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Thursday, July 20, 2017

Only Free Markets Will Liberate Russia

According to results of the latest survey undertaken by the Levada Center, 63 percent of Russians will be voting for the current President Vladimir Putin in the upcoming presidential elections in 2018,

Recently, Russia has been experiencing a positive trend in support of more political freedoms. While this move undoubtedly signals significant progress, it also reflects a characteristic peculiar to the Russians: a resentment towards free market ideas.

This year, Russia saw a surge in support of freedom from political oppression.

The Russian dissatisfaction with capitalism is mostly based on the experience of attempted reforms during the 1990’s. But ironically enough, these capitalist ideals are precisely what allows the emergence of political freedoms— a concept largely misunderstood by the Russian people.

Discrepancy of public opinion presents both opportunity and challenge for foreign and a small fraction of domestic free market supporters. The struggle comes into play when trying to educate Russian society on the merits of laissez-faire practices; a task that is unlikely to be fulfilled by an autocratic state, which opposes a market economy, or the citizens themselves. 

Are the Tides Changing? 

Thousands of demonstrators gathered across more than 100 cities in Russia in June.

This year saw a surge in support for the ideas of free speech, more transparent government, and freedom from political oppression. The largest crowds since the Bolotnaya Square demonstrations of 2012 gathered in Moscow on March 26th in order to express dissatisfaction with Prime Minister Dmitriy Medvedev. Weeks earlier, Medvedev was accused of egregious corruption in the Anti-Corruption Foundation’s (ACF) viral documentary, He is Not Dimon to You.

The rally against corruption followed, despite being prohibited by Moscow official. Eventually, after  hearing additional outcries for free speech, the protest was allowed to continue as planned. Surprisingly, even teenagers, a stratum of society that was previously politically inactive, took to the streets to exercise their constitutional rights. 

Inspired by these events, protests took place amidst scenes of public outrage, focusing on political oppression and freedom of expression. Thousands of demonstrators gathered across more than 100 cities in Russia on June 12th to condemn political tyranny. Moreover, the Open Russia party urged President Vladimir Putin to not run for reelection in 2018.

Though increasing public activity is unquestionably a positive sign of Russians becoming more assertive in defense of their political rights and freedoms, demands concerning free market reforms – that make political freedoms possible – are nowhere to be seen.

Russia’s presidential candidates each represent big government.  

That could best be presented by observing the popularity of presidential candidates and their shared opinion towards the market economy.  

Big Government is Everywhere

According to results of the latest survey undertaken by the Levada Center, 63 percent of Russians will be voting for the current President Vladimir Putin in the upcoming presidential elections in 2018, while other potential candidates such as Vladimir Zhirinovsky, Gennady Zyuganov, Alexey Navalny, Sergey Mironov, Grigory Yavlinsky, and Mikhail Kasyanov received 6 percent or less.

The economic policies proposed by Putin need no description since it is under his 18-years-reign that Russia has seen a massive expansion of government. Nor is there a reason to describe Mr. Zyuganov’s support towards market economy, considering his leadership position in the Russia’s Communist Party.

The second most popular candidate, Vladimir Zhirinovsky – a leader of Russia’s Liberal Democratic Party – promotes further expansion of government into the economy and basic interventionist proposals such as increases in the minimum wage, an expansion of existing universal pension programs, increased infrastructure spending, and greater control over commercial banks. These three potential presidential candidates mentioned above generally represent mainstream views in support of the strong government.  

Lack of support toward free-market ideas impedes future prosperity.

In an interesting twist, the opposition leaders who advocate against government-instigated political tyranny do not wander far from the mainstream in their views on the market economy.

Alexey Navalny – by far the most influential oppositionist known for exposing government corruption – supports minimum wage laws, higher government-provided pensions and medical coverage. Moreover, while explicitly emphasizing the importance of entrepreneurs, Mr. Navalny wants to provide free education and to curtail immigration from post-soviet countries in an effort to stop the flow of cheap labor.

Markets Empower 

The obvious popularity of anti-free-market candidates – from both mainstream and opposition parties – represents a general ignorance and contempt of market virtues among the vast majority of Russians. The phenomena could be attributed to the painful shock therapy that Russia underwent under Soviet Union’s collapse. Furthermore, general ignorance stemming from a lack of education on economic principles influences public opinion.

Regardless of the reason, lack of support toward free-market ideas impedes future prosperity, as well as the existence of political freedoms that are so cheered by Russians. Unfortunately, my fellow countrymen do not seem to realize that political freedoms can only be upheld when a market economy is present.

As Ludwig von Mises pointed out in Human Action:

“As soon as the economic freedom which the market economy grants to its members is removed, all political liberties and bills of rights become humbug.”

Under a capitalist society, people are free to choose their occupation and consumption based on their personal principles and beliefs, while the contrary holds for societies with the only one employer – government.

The state, controlling large swathes of the economy, is capable of getting rid of undesirable employees by sending them to remote locations, (labor camps). In the absence of a free market economy, the state controls the press, making freedom of speech utterly impossible. In short, a massive government presence in economic activities makes the exercising of political freedoms almost impossible due to its arbitrary ability to effectively coerce at its own will.

More Government Intervention, More Oppression

The example of modern Russia vividly illustrates von Mises’s point of the negative influence government intervention has on the economy and political liberties. As could be seen from Heritage Freedom Index, Russia currently occupies the 114th place with an overall score of 57.1. The low ranking is, besides being due to a weak legal structure that fails to protect private property rights effectively, is the result of immense government spending, where 35.8 percent of total output is produced by the state.

Similarly, regulatory efficiency is not in better shape, with burdensome regulations preventing the development of a strong private sector and limiting employment. In addition, the market is constantly disturbed by the actions of state-owned enterprises that are major actors in energy (Gazprom and Rosneft), banking (Sberbank and VTB), defense (Almaz-Antey), and transportation (Aeroflot and Russian Railways) industries.

The Russian youth are significantly more open-minded than older generations.

Just as von Mises explained, this large presence of government in the economic activity of the nation hinders the development of political liberties. The problem is particularly acute for freedom of speech, where only a few independent media outlets exist and where the government pressures social networks and the media to comply with their arbitrary regulations.

From this perspective, it seems somewhat ironic, and sad, that Russians are supporting causes that contradict their persistent demands for political liberties. If anything, my fellow countrymen’s support towards anti-free-market candidates will result in more political oppression.

The Next Generation 

Since Russian citizens are not capable of instigating free market changes, might not the government step in to introduce such reforms? The public’s demand for socialist policies, however, is in harmony with the policies of the current government and specifically those of President Putin. Indeed, Putin has no incentive to allow free markets and greater economic freedom, as an open economy would mean a loss of control for him.

The market economy would create competition to state run companies such as Rosneft, Gazprom etc. More competitors will shatter the Russian budget and the stability of inner politics since these companies happen to be run by Mr. Putin’s friends.  

Given these considerations, free market reforms initiated by the state are also highly unlikely.

Thus, the question that might arise is: how can economic changes towards a free market emerge at all, if neither the government nor the people support such changes? While the situation seems rather bleak at first glance, the future of Russia is actually not so grim.

But there is cause for optimism. The Russian youth appear to be significantly more open-minded when compared to older generations. Those who were born in post-Soviet Russia have experienced relative freedoms and a more open economy during the first half of the last decade. Moreover, government propaganda was not so persistent until 2012.

Even though young Russians have not shown their support towards a market economy, their young curious minds could very well be swung by popular media outlets.  YouTube vloggers have been extremely renowned among Russian youth. So it could easily be the case, that a free market YouTube vlogger, capable of explaining the importance of economics – and in particular the virtues of the free market in an entertaining way – would influence my peers to change their perception and become fascinated by the subject.