Vladimir Putin's 1999 Vision for Russia

Russia at the Turn of the Millennium Vladimir Putin The modern world is shaped by two major events: humanity’s entry into the third millennium and the 2000th anniversary of Christianity. In my opinion, the immense attention these events receive reflects something far deeper than just a tradition of marking important dates. New opportunities—new challenges Whether by coincidence or not, the arrival of the millennium aligns with a major shift that has been taking place over the last 20-30 years. I’m talking about the rapid and profound changes in human life as we transition into what’s often referred to as a post-industrial society. Let’s highlight some of its key features. We’re seeing a shift in the economic structure: the share of material production is shrinking, while the service and information sectors are growing. There’s constant innovation and the fast-paced adoption of advanced technologies, as well as an increase in the production of high-tech goods. Information technology and telecommunications are booming, and there’s a greater emphasis on management, with a push to improve how society is organized and governed. At the heart of it all is the individual. It’s people, with their education, professional skills, and entrepreneurial spirit, who are driving development and progress. This transformation has been unfolding for some time, long enough for attentive politicians, scholars, and even ordinary people to notice two major concerns. First, the changes bring not only new opportunities for improving lives but also new risks and challenges. The most obvious issues first appeared in the environmental sphere, but they have surfaced across all areas of public life. Even the most economically advanced countries are grappling with organized crime, rising violence, alcoholism and drug addiction, the weakening of family structures, and the erosion of their role in society. The second concern is that the benefits of the modern economy and the new standard of living it promises aren’t being shared equally. The rapid development of science, technology, and advanced economies has only touched a small group of countries—the so-called "golden billion." While many other nations have made strides in economic and social development, it’s too early to say they’ve joined the ranks of post-industrial societies. Most aren’t even close. In fact, there’s reason to believe the current gap will persist for a long time. Perhaps that’s why, on the eve of the third millennium, humanity looks ahead with both hope and apprehension. The Current Situation in Russia I don’t think I’m wrong in saying that for our people, these feelings of anxiety and hope are especially intense. There are few countries in the world that have endured as many trials in the 20th century as Russia has. To begin with, our nation is no longer among the world's economic and social leaders. And secondly, we are facing very tough economic and social challenges. Over the course of the 1990s, Russia’s GDP nearly halved. In terms of total GDP, we lag behind the U.S. by a factor of ten and China by five. After the 1998 crisis, our GDP per capita fell to around $3,500—about five times lower than the average of the G7 countries. The structure of Russia’s economy has also changed. Key industries today are fuel production, electricity generation, and metallurgy (both ferrous and non-ferrous). These sectors now account for about 15% of our GDP, 50% of industrial output, and over 70% of exports. Labor productivity in the real economy is extremely low. While it’s close to the global average in the raw materials and energy sectors, in other industries it’s only 20-24% of what we see, for instance, in the U.S. The technological level of our products is largely determined by the age of our equipment. The percentage of machinery that’s less than five years old has dropped from 29% in 1990 to just 4.5% in 1998. More than 70% of all machines and equipment in use today are over 10 years old, which is more than twice the rate in economically advanced countries. This situation is the result of steadily declining domestic investment, especially in the real sector. Foreign investors are also hesitant to enter Russia. As of now, the total accumulated direct foreign investment in Russia is just over $11.5 billion. By comparison, the same figure for China is $43 billion. While our R&D spending has been decreasing, the 300 largest multinational corporations in the world allocated $216 billion to R&D in 1997 and around $240 billion in 1998. Only 5% of Russian enterprises engage in innovation, and even then, the scale is very modest. The lack of investment and insufficient focus on innovation has led to a sharp reduction in the production of competitive goods on the global market in terms of both price and quality. We have been pushed out of many markets, particularly those for high-tech civilian products. Russian-made goods now account for less than 1% of that market, compared to 36% for the U.S. and 30% for Japan. Throughout the years of reform, we have seen a steady decline in real income for the population. The most significant drop occurred after the 1998 crisis. It will not be possible to restore pre-crisis living standards this year. At present, the total monetary income of Russians, calculated using UN methods, is less than 10% of the average American's. Key indicators that determine a nation’s quality of life, such as health and life expectancy, have also worsened. Today’s difficult economic and social conditions are, to a large extent, a price we’re paying for the legacy of the Soviet-style economy. We didn’t have any other system when the reforms began. Market mechanisms had to be introduced into a system that was built on entirely different foundations, one with a cumbersome and distorted structure. It’s no surprise that this affected the course of the reforms. We’re also paying for the Soviet system’s overemphasis on the raw materials and defense sectors at the expense of consumer goods and services. We neglected key sectors crucial to the modern economy, like IT, electronics, and communications. The lack of competition among producers stifled technological progress and made the Russian economy uncompetitive globally. The suppression of initiative and entrepreneurship, both at the enterprise level and among workers, has led to bitter consequences, both material and psychological, that we’re dealing with today. Of course, some of the costs of rebuilding the country were not inevitable; they resulted from our own mistakes, miscalculations, and lack of experience. But many of the challenges Russian society has faced were unavoidable. The path to a market economy and democracy has been difficult for all countries that embarked on it in the 1990s. They all encountered similar difficulties, although the severity varied from country to country. Russia is completing the first, transitional stage of its economic and political reforms. Despite all the difficulties and missteps, we have set out on the main road that the rest of humanity is traveling. This path, as world experience clearly shows, is the only one that offers a real prospect for dynamic economic growth and improving the standard of living for our people. There is no alternative. Now, Russia faces the crucial question: what’s next? How can we fully activate these new market mechanisms? How can we overcome the deep ideological and political divide that still exists in society? What strategic goals can unite the Russian people? What do we envision for our country’s place in the world in the 21st century? What economic, social, and cultural milestones do we aim to reach in 10 or 15 years? What are our strengths and weaknesses? What material and spiritual resources do we have today? These are the questions life itself is asking us. Without clear, understandable answers, ones that resonate with the entire nation, we won’t be able to move forward at a pace or towards goals that are worthy of our great country. Lessons for Russia The answers to these pressing questions, as well as our future, are inseparable from the lessons we learn from both our past and present. This will be a long process for society as a whole, but some lessons are already becoming clear. 1. For nearly three-quarters of the 20th century, Russia lived under the banner of communism. It would be a mistake not to recognize the undeniable achievements of that time. However, it would be an even greater mistake not to acknowledge the immense price society and the people paid during this social experiment. The key point is that Soviet power did not make the country prosperous, did not create a dynamically developing society, nor did it make people free. Moreover, the ideologically driven approach to the economy doomed our country to fall steadily behind more advanced nations. As painful as it is to admit, for nearly seven decades, we followed a path that led nowhere, a path that diverged from the main highway of civilization. 2. Russia has exhausted its limit on political and socio-economic upheavals, catastrophes, and radical transformations. Only fanatics or those utterly indifferent to Russia and its people would call for yet another revolution. Regardless of whether it is framed in communist, nationalist-patriotic, or radical-liberal terms, any new upheaval will be more than the state and its people can bear. The nation’s patience and ability to endure, survive, and rebuild have reached their limits. Society will collapse—economically, politically, psychologically, and morally. Responsible political and social forces must offer the nation a strategy for Russia's revival and prosperity. This strategy should build on the positive outcomes of the market and democratic reforms and should be carried out through evolutionary, gradual, and balanced methods. It must be implemented in conditions of political stability and without worsening the living standards of the Russian people across all layers and groups of society. This is an imperative requirement given the current state of the country. 3. The experience of the 1990s clearly shows that successful, low-cost modernization of our homeland cannot be achieved by simply transplanting abstract models and schemes from foreign textbooks onto Russian soil. Nor will mechanical copying of other countries' experiences lead to success. Every country, including Russia, must find its own path to renewal. So far, we have not been very successful in this regard. We have only begun to feel our way toward our own path, our own model of reform, in the past year or two. We can hope for a better future only if we manage to organically combine universal principles of the market economy and democracy with Russia's realities. This is the direction that academic, analytical, and expert work should take, as well as the work of government bodies at all levels, political organizations, and civil society groups. Chances for a Prosperous Future These are the main lessons of the outgoing century. They allow us to outline a long-term strategy aimed at overcoming the protracted crisis in a relatively short period of time, historically speaking, and creating the foundations for rapid and sustainable economic and social development. I emphasize rapid because the country does not have time to waste. Here are the experts' estimates. To reach the per capita GDP levels of modern Portugal or Spain—countries that are not considered global economic leaders—it will take us about 15 years if we achieve GDP growth rates of at least 8% annually. If we can maintain growth rates of 10% annually over the same 15 years, we could reach the current per capita GDP levels of the UK or France. Let’s assume the experts’ estimates are not entirely accurate, that our current economic lag isn’t as severe, and that we could overcome it more quickly. Even so, this will still take many years. Therefore, we must start formulating and implementing a long-term strategy as soon as possible. The first step in this direction has been taken. At the end of December, the Center for Strategic Research, created on the initiative and with the active participation of the Russian government, began its work. Its mission is to unite the best intellectual resources of our country to provide the government with recommendations, proposals, and projects of both theoretical and practical nature aimed at developing a strategy and the most effective solutions to the challenges that will arise during its implementation. I am convinced that achieving the necessary dynamic growth is not only an economic issue. It is also a political issue and, dare I say it, in a certain sense an ideological one. More precisely, it is an intellectual, spiritual, and moral issue. In fact, at this stage, I believe this last aspect is particularly important for consolidating Russian society. (A) The Russian Idea Fruitful and creative work, which our homeland so desperately needs, is impossible in a society that is fractured and internally divided. In a society where the main social layers and political forces adhere to differing fundamental values and ideological orientations. Throughout the past century, Russia has found itself in such a state twice: after October 1917 and during the 1990s. In the first instance, civil agreement and social consolidation were achieved not so much through what was then termed "ideological and educational work," but rather through coercive measures. Those who disagreed with the ideology and policies of the government faced various forms of persecution, including outright repression. For this reason, I do not find the term "state ideology," as called for by some politicians, publicists, and scholars, to be successful. It conjures up specific associations with the recent past. Where there is a state ideology that is officially blessed and supported by the government, there is, strictly speaking, little room left for intellectual and spiritual freedom, ideological pluralism, and freedom of the press. And thus, there is little room for political freedom. I am against the restoration of a state, official ideology in any form in Russia. In a democratic Russia, there should be no forced civil agreement. Any societal consensus can only be voluntary. This is why it is so important to achieve agreement on fundamental issues such as goals, values, and developmental milestones that are desirable and appealing to the overwhelming majority of Russians. One of the main reasons why our reforms are progressing so slowly and with such difficulty is precisely the lack of civil agreement and social consolidation. Energy is mainly spent on political squabbles rather than on solving specific tasks related to the renewal of Russia. Nevertheless, in the past year or so, some positive changes in this area have begun to emerge. The majority of the populace is showing more wisdom and responsibility than many politicians. People desire stability, confidence, and the ability to plan their future—and that of their children—not just for a month, but for years and decades. They wish to work in conditions of peace, security, and a solid legal order. They want to take advantage of the opportunities and prospects opened up by the diversity of property forms, entrepreneurial freedom, and market relations. On this basis, a process has begun whereby our people are internalizing and embracing supranational, universal values that rise above social, group, and ethnic interests. People have embraced values such as freedom of speech, the right to travel abroad, and other fundamental political rights and personal freedoms. They cherish the ability to own property, engage in entrepreneurship, and create wealth. This list could go on. Another pillar for the consolidation of Russian society can be described as the core traditional values of Russians. Today, these values are becoming increasingly clear. Patriotism. This term is sometimes used ironically or even pejoratively. However, for most Russians, it retains its original, entirely positive meaning. It is a feeling of pride in one’s homeland, its history, and its achievements. It is the desire to make one’s country more beautiful, richer, stronger, and happier. When these feelings are free from national arrogance and imperial ambitions, there is nothing reprehensible or stagnant about them. They are a source of courage, resilience, and strength for the people. Losing patriotism, along with the associated national pride and dignity, would mean losing our identity as a people capable of great achievements. Statehood. Russia has been, and will remain, a great country. This is determined by the inherent characteristics of its geopolitical, economic, and cultural existence. These have shaped the attitudes of Russians and state policies throughout the history of Russia, and they must continue to do so today. However, today these attitudes must be infused with new meaning. In the modern world, a country’s power is manifested not so much in military strength as in its ability to lead in the creation and application of advanced technologies, ensuring a high standard of living for its people, and reliably safeguarding its security while defending its national interests on the international stage. Statism. Russia is unlikely to become, if it ever does, a second edition of, say, the USA or the UK, where liberal values have deep historical roots. In our case, the state, its institutions, and structures have always played an exceptionally important role in the life of the country and its people. A strong state is not an anomaly for Russians, nor is it something to be fought against; rather, it is a source and guarantor of order, the initiator and main driving force behind any changes. Modern Russian society does not equate a strong and effective state with totalitarianism. We have learned to appreciate the benefits of democracy, the rule of law, and personal and political freedom. At the same time, people are concerned about the evident weakening of state power. Society desires the restoration of the guiding and regulating role of the state to the extent necessary, based on the traditions and current situation of the country. Social Solidarity. It is a fact that in Russia, the inclination toward collective forms of activity has always dominated over individualism. It is also a fact that paternalistic attitudes are deeply entrenched in Russian society. The majority of Russians have become accustomed to associating improvements in their circumstances not so much with their own efforts, initiative, or enterprise, but rather with help and support from the state and society. This habit dies slowly. We need not attempt to answer the question of whether this is good or bad. What is important is that such attitudes exist. Moreover, they currently prevail. Therefore, it is crucial not to ignore them. This should be taken into account primarily in social policy. I believe that a new Russian idea will emerge as a synthesis, an organic union of universal human values with the time-tested core Russian values that have withstood the tests of time, including the tumultuous 20th century. It is essential not to rush this process but also not to interrupt or destroy it. We must not allow the first sprouts of civil agreement to be trampled in the heat of political campaigns or specific elections. In this sense, the results of the recent State Duma elections inspire great optimism. They reflect a shift in society toward stability and civil agreement. Radicalism, extremism, and revolutionary opposition have been rejected by the overwhelming majority of citizens. Perhaps for the first time in all the years of reform, favorable political conditions have emerged for constructive interaction between the executive and legislative branches of power. Serious politicians whose parties and movements are represented in the new State Duma cannot ignore this fact. I am convinced that a sense of responsibility for the fate of the people and the country will prevail, and that Russian parties, organizations, movements, and their leaders will not sacrifice the common interests and prospects of Russia—requiring the consolidation of all healthy forces—for narrow party or opportunistic interests. (B) A Strong State We are at a stage where even the most sound economic and social policies face challenges in implementation due to the weakness of state power and management institutions. The key to reviving and uplifting Russia lies today in the political sphere. Russia needs strong state authority and must have it. This is not a call for a totalitarian system. History convincingly shows that all dictatorships and authoritarian regimes are transient. Only democratic systems endure. Despite their flaws, nothing better has been devised by humanity. A strong state power in Russia means a democratic, lawful, and effective federal state. I envision the following directions for its formation: • Rationalization of the structure of state power and management, enhancing the professionalism, discipline, and accountability of civil servants, and intensifying the fight against corruption. • Restructuring state personnel policies based on the principle of selecting the best specialists. • Creating conditions conducive to the establishment of a robust civil society in the country that balances and monitors state power. • Increasing the role and authority of the judiciary. • Improving federal relations, including in the budgetary and financial sphere. • Launching an active and proactive fight against crime. Amending the Constitution does not seem to be an urgent or top-priority task. We have a genuinely good Constitution. Its section on individual rights and freedoms is considered the best constitutional act of its kind in the world. In truth, the serious challenge is not to draft yet another fundamental law for the country but to make the implementation of the existing Constitution and the laws based on it a norm of life for the state, society, and individuals. An important issue in this regard is the constitutionality of the laws being enacted. Currently, Russia has over a thousand federal legislative acts and several thousand laws from republics, regions, and autonomous districts. Not all of them meet the aforementioned criteria. If the Ministry of Justice, the Prosecutor's Office, and the judiciary continue to address this problem as lethargically as they have so far, a multitude of questionable or simply unconstitutional laws could become critical in both legal and political terms. This would jeopardize the constitutional security of the state, the effectiveness of the federal center, and the governance of the country, along with the integrity of Russia. Another significant problem relates to the branch of power to which the government belongs. Global experience shows that the primary threat to human rights and freedoms, and democracy as a whole, stems from the executive branch. Of course, the legislative branch, by passing poor laws, also contributes. However, the main issue remains with the executive authority. It organizes the life of the country, enforces laws, and can significantly distort them, albeit not always intentionally, through administrative procedures. There is a global trend toward the strengthening of executive power. Therefore, it is not coincidental that society seeks to enhance control over it to prevent arbitrary actions and abuses. This is why I personally attach great importance to establishing partnerships between the executive branch and civil society, developing institutions and structures within the latter, and launching an active and rigorous fight against corruption. (C) An Effective Economy As I have already mentioned, the years of reform have led to the accumulation of many difficult problems in the Russian economy and social sphere. The situation is indeed complex. However, it is, to say the least, premature to bury Russia as a great power. Despite everything, we have preserved our intellectual and human potential. A number of promising scientific and technological developments and advanced technologies have not been lost. We still have our natural resources. Thus, the country has a worthy future ahead. At the same time, we must learn lessons from the 1990s and reflect on the experience of market transformations. 1. One of the main lessons I see is that throughout these years we have been moving somewhat blindly, without clear ideas about national goals and benchmarks that would ensure Russia's status as a highly developed, prosperous, and great country. The absence of such a forward-looking strategy for development, aimed at 15-20 years or more, is particularly acute in the economy. The government is firmly committed to basing its activities on the principle of unity between strategy and tactics. Without this, we are doomed to patching holes and operating in emergency response mode. Serious politics and significant achievements cannot be accomplished in this manner. The country needs a long-term national development strategy. As I mentioned, the government has initiated work on its preparation. 2. The second important lesson from the 1990s highlights the necessity for Russia to establish a cohesive system of state regulation in the economy and social sphere. This does not imply a return to a system of directive planning and management, where an all-pervasive state regulated every aspect of each enterprise from top to bottom. It is about making the Russian state an effective coordinator of the country’s economic and social forces, balancing their interests, defining optimal goals and parameters for public development, and creating the conditions and mechanisms for achieving them. This certainly goes beyond the common notion that reduces the state's role in the economy to formulating rules and ensuring compliance. In time, we are likely to arrive at this notion. However, the current situation requires a greater degree of state intervention in economic and social processes. In defining the scope and mechanisms of the system of state regulation, we must adhere to the principle: "The state should be present where and to the extent necessary; freedom should exist where and to the extent needed." 3. The third lesson is the transition to implementing a reform strategy that would be optimal for our country's conditions. It appears to consist of the following action directions. 3.1 Stimulating dynamic economic growth. The primary focus here should be on increasing investment activity. We have yet to solve this problem. Over the 1990s, investments in the real sector of the Russian economy decreased fivefold, including a 3.5-fold reduction in fixed capital. There is a process of destroying the very material foundations of the Russian economy. We advocate for conducting an investment policy that combines purely market mechanisms with state interventions. Simultaneously, we will continue efforts to create an investment climate in the country that is attractive to foreign investors. I will be frank: without foreign capital, the country will take a long and arduous path to recovery. We do not have the luxury of time for a slow revival. Therefore, we must do everything to ensure that foreign capital flows into our country. 3.2 Implementing an active industrial policy. The country’s future and the quality of the Russian economy in the 21st century primarily depend on progress in sectors based on advanced technologies and producing knowledge-intensive products. In the modern world, economic growth is 90% driven by the application of new knowledge and technologies. The government is prepared to implement an industrial policy focused on the priority development of sectors that lead in scientific and technological progress. Necessary measures include: • Promoting the development of off-budget domestic demand for advanced technologies and knowledge-intensive products and supporting the export orientation of high-tech industries; • Supporting non-resource sectors primarily serving domestic demand; • Enhancing the export capabilities of the fuel, energy, and raw materials sectors. To mobilize the financial resources necessary for this policy, we should employ mechanisms that are well-known in global practice. These include targeted credit and tax instruments and various forms of benefits backed by state guarantees. 3.3 Implementing a rational structural policy. The government believes that the economy of Russia, like that of other industrially developed countries, has room for both financial and industrial groups and corporations, as well as small and medium-sized enterprises. Any attempts to stifle the development of one while artificially accelerating the growth of others only hinder the rise of the Russian economy. The government's policy will be directed toward building a structure that ensures an optimal balance of economic forms. Another important direction in this regard is the rational regulation of natural monopolies. This is a key issue, as they largely determine the entire structure of production and consumer prices. Thus, they significantly influence both economic and financial processes and the dynamics of population income. Formation of an Effective Financial System. This is a massive undertaking that includes the following directions: • Improving the efficiency of the budget as a vital tool of state economic policy; • Conducting tax reform; • Eliminating arrears, completely removing barter and other quasi-monetary forms of settlement; • Maintaining low inflation and a stable ruble exchange rate; • Developing civilized financial and capital markets, transforming them into instruments for accumulating investment resources; • Restructuring the banking system. 3.5 Eliminating the shadow economy and dismantling organized crime in the economic and financial-credit sphere. The shadow economy is pervasive. However, while in developed countries its share of GDP does not exceed 15-20%, in our case, this figure reaches 40%. To address this painful issue, alongside improving the work of law enforcement agencies, we need to tighten licensing, tax, currency, and export controls. 3.6 Consistent integration of the Russian economy into global economic structures. Without this, we simply cannot reach the levels of economic and social progress achieved by leading countries. Our main directions here are: • Actively supporting the foreign economic activities of Russian enterprises, companies, and corporations. In particular, there is an urgent need to establish a federal agency for export support that would provide guarantees for export contracts of Russian producers; • Firmly opposing discrimination against Russia in global markets for goods, services, and investments. This includes adopting Russian anti-dumping legislation and enforcing it; • Incorporating Russia into the international system regulating foreign economic activities, primarily in the WTO. 3.7 Implementing a modern agricultural policy. The revival of Russia is unthinkable without the revival of the Russian countryside and the uplift of the country's agriculture. We need an agricultural policy that organically combines measures of state support and regulation with the implementation of market reforms in rural areas and land ownership relations. 4. It cannot be overlooked that for Russia, any transformations or measures associated with worsening the living conditions of people are practically excluded. Here, we have reached a critical point. Even the most justified and necessary reforms must be carried out in a manner that doesn’t bring about further hardships for the population. In this regard, I want to highlight the government’s social policy. One of its key directions is the search for ways to increase wages in the public sector and simultaneously enhance the social support system for low-income families. The government’s social policy will be characterized by consistency, gradualism, and a clear understanding of the current economic situation. 5. The practical realization of the above-mentioned policies depends on the emergence of a strong, effective government. However, the nature of this government cannot be limited solely to the concept of an executive authority in the traditional sense. We need a new government—a collective government capable of inspiring confidence in citizens and the business community. The government must engage with society. It must be open to ideas and demands. It must be able to support initiatives and protect innovative projects. I believe that a broad range of opinions must be represented in government bodies, and their composition should reflect all sectors of society. 6. It is vital to prevent the centralization of public life and maintain its democratic nature. The formation of a strong state is necessary. However, its strength should not manifest through coercion but rather through the public's trust, the will of citizens, and their active participation in decision-making.