food chain, a vast empire that challenged and frightened the whole of the western world, Russia in contrast was an anemic, ill-governed state that went by on morsels and bailouts from its ex-rivals. Surely, the IMF bailout of 1998 must have been a supremely humbling experience for the Russians.
Between 1989 till 1998, Russia’s economy shrank dramatically. In 1992, for example, the Russian economy contracted by 14.5 per cent. 1997 was the anomalous year, when the economy grew but even then expanding by a mere 0.8 per cent. By the year 2000, compared to the USSR era, the country’s GDP was down by a colossal 42 per cent, according to a report on the Russian economy by the Center for Strategic and International Studies. From global superpower to an emblem of communism’s failure, Russia’s downfall must have been a jarring and painful journey.
It was in this backdrop of a country swept by pessimism about the future that Vladimir Putin took over the presidency. Given past performances, expectations must not have been particularly high.
Recent political tensions with the west and a stalling economy have left investors wary. 2013 saw foreign capital outflows at $63 billion and a similar amount has been pulled out from the country over the first quarter of this year.
The oil bonanza, however, allowed Putin to exceed those expectations by an exponential magnitude. Instability in the Middle East and a developing world hungry for energy drove up oil prices to unprecedented highs. By 2003, with GDP growing at 7.3 per cent, the frequency of champagne glass clinking had increased considerably in the country.
The good times came, prosperity ensued, where America’s per capita GDP was 17 times that of Russia’s in 1998, that gap had narrowed considerably to five times of Russia’s per capita GDP by 2007.
The party in Russia, however, seems to have ebbed somewhat. Recent political tensions with the west and a stalling economy have left investors wary. 2013 saw foreign capital outflows at $63 billion and a similar amount has been pulled out from the country over the first quarter of this year. The World Bank estimates that capital outflows could potentially reach $150 billion.
If things hold up for Russia, economic growth is expected to be an earth scraping 1.1 per cent, which could potentially plummet to -1.8 per cent, according to World Bank estimates published in March. 2015 is not expected to be much better with economic growth expected to lie in the range of 1.3 per cent and 2.1 per cent.
Russia’s economic background is important because it is an essential piece of the context that has allowed Putin to consolidate power. Economic growth has become a valid means of earning legitimacy to rule. This can be seen in other countries around the world. Take China as an example, the communist party has realised that inclusive economic growth which provides a higher standard of living to its citizens is essential inmaintaining its grip on power. China’s response post 2008 clarified this stance further as the countryembarked on a an ambitious policy that saw infrastructure investment go up from 42 per cent of GDP to 49 per cent of GDP, mostly in order to offset a slowdown in export led growth caused by the financial crisis.
Russia’s economic background is important because it is an essential piece of the context that has allowed Putin to consolidate power. Economic growth has become a valid means of earning legitimacy to rule.
Governments which have been unable to deliver on the economic front sooner or later find themselves being booted out of power. Congress was disemboweled by the BJP partly because of its inability to deal with flagging economic growth while Narendra Modi’s success in fostering the same in Gujrat provided voters with a contrast that simplified decision making even for the most politically uninformed citizen.
Economic malaise has a way of eroding legitimacy. Grievances that are buried under a veneer of better opportunities slowly surface, the electorate starts grumbling and an anti-incumbency feeling takes over. Slowly but surely, a lack of economic progress starts showing and pervading through society, leaving people questioning their choice of candidate.
Russia’s current economic situation then leaves Putin with perhaps one of the biggest challenges to his authority. An inability to deal with flagging growth could potentially loosen Putin’s grip on power, unless he finds other means of legitimacy to hold on to his position.
However, recent sanctions imposed by the west on Russia could very well work in Putin’s favour, with the west acting out their historically hostile attitude towards Russia, it would be easy for Putin to make his electorate believe that Russia’s economic woes are the work of the west. Sanctions could also push sections of the business community to find refuge with Putin, further strengthening his power base with the oligarchs.
Putin has shown himself to be a master at preserving his power. The oil bonanza allowed him to consolidate his authority. However, the fall in economic growth presents him with a multi-dimensional power challenge that could very well spell his end.
