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Russia as a Network State: What Works in Russia When State Institutions Do Not?

Log out of Readcube. Click on an option below to access. Log out of ReadCube. Power and authority in Russia are traditionally seen to reside with the president. Such an understanding was emphasized during the eight years of Vladimir Putin's presidency, from to , as he sought to centralize power, strengthen the state and establish a strong vertical of power to implement policy. This article examines the nature of this power and authority in the light of the tandem, the ruling arrangement between current President Dmitry Medvedev and Prime Minister Putin.

While acknowledging the central importance of Vladimir Putin in Russian political life, the article argues that emphasis on his role draws too much attention away from the leadership team that he has shaped with Medvedev. This team takes shape in formal institutional structures such as the Security Council, which has become an increasingly important group as a reservoir of experience and authority.

It also takes shape in an informal network that stretches across state and business boundaries. Although there are some tensions in the network, this team ensures broad policy continuity. Furthermore, the article questions Putin's success in establishing a vertical of power, and the authority of both President Medvedev and Prime Minister Putin.

The analysis explores evidence that suggests that, despite the appointment of loyal personnel in this vertical of power, presidential instructions, orders and personnel commands often remain incompletely and tardily carried out or even unfulfilled. In essence, therefore, although many have suggested a split within the leadership, particularly between Medvedev and Putin, the article suggests that the more important splits are horizontal ones between different layers of authority.

Thus, a process of direct control is necessary, whereby the most senior officials are obliged personally to oversee the implementation of their instructions. Volume 88 , Issue 1.

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Russia as a Network State

Russians are richer today than they have ever been in their thousand-year history. But have Russians maximized their potential for personal prosperity and well-being? The question of course is a hypothetical, but the answer most certainly seems no. Russians could be much richer today -- the Russian economy as a whole could be much bigger and stronger -- had Russian leaders created the permissive conditions for technological innovation and investment. Russia should be one of the technological centers of the world; a second Silicon Valley.

But so far, that potential has not been realized. None of the largest tech companies in the world are Russian.


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Russia produces few international patents. Automation in Russian companies is far behind advanced industrial economies. Russians are well off today, but could be so much more prosperous. Politics are to blame. To develop this argument about how politics have held back Russian economic development particularly through stifling technological innovation and investment, this paper proceeds in seven parts.

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Part four explores the pernicious effect of some technological investments in the Putin era. Part five discusses the Medvedev era, when the development of high-tech became a national priority. Part six examines the negative consequences for high-tech innovation and investment in the current Putin era. Part seven concludes. For most centuries, Russia has lagged behind other European countries regarding economic and technological development.

At times, including most prominently in the s, the Soviet system even seemed to outperform European economies. During the final decades of the communist era, however, the Soviet economy fell back behind the capitalist economies in Europe and elsewhere in the world. The communist regime could command peasants to become factory workers and thereby drive industrialization, albeit a very inefficient and corrupt form of industrialization. But the Soviet regime could not command people to become entrepreneurs or invent technologies, or found companies needed to prosper in the post-industrial age.

Most importantly, the Soviet system did make major investments in education and science. Cold War competition with the United States required the Soviet regime to make massive investments in military technologies. Even as Soviet citizens endured major shortages in consumer goods and basic living standards, the Soviet government produced some of the most advanced rockets, nuclear warheads, tanks, radars, and communication systems in the world. To become a military superpower in the twentieth century, the Soviet system invested heavily in scientific education, especially in the hard sciences.

By the time of the Soviet collapse, literacy rates in Russia creeped close to a hundred percent. The transition from communism to capitalism produced an economic depression in every country in Europe and Eurasia. The degree and length of this transitional economic contraction, however, varied considerably in the post-communist world.

What Works in Russia When State Institutions Do Not?

Contrary to initial expectations, those countries that made the quickest transition to democracy also returned to economic growth the fastest. The biggest initial impact of new political freedoms was a massive brain drain. Tens of thousands of smart, well-trained engineers and scientists moved to countries where they could exploit their talents most effectively.

Israel was the biggest beneficiary. And yet, not every talented innovator or technologist left Russia.

Ruble Tumbles as U.S. Sets Out New Sanctions on Russia

The legalization of private property and market prices eventually created the permissive conditions for Russian tech companies to emerge. In other high-tech sectors, defense conversion occurred not at the enterprise level but at the individual-level, as employees of Soviet military enterprises left and converted themselves to work as employees for private companies — foreign and domestic — or started their own firms.

During this era, Russian companies never produced hardware products — computers, chips, or phones — to compete with Western and Asian companies. But several Russian internet, software-driven companies did withstand tremendous competition from Google, Facebook, and others to survive. The search engine company, Yandex, competes with Google for market share in Russia and a few other countries. And unlike their Chinese counterparts, these companies formed and grew largely without the benefit of state protection or subsidies.

A decade ago, the possibility of Russia emerging as a technology hub in the global economy seemed real.

Russia beyond the challenges of the network state | openDemocracy

In , the Russian economy grew for the first time ever since independence in In addition, domestic consumption of consumer goods, as well as rapid expansion of transportation, construction, and telecommunications also contributed to this extraordinary period of Russian economic expansion. Most growth came from raw materials exports, which in turn fueled domestic consumption.

Putin did not listen. On the contrary, after an initial spurt of pro-market reforms in the first years of his presidency, Putin showed little inclination to create friendly conditions for private sector development of any kind, including the high-tech sectors. To his credit, he allowed the technocrats in his government and the Central Bank to maintain sound fiscal and monetary policies. But Putin pumped the brakes on pursuing those hard, complex institutional reforms needed to stimulate the formation of new firms and new investment.


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Rule of law reforms ground to a halt. Privatization stopped. Other acts of asset stripping and redistribution occurred, sometimes involving Western investors. Insecure property rights in turn scared away investment. More generally, Putin weakened institutional checks on his executive power.

Putin also undermined the autonomy of regional governments, including doing away with direct elections for governors in By the end of his second term, Putin had consolidated an autocratic regime. The coincidence of new economic growth and growing autocracy in Russia in the s created the false impression that a strong hand in the Kremlin and an alleged strong Russian state were responsible for economic development.

It was a spurious correlation. Russians were doing well, but could have been doing much better. The genuine private sector suffered generally, but the high-tech sector suffered to an even greater degree. Venture capitalists like the rule of law. Foreign investors fear arbitrary redistributions of property. Some industries have to invest locally in Russia to do grow. If you are an oil company, you have to invest where the oil is.