The Country of Developed Neoliberalism

It appears that in recent days Russia has been labeled ‘neoliberal’ with increasing frequency. At the very least, this is surprising for the country, where the degree of the state’s involvement in the economy is as significant as it is in Russia and where the president publicly criticizes “neoliberalism.” Is it fair to discuss Russian neoliberalism? In our new text, we attempt to explore why the mainstream approach to the Russian political dynamics is often remote from reality (as, for instance, in the case of the view that the current President subjected “the oligarchs” to his own interests and deprived them of ability to influence politics), whereas the theoretical framework of neoliberalism can explain much about today’s Russia.

When looking at the titles of recent publications or scrolling through social media feeds, one cannot fail to notice that the word ‘neoliberalism’ appears ever more frequently in today’s public discourse. For instance, only recently the newsletter Kit featured a text by journalist and researcher Georgiy Vanunts that dealt in great detail with the issue of neoliberalism. This text was an attempt to figure out what exactly Vladimir Putin means when he criticizes ‘the neoliberal order’ and ‘neoliberal values.’

Just a couple of months before this, the Swiss publication Neue Zürcher Zeitung had published a column by Russian sociologist Grigory Yudin, in which he had characterized the social order of today’s Russia as “the radical version of contemporary neoliberal capitalism, where greed reigns supreme, where personal benefit becomes the end-all of all human activity, and where cynicism, irony, and nihilism give one a redemptive feeling of mild superiority.” This characterization was met with much criticism. Some critics of Yudin’s thesis pointed out the discrepancy between the economic measures commonly deemed neoliberal (deregulation, privatization) and the high level of government ownership in the Russian economy. Others went so far as to attempt to prove that the term ‘neoliberalism’ itself “is not used by experts” and that “‘neoliberalism’ and ‘capitalism’ amount to swear words used by neo-Marxists and certainly not by scholars.”

Here, we will explore whether the conceptual framework of neoliberalism is applicable to contemporary Russia, whether neoliberalism played a role in shaping and maintaining the Russian political regime, and whether it is fair to define the Russia of 2022 as ‘neoliberal.’

What is neoliberalism?

There are two extremes one faces whenever the Russian reality is discussed through the prism of neoliberalism. The first extreme amount to the denial of the existence of neoliberalism as a phenomenon: for some, it is merely ‘a pejorative’ or ‘a phantom of the mind,’ while for others it is “a bogeyman used both by the left and the extreme right for their respective rhetorical purposes.” The second risk is to reduce ‘neoliberalism’ to particular economic measures that aim at the minimization of the state involvement in the economy (as it may appear initially, this makes the term inapplicable to contemporary Russia).

If we follow the first approach, then both Vladimir Putin and his critics use ‘neoliberalism’ as a rhetorical device the meaning of which varies in accordance with the situation. In his Valdai speech alone, the Russian president speaks of “the neoliberal model of world order,” “neoliberal values,” and “neoliberal elites.”

Arguably, the key to understanding what Vladimir Putin criticizes when he talks about neoliberalism can be found in the publications of the most renowned critic of ‘neoliberalism’ in the President’s close circle, ex-President of Russian Railways Vladimir Yakunin, who made his position concerning neoliberalism clear since at least the mid-2000s.

His conception of neoliberalism is eclectic but nevertheless oftentimes assumes either one of the following two shapes. In the “narrow” sense, neoliberalism is understood as a principle that lies at the foundation of economic reforms and can be reduced to the minimization of state participation in the economy. From this point of view, Yakunin talks about “the preponderance of economists and financial experts of the neoliberal persuasion” (among whom Yakunin includes Gref, Kudrin, Guriev, and Yasin) in Russia, about the country being “in the process of the implementation of the neoliberal paradigm for more than 20 years,” as well as about the idea, according to which the government ought to “withdraw itself from participating in the economic development and planning in order to ensure the freedom of the market and economic initiative.”

However, since the mid-2010s, Vladimir Yakunin has with increasing frequency started to use the term ‘neoliberalism’ to criticize globalization, seeing in the term the ideology of individualism and universalism. In his recent publications, we can encounter a thesis about “the struggle between two tendencies: the neoliberal dictate and the traditional world of common sense” as well as about “the ideological monotony of Western globalism.” It is precisely in this sense that Vladimir Putin talks of “neoliberalism,” behind which he sees, first of all, the US hegemony in world politics. It is hardly surprising, therefore, that politicians as diverse as Viktor Orbán and Nicolás Maduro become the critics of ‘neoliberalism’. It is precisely this that drives the left in many countries around the world to support Vladimir Putin or Xi Jinping, since the logic of campism allows only for the existence of the hegemon’s camp and those who struggle against it and who, therefore, deserve our support.

Arguably, the concept of neoliberalization, understood as “the global process of change in the established forms of economic regulation aimed at assigning to the market a disciplinary role”, might be a more productive one than the concept of ‘neoliberalism’. Russian political scientist Ilya Matveev characterizes the process of neoliberalization as “the global proliferation of a very specific response to the new conditions created by globalization – a response, the essence of which consists in the alteration of public policies on the basis of various market decisions.” David Harvey, a classical scholar of neoliberalism, holds it that, within the framework of neoliberalization, the market exchange becomes the foundation of “an ethic in itself, capable of acting as a guide to all human action, and substituting for all previously held ethical beliefs,” while the leading role is assumed by the contractual relations under the market conditions. In particular, according to Harvey, this explains an explosion in the development of information technologies: that is, making global decisions in the markets under the condition of the rising density of market transactions in both space and time necessitates new methods of storing and transmitting the information. What Social Sciences textbooks сommonly label as an “information” or “post-industrial” society is, in reality, just this: one of the consequences of neoliberalization.

This theoretical framework has several advantages:

  • First of all, it allows us to overcome the contradiction between understanding neoliberalism as an ideology and as a practical measure of economic regulation. Neoliberalization means essentially the transformation of economic and political institutes in accordance with a particular doctrine. As always, the practice may significantly diverge from theory, and different countries may implement neoliberalization very differently from one another;

  • Secondly, it allows us to understand why it is meaningless to talk about neoliberalism in the context of separate states. Neoliberalization implies not “the construction of developed neoliberalism” but rather an implementation of very specific responses to the challenge of globalization. This explains why we can talk about ‘neoliberalism’ to describe such dissimilar political systems as Pinochet’s Chile, Xiaoping’s China, and Macron’s France. To put it crudely, neoliberalism is not “one social formation” that can be preferred to others and not an ideology suitable for a political party, but rather a way to respond to contemporary challenges – a response that in the recent decades has become “the common sense” (in his book A Brief History of Neoliberalism David Harvey explains why and how neoliberalism became “the common sense”).

Neoliberalism with Russian characteristics

Although in the last thirty years there have been profound disagreements between the supporters of the current political regime and its opposition, paradoxically, they have something in common. Both share the idea that the neoliberal market reforms of the 1990s (deregulation, privatization, etc.) were followed by “the coming-back of the state” in the 2000s: from the crackdown on NTV and the Yukos affair to the arrest of the Magomedov brothers and the creation of the Coordination Council for Material Support of the Russian Federation Armed Forces with Mishustin and Sobyanin as its members, the government had started to play an increasingly more important role until it achieved nearly total control over the economy, politics, culture, etc. This, no doubt hardly reminds us of the “free market” society that is at the heart of neoliberalism. The difference is that the supporters of the existing regime tend to consider these changes in a positive light, whereas its opponents see them negatively.

Some researchers of Russian neoliberalism share this view. For instance, historian Tobias Rupprecht pointed out in his recent article for the book on “non-Western neoliberalisms” that Russia had not managed to become neoliberal after all, even though the neoliberal reforms contributed to the strengthening of the authoritarian regime. According to Rupprecht, what became established in today’s Russia was crony capitalism, which remained “remote from neoliberalism.”

This narrative does, in fact, seem to be convincing, although only initially. First of all, the Russia of the 1990s was rather far from its image as the laboratory of neoliberalism brought in by foreign experts. Rupprecht convincingly shows that the ideas of the Russian market reformers emerged independently from the spread of neoliberal ideas in the West (the later reception of these ideas conferred legitimacy to the chosen economic course, however). Although young Soviet economists – the participants of the famous Zmeinaya Gorka (Snake Mountain) seminar – may have been reading Hayek and von Mises, their opinions were in fact formed under the influence of other factors: for instance, the analysis of the welfare state crisis in the West, the experience of market reforms in Hungary and of NEP in the USSR, as well as elitism and demophobia characteristic of the Russian intelligentsia’s intellectual tradition (regarding this, Rupprecht mentions the essay collection Vekhi).

Besides, it is incorrect to think of neoliberalization as the process of the weakening of the state: on the contrary, successfully implemented reforms, which among other things imply abrupt cuts in public expenditure on social services, meet serious public resistance. Under such conditions, the state must possess sufficient state capacity to silence the protesters, oftentimes by force. It was precisely this that the Russian state lacked. The cabinet of neoliberal mastermind Yegor Gaidar existed for a little over a year and was replaced by the cabinet of Viktor Chernomyrdin, a more appropriate candidate in the eyes of various elites. In addition to this, throughout the entire period of Yeltsin’s presidency, the government had to co-exist with the oppositional Duma with the communist majority capable of blocking unpopular reforms.

Therefore, the weakness of the state in the 1990s was not the aim of “neoliberals” but rather the reason why truly large-scale reforms were implemented only with the coming to power of the new president.

Is Putin a neoliberal?

Many remember “a survey about Stierlitz” in the Kommersant Vlast newspaper as well as the promise that Vladimir Putin gave at the beginning of his presidency to “follow [Chechen separatist] terrorists everywhere . . . corner the bandits in the toilet and wipe them out” – a promise that offered to the Russian society an image of a strong leader. His socio-economic proposals, outlined in the Strategy-2010 that was drafted by the Center for Strategic Research under the direction of Herman Gref, are less well-known.

The strategy designed for the next 10 years declared that one of the main problems of the Russian economy was “an excessive involvement of the state in the economic life of the country, together with the state’s inadequacy in creating such basic conditions for the market economy as the defense of property rights and creation of equal conditions for competition.” Therefore, the logic of “the coming-back of the state,” combined with the expansion of the state’s administrative possibilities, did not contradict the logic of neoliberal reforms. Instead, it was their important constituent part. Moreover, despite the social character of the Russian state proclaimed in the constitution, the Strategy 2010 entailed that “the welfare state (paternalism) would be replaced by the ‘subsidiary’ state that ensured social guarantees only to an extent that could not be ensured by society itself. This received the name of “the politics of common sense that offered real solutions to the existing problems. ”

Elisabeth Schimpfössl, an author of Rich Russians: From Oligarchs to Bourgeoisie, describes the nature of the reforms implemented in accordance with the Strategy 2010 as follows:

“Gref has initiated privatization and liberalization in such areas and to such an extent that had not been imaginable to the market reformers of the previous decade. Whereas Russian experts claim that the apogee of neoliberal politics was reached in the 1990s, political scientists Hilary Appel and Mitchell Orenstein argue that the period of Gref’s ministry upstaged the 90s in the scale of neoliberal reforms. For instance, in 2001 Gref introduced a flat tax of 13%, a symbolic carte de visite of the overly liberal economic policies. And it was the fragmentation and privatization of the state monopoly RAO ‘UES of Russia,’ which owned most of the power plants as well as the energy-transport system, that became Gref’s most significant initiative.”

grefputin.jpgSource: Wikimedia Commons

Apart from this fiscal reform and ongoing privatization, the first years of Vladimir Putin’s presidency were marked by an introduction of the Land Code, which secured private property rights on land, and of the Labour Code favorable to employers. The introduction of these legislative enactments was directly connected with the novel arrangement of political power: the President’s administration did not conceal from the public that the main reason why similar legislative acts had not been adopted in the previous decade was “the opposition of the parliamentary majority” to it.

It was the monetization of social benefits that became the apogee of neoliberal reforms during the first presidential term of Vladimir Putin. According to researcher Julie Hemment, this monetization reform continued the logic of social transformations of the Yeltsin period, which in their turn had been based on the World Bank models. The reform unleashed widespread protests across the entire country, which in a way resulted in a curtailment of neoliberal reforms during the second presidency. Nevertheless, external shocks like the crisis of 2008 forced the powers that be to regularly return to the practices of “optimization,” social expenditure cuts, and deregulation. Year after year Vladimir Putin and Dmitry Medvedev repeated in their speeches that it was necessary to “end business ‘nightmares,’” reduce the government apparatus, and continue privatization. All of this was conjoined with the rhetoric of heightening the social responsibilities of the state, with “May decrees,” etc. Political scientist Ilya Matveev believes that, despite the “hybrid” nature of Russian neoliberalism, which finds itself modified, on the one hand, by the government security services interested in the consolidation of the patrimonial character of the political regime and, on the other hand, by the social rhetoric that serves as a means of its legitimation, “on a more fundamental level, Putin’s economic and social model is an organic part of the global neoliberal turn, the key characteristic of which consists in the restructuring of the relations between the public and the private sectors, in the reinvention of ‘public’ as it is.”

A sharp increase in the number of Russian dollar billionaires serves as a good indicator of this process. If in the 1990s they could be counted on the fingers of one hand, their number went well over 100 at the beginning of the 2000s. These numbers do not go very well with the common belief that Putin did away with the oligarchs. Rather, the power of big capital has become structural in the last 20 years, while its opportunities for lobbying have sharply increased. However, this does not prevent the government from occasionally participating in “the public bashings” like the Yukos affair or the arrest of the Magomedov brothers. Elisabeth Schimpfössl explains this contradiction as follows:

“Although there are parliamentary and presidential elections in Russia, the vertical organization of power means that the bourgeoisie, evading social control, is protected only by the Kremlin. When it is in his interest, Putin can use the Russians’ negative attitude toward the wealthy elites for his own purposes. Otherwise, however, he secures the dominant position of the elites and uses his power to protect their property rights.”

However, it is the depoliticization and atomization of Russian society that likely turned out to be the most important effect of neoliberalism on the formation of the current political regime. Despite the widespread image of the Russians, they primarily rely on themselves, rather than on collective action, and in some sense represent the ideal of “homo economicus” that maximizes his profits and minimizes costs in accordance with market logic.

Under these conditions, the authoritarian turn of the 2000s implied the continuation of neoliberalization rather than its curtailment. As Lilia Schevtsova suggested, “economic liberalism . . . served as Viagra for Russian authoritarianism.” It is telling that Putin’s criticism of “the neoliberal system” is often related to the failure of “Western partners” to abide consistently by the neoliberal principles of free trade and “depoliticization”. In this, Putin does in fact emerge as “the last neoliberal of Europe.”

It is not coincidental that the public discussion of neoliberalism became particularly relevant after the 24th of February. It seems that it can not only help us explain the reasons behind the tragedy (for instance, the depoliticization and atomization of the Russian society, the political strategies underpinning “actually existing neoliberalisms” in different parts of the world, the character of the Russian political regime, etc.) but also contribute to the discussion concerning the future, in which we want to live: the conflict exposed so many contradictions both in Russia and the rest of the world that placing our hopes on the advent of the “Beautiful Russia of the Future” with its independent legal system, competitive elections, and freedom of speech does not seem either realistic or sufficient anymore.

Translation: Vladlena Zabolotskaya

Editing: September collective