Putin? Really?

Time magazine gives Vladimir Putin way too much credit for Russia’s economic recovery.

Vladimir Putin

As an exercise in journalism, Time’s annual selection of a “Person of the Year” has always been a strange ritual. Although the magazine annually devotes gobs of resources and dozens of print pages to selecting and reporting on a winner, the editors take great pains to emphasize that the choice is not an “honor.” Rather, as Managing Editor Richard Stengel explains, the selection goes to “the person who has most profoundly influenced the world during the past year, for better or for worse.” That Stalin and Hitler are previous winners underscores Stengel’s point.

But leaving aside the value of journalists engaging in a process that is a “subjective one,” which includes “no measuring stick or algorithm” but just “feels right” and ends up choosing Stalin (twice), this year’s selection of Russian President Vladimir Putin is particularly odd, if only judged by the criteria that Time editors themselves establish. The selection of Putin is based on a theory about recent Russian history that is simple, powerful, and wrong.

In the 1990s, so the Time story goes, Russia was a place of lawlessness, economic depression, and instability. In the last decade, however, Russia has become a place of order, economic growth, and stability. The cause for the change: Putin. As Stengel theorizes, “Individuals can make a difference to history, and Russia’s Vladimir Putin, our choice for 2007, proves the point.”

Time’s theory about Putin and Russia contains three central flaws. First, the positive change so trumpeted is exaggerated. Second, the positive change that has occurred between the 1990s and the last several years has little if anything to do with Putin. Third, the Time theory that Putin’s democratic rollback has been a necessary condition for achieving stability and growth—they call it the “grand bargain”—is simply wrong. In fact, there is no evidence at all—and most certainly not in the 36 pages Time devotes to Putin and his Russia—that greater autocracy has caused either order or growth. Autocracy’s re-emergence under Putin has coincided with tremendous economic growth but has not caused it. If anything, Putin’s autocratic turn has reduced the economic gains from what they would have been had democracy survived.

In proving Putin’s greatness, the word stability appears most often in the Time coverage; on his “report card,” this is the only subject in which Putin gets an A. But finding evidence of this new stability, both in Time’s reporting and in reality, is difficult. Time writers conflate “central authority” with “stability,” a real no-no in my business of political science, since there are lots of autocracies in the world that do not provide stability (think of Angola, among other examples). Lower crime rates, less corruption, fewer terrorist attacks, better health conditions, or more secure property rights are some conventional measures of strong, stable government, yet Putin’s Russia has made amazingly little or no progress on any of these indicators, despite eight years of economic growth.

The only hard evidence of stability in the Putin era is economic growth. During Putin’s tenure, growth in Russia has averaged an impressive 6.7 percent; real disposable income has increased by more than 10 percent a year; consumer spending has skyrocketed; unemployment has fallen from 12 percent to 6 percent; and poverty, according to one measure, has declined from 41 percent to 14 percent. Russians have never been richer. Public opinion polls show that this economic growth, after a decade of recession, makes Russians feel more stable and better off compared to the Yeltsin era.

But did Putin have anything to do with this recovery? Surprisingly, for a theory based on the role of the individual in making history, Time’s writers use almost no “action verbs” to describe Putin’s economic policies. And there’s a reason that Putin seems like an observer, rather than an actor, in this central drama of his era: It’s because he was one.

Russia’s economic transformation from communism to capitalism followed a very similar pattern to all countries in the region. Given the dreadful initial economic conditions, every post-Communist government was compelled to pursue some degree of price and trade liberalization, macroeconomic stabilization, and eventually privatization. The entire region experienced economic recession and then began to recover several years after the adoption of reforms. Russia followed this same general trajectory and would have done so under Putin or Yeltsin. Had Putin become president or prime minister in January 1992, he would never have appeared on the cover of Time.

Russia’s economic turnaround came after a financial meltdown in August 1998 that finally forced the Russian government to pursue prudent fiscal policies and a more rational exchange-rate policy, including a major devaluation. As a result of these painful but necessary reforms, Russia’s economy finally began to grow a year before Putin came to power.

In addition to coming to power well after the painful reforms necessary to jump-start growth had been implemented, Putin benefited from another force not of his making: rising world oil prices. As the price of oil moved from $10 a barrel in 1998 to over $90 a barrel today, anyone in the Kremlin would have reaped the credit for Russia’s economic recovery. But is being in the right place at the right time “leadership—bold, earth-changing leadership“? Putin did implement some important tax reforms and established a stabilization fund to ensure that the windfall revenues would not be spent frivolously or in an inflationary manner. The main drivers of Russia’s economic rebirth, however, were world commodity prices, not Putin’s leadership.

In fact, the change in which Putin’s leadership is most apparent—growing autocratic rule—has slowed economic growth, not spurred it. Corruption, a drag on growth, has skyrocketed under Putin’s “central authority.” Renationalization and redistribution of property directed by Putin’s autocratic regime have caused declines in the performance of formerly private companies, destroyed value in Russia’s most profitable companies, and slowed investment, both foreign and domestic. Investment in Russia, at 18 percent of GDP, is stronger today than ever before, but well below the average for democracies in the region, such as Poland and Estonia.

Perhaps the most telling evidence of Putin’s personal impact on Russian growth is provided by regional comparisons. Between 1999 and 2006, Russia ranked ninth out of the 15 post-Soviet countries in terms of average growth. In 2006, the Russian economy outperformed only Moldova’s and Kyrgyzstan’s. That’s leadership? Time’s claim, therefore, that Putin has provided a “grand bargain” of more growth for less freedom is indeed a “subjective one,” based on “no measuring stick or algorithm.”

Comparing Russia with Ukraine especially underscores the fallacy. Russia and Ukraine share hundreds of years of culture and history and endured the hardships of the 1990s. But today the two countries have two big differences: Russia has oil and gas, and Ukraine does not; Russia is an autocracy, Ukraine is not. Yet, despite these differences, democratic Ukraine has managed annual growth rates higher than autocratic Russia’s, despite having to pay dearly for—rather than reaping profits from—higher energy prices. So, why was the erosion of democracy necessary for economic growth? How did taking control of Russia’s independent TV stations help to balance the budget? How did arresting Garry Kasparov earlier this month foster investment? One can only wonder how much faster Russia would have grown with a more democratic system, complete with an independent media to expose corruption, a genuine courts system to prosecute illegal seizures of property, and a real opposition to check the Kremlin’s predatory behavior.

In mistaking correlation for causation—in arguing that the coincidence of Putin’s time in power and Russia’s economic recovery proves that “individuals can make a difference to history”—Time has delivered a public relations coup to Putin. Kremlin officials have already applauded. For those in Russia still fighting for independent media and still convinced that objective journalism is a noble aspiration, Time’s decision to celebrate Putin with this un-honor most certainly doesn’t “feel right,” and it most certainly doesn’t feel like journalism. Some traditions should come to an end.