Russia is at a crossroads in how to build a strong, functioning state. Old models – such as the neo-Soviet model and the liberal Western model – have already been discarded by the Kremlin. So what comes next?

Today, Russia’s main challenge is not to fall behind the developed world in economic and military modernization. Photo: RIA Novosti

Global instability continues to challenge prospects for economic growth and political openness in the world. As we saw during the recent financial crisis of 2008, many states are vulnerable and are therefore tempted to look inward for solutions. In a worst-case scenario, this can lead to economic autarky and nationalism once more coming into fashion in parts of the world.

Russia, too, is vulnerable to pressures from this international instability. The global political system is destabilized and has entered a period of transition with a growing vacuum of power and institutions. Increasingly, we are witnessing great powers’ growing appetites to consolidate their perceived spheres of influence, whether in Europe or Asia.

Indeed, compared to other powers, Russia has been historically the most affected by disruptions of global order. It was hit the hardest due to its involvement in World War I by suffering a major revolutionary upheaval in 1917. And no other country suffered as much in terms of civilian casualties and economic destruction from its involvement in the World War II.

Today, Russia’s main challenge is not to fall behind the developed world in economic and military modernization. If Russia fails to modernize, it will become dependent on Western nations and China as a resource appendage by sacrificing the sovereignty and status of a great power it has historically enjoyed.

What makes it especially difficult is that this challenge must be met in the context of other alarming international developments including the threat of terrorism, growing regional instability, and strained relations with Western nations over the future shape of the international order.

Historically, Russia depended on a strong state construct to meet the challenges of modernization and instability. The strong state system is more centralized than Western-style decentralized systems and has the benefits of long-term planning and the concentration of the required resources for development.

But does Russia have a functioning strong state system today?

There is no question that Russian President Vladimir Putin deserves credit for preventing state disintegration following the chaotic 1990s by curbing the predatory instincts of the oligarchs, ending the war in Chechnya, improving socio-economic living standards, and instilling a sense of pride and stability in the country’s citizens.

However, preventing state disintegration and building a functioning state capable of modernization are different priorities. The era of prosperity in the 2000s has not solved some fundamental problems of economic and political development. Economically, the country suffers from excessive dependence on energy exports. Politically, the head of state remains unable to effectively allocate resources for development and operates as a broker in mediating disputes between various elite factions.

Today’s tasks are different. Russia can no longer merely collect petrodollars for its modernization. The state should encourage investments at home, create well-paid jobs in the industrial and tech sectors, activate local initiative, and crackdown on corruption like it never did before.

Relative isolation from the Western economies due to sanctions carries not only risks but also opportunities. Those opportunities include not only the revival of key economic sectors such as the recently revived agricultural sector, but also building a functioning strong state. Sanctions may help Russia if its leadership acts by taking an active role in unleashing new social initiatives, designing new projects, and allocating new resources. Sanctions should not, however, push Russia toward an autarkic, Soviet-style system.

Russia therefore must steer its way between two extremes, the Soviet and Western ones. The neo-Soviet path is a dead end. Russia is better off with globalization moving forward, not backward. Instead of suffocating businesses, the state should establish clear rules and create additional incentives for private initiative and investment inside the country. The example of Pyotr Stolypin’s ambitious program of economic modernization nearly 100 years ago remains as vital as ever.

[Stolypin was an influential prime minister and economic reformer under Nicholas II. He started an ambitious program of economic modernization to deeply integrate Russia in the world’s economic system – Editor’s note]

The pro-Western path also has not worked for Russia historically and is increasingly being challenged by the West itself. During times of crisis, liberal Western states, too, seek to obtain additional policy tools if not for development, then at least for averting further economic meltdown.

Another aspect of Western-style systems is democracy. While Russia can certainly use more democracy, building a functioning strong state is no less important and should not be viewed as undemocratic. In the context of international competition, the “lack of democracy” argument is sometimes deployed to undermine state-building efforts and encourage compliance with stronger nations’ vision and foreign policy preferences. Democracy / rights and governance / order are simply two distinct dimensions of the political system and they should not be conflated. Depending on their international predicaments and domestic political cultures, different nations strike a balance between the two differently.

Following the Ukraine crisis and the territorial integration of Crimea, Russia’s development path is not yet determined. The good news is that Putin has strengthened state autonomy further and is no longer as dependent on the old influences from Boris Yeltsin’s “family.” The era of the dysfunctional tandem is also largely over. The not so-good news is that much of the process of seizing power from various factions was accompanied by a shrinking space for public debate and a demoralization of the opposition.

The overall process of building a strong state in Russia is far from complete. For Putin’s inner circle, the choice is to consolidate power within the Kremlin or to move toward building a more diverse coalition for development. The latter should result in the state’s ability to offer a new vision, consolidate the required resources, and remove from the government those interested in business as usual. What will be the future direction of the state remains to be seen.

The opinion of the author may not necessarily reflect the position of Russia Direct or its staff.