Putin’s Economic Vision: Centralize and Control Everything

Vladimir Putin inside of a full-size mockup of Russia's six-passenger "Rus" spacecraft. (Credit: RSC Energia)
Vladimir Putin inside of a full-size mockup of Russia’s six-passenger “Rus” spacecraft. (Credit: RSC Energia)

Bloomberg has an interesting report on Russian President Vladimir Putin’s economic strategy, which is characterized by the type of centralized government control that we’re now seeing imposed upon the space industry.

For all his vows to modernize and diversify the economy, though, Russia remains a nuclear-armed petrostate and Putin’s remedy for growth now is more, not less, government control.

“The measures the president is proposing will certainly limit competition and freeze modernization,” Alexei Kudrin, a Putin adviser who steered the country’s finances for more than a decade, said in an interview in Moscow. “They will lead to an increase in market regulation and protectionism.”

Unlike in his first term, when the benefits of major policy achievements such as cutting taxes were spread across the economy, Putin’s recent years have been marked by the creation of national champions in select industries such as energy, technology and aviation.

State enterprises now account for more than half of the economy, up from 30 percent when Putin came to power at the end of 1999, according to BNP Paribas SA. (BNP) As the bureaucracy swelled during that period, Russia emerged as the world’s most corrupt major economy. It ranks alongside Pakistan and Nicaragua at 127th, out of 176 nations, by Transparency International, down from 82nd in 2000.

Russia is now consolidating almost all of its space industry under the government-owned United Space and Rocket Corporation. Deputy Prime Minister Dmitry Rogozin, who is a great admirer of Josef Stalin, is overseeing reform of the space and defense industries.

Putin’s policies raise serious questions as the United States turns more to commercial rocket and space providers while Europe and other space powers strive to become more competitive. Is Russia’s leader for life doing precisely the wrong thing at the wrong time?