Another great leap forward?

IMAGINE a town or settlement of 30,000 people, probably near Moscow. Its high-tech laboratories and ultra-modern glass houses make California's Palo Alto look ancient. It has a greater concentration of scientists than anywhere else in the world. The atmosphere in the town is free, cosmopolitan and creative, almost anarchic at times. Police harassment is minimal, “at least to start with”. Riff-raff and drunks from surrounding villages are kept away by tight security.

The streets are clean, and shops are stuffed with organic food to stimulate the brain. Here, in this exclusive “zone of special attention”, the state is extracting creative energy from Russian and foreign scientists that is driving the country along the path of modernisation and innovation.

This is not a parody, but a government plan outlined by Vladislav Surkov, the Kremlin's chief ideologist, in a recent interview given to Vedomosti, a Russian business daily. It was entitled: “The miracle is possible”. The miracle Mr Surkov talks about is transforming the Russian economy and generating new technologies, where Russia lags badly (see chart 1)—and all without touching the foundations of the Russian political system.

Modernisation was the slogan proposed by Dmitry Medvedev, Russia's president, in an article last September called “Russia Forward!”, published on a liberal website. “Should we drag a primitive economy based on raw materials and endemic corruption into the future?” Mr Medvedev asked rhetorically. While admitting a vast array of problems, from economic weakness to alcoholism, he painted a picture of a Russia with nuclear-powered spaceships and supercomputers. In short, if Russia managed to modernise, it would once again become a world leader.

Although Mr Medvedev's article was dismissed by critics as a mere simulation of action, it inspired lively debate among the elite. Even those who suspected the slogan was fake found they could not disagree with it. Thus discussion focused on different ways to modernise, but did not question the goal itself. The Kremlin had imposed its own agenda.

Liberal critics quickly pointed out that modernisation in Russia is impossible without political liberalisation and institutional change. A country with weak property rights and a rent-seeking bureaucracy, they argued, can invent new ways of extracting bribes and robbing businesses, but not of creating intellectual wealth. Most recently Mikhail Gorbachev, the last Soviet leader, said modernisation was impossible without democratic reforms.

Yet the experience of Mr Gorbachev's perestroika—which started with talk of technological renewal but ended in the collapse of the Soviet system—has persuaded the Kremlin to define modernisation strictly within technological boundaries. Hence Mr Medvedev's warning not to rush political reforms. His supporters argue that only authoritarian government is capable of bringing the country into the 21st century. “Consolidated state power is the only instrument of modernisation in Russia. And, let me assure you, it is the only one possible,” Mr Surkov told Vedomosti.

In Stalin's shadow

In Russian history, it is Peter the Great and Stalin who are considered the great modernisers rather than Alexander II, who abolished serfdom, or Mr Gorbachev, who opened up the country. Brutality trumps mild liberalisation. In his article, Mr Medvedev described Stalin's bloody policies as unacceptable. Yet the idea that a top-down modernisation is the only option available to Russia still dominates the minds of its rulers.

“We are lagging behind the leading countries by some 50-100 years. We must cover this distance in ten years…[This requires] a party sufficiently consolidated and unified to channel all efforts in one direction,” Stalin wrote in 1931. As Andrei Zorin, a historian at Oxford University, explains, the efforts of Stalin and Peter the Great involved the forced creation of an educated class capable of generating, or at least replicating, the best Western innovation. Mr Surkov's science town has less in common with Palo Alto than with the closed Soviet research towns that mostly grew out of the gulag system.

In the 1930s leading Soviet engineers arrested by Stalin laboured in special prison laboratories within the gulag. After the war, when Stalin required an atomic bomb, a special secret town was established where nuclear physicists lived in relative comfort, but still surrounded by barbed wire. Subsequently hundreds of secret construction bureaus, research institutes and scientific towns were set up across the Soviet Union to serve the military-industrial complex. They also spawned a technical intelligentsia. In the 1980s it was this class of educated people—permitted more freedom and better food than the rest of the country, but still poorly paid and not allowed to go abroad—that became the support base of perestroika. But it was also this class that was hit by the market reforms of the 1990s.

“They supported us in 1991 and most of them got nothing out of our reforms,” admits Anatoly Chubais, who, as Boris Yeltsin's chief man in charge of privatisation, devised and implemented them. These days Mr Chubais heads a state corporation charged with incubating nanotechnologies, a project central to the Kremlin's modernisation effort, and is going to be in charge of building the Kremlin's Silicon Valley. He argues that the time has come to empower the technical intelligentsia again, recreating a social class that will in time demand liberalisation and become, as it did in the 1980s, a catalyst of change. “The moment they become part of the Russian economy, they will become part of Russian political life,” Mr Chubais says.

Mr Zorin says this kind of social engineering is the key to understanding today's problem. An authoritarian regime creates an educated class which becomes emancipated from the state because of its intellectual superiority; it then undermines the state, and often gets buried in its wreckage. The problem, says Mr Zorin, is that this class cannot live on its own. “It can be in conflict with the state, but it cannot exist without it.” The second problem is that the modernisations of both Stalin and Peter the Great were driven by clear military goals. It is much harder, in an innovative economy today, to tell scientists what they should be inventing.

Khodorkovsky's lament

In order to modernise Russia, Mr Chubais argues, political liberalisation is desirable, but not essential. Fixing the tax code or amending customs law is equally important. After all, autocratic regimes like Singapore, South Korea and, above all, China, have leapt forward without liberalising. Yet as Vladimir Ryzhkov, a liberal Russian politician, points out, to go the way of Singapore you need at the very least strong property rights, the rule of law, competition and the ability to fight corruption. Russia has none of these.

Yegor Gaidar, a reformer and Mr Chubais's long-time friend, spelled out Russia's predicament in a book published shortly before his death last December. The end of socialism, he wrote, does not automatically create a competitive free market, but can lead, as it has in Russia, to a dangerous version of capitalism where the bureaucracy considers the state its property and uses its mechanisms for personal enrichment.

Russia's ruling elite, which consists of a corrupt bureaucracy, the security services and a few oligarchs, lives off the rent from natural resources or administrative interference in the market. Competition and the rule of law undermine this arrangement. Corruption (see chart 2) holds it together, and ensures the loyalty of the bureaucracy.

The conflict between real modernisation and the vested interests of this bureaucracy is summed up in the fate of Mikhail Khodorkovsky, once Russia's richest man and now its most famous political prisoner. Mr Khodorkovsky replied to Mr Medvedev's manifesto with one vital question: “If the political decision about modernisation is made in today's Russia, who is going to carry it out?”

Clearly neither the corrupt bureaucracy nor the security services can do so. What is needed, Mr Khodorkovsky wrote, is “a whole social stratum—a fully fledged modernising class which sees modernisation as a question of survival and fulfilment in their own country.” In fact, it was precisely this class of people that Mr Khodorkovsky represented and which he tried to foster when he financed boarding schools for orphans, computer classes for village schools and civil-society programmes for journalists and politicians. That was why he was a threat to the system.

Mr Khodorkovsky's other problem was that he behaved as a private owner of his vast oil company, refusing to accept the supremacy of the state bureaucracy. The subsequent expropriation of Yukos by the bureaucrats has turned Mr Khodorkovsky into a symbol of property rights, just as Andrei Sakharov became a symbol of human rights in the Soviet Union.

As Mr Gaidar argued, if modernisation of the country were a real priority, the state would have to clear social and economic space for the development of society, which would in turn mean ceasing to raid businesses and concentrating on its key tasks: education, health care and helping the poor. There is little sign of this. In fact, both Vladimir Putin, the all-powerful prime minister, and Mr Medvedev have been fostering the cult of the state as the only force capable of making Russia great and respected once again.

Mr Medvedev's September manifesto marks no break with Mr Putin's legacy. Quite the opposite. So long as Russia's economy was growing, consumer choice and stability gave the state legitimacy. Now that the crisis has revealed how weak the Russian economy is, modernisation provides a new justification for the state's existence. The state is essential in either case. Modernisation is at best a cover-up for preserving the status quo, and at worst a way of siphoning off more public money.

Nonetheless, an unprecedented public discussion has now started about what the country's priorities should be. Under cover of that debate, the Institute of Contemporary Development, a think-tank close to Mr Medvedev, has published an essay calling for the restoration of regional elections, respect for the constitution, and the elimination of state-affiliated companies and the federal secret police. The authors have little faith that the Kremlin will take up their suggestions. Mr Putin, not Mr Medvedev, pulls all strings there. But they feel that even limited discussion about the subject is better than none.

The debate has also revealed great discontent with the present political system among the business elite. At a recent forum in Krasnoyarsk for economists, business bigwigs and politicians, including some members of the pro-Kremlin United Russia party, there was agreement that the state is not ready to negotiate with, let alone be controlled by, society, and that existing institutions are just a device for the redistribution of property. Without proper political competition, Russia is destined to waste its resources and cannot modernise.

The main question for Russia, however, is not how to achieve that. The problem is that to vaunt modernisation, which implies that technological successes will make Russia a great world power again, is to set the wrong priority. Learning to live as a post-imperial state according to its means, rather than its ambitions, and learning to show more care for human life and dignity, are more important to Russia's renewal than winning a geopolitical race.

Mr Surkov is quite right when he argues that democracy would not stimulate technical innovation. The reason for this, however, is that under democracy a country with a declining population, a frighteningly high rate of birth defects, crumbling infrastructure and deteriorating schools might find a better use for taxpayers' money than pouring it into Mr Surkov's Silicon Valley dreams.