As I am writing, the Western media is focused on the Russian elections. In the U.S. in particular, the coverage is spun to show that the elections are proof
Putin is dominating all aspects of Russian life and stifling what was left of a once emerging democracy. What is often not mentioned is that the opposition movement to Putin or "Other Russia" relies on the outlawed
"National Bolshevik Party" movement for its boots on the streets in anti-government demonstrations and rallies. A prominent component of the "Other Russia," the National Bolsheviks share more in common with the radical leftist organizations that often battle with riot police in the capitals of numerous Western countries than any peaceful democratic movement. Interestingly, statements from the U.S. State Department constantly scold Russia for rolling back democracy. No wonder why the average westerner already is convinced that Putin is restoring the Soviet Union!
Despite all the alarm over democracy in Russia, the fact remains that capitalism is alive and well according to all the economic data which strongly contradicts suggestions of a return to Soviet style socialism. Is the widespread popularity for Putin in today's Russia a result of everyday Russians being nostalgic for a return of the Soviet Union? The answer is no. Anyone who has been in the Soviet Union or the "democratic" Russia under the chaotic 1990's knows that Russians do not wish to turn the clocks back to either period. Today, even in smaller cities, one can see for themselves an
emerging middle class that spends their leisure time in newly built shopping malls while the number of automobile owners is rising. Evidence of this fact is by the sheer number of retailers opening up businesses throughout Russia (including Siberia) and the arrival of Western auto manufacturers who are setting up plants in Russia in order to keep up with the demands of the Russian consumer. Even Ford has entered the
Russian automobile market while its factories in Detroit are on the brink of bankruptcy.
In summary, there are many factors that demonstrates that the Russia of today is quite different from the previous Soviet one. Among these factors are private ownership, freedom to practice religion, and other freedoms that were previously banned but encouraged in today's Russia. And thanks to Putin's reforms, Russia has begun to reduce its size of government and implement a 13%
flat tax to the envy of many pro-business economists in the United States! Although one can argue on how democratic Putin's Russia is or isn't, one thing is for sure, Russia is embracing free market policies that are certainly more liberal than currently in the United States.
By no means is Russia yet an ideal place of opportunity as compared to the United States, it is however on the right path. Let us not forget that before there was a United States, colonists lived under the authoritarian rule of the English King. Thanks to the ingenious American Founding Fathers, the United States was ushered into history on the foundations of free market principles. Today the Founding Fathers would gasp at the size of the current U.S. government and how intrusive Washington has become.
During the Cold War period, Ronald Reagan often cited that economic prosperity taking place outside the walls around the Soviet Union would eventually help defeat Communism. He argued that the Soviet government had an ineffective economic system that was doomed to fail and of course he was right. Eventually Moscow could not control the millions of people trapped behind the "Iron Curtain" when they realized that on the other side was a better life awaiting. By the end of the Cold War however, the West and in particular the U.S., squandered the opportunity to help lead these peoples to real prosperity. Rather than allow the newly freed peoples of former Soviet republics, and other former communist countries the opportunity to pull themselves up by the boot straps, the Euro-Atlantic alliance decided instead to divide and conquer them. Firstly this was tested when a newly united Germany took center stage in the international arena leading a united Europe to recognize the independence movements in Slovenia and Croatia thus breaking up Yugoslavia - the most multi-ethnic country in Europe, and certainly the least autocratic of their communist neighbors. Next, was to foment revolutions in governments that may lean towards Moscow. As some of these former communist countries embraced Europe and the United States, they received the coveted title of being "pro-Western, regardless if they are genuinely democratic or try to implement real capitalism. In other cases, the pro-Western politicians came from the same government that was previously subsidized from a bankrupt Moscow. These pro-Western countries simply swapped their allegiances and began taking handouts from Brussels and Washington. The irony however, was that instead of embracing the free market reforms that Reagan advocated for the peoples within the Iron Curtain, a new European Union emerged that absorbed some of these former communist regimes morphing into a new super state. Today, the EU micromanages the European economy while its ineffective beau racy will soon rival the managed economy of the Soviet Union!
By the time Vladimir Vladirmirovich Putin became the president of the Russian Federation, the Russian economy was in a shambles while its former communists neighbors where enjoying growing prosperity after their governments sold off state assets. This initial period of privatization allowed a quick influx of hard currencies to enter their economies as Europeans and other foreign investors began to snap up state run enterprises. However, as these countries become integrated into the European bureaucratic apparatus, Brussels can now dictate how these countries must run themselves rather than allowing the market to drive the economy. For example, the EU can tell the Poles how they should label and define vodka rather than allowing the Poles themselves. There is no question that much of the former communist bloc has benefited by the technical know how and investments from Europe after the USSR collapsed. Even the intent and idea of uniting the European markets is novel at least in theory. But in any case, EU expansion is running out of steam as is evident of the status and performance of newly admitted EU members Rumania and Bulgaria, more evidence that it is not EU membership alone the magic wand that can bring about economic prosperity but rather real free market implementation.
Case in point is the once former Soviet republic Moldova. Moldova is officially an independent country no longer under Moscow's rule. However, the Transdniester region of Moldova (predominately Russian speaking area) separated itself from the central rule of Chisinau, the capital of Moldova. Moldova receives backing and support from the United States, NATO and the EU. Moldova also has started the path to the necessary reforms for EU accession. Why that Moldova is then is one of the poorest countries in Southeastern Europe? Across the Dniester River, one can look at a contrasting picture when you consider the breakaway Transdniester Region. This area which is de facto independent of the "pro-Western" government in Chisinau is experiencing high economic growth while attracting outside investment. Today rosy economic reports are coming from Tiraspol, the capital of Transdniester. Since they have also adapted an even smaller flat tax than Russia, reduced government bureaucracy, and created a more business friendly environment than is the case outside of Transdniester, this region will ironically be better off without EU's intrusion. Could this serve as a new model for other former communist countries who may grow tired of a stagnant EU?
Always follow the money. Signs already may suggest that "pro-Western" countries may again swap allegiances as Moscow grows prosperous. The vehemently pro-Western government of Georgia is facing stiff opposition and growing street protests. In Serbia, where the U.S. is the largest single investor in that country, may soon see Russian capital flowing in. Especially with the fate of Kosovo-Metohija and the U.S. attempts to centralize Bosnia, Serbia may soon realize it could benefit from a closer relationship with Moscow. Next door to Serbia, the Serb Republic within Bosnia Herzegovina is also enjoying support from Moscow to counter attempts by the U.S. to integrate the Serb entity into a Muslim dominated centralized state. If this trend continues, the Serb Republic could also follow the "Transdniester Model" to build a more prosperous free market outside of Sarajevo and U.S. control. Even the new
pro-business government of Poland is pledging to strengthen Moscow - Warsaw ties, and I predict that if Russia continues its economic success, more of her neighbors will try to get into the action.
Throughout the world one can find examples of how the free market can win. While the U.S. wastes its time on trying to build democratic institutions in Iraq, it should instead focus on building a free market there first. While factions butcher each other in that country, Iraq's other oil rich neighbors Saudi Arabia, Kuwait, United Arab Emirates, etc., enjoy unprecedented prosperity and relative stability while being ruled by undemocratic monarchs. Even U.S. ally Egypt is faced with a similar situation of trying to build a free market system before it can democratize. Although some of Egypt's opposition faces a similar fate to Russia's opposition, Cairo has enacted reforms to cut taxes and encourage a free market. Should Egypt's President Mubarak lose his grip on power, the Muslim Brotherhood will surely win elections and establish an Islamic regime in Cairo creating more instability in that already volatile region.
Time will tell which side will win as the war between socialism under the guise of democracy, versus free market capitalism continues to wage for hearts and minds throughout emerging markets. If the West, i.e. European Union continues to embrace "socialist democratic" policies, it will too implode like the USSR. Will the peoples of Europe and especially former communist countries benefit from a chaotic but democratic Russia or a stable free market one?
