Thoughts on Putin, Economic Downturns and Democracy

Dean Baker

A friend called my attention to this Project Syndicate piece by Kenneth Rogoff, a Harvard economics professor and former chief economist at the I.M.F. Rogoff  argues that Russia will need major economic reform and political reform in order for its economy to get back on a healthy growth path.

In the course of making his argument, Rogoff makes a quick and dirty case that the fact Putin was able to win re-election despite the economic downturn in 2015-2016 resulting from the collapse of world oil prices, shows that the country is not a western democracy.

“The shock to the real economy has been severe, with Russia suffering a decline in output in 2015 and 2016 comparable to what the United States experienced during its 2008-2009 financial crisis, with the contraction in GDP totalling about 4%. …..

“In a western democracy, an economic collapse on the scale experienced by Russia would have been extremely difficult to digest politically, as the global surge in populism demonstrates. Yet Putin has been able to remain firmly in control and, in all likelihood, will easily be able to engineer another landslide victory in the presidential election due in March 2018.”

First, the I.M.F. data to which Rogoff links, does not support his story of an economic collapse in Russia. The reported decline in GDP is 2.7 percent, not the 4.0 percent claimed by Rogoff. And, it is more than reversed by the growth in 2017 and projected growth in 2018. In other words, there does not seem to be much of a story of economic collapse here.

But the idea that a Russian government could not stay in power through an economic downturn, if it were democratic, is an interesting one. According to the I.M.F., Russia’s economy shrank by more than 25 percent from 1992 to 1996 under Boris Yeltsin, a close U.S. ally. Yet, he managed to be re-elected in 1996 despite an economic decline that was an order of magnitude larger than the one under Putin from 2014 to 2016. By the Rogoff theory, we can infer that Yeltsin should not have been able to win re-election through democratic means.