Imagine if inflation hit 17%, banks were poised to collapse and the economy were sinking into a recession worse than the one that followed the 2008 financial meltdown. The president might have some explaining to do.
This is the actual condition of the Russian economy, which was wheezy to start with and is now reeling from plunging oil prices, western sanctions laid on to punish Russia for its incursion into Ukraine and foreign capital fleeing the country before things get even worse. The economy could shrink by 10% this year, with unemployment soaring and imported products becoming scarce.
Yet Russia’s president, Vladimir Putin, enjoys a popularity rating in excess of 80%, which is nearly twice President Obama’s approval rating, and higher than that for any U.S. president of the last century, except during wartime. Putin’s recent 10-day disappearance fed rumors of a coup (or, alternatively, the birth of a love child in Switzerland), yet his nonchalant return seems to have enhanced the internal image of the macho judo master who rides bareback, hunts shirtless and tames all manner of gnarly wildlife. No western leader can match such charisma, even if it's manufactured.
How does Putin do it? Is he politically invincible? Are Russian voters constantly drunk? The answers are no, Putin’s not invincible, and no, many Russians are not constantly drunk. But western political norms don’t apply in Russia, which is why contrary to our experience, a worsening economy may actually strengthen Putin and his grip on power — which nobody understands better than Putin himself.
Russia, of course, has a long and painful history with foreign aggressors and tough living. So when Putin blames the country’s economic problems on western sanctions, he’s perpetuating a narrative that’s a staple of Russia’s national identity.
“The government has successfully framed economic hardship as the price of patriotism in Russia,” says Alex Kliment, director of Russia research at the Eurasia Group. “He’s tapping into a rich tradition of Russian fears about encirclement and betrayal by western powers.”
Russia’s economy actually did well between 2000 and 2008, with GDP growing between 5% and 10% per year, and the income of ordinary Russians rising by just as much. Putin was president during that span, when global investors came to see Russia as one of the world’s most important developing nations, on par with China and India. Putin was prime minister from 2008 through 2012, when he was elected president again. All told, he has basically been the man running Russia for the last 15 years.
During that time, Putin and a legion of kleptocrat cronies were looting everything they could lay hands on in Russia’s huge public sector — which includes giant firms such as Gazprom and Rosneft — while neglecting private-sector reforms that would have made the economy more stable. That left the economy highly vulnerable to shocks, which hit with cyclone force in 2014 as sanctions took effect and the price of oil and gas — which account for two-thirds of Russia’s exports — plummeted.
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Putin has been scrambling to keep banks afloat and Russia’s biggest companies in operation. But so far, that hasn’t harmed Putin’s standing with his countryfolk. Part of the reason is pervasive propaganda that many Russians devour, even though Russia is much more open than places like China, where access to the Internet and foreign media is tightly controlled and sometimes banned.
Internet vs. TV people
Anders Aslund of the Petersen Institute for International Economics divides Russia’s basic population into two groups: Internet people — roughly 10% of the population — and TV people, who constitute the other 90%. “Those getting their information from the Internet are basically free,” he says. They get real news from western sources and can live as they wish — as long as they don’t represent a threat to Putin.
Those who get their information from TV, by contrast, see propaganda that lionizes Putin while demonizing Ukraine, the U.S. and the west. There are other TV options besides state-sponsored programming, but nationalist state TV draws an enthusiastic audience with no American analog. Polls by reputable groups such as Russia's Levada Center may overstate Putin's popularity -- since people who get anonymous phone calls asking their opinion of the leader may not answer honestly in a despotic state -- but they're not fabrications. And a high approval rating may accurately reflect Putin's standing among TV people who don't necessarily agree with the war in Ukraine or other Putin policies, but stand by their man because not doing so would represent a kind of allegiance with the enemy.
Putin’s government also hands out plenty of goodies to citizens, placating the populace much more than a stimulus program might in the United States. Millions of Russians have jobs or pensions courtesy of the huge public sector and its state-owned companies, a vestige of seven decades of commumist rule. Putin wields remarkable influence over private companies, too. Several big food companies, for instance, recently agreed to “voluntary” price freezes on staple items, to help consumers cope with inflation. Unstated is the growing dependence of such companies on Putin and his minions, especially as foreign financing dries up.
“The Russian government is the lender of last resort to many companies,” says Kliment. “That gives Putin tremendous leverage over ‘private’ companies.”
Imminent day of recknoning
Putin can’t hold out forever, though, and his popularity could decline along with the money he has available to dole out. Russia has roughly $360 billion in reserves, down from $500 billion at the end of 2013. That’s enough to ride out a short-term crisis, but if the current burn rate continues, Putin could come up short in 2017 or 2018. Some argue the amount of usable funds is much smaller than $360 billion, which means the day of reckoning for Putin could come sooner.
Aslund, in fact, thinks Putin won’t survive the year. “I think we’re close to a collapse of the political system,” he says. And a successor could make Putin look downright cuddly. The recent murder of Putin critic Boris Nemtsov eliminated one of Putin’s most liberal-minded antagonists. No other opposition figure can match Nemtsov’s stature, and none seems eager to step into his bloody shoes, anyway. There are several hard-liners, however, who would like Putin’s job, including several who, like him, are former KGBers -- but even more militant.
Would Russians care if a new leader dragged them even further back into the isolated paranoia of the Cold War? Not necessarily. Poets and philosophers have long observed that Russian society is indifferent to tragic events. Even when the tragedy hits their wallets. Long live Putin.
Rick Newman’s latest book is Liberty for All: A Manifesto for Reclaiming Financial and Political Freedom. Follow him on Twitter: @rickjnewman.
