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The symbiotic relationship between politics and the economy benefits society as a whole, and this carefully constructed, mutually beneficial connection can easily turn sour should one side negatively impact the other. To further expand upon this claim, it is hardly a revolutionary idea to say that economic theories have changed depending on who has political control, and individual politicians can usurp power depending on the state of the economy. A further fragmented political state evolves when regional government carries most of a national economic burden. This give and take association is exemplified in Russia following Putin’s return to power combined with the Russian financial collapse during the latter portion of 2014. The political ideologies of Russia under Putin aggravated pre-existing financial instabilities within regional economies, and the sharp decline of the price of oil as well as international economic sanctions imposed on Russia that led to the collapse of the Russian ruble.
As the name Vladimir Putin echoes in every corner of the world, the leader of the world’s largest nation is known for being quite a controversial figure. Putin maintains a pseudo democracy that could be labeled as potentially more dangerous than the pure autocracy Russians suffered for decades. Even for centuries, Russia has experienced a tumultuous political climate; specifically, “Nearly two decades after the fall of communism, Russia is not a democracy. But neither is it an absolute autocracy in the mold of, say, Cuba or North Korea. That is to say, Russia pretends to be democratic…” (Shevtsova). Pretending to be democratic, however, comes from years of chaos and uncertainty. With help from Western governments, the World Bank, and the International Monetary Fund, Russia underwent the largest and fastest privatization in history in order to establish a fully nationalized Soviet economy. But, seven years after the fall of the Soviet Union, Russia suffered the 1998 financial crisis, and at the time, it’s regional governments shouldered most of Russia’s economic burden. During the course of those seven years, Russia entered a deep depression, thus the 1998 financial crisis worsened an already dire situation. Boris Yeltsin weathered Russia through their economic troubles to the best of his ability, and the economy only really recovered once demand for oil rose. However, hours before the first day of the year 2000, Yeltsin announced his resignation, leaving the government in the hands of Vladimir Putin, a former KGB official and the head of the FSB. Putin’s action during both his previous and current terms in office reflect the scarily obvious link between the political climate within a country and its economic state. For Putin in his first term, he rebuilt an impoverished Russia with the help of the Russian oligarchs, or the wealthy businessmen who were former Soviet Union officials. Putin’s association with former Soviet Union officials came with little to no surprise for anyone when he described the collapse of the Soviet Union as, “… the greatest geopolitical catastrophe of the Twentieth Century,” (BBC). His hopeful Soviet Union ideals continue to drive Russia into a divided political state, and further antagonizes existing economic troubles.
Given its vast size, Russia reaps an abundant amount of natural resources, which they use for economic purposes. Similar to the 1998 financial crisis, the root of the 2014 economic struggles revolve around oil prices, the principal resource of their economy. Or in other words, “Russia gets around half of its budget revenue from taxes on oil and natural gas, and as long as the price of oil is plummeting, its economy is likely to continue sinking.” (McLaughlin). The collapse of the ruble in 2014 was not directly linked to just oil though. Russia’s economy was also deeply affected by an unbalanced pension system, inflation, and severe US and European sanctions. Other than oil, the most noteworthy cause for this period of economic instability would be the international sanctions made against Russia during the Ukrainian crisis. Addressing the Crimean crisis and the shortly followed annexation of Crimea by the Russian Federation, several governments and international organizations, led by the United States and European Union, imposed sanctions on Russian individuals and businesses. On October 3, 2014, Joe Biden even commented, “We don’t want Russia to collapse. We want Russia to succeed. But Putin has to make a choice. These asymmetrical advances on another country cannot be tolerated. The international system will collapse if they are.” (Biden). Russia continues to push the boundaries of the political spectrum, despite already suffering from issues such as inflation. Inflation has a direct connection to issues such as unemployment, which in turn affects political policies. Russia’s annual inflation for 2014 was 11.4%, the highest level of inflation since 2008, and combining that very high percentage with the falling ruble, consumer prices, especially food, began to skyrocket. The various factors causing economic instabilities beginning in 2014, which can still be seen today, have had definite political effects.
In 2012, Putin reclaimed presidential power, but the international community called into question the logistics of his election. Specifically, the Organization for Security and Cooperation in Europe observed blatant fraud, “…including the brazen stuffing of ballot boxes.” (Schwirtz). The legality of this election spurred protests throughout the streets of Russia with people asking for Russia without Putin, but Putin quickly squashed any opposition against him through means of violence, intimidation, and coercion. His reassertion into power laid a shaky political foundation that was aggravated by the collapse of the Russian ruble in 2014. For Russia, their primary political concern in 2014 occurred when Russia seized Crimea, exponentially affecting tensions between the East and the West, and in the latter portion of 2014, the ruble began to devalue. In 2015, Russia launches military support for their ally President Bashar al-Assad in Syria, and “oil and gas accounted for 43 percent of the government’s revenue. The World Bank predicted the poverty [in Russia] rate will reach 14.2 percent in 2016,” (Lee). Now, currently in 2017, the United States has launched an investigation into Russia’s role with the Trump administration. The correlation between the economic state of Russia and political climate within this vast state is that both sides need each other to be successful. However, a declining economic state led to a more tense political atmosphere, because the ruble was suffering due to rising U.S. interest rates as well as economic sanctions. But, the ruble drastically dropped because of a series of controversial political decisions by the Putin and other Russian leaders. Since the national government is slowly unraveling, the regional governments throughout Russia are capitalizing on their lack of assertiveness.
“the difference across Russian regions, although they may not be enormous by EU standards, are nonetheless striking: from highly urbanized to predominantly agrarian, from Mediterranean climatic conditions to extremely cold, from rich to natural resources to poor in natural resources, from gateway or commercial hub regions to regions facing high transport costs,” (Dimitros).
Under the Russian constitution, the regional and local government received numerous powers such as imposing regional taxes, and they fully exercised their enumerated powers to alleviate their economic burdens. Russia currently has nine established districts which include Central, Far East, Northwest, Siberia, Southern, Urals, Volga, and Northern Caucasus. The ninth district was established in 2014 following Russia’s annexation of Crimea. In comparison to the federal government, these nine districts lack adequate tax revenue to pay their teachers, police officers, or other public officials, and they are overburdened by pensions. Although these regions face similar economic burdens:
“The resource-rich areas, the financial capitals and the maritime regions would benefit from the liberalization of the economy and from free trade. These regions, relying on the export of mineral resources, on geographic location, or on financial capital, are more inclined to back the more liberal foreign trade oriented policy,” (Dimitros).
As the resource-rich regions of Russia lean towards more liberal policies, the traditional industrial areas suffer from an inability to make structural adjustments. Whereas, the less industrialized regions are more likely to endorse domestic trade rather than international. The simple difference of regional economies can not be emphasized enough in Russia, because it exposes fragmented political ideologies.
During their long term structural economic decline, Moscow has slowly started to crumble and in turn Putin is losing control of his country. In other words, the domestic problems that the Kremlin is facing threatens the centralized authority that Putin has worked so hard to build. Last year, “even the Russian Ministry of Economic Development admitted that [acceptable] living standards are unlikely until 2035,” (Jarmas). Thus given that the overall conditions of Russia’s federal government are declining rapidly, many regional governments are trying to maintain their minimal portions of the federal budget. The regional economies within Russia are preemptively preparing to ford their people through yet another tragic financial collapse, although they thought they would receive assistance from Putin. In 2012, for this third term Putin ran on the platform that he would increase wages in the public sector, but now in 2017, Putin is yet to make good on his promises. The federal budget has provided little funding for regional governments, who ultimately would be responsible for the higher wages. Putin has entrapped regional governments within a vicious cycle, where they are mandated to provide costly welfare programs by the central government which provides little to none federal funding.
However, the Kremlin requires that regional governments carry most of their economic burden so they can focus on larger political conflicts.
The relationship between politics and the economy highlights the effect of political ideologies on both regional and national economies. Political ideologies can alter depending on the economic state of a country, and that economic state can be drastically affected by a country’s political regime. The ramifications of Russia’s financial collapse that began in 2014 are seen today, and protest over unpaid wages continue to rise across Russia. With the 2018 World Cup around the corner for Russia, protesters have begun to link Kremlin’s megaprojects, such as a new soccer stadium, to worsening economic conditions in various regions throughout Russia. Russia has also been in numerous headlines, for their ties to the Trump administration, and their continual involvement in American politics mounts growing international concerns. Russia’s eagerness to venture into foreign affairs reflects a nation desperate for a new form of economic stability, a concept that may elude them for years to come and will continue to do so until many of the nation’s systemic issues are resolved.
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