Igor Yurgens And Russian Democracy

In February a Moscow think tank run by Igor Yurgens, a liberal economist and one of Russian President Dmitry Medvedev's closest economic-policy advisers, delivered a scathing critique of the government's shortcomings in combating Russia's deepening economic crisis—and a set of radical prescriptions for reversing Russia's dependence on oil and reducing its crippling bureaucracy. The report sent shock waves through Russia's establishment, not least because public policy debate over the Kremlin's course has become so rare.

Yurgens now argues that only by instituting dialogue between government and society, and rebuilding the democratic institutions that were made irrelevant under Putin, can Russia ever overcome its deep economic problems. He spoke to NEWSWEEK's Anna Nemtsova in Moscow.

NEMTSOVA: Is your institute the source of Medvedev's liberal political ideas?
YURGENS: We are a source of policy ideas for the president and the government. We started working with Medvedev a few years ago on a series of nationwide renewal projects. It was a new page for him. Medvedev told us that the Kremlin doesn't need brown-nosers, it requires an honest and independent picture of what is actually going on. Today, the most honest and independent opinions on Russia's problems are coming from the liberal wing, rather than from the so-called statist patriots. The pendulum is definitely swinging our way.

What are the main problems with the government's policies?
Our ideal scenario is that the state should mix liberal and statist policies. They should allow the market to decide what industries should die naturally, but at the same time selectively support the sectors whose collapse would cause the most social upheaval. We recommend the state should stop helping its favorite oligarchs and spend its money on strategic goals like economic diversification, and developing nanotechnology, biotechnology and information technology. The biggest fault is that the government has not explained its strategy to people, and there appears to be favoritism in selecting which businesses to bail out. People believe that the state is helping its friends and letting others fail.

Can your reforms break Russia's oil dependency?
Our oil reserves are not unlimited. The most important thing is the diversification of business and industry—something that we have never had time to do before. If we do not catch up with our competitor countries now, we will never survive the next crisis in 10 to 15 years' time.

Who is getting in the way of reform?
There's a very simple answer to that. The old U.S.S.R. had 300,000 bureaucrats. Today in Russia we have 1.4 million. Bureaucrats always resist everything new. Nobody—not even the most progressive bureaucrat—wants to come to work and undo everything he has been doing all his life. One of the government's worst decisions [to abolish elections for regional governors in 2004] was made at the peak of the Chechen war, when the country was still deeply criminalized. In southern Russia, criminal clans used the democratic process to get elected as governors. Putin had to construct his "vertical of power" [by introducing Kremlin-appointed governors] in those regions, otherwise everything would have blow up. On the road to establishing the Kremlin's control, [however], we lost freedom of our press—it shrank down to just three newspapers and a single radio station, which are read and heard only by the tiny Russian elite. Now the biggest challenge we have is how to make this hard bureaucratic system more flexible, expand democracy and raise public dialogue about the country's future to an entirely new level.

Freedom of speech is vital. It's one of the reforms Russia needs most. Then the old institutions of power should be broken. Now is the time to develop real democracy. If the crisis grows tougher, the reputation of United Russia [the ruling party] will suffer gravely. At the moment we do not have any real political competition, and few dare to struggle against the ruling United Russia party. The government needs to strengthen democratic institutions now—it's a matter of the basic principles of survival. Just as the state created its "vertical of power" by fiat, it now needs to dismantle reform by fiat—for the sake of rescuing itself.

What are the main differences between Putin and Medvedev?
Mr. Putin grew up in an imperialist [Soviet] Russia, where people respected the empire. Mr. Medvedev grew up in a more classically liberal atmosphere, among lawyers and several generations of intellectuals. As [the first Soviet education minister] Anatoly Lunacharsky used to joke, he didn't just graduate from his own university but those of his grandfather and father too. Both leaders are very loyal, faithful people, and good friends. Between them, they reflect the opinions of the majority of Russians.