The muddle in the huddle

By Aussiegirl


Kremlin economic muddle

While Yushchenko and Tymoshenko waste no time in restucturing and dragging Ukraine's economy in line with other western economies in preparation for WTO and EU membership, Russia is going in the opposite direction. Why am I not surprised?

Forbes has an in depth analysis of the muddles in the huddles of the Kremlin that will make any economic policy wonk go gaga. Here's just a sample of the much longer article:

Global Strategic Analysis
Policymaking Muddle In Russia
Oxford Analytica

While frictions between members of the same team in a national administration are common, the situation in Russia is unusual in that some disagreements are both fundamental and publicly aired. Also, there have been a series of muddles that indicate an unusual lack of coherence in the public administration.

The fundamental policy split in Russia's policymaking elite is between liberals and statists. The controversy over the state's attack on the Yukos oil company has revealed this split most clearly, but that is not the only matter at issue between the two camps. The division is between those who broadly favor free markets and private enterprise and those who have a traditional Russian preoccupation with national security and put more trust in the state as an economic manager.

The clearest liberal voices inside the state machine are German Gref, head of the Ministry of Economic Development and Trade, and presidential adviser Andrei Illarionov. However, senior officials in MERT and the Ministry of Finance broadly continue to pursue a liberal line.

(And let's not forget that all-important macro-economic factor -- yes -- Evgeny Primakov attacks Gref's 3-year projection as being "idologically flawed". They just can't forget that ideology stuff, can they?)

. . .Closely connected with this issue of state intervention is a controversy over medium-term growth prospects. MERT has the chore of devising rolling three-year projections of the economy as a framework for policy. President Vladimir Putin has been calling for a doubling of gross domestic product over ten years, but Gref's team continues to come up with projections well below the average required rate of 7.2% a year. They say that growth at a rate above 7% is unlikely before 2011 and requires a faster pace of reform. Yevgeny Primakov, a former prime minister and now a member of the upper house of parliament, described Gref's latest three-year projections as "ideologically flawed" and as "ignoring the crimes and mistakes of the 1990s." A "new phase of policy" was now needed.

Primakov's criticism of Gref is an example of a widespread phenomenon: courtiers and underlings displaying their zeal for what they see as the new turn in Kremlin policy, and creating more trouble for senior policymakers in the process.

(Some things never change.)