If “economics is politics” in China, does the same hold true for Russia?
Both regimes rely on a form of performance-based legitimacy underpinning an authoritarian pact in which citizens have ceded political rights for rising living standards, personal security and political stability. But is that social compact now under threat as the economic growth on which it is predicated appears increasingly fragile?
“What is good politics for the Communist Party is no longer good economics for the country,” writes Dr. John Lee, an adjunct associate professor at Sydney University Centre for International Security Studies, and a visiting senior scholar at the Hudson Institute in Washington, D.C. He is the author of Will China Fail? (CIS, 2007).
“As the Bo Xilai and Chen Guangcheng episodes show, politics in China can be brutal,” writes Lee, author of Will China Fail?
“For the Chinese Communist Party, an enduring social compact with its people is still a long way off. When it comes to economic management, though, the assumption is that China’s authoritarian leaders are streets ahead, since they have to deliver prosperity to remain in power,” he observes. “So when industrial production falls, fixed-asset investment and retail spending slows, and home sales plummet, Beijing worries.”
China’s economic growth rate fell to 8.1% in the first quarter of this year, the lowest level since the spring of 2009, and prominent analysts are marking down projections for second-quarter and full-year growth, the Wall Street Journal reports:
Over the long term, China wants to shift the economy away from a reliance on exports and investment, toward domestic consumption, even if that means somewhat slower growth. But Beijing has a more pressing short-term goal: Keep growth high enough so unemployment doesn’t surge. That is a particular concern this year as China makes its once-in-a-decade leadership change, a process that already has been marred by the turmoil surrounding the ouster of Politburo member Bo Xilai.
Russia’s authoritarian social pact is also at risk from a floundering economy, say analysts.
Capital flight is a “serious problem,” Russia’s top central banker warned this week, as newly released statistics revealed that at least $42 billion fled the country in the first four months of the year.
“Russia, despite the generally positive domestic backdrop and very cheap asset base, is viewed as being the most at-risk economy in the world,” said Chris Weafer, chief strategist at Troika Dialog, an investment bank in Moscow.
Vladimir Putin’s return to Russia’s presidency has been followed by a rash of proposed economic measures that have drawn comparison with Chairman Mao’s Great Leap Forward but failed to reassure potential investors:
While the new government still has to reveal many policies, market participants say they have been unimpressed or alarmed by what they have seen so far. A flurry of decrees issued by Mr. Putin on everything from cutting corruption to raising life expectancy within his six-year presidential term drew scorn from a leading think tank.
“Goals which, under present conditions, could realistically be accomplished in 10 to 15 years are packed into a mere six, trampling the laws of economic development and nature,” wrote Natalia Akindinova of the Higher School of Economics in Moscow.