Putin’s Failing Social Contract

The worldwide economic crisis is having a tremendous effect on the Russian economy and the Russian people.  As the downturn develops, the weakness of the state built by Vladimir Putin has begun to emerge.  In the latest issue of Foreign Policy magazine, Arkady Ostrovsky explores the fragile social contract Putin built with the Russian public.  The dangerous nationalism nurtured under Putin, coupled with troubling social policies, has created an instability that threatens to spiral out of control.  With a state becoming unable to meet its obligations to its citizens, the situation, both for Russia and the world, may turn ugly.

From Foreign Policy:

Russia’s ambitions were backed by rising oil prices and swelling coffers. Money kept flowing in no matter what the Kremlin said or did. Local businesses and international corporations were scared into total obedience. Dmitry Medvedev, Putin’s protégé and successor as president, even began lecturing the world on how to reorganize the global financial system. He dreamed Russia would become a new financial capital, and the ruble a new reserve currency. At last, Russia was feared by the West, which in Putin’s book is equivalent to respect.

Then the economic crisis engulfed Russia, too.

The current economic crisis has hit Russia hard, exposing its institutional weaknesses and the fragility of its success. The drop in the price of oil and the seizing up of capital markets are choking Russia’s economy, which has relied on petrodollars and cheap credit. Economies have been hit all over the world, but nowhere, it seems, has the reversal been as dramatic as in Russia.

Confidence in the rule of a wealthy, heavy-handed Russian state has been shaken, and it is now a real possibility that the global economic crisis, as it persists and even intensifies, could cause Putin’s social contract to unravel. What is not clear, however, is what would take its place-and whether it would be any improvement. The nationalist passions and paranoia that Putin has stirred up have poisoned Russian society in lasting ways. Now, 2009 could be a new “Great Break” for Russia, but the result might just be a country in upheaval-broken.