Can Putin Put Russia Right?
The new president is a strong man, but he faces daunting problems
Rule of law. Putin is going to have to strengthen the state and make sure that there is rule-based and law-based economic behavior. That is what he says he means by his intention to enforce a "dictatorship of the law." It is a welcome statement. It is the only way he can remonetize with a sound ruble an economy that is now functioning primarily through barter and a confiscatory tax system. He believes a strong state is indispensable to the functioning of a market economy and to the transformation of robber capitalism into legitimate capitalism. Only a strong state, he maintains, can support an honest civil service and a judiciary.
His immediate nightmare is that Russia has a huge external debt of about $160 billion that requires about $1 billion a month in principal to be repaid. That doesn't take into account that he will have to pay to buy as much as 10 million metric tons of grain to feed his population. Given that foreign loans are no longer available, he may have to spend his limited hard-currency reserves--but that will further undermine the ruble and increase inflation.
The Russia that Putin takes over is rich in natural resources, but its people are poor, the country is dispirited, and physical plants in industry and agriculture are worn out. The entire national revenues for the central government amount to about $25 billion today, only about two thirds the budget of New York City. And out of this he has to support the military, social services, and law and order.
It is no longer appropriate for the West to fund flawed economic policies. It is Russia that has to reform itself. In the enigmatic and intriguing Putin, it seems it may have the best hope since the collapse of communism.
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