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‘Russia was already failing before the war’ Economist Daron Acemoglu on stopping Putin with sanctions and the difficult path to democracy

Source: Meduza

After two months of Moscow waging all-out war on Ukraine, it’s become clear that it will take more than Western sanctions to stop the Russian army. But after years of Putin’s regime tightening its grip on the country, neither Russian society, nor the elite, appear to have any influence on the Kremlin’s policy of aggression. How did Russian elites become so powerless? Could depriving Russia of oil and gas revenues bring about regime change? And is there any hope left for a democratic Russia? For answers to these and other questions, Meduza turned to economist Daron Acemoglu — a professor at the Massachusetts Institute of Technology (MIT) and the co-author of Why Nations Fail: Origins of Power, Poverty and Prosperity.

Our readers likely know you as the co-author of Why Nations Fail. Do you think that Russia failed as a nation by starting this war against Ukraine?

Well, I think Russia actually, unfortunately, was already failing before the war. And I think the war is just a continuation of that trend. The Soviet Union had a lot of problems: institutional, economic and in its latest stages, obviously cultural. And it was going to be very difficult to build what we call inclusive institutions starting from the institutional structure of the Soviet Union. I don’t know whether it was even feasible in the short run, but after Putin came to power, I think he completely reversed any possibility of building anything approaching inclusivity.

[Putin] was aided in that by many things, by the fact that Russia, the Russian Federation, now could actually become better integrated into the world economy and rely on its natural resources. And [by] the fact that it was lawless, it had become lawless in the process. Therefore, it was very easy for him to build a coalition that was powerful enough, rooted in the KGB, rooted in the power of the emerging oligarchs, and also control of the media. But I think it went to an extent that I think few people could have foreseen it at the time.

I think one feature of the system that Putin was very successful in building is that he becomes completely isolated and surrounded by yes-men and becoming more and more drawn into his own propaganda. You see that in Turkey with [President Recep Tayyip] Erdogan. You see that in many African nations when they had their own kleptocratic rulers. And then once that happens, it becomes very dangerous because there are really no institutional checks. That was the logic of the system that Putin built. But there are also no voices to tell him things that are going to be disastrous for himself and for Russia.

Many countries that reached this stage are not strong enough to really do damage. The Democratic Republic of the Congo under Mobutu could do regional damage to some extent — but it had limits. But Russia, again, now as an inheritance of the past, has nuclear weapons, has an enormously large army that has not just nuclear weapons, but other very modern armament, as well as a super-charged cyber force.

So all of these now are unmoored, unchecked. And that is actually the second stage of Russia’s fate. So I think that it is a complete continuation of the earlier failure, institutional failure, economic failure that has, to a large extent, created very little gains for the Russian people, but enriched an enormously kleptocratic oligarchy, many of them who live in London, not in Moscow, but so be it. Now we are entering the second phase of that failure. And that is actually very dangerous to the outside world as much as to the Russian people.

And what exactly do you mean by this second phase? The war itself or something that can happen inside Russia after the war?

Well, I am not a Russia expert, so it is very difficult for me to tell what can happen inside Russia. So, when somebody like Mobutu in the Democratic Republic of the Congo or [President Robert] Mugabe in Zimbabwe engage in this type of action that is dangerous for the regime, dangerous for himself, and of course, ruinous for the people, there are powerful forces within the regime that can try to topple them. But I think you know, from the outside at least, Putin’s control is firm enough that that’s not likely.

From what I can glean, that information that he received from his generals, from the people around him, from his advisors, wasn’t accurate about how quickly the West would fold and how quickly Ukraine would collapse. So now we are at a very dangerous point. He’s not likely to pull back, but this war is not going to end even when it is limited to the east, which seems to have become more so.

So there is going to be every danger that there could be escalation. I think there is going to be a lot of chatter around Putin’s close circle saying that this is all the fault of the Westerners who are giving weapons to Ukrainians. And we have to teach them a lesson. Again, [there’s] no other voice to tell them this is really crazy, this is really dangerous. And so it’s an unpredictable phase.

In your recent piece for Project Syndicate, you said an important pillar of the Russian regime is a “deal” between Putin and his allies, where in he rules, doing whatever he wants, and they make their fortunes. But actually, most of them lost any chance to making fortunes now. Do you think this changes this “deal” and, if so, in what way?

Well, I think it is probably too late for the deal to change, meaning that if the situation was different from the beginning, the owners and top managers of oil giants, for example, or other natural resource monopolies would start pushing back against some of the system that is so centered around Putin and his entourage. But right now, they have no independent power. They get all of their power from Putin.

I think Roman Abramovich is a very good example. From the outside, he looks like an independent, powerful businessperson. But a lot of evidence suggests that he owes it all to Putin. And and he does not have much room for independent action. Sure, now, life is much worse for him. He probably won’t live in London and he might lose the Chelsea [soccer] club but you know, he’s going to continue to be very rich and probably his family will continue to enjoy some of the benefits of wealth that has come through these channels. So I don’t think it’s a complete collapse of this regime.

Now, it will probably be the case, that’s my guess, I don't know, cannot know for sure. But people like Abramovich might advise Putin to reverse course but how much convincing power they have? and they certainly don't have any type of veto power. So the question is whether that will be influential. I mean, I think that's probably why he was trying to do as sort of an envoy between Ukraine and Russia for example. But I don't know how influential that will be. I mean, I hope it is influential because I think any reversal in the current Russian strategy would be great for Russian people and great for the Ukrainian people and great for the rest of the world.

In another books of yours, The Narrow Corridor, you argue that democratic development requires an active struggle between the state and society, and unless there is this struggle, liberty can’t be achieved. What does it take for a society to become stronger and then begin this struggle? We now see this drastic difference between Ukrainian society, which successfully rose up in 2014, and Russian society, which is either reluctant or unable to begin this struggle.

Well, I think that’s very, very important — in every case it’s a protracted process. And I don’t think anybody understands it fully. I completely agree with you that Ukrainian civil society has actually developed a lot. And in fact, you see that not just in the two “color” revolutions [the 2004 Orange Revolution and the 2013–2014 Maidan Revolution], but in the general organization of civil society, in media, in the sort of general diversity of voices if you were to visit Kyiv or other parts of Ukraine.

In the Ukrainian case, I think there are three factors that were important. The first one is historical. Ukraine had a national identity, separate from the Soviet and the Russian one. And it did not have the same degree of powerful state control because the state had migrated over time to Saint Petersburg and Moscow. Also, that became probably heightened during the great famine [the 1932–1933 Holodomor] that really affected some Russian people, but affected Ukrainian people much more severely, and was very clearly viewed by least some of them as perpetrated by the communist leadership. So those, I think, have created the historical precedent for it.

Second, I think Ukraine, after the breakup of the Soviet Union, turned West as a countermeasure towards Russian dominance. Not completely. Obviously, business with Russia played an important role for the fortunes of some of the Ukrainian oligarchs. But [Ukraine] certainly did turn West, and ideas from the West, studying in the West, [and] Western media’s penetration into Ukraine, I think, have motivated the youth to become more active.

The third [factor] is that the [Ukrainian] state never had very firm control. You know, there was oligarchy, there was sometimes repression under [ex-President Viktor] Yanukovych, but it wasn’t like a strong society that’s capable of controlling the media. So, incompetence sort of fueled civil society action, especially if it’s not coupled with repression. So I think all of these [factors] have created a very vibrant civil society in Ukraine.

In Russia, you have the beginning of this type of civil society towards the very end of Gorbachev’s rule, the very beginning. And then during Yeltsin’s time and even as late as 2000s, you have free media — some free media in Russia that was not very heavily censored. But the state control is always very, very strong. And you see the murders of journalists, or politicians, or former dissidents, wherever they are — in London or in Moscow. Those are very symbolic gestures. Those are about silencing the civil society. And and I think progressively — after the middle of the 2000s, and accelerating with the annexation of Crimea, and then especially after the hardening of the line against [opposition leader Alexey] Navalny — the room for civil society has been getting smaller and smaller.

And of course, now the level of control has increased. I would certainly not say that Russian civil society is doomed to insignificance. But right now it's not strong enough to be a counterweight to Putin. And who can blame it? I mean, I think being a civil society activist right now in Russia is very, very dangerous. It's one of the most dangerous places to be a civil society activist in the world.

Is it a dead end? What can be changed? Does the state have to become weaker for civil society in Russia to evolve?

Well, some aspects of the state have to become weaker and some aspects of society’s organization have to change. So, obviously, if you make the state weaker in tax collection, it’s not going to help civil society. But the strength of the Russian state is most palpable in a security apparatus that did not become reformed or weakened after the transition from Soviet rule.

If you also look at the economy of Russia, especially before 2014, you can characterize it as glass half full, glass half empty. You have a vibrant tech sector. You have consulting, you have lawyers. So there is some room for people to develop an independent identity but it’s a very limited space. So, you can be a lawyer, you can be a management consultant, you can work with Western companies. But if you start investigating what’s going on in the state sector or in natural resources, there’s not a lot [of opportunities to be independent]. And a lot of the money comes from natural resources, a lot of the middle class income for people who live in St Petersburg or or Moscow has its roots in the natural resource and oil and gas sector. So that creates much less independence to civil society. So in a post-Ukrainian crisis, post-Putin period, I think a very important part of that step would be to have a more independent roots for economic activity, for a larger segment of the private sector, so that civil society dynamics can be more autonomous.

Did Russia’s macroeconomic stability, something so precious to Putin, only exacerbated this demise of civil society?

Absolutely. That’s exactly correct.

In one of your talks, you mentioned that the West should fully stop importing Russian gas and exclude all of the Russian banks from SWIFT. Wouldn’t that provoke more aggression from Russia?

It may. Again, it’s the same danger if the West continues to help Ukraine, but it has to do something. Russia obviously is punching above its weight in terms of international matters. Its GDP is much smaller than the UK or Germany. It does not have as advanced technology in most fields, but it has a very strong military. It has nuclear weapons. But more importantly, I think it instills fear in every part of the world. Russian intervention in Syria was a show of force at some level.

So the question is, how do you negotiate that? I think the more the West is viewed as completely giving in to Russia it will increase the confidence of the ruling clique around Putin. And I think that was exactly the lessons that they drew from Syria. Russia can do anything it wants, and the West is too weak and too afraid to interfere. And obviously that means it’s a dangerous period.

That’s what I was trying to refer to earlier on, because I think the West has learned a lesson that it has to put [up] some resistance, [but] where is that resistance more dangerous and where is that resistance going to be more effective? I think the Biden administration has the right instincts. I think the No-Fly Zone would have been too dangerous. I think sending the most advanced American equipment directly to Ukraine might have been too provocative. But economic sanctions, I think, are more effective and more likely to be perceived as just a type of great power rivalry that the Soviets and Americans and NATO were engaged in before the fall of the Soviet Union. So I think that’s why doubling down on the economic sanctions does makes sense, in my opinion.

In your opinion, what is the main reason why the West is not doing that yet? Is it this fear that you mentioned or something else?

I think the West is clearly divided, although it has come together and there are big fears about economic recession in the West, it is a natural calculation that many politicians are engaged in. I was actually even surprised that at the early stages of the crisis that the German chancellor immediately canceled Nord Stream 2. But it’s going to be harder for them to put up with the significant increase in energy prices that would be the result if they stopped Nord Stream 1, as well. But I think if evidence of war crimes mount, that will actually trigger such a move.

There was the same notion at the beginning of the war about the influence of evidence of war crimes. But now the world has seen Bucha and other atrocities, and it really seems that the main problem is this division that you mentioned.

Absolutely. But Bucha was at a much higher level of evidence than anything that had come before. So I think it does have an impact.

Aside from the current sanctions against Russia, the world’s leading countries intend to carry out decarbonization and switch to green technologies. If, over the course of say the next 10 years, Russia is deprived of a large portion of its oil and gas revenues, could this provoke institutional changes?

I don’t think it’s that automatic. Obviously the current Russian equilibrium, the current Russian economic political system, could not have arisen without oil and gas. But it’s not automatic. It’s not like you take the oil and gas revenue [or] you start reducing it, and [things] will immediately change.

The transition to green technologies is a process. It’s not going to happen overnight. There are many different moving parts. I don’t really agree with this view, but many people view gas as an important part of the transition because it’s cleaner than coal and oil. And it could be a significant part of that transitional phase where green technologies are ramping up, storage is still a bit of a problem.

Russia and Russian gas are very attractive to the Germans, exactly because of that reason. They want to reduce carbon emissions. They have ruled out nuclear power. They just can’t do it on the basis of the existing solar and wind and other options. So I don’t think we can think of the next ten years as the period where suddenly the Russian political economy will change because oil and gas revenues will be much less — unless again, it’s through sanctions. The sanctions could have exactly that effect, but it’s anything that happens through that channel will be destabilizing.

By “destabilizing” do you mean the state getting weaker in terms of its military potential?

Exactly. The state is getting weaker. Putin and his entourage trying to find [responses] to it. One might be selling more to China, which would not be particularly destabilizing, but there might be other responses again related to the military, like the threats that were recently made against Finland and Sweden, for example.

A lot of people in Russia see current developments as a return the USSR — only worse, like a USSR 2.0. Is this actually a reversal to Soviet times or no?

Well, it is not a reversal to Soviet times, but there are aspects of it that are […] worse. It depends on what period you compare it to. I think compared to Stalin’s time, [it’s not worse]. I think what came out of Stalin’s rule was a more circumspect dictatorship. More fear that things were going to get out of control. Khrushchev, for example, wasn’t somebody who had the same level of control as Stalin had. And that sort of checks and balances, even if they just develop within the communist elite, I think brought some stability.

It’s amazing if you think about it. We went through a Cold War and there are some international relations scholars that say, oh, you know, the Cold War period was great. You had this threat of mutually assured destruction and that stabilized the world. I completely disagree with that. That was such an unstable period. You could have had a nuclear war at any point in time because of mistakes, misunderstandings, extreme behavior. But I think after Khrushchev, there was a sort of a recognition of these dangers and there was a little bit more of an effort to sort of contain some of these aspects. Now, we’re not as bad as “back to Stalin,” but I don’t see those same checks and balances within the Putin leadership as there was very much within the communist elite leadership at the time.

It’s a very popular view in Russia that because of the particular culture, and a desire for a “strong hand,” Russia will always end up as an autocracy and can’t embrace democracy fully. Do you agree with that? And if so, what can be done about it?

I disagree with that [idea]. First of all, look at Russian culture. If you go back to the 19th century even though Tsarist Russia is a horrible place for serfs and for peasants — [it’s] hugely unequal, there’s quite a bit of repression — you have some of the best literature, some of the best music, some of the best thinking in terms of political thought coming from Russia. It’s completely integrated into some parts of the West. In some ways, it’s actually more advanced and more adventurous in terms of its thinking.

So it’s hard to say that Russia as a whole is a “backward” sort of cultural place. But obviously there is a specific set of norms and hierarchies that have been established over several centuries, [according to which] a large portion of the population is subservient. If you look at Russian serfdom — I mean, I’m not an expert — but the serfdom in England or in France was cruel and Russian serfdom was much more cruel. So that sort of hierarchy, of course, leaves scars. But I don’t think there is a specific Russian culture that’s unchangeable. And I think Ukraine proves that, you know, Ukraine in some sense is a real thorn on the side of Putin in the same way that Taiwan and Hong Kong are a thorn on the side of the Chinese Communist leadership because they show exactly what the alternative path could be.

If you’re going to go back and define a sort of a Russian culture at the end of the 19th century or early 20th century that is going to doom the country to oppression, you wouldn’t say that’s very different in Kyiv than in St Petersburg. But you see the divergence and the same thing in Taiwan versus China. So I think it is a painful process. And certainly, if the KGB had been as strong in Ukraine as it had been in Moscow, I don’t think Ukraine would have happened in the same way. But I think the KGB or the security services is much more important for the Russian story than Russian culture, in my mind. And then of course, once you have that repression, it sort of conditions what people’s expectations are, what the norms are — and what they are told by the media conditions those things, as well.

What prerequisites can we imagine for Russia to finally change its path and start moving in a democratic direction? When Russia becomes effectively isolated from the world, won’t it naturally be harder to move towards democracy? Is this feasible or is it going to take 50 years?

I don’t know. I wish I had the answers to these questions. But I think certainly what comes out of this process is a complete delegitimization of the security apparatus and the current oligarchy in Putin’s entourage — I think that would help break it.

I think what enabled, for instance, a much swifter transition to democracy in South Africa than anybody could have hoped was that in the course of about ten years, the apartheid regime became completely delegitimized — even in the eyes of some of the white South Africans. And if the current Russian institutions become delegitimized in the eyes of the middle class, then I think there’s every danger and possibility [for radical change in Russia’s development]. I think that would be a great beginning. But it doesn’t guarantee anything because that delegitimization might then open the door to another dictator or another populist who promises a lot, but then sets up a regime that’s very similar. After all, Yeltsin came to power with great hopes and great promises, and he was the one who brought in Putin. So, I think that that is not a guarantee.

I also think Russian isolation doesn’t help. But on the other hand, I don’t think Russian civil society such as it is, or Russian youth, or the Russian middle class, are ever going to be as isolated as they were during Soviet times. There’s the Internet. Thousands of people have fled Russia because of reaction to the war, I understand. And they are in constant touch with the people in Russia, or at least some segment of it. Russia and Ukraine are still very well integrated in terms of knowledge flows — again, that might change. But I think it’s not going to be the same level of isolation as what we saw during Soviet times.

The economy, the war, their reactions, their lack of a a convincing rhetoric of where Russia is going – I think all of these will contribute [to the Russian authorities losing legitimacy]. Of course, if the media was freer, it would have helped, but after all you still have the Internet and VPN.