The Politics of Bad Governance in Contemporary Russia

Chapter

5

The

Technocratic Traps

of

Policy Reforms

HOW DOES POLITICS AFFECT policy and vice versa? Why are these two dimensions of political development so often at odds and how this does this relationship affect the quality of governance? Very often, power struggles, the essence of politics, inhibit efficient policies, and this is why numerous projects of policy reforms are implemented only partially and/or in a distorted way or result in unanticipated and undesired outcomes. There are many reasons for contradictions between politics and policy—including political business cycles that put policy changes between elections into question, ideational polarization of political actors whose policy priorities differ widely, and the inability to reach major policy agreements that may block any changes or even lead to policy decisions that make the situation worse than the previous status quo. Examples of the juxtaposition of politics and policy are numerous across countries and time periods. Thus, it is no wonder that many politicians, policymakers, and experts around the globe can endorse the bold statement of Russian economist and former minister of economic development Alexey Ulyukaev: “The main question of every evolution is constraining political power: how to provide competent decision-making which will depend upon knowledge and experience and not upon voting results, and how to achieve a ‘regime of non-interference’ of politics in other spheres of public life.”1

In fact, a “regime of non-interference,” if and when it has been achieved in those political and institutional contexts where policy decision-making does not depend upon voting results, has seldom brought positive effects from the perspective of quality of adoption and implementing policy decisions. To a large degree, this disjunction is acute for authoritarian regimes, where voting results do not directly affect possession of political power.2 Yet major advancements from policy reforms in authoritarian regimes are relatively rare.3 Moreover, authoritarian leaders sometimes have a vested interest in the inefficiency of their own policies, since it may be used as a mechanism for maximizing political power—the “bad policy as good politics” paradox.4 As I stated in the preceding chapters, these leaders and the members of their winning coalitions are beneficiaries of the politico-economic order of bad governance and have little interest in having it undermined from within. That said, many autocrats are proponents of efficient policies aimed at rapid and sustainable economic growth and socioeconomic development of their respective states. In democracies, politicians may also attempt to insulate policy from politics,5 but the results of reforms in various policy areas are not always in line with the expectations of supporters of the regime of non-interference.

The unavoidable and irreconcilable contradiction between politics and policy, widely discussed in the literature,6 has often stimulated searches for mechanisms to improve the quality of policy intended to limit its dependence on the directions being taken by politics. Following William Easterly, I will label these mechanisms “technocratic”—as opposed to political mechanisms, which imply that decision-making in both politics and policy arenas is conducted by the same legitimate actors. The goal of this chapter is to analyze the opportunities and constraints inherent to technocratic mechanisms of governance in terms of policy-making and the effects of policy reforms on the quality of governance in post-Soviet Russia. In the 1990s competitive and polarized politics were at odds with market reform policy and were widely perceived as a hindrance to economic transformation.7 Conversely, in the 2000s, some policy advancements in Russia were achieved at the expense of degradation of politics.8 The insulation of policy changes from politics has not always led to success,9 and certain policy outcomes paved the way for the rise of authoritarian tendencies10 but brought mixed results at best during the entire post-Soviet period—illustrating the inherent weaknesses of the political mechanisms for governing the state.

Explaining why following technocratic recipes has brought policy successes in some cases and not others requires an in-depth analysis of technocratic mechanisms for governing states, one that will reveal the opportunities and constraints inherent to technocratic policy reforms (described in chapter 4). The argument of this chapter is that, given the key role of rent-seeking in governing post-Soviet Russia, attempts at significant policy reform and improving the quality of governance using technocratic mechanisms meet major resistance from interest groups and parts of the bureaucracy (who often unite their efforts in informal coalitions). At the same time, the regime of non-interference has left little room for the emergence of broad and sustainable pro-reform coalitions. This is why the personal priorities of political leadership have become the main, if not the only, source of policy reforms. Yet they are often insufficient for successful achievement of the goals of policy changes and can even turn into an obstacle to these reforms. The experience of policy changes in the 1990s–2010s in Russia has demonstrated the range of vicissitudes faced by the technocratic model of policy reforms in unfavorable political and institutional environments.

The structure of the chapter is as follows. After theoretical considerations regarding mechanisms of interaction between politicians, bureaucrats, and technocratic policy reformers in nondemocracies, I present an overview of some policy reforms in Russia and their implementation during the 1990s–2010s within the framework of analysis of the regime of noninterference of politics in policy. Possibilities and opportunities for realist alternatives to the technocratic model of policy-making are discussed in the conclusion.

The Technocratic Trap: Dictators, Viziers, and Eunuchs

Technocratic policy reforms are deeply embedded in global history. Most policy changes in the past, both successful and unsuccessful, were conducted in various states and nations within the framework of a technocratic model of policy-making. Political leaders exerted a firm control over politics, and due to domestic and international challenges opted for policy reforms intended to reduce costs and increase benefits, both for their countries and for themselves. But since policy reforms require professional skills and expertise, while their results are unpredictable by definition, it is no wonder that the role of reformers has been delegated to those officials and/or professionals who have certain specialized competences and may be blamed for policy failures in case of undesirable outcomes. In fact, policy reformers in various areas are similar to company managers hired by the owners (in this case, political leaders) to accomplish strictly defined tasks. With that said, policy reformers enjoy a degree of autonomy in their respective areas and are accountable only to their bosses. Political leaders, in turn, benefit from a monopoly on decision-making and policy evaluation, and therefore, can insulate the substance of the reforms from public opinion and, to some extent, from interest groups. Many historical reformers fit this description, ranging from Colbert and Turgot in absolutist France to Witte and Stolypin in Tsarist Russia, and from the “Chicago Boys” in Chile under Pinochet to the Opus Dei technocrats during the last decades of Francoist Spain.

At first sight, this institutional design facilitates the autonomy of technocratic policy-making from politics in both democracies and nondemocracies (even though the nature of politics in these regimes is different). However, it leads to an aggravation of principal-agent problems, and their scope increases with the scale of policy changes. Political leaders are unable to judge the credibility of policy proposals and the quality of their implementation. At best, feedback on policy outcomes reaches the top of the power hierarchy too late (or, conversely, too early in the case of reforms that may bring fruits only in the long term). At worst, especially in authoritarian regimes, this feedback may be heavily distorted and contribute to poor political decisions.11 Asymmetric relationships between political leaders and technocratic reformers are similar to those between company stakeholders and managers: their interests and incentives differ hugely by definition. The alternative to the technocratic model of policy-making is the political model, which implies that legitimate political leaders and/or parties themselves develop and approve major policy decisions (though these decisions are often based on external expertise) and bear political responsibility for policy outcomes, thus being unable to shift the blame onto technocratic reformers.12

However, the mode of interaction between political leaders and technocratic reformers is more vulnerable in terms of principal-agent relations: policymakers concentrate the power resources involved in their own hands, and those resources can be used (or rather, abused) for political purposes. Unlike top managers of companies who cannot overthrow the stakeholders who hired them, top-level technocrats may not only betray political leaders and join the ranks of the opposition, but also even transform from policymakers to politicians and take power for themselves. These risks increase alongside challenges to the political status quo (regardless of policy outcomes), thus raising tensions between political leaders and technocratic policy reformers. Successful and capable technocrats may be even more dangerous for political leaders than their unsuccessful and incapable colleagues, especially in authoritarian settings where power losses and regime changes usually result from intraelite conflicts and breakdowns of informal ruling coalitions.13 This is why political leaders are often tempted to prioritize the loyalty of technocratic policymakers over their competence. As Georgy Egorov and Konstantin Sonin convincingly demonstrate, the weakening of autocrats’ political positions often contributes to the replacement of efficient technocrats (“viziers”) with loyal yet inefficient ones, thus decreasing the quality of policy-making.14

Examples of betrayal of political leaders by their competent yet disloyal viziers may be considered an extreme version of aggravation of principal-agent problems. Although these practices are relatively uncommon, political leaders will still employ various techniques to prevent the disloyalty of technocratic policymakers without damaging their policy efficiency. In addition to oversight and monitoring of technocrats to reduce information costs, they also promote internal competition between state agencies and informal cliques within the state apparatus and at times constrain technocrats’ freedom of decision-making. Also, some policies face a formal and/or informal veto from political leaders (these two options are not mutually exclusive but rather complementary). The windows of opportunity for technocrats regarding policy changes are limited both in terms of the policy areas to which they are granted access and in terms of the scope of their influence on policy outcomes. The weakest link here is not the development of plans and programs of reforms but their implementation by the state apparatus, which is usually not controlled by the technocrats and has little or no incentive for policy reforms regardless of their content. If the quality of the state apparatus is poor, then the technocrats’ chances of successfully implementing their plans and programs (even when their hands are completely untied in conducting policy reforms) are slim. Therefore, technocrats limit themselves to partial solutions, diminishing the scope and domains of policy reforms to those specifically protected by political leaders who may grant their patronage to these changes for various reasons. These solutions are less risky in terms of disloyalty of technocratic reformers, but the benefits of the resulting policy advancements for political leaders and their countries are also far from obvious. This is why good intentions of improvements in certain policy areas may contribute to further worsening of the situation.

However, the most important challenge for technocratic policy reforms lies not along the lines of conflict between political leaders and policy reformers and is not even related to the resistance of the bureaucracy to policy changes (whether open or concealed) but arises from the policy influence of interest groups operating both within and outside the state apparatus. The gap between politics and policy-making opens a window of opportunity for “distributional coalitions”15 and numerous rent-seekers, whereas technocrats’ opportunities to build efficient informal (let alone formal) pro-reform coalitions are markedly limited. The struggle between technocratic policy reformers and rent-seekers over policy decisions was at the heart of the turbulent changes in Russia in the 1990s and the 2000s.16 However, the subordinated status of technocrats makes them vulnerable in terms of politics. Within the framework of the political model, politicians and/or parties may use the popular mandate to launch policy reforms in at least the early stages of political business cycles. Meanwhile, under the conditions of the technocratic model, these opportunities can disappear at any given moment if rent-seekers become more influential in behind-the-scenes lobbying and/or if opponents of the reforms successfully establish coalitions of potential losers from the policy changes.17 Although insulation of reformers from these influences may reduce the risk of policy changes being curtailed, it also reduces the political support available to technocrats and may provoke them into tacit alliances and compromises with rent-seekers.18 In essence, technocratic reformers can reach success only when their plans coincide with the priorities and preferences of political leaders. This is why the major political resource of technocrats is their ability to sell policy recipes to political leaders using bright covers and attractive labels whenever those leaders are willing to buy their proposals. Under the conditions of the politico-economic order of bad governance, this venture is questionable to say the least, and it comes as no surprise when the reforms become unsustainable, and are ultimately distorted, diminished, or revised—and not always because of the outcomes of the actual policy. Moreover, policy failures do not so much bury technocrats’ reform plans as such but diminish the chances of their implementation by the same teams of reformers.

The combination of negative features that shapes the technocratic model of policy-making are: (1) aggravation of principal-agent problems; (2) risks of disloyalty and attempts at their evasion; (3) limited resources and powers of technocrats against the background of; (4) resistance from interest groups; and (5) limited opportunities for pro-reform policy coalitions. These factors make technocratic reforms unreliable and unsustainable. Under these conditions, technocrats may fall into a trap where their overall role in policy-making diminishes over time, yet they have few opportunities to advance major changes while they still can. Policy areas and zones where positive changes are possible are reduced to a limited number of pockets of efficiency with unfavorable odds of extending them to other policy areas; while the technocrats’ discretion is limited to the development of policy programs in the form of advice and consultation without power over the adoption of key policy decisions or control over their implementation.

To put it succinctly, if viziers remain loyal to political leaders but lack major leverages of influence, they may become “eunuchs” of a sort. They often maintain a formally high status that serves as a reward for loyalty and camouflages their inability to exert meaningful influence on policy-making, let alone politics, in their states. In the end, the boundary between technocrats and rent-seekers may be blurred: even if the top echelons of the Russian state agencies are staffed by professionals responsible for problem-solving,19 their presence does not change the overall picture of bad governance. Rather, technocrats perform important functions of fool-proofing:20 they may protect autocrats from the most dangerous policy failures, which may result from incompetence and/or their subordinates’ excessively voracious rent-seeking appetites (similar to those of Yakunin, described in chapter 2). Yet under conditions of bad governance, policy reforms as such cannot become a magic bullet to diminish the negative effects of this politico-economic order. Technocrats themselves cannot improve the quality of governance, and may be not very interested in doing so, lacking strong positive performance incentives.

These flaws and limitations of the technocratic model are universal and not related to particular countries or historical periods. However, under the conditions of the politico-economic order of bad governance they are aggravated over time.21 These factors are inescapable and push political leaders, even if they opt for policy reforms, to concentrate their efforts on a narrow front of top-priority reform projects at best and pay less attention to policy changes in other areas. In the worst cases, they are tempted to revise their priorities and to sacrifice reforms to the benefit of the coalition of bureaucrats and rent-seekers. In addition, the dependence of political leaders in Russia on “regime cycles”22 places priority on those policy changes that may bring relatively quick positive outcomes, while long-term development plans often remain on paper. Due to these factors, even if technocratic reformers enjoy full support from political leaders and overcome resistance from rent-seekers, they are limited in the time and scope of their plans and are often convinced that their cause is hopeless from the very beginning. Policy programs are often subject to self-censorship even at the planning stage, while implementing some reforms becomes filled with bureaucratic tricks, unworkable administrative compromises, and the rejection of key elements.23

How does the technocratic model of policy reform in autocracies really work in general and in Russia in particular? Why does it survive regime changes, only adjusting to changing circumstances, and what is its impact on the quality of governance in Russia and elsewhere? Why do technocratic policy reforms bring success in some cases but result in failure in others? How sustainable is the technocratic model and to what extent do political models present acceptable and realistic alternatives? Some of these issues are explored and highlighted in this chapter.

The Origins and Substance

of

Post-Soviet Technocracy

In May 1992, two major post-Communist policy reformers—Czech prime minister Vaclav Klaus and Russian first deputy prime minister Yegor Gaidar—met in a beerhouse in Prague. According to Gaidar, their discussions about economic policy soon evolved into a heated debate on the politics of transition.24 Klaus suggested that Gaidar and his team should not limit themselves to policy recommendations but become independent political actors who had to build their political bases of support, compete for political power, establish political parties, and participate in elections. Otherwise, Klaus warned, policy reforms in Russia could be reversed and lead to undesired outcomes. Gaidar, however, was skeptical of Klaus’s recommendations and followed them only partially and inconsistently. Overall, Gaidar and the other Russian policy reformers of the 1990s served as viziers who acted under Yeltsin’s patronage and (with certain exceptions) did not attempt to play an independent role in politics. Similar tendencies were observed in the 2000s, when technocratic reformers were at the forefront of policy-making in Russia but accepted the Kremlin-imposed formal and informal rules of the game in politics as given facts rather than objecting to these conditions.25 In the 2010s and later on, technocratic reformers in Russia continued to serve as viziers, despite the dramatic shrinking of their room for maneuver in terms of policy-making. Yet many analyses of policy reforms in Russia and beyond disregard the impact of politics as a key factor in the success and failure of policy changes or attribute secondary importance to this factor.26

Of course, it would be unfair to explain the greater success of the economic reforms in the Czech Republic compared to Russia’s policy troubles in the 1990s only through the relationship between policy and politics in both countries: their initial conditions and structural problems were also very different.27 Moreover, Russia in the 1990s was heavily polarized in terms of politics and also experienced numerous intraelite conflicts against the background of a weakening state after the Soviet collapse. These developments left little room for conducting consistent policies, several reforms were compromised, and the decision-making process was chaotic.28 Even if Russian policy reformers in the 1990s had not restricted themselves to the role of viziers but attempted to themselves set the political agenda, their efforts might have been even less successful in terms of policy outcomes. At best, Russia would have followed a path of “polarized democracy” similar to Bulgaria’s where policy was inconsistent and inefficient amid several changes of government.29 At worst, a defeat of the reformers in the political arena could have aggravated the negative consequences of bad policies similar to those conducted by the Soviet leadership before the collapse of the Soviet Union, thus making the situation in Russia even more chaotic. The technocratic reformers’ strategic choice of the role of viziers most probably was the second-best solution. It brought certain short-term benefits for policy changes in the 1990s and 2000s. However, over time, this choice resulted in an increase in social costs for Russia in terms of both politics and policy-making.

What caused the turn of policy-making toward technocracy in post-Soviet Russia instead of choosing a political model? The post-Soviet technocratic reformers in Russia were pragmatic and skeptical of democratic procedures.30 Their skepticism was fueled by the experience of Gorbachev’s perestroika when politics deeply affected policy-making after major liberalization of the Soviet system. Instead of the emergence of a political model of policy-making, these developments greatly contributed to the economic crisis and the subsequent collapse of the Soviet state.31 Among the reformers themselves, democratization was perceived as a source of risks stemming from populist policies and as an obstacle to market reforms, while the insulation of government from public opinion and the patronage of a strong leader were considered preconditions for effective policy changes.32 Due to the major economic crisis and chaotic breakup of the Soviet Union, opportunities to adopt a political model of policy-making were missed. In 1991, the Russian Parliament delegated extraordinary powers to Boris Yeltsin, who established unilateral control over government formation and policy-making, and this decision was enthusiastically approved at that time by Russia’s political elite and by public opinion. This move paved the way for further institutionalization of the technocratic model, and the 1993 conflict between Yeltsin and the Russian Parliament, when the latter lost in a zero-sum manner,33 eliminated opportunities for possible revision of this model.

The technocratic model of policy-making in Russia faced numerous problems related to the notorious inefficiency of the state apparatus and the policy influence of interest groups. The technocratic model presupposes that politics, with its formal actors and institutions, which may affect policy-making (namely voters, parties, and legislatures), should be banished from the policy arena. Yet politics also affects policy-making due to the rise of informal actors—oligarchs, cronies, friends, and followers of political leaders whose policy influence is often much greater than that of formal actors. In the 1990s, the influence of interest groups on policy-making was a side effect of the major decline of state capacity in Russia, growing pains so to speak, of the construction of new states and economies. However, in the 2000s and especially in the 2010s, this process became an indispensable part of bad governance and growing pains transformed into a chronic disease. The increasingly rent-seeking way Russia was governed discouraged policy reforms and reduced them to optional items on the policy agenda. Finally, by the 2020s, policy reforms were excluded from the menu of options altogether, although technocrats still play a major role in fool-proofing, preventing Russia’s turn to further decay and degradation in terms of the quality of governance.

Meanwhile, a full-fledged insulation of policy-making from politics was unavailable in many instances: the technocratic model had little chance of realization in a pure form. At minimum, political leaders considered public support to be an important factor in the preservation of their power, thus making politics matter for policy. To a great degree, public opinion in Russia was a function of mass evaluations of policy performance,34 and despite certain incentives for policy reforms in given areas, poor performance generated short-term risks of declining public support for political leaders due to the social costs of unpopular measures. Even relatively minor bumps on the road, such as the poorly conducted monetization of social benefits in Russia that caused the wave of public protests in 2005,35 resulted in postponement of policy reforms in various areas. No wonder that later on the very notion of “reform” was rarely used in Russian political discourse and became synonymous with changes that bring numerous negative effects.36 Moreover, in electoral (rather than in hegemonic) authoritarian regimes, political leaders fear loss of power due to undesired outcomes of elections.37 These factors provide political leaders with incentives for the extensive use of the state apparatus for political purposes, ranging from delivery of votes for desirable election results to distributing influential posts and rents among allies in informal ruling coalitions. This is why barriers to policy reforms become almost insurmountable.

As a result, post-Soviet technocratic reformers found themselves between a rock and a hard place. On the one hand, political leaders and public opinion expected policy successes; on the other, their policy plans met fierce resistance from interest groups and the state apparatus. This situation contributed to privatizing gains and nationalizing costs: the costs of policy changes were imposed on society, while rent-seeking cronies of political leaders became the main beneficiaries. Technocratic reformers, even if they were able to implement their plans, rarely benefited from policies themselves, but were criticized from every corner, and their achievements could be revised due to changing political circumstances. Still, the need for social and economic development maintained demand for the presence of technocratic reformers in ministries and state agencies and called for more proposals for policy changes.38 Yet the scope of this demand declined over time, and the supply of reforms became increasingly unwanted. According to an analysis by the Center for Strategic Research, the Strategy 2010 program of policy reforms developed by technocrats was only 36 percent implemented;39 a follow-up policy program Strategy 2020, to some extent developed by the same expert teams in the early 2010s (and based on its predecessor’s policy proposals), was curtailed and only 29 percent of its plans were implemented.40

Nevertheless, the same approach to strategic planning was used once again; in May 2018, after his inauguration for his fourth term, Putin signed a new collection of decrees that set strategic goals for Russia until 2024. The contents of these decrees were even less comprehensive and less concrete than those of their predecessors, but the Kremlin proudly announced that Russia was to become one of the top five global economies by 2024. In practice, this round of strategic planning in Russia faced the same institutional problems, such as poor coordination of state agencies and insufficient leverages of manual control from Putin’s side. But this time, implementing the strategic plan was related to national projects: eighteen large-scale state programs were approved by the government, and huge funds were assigned to achievement of these goals. However, according to analysis done by the Audit Chamber in early 2020, most of the national projects were conducted in a rather inefficient way, and the state funds were sometimes not even spent 41 or their use did not bring the desired results. Still, the main proponent of the national projects, Putin’s economic advisor Andrei Belousov, also known as the leading statist among top economic policymakers, was promoted to first deputy prime minister in 2020. Meanwhile, the economic downturn caused by the COVID-19 pandemic made many of the previously approved national projects irrelevant, and national development goals were once again brought into question. Under these conditions, the constrained political and policy autonomy of the government vis-à-vis the president diminished even further. It came as no surprise that in August 2020 Putin unilaterally and abruptly changed the national development goals he had previously established. Implementing ongoing national projects was simply postponed until 2030, a date that coincided with the end of the following presidential term (allegedly a term to be served by Putin himself). Moreover, the list of Russia’s strategic targets was revised, and the much-debated statement about Russia’s planned ascendance into the top five global economies suddenly disappeared from it.42 The approach to the revision of these targets was criticized by some observers,43 but most important, the validity of strategic planning for Russia’s development was questioned, as no one took it seriously as a mechanism of setting goals for the country—at best, these plans could be considered political tools of the Kremlin rather than policy instruments. Considering this experience, the fate of new major policy programs seems uncertain at best.

Judging by the contents of policy reforms initiated by technocrats in Russia in the 1990s, 2000s, and the 2010s, one may identify these reforms as “neoliberal,” as initially they were aimed at privatizing state enterprises and at diminishing state involvement in the economy. In fact, Strategy 2010 and other policy programs in Russia were greatly influenced by the neoliberal drive that was a feature of many post-Communist transformations.44 Moreover, some technocratic reformers, such as Gaidar and members of his team, were actively involved in Russian politics under the banners of liberal parties (Russia’s Choice, Democratic Choice of Russia, and Union of Right Forces) in the period between 1993 and 2003.45 Ulyukaev, who served as Gaidar’s advisor in the early 1990s and took key governmental posts in the 2000s, may be a prime example of a reformer following such a trajectory. That said, these reformers largely remained loyal to the Kremlin, serving as viziers. This is why in the Russian context technocrats were often labeled “systemic” liberals by analysts and observers (as opposed to “non-systemic” liberals, who openly raised their voice against the Kremlin).46 Yet such an equation of technocrats with economic liberals would be rather incorrect, if not misleading. First, many of the policies proposed by technocrats were not so neoliberal either in terms of content or outcomes, even if they were promoted under liberal slogans. The analysis of reform of Russian electricity in the 2000s conducted by Susanne Wengle convincingly demonstrated that despite the fact that Anatoly Chubais, the leading figure of the camp of Russian liberals, was the main driver of changes, its results were far from the wishes of followers of Friedrich Hayek and Milton Friedman.47 The former nationwide electricity network, RAO UES, was divided into several subnational monopolies, which in turn, were taken over by major companies such as subsidiaries of Gazprom (in Central Russia) or aluminum giants (in Siberia) so the reform was probably not so much a matter of neoliberalism (or ideology in general) but rather of the business interests of key stakeholders. Second, a number of highly visible technocrats in Russia, such as the former presidential economic adviser Sergey Glazyev or Andrey Belousov, were not liberals at all, and may be better considered economic statists and illiberal politicians.48 Furthermore, as Joachim Zweynert points out, liberal economic ideas in Russia remain less than popular within the expert community after a quarter century of post-Communism,49 so labeling virtually all technocratic experts in Russia “liberals” may have little relevance for analysis of their role in policy-making.

Despite the unequivocal rejection of economic growth and development as policy goals of the Russian authorities in the 2020s,50 one should not infer that the post-Soviet technocratic model of policy-making has been exhausted. On the contrary, it seems that under conditions of bad governance, the technocratic model finds no alternatives in Russia. The key asset of post-Soviet technocrats is their (often high-quality) professional expertise, especially in complex and technically difficult areas such as tax policies51 or the banking sector,52 where political leaders cannot govern without reliance upon qualified professionals. In essence, politicians want to avoid major crises in the governance of their respective countries and seek foolproof approaches at least to the economy and finance. In addition, the participation of technocrats in informal ruling coalitions may increase the sustainability of regimes: it allows political leaders to use divide-and-rule tactics vis-à-vis their junior partners53 and reward successful technocrats who combine both loyalty and competence. The involvement of technocrats in policy decision-making is considered by economic agents (including international businesses) to be a possible barrier against the expropriation of their assets by rent-seeking bureaucrats and against arbitrary changes in the rules of the game. Thus, the promotion of reforms or even the maintenance of the status quo by technocrats serves the legitimation of the politico-economic order of bad governance and brings benefits to political leaders, and sometimes (but not always) to the technocrats themselves. At the same time, political leaders, who may be genuinely interested in policy success, can blame technocrats for undesired costs and unintended consequences of reforms, while positive results of policy changes may open up new opportunities for rent-seekers and increase the aggregate profits of the members of the informal ruling coalitions.54 Even the potential replacement of competent technocrats with loyal yet incompetent ones (if and when it occurs) does not mean inevitable revision of the technocratic model as such, even though the quality of policy-making may decrease, thus further aggravating numerous problems of bad governance. This is why one must turn from a normative critique of the technocratic model of policy-making to its positive analysis: how it really works and why its political and policy effects are so diverse and often contradictory.

Technocracy

at

Work: Policy Reforms

in

the

Crossfire

For policy reformers, there is seemingly no task more daunting than conducting major changes within the framework of the political model of policy-making. They face opposition from public opinion, the parliamentary opposition, social movements, media, and interest groups. One can imagine what might happen if major policy changes such as the introduction of the Unified State Exam (EGE)55 in Russia in the 2000s were advanced by a government politically accountable before a legislature elected via free and fair contest. In that event, an informal coalition of angry parents, dissatisfied educational bureaucrats, and teachers and rectors of most universities would not allow the reformist minister of education to propose the draft bill on the EGE to the parliament, and opposition parties could block the proposal during floor discussions and/or attempt to revise it after the next elections. At best, this reform would be protracted, postponed, and implemented in a different format than initially developed; at worst, it could be completely buried.

Within the framework of the technocratic model, the introduction of the EGE occurred under a completely different scenario. Anticipating huge resistance from opponents of the reform, the Ministry of Education co-opted them into the group in charge of developing the National Education Doctrine (a false target, initially proposed to generate clamor without any real policy impact). At the same time, it pursued a creeping introduction of the EGE under the label of an “experiment,” which set its scope to seven years. When the experiment became so widespread over the course of the 2000s that almost all school graduates were required to pass the EGE, the legal codification of this already adopted decision by the parliament become inevitable. However, the initial ideas, which proposed linking EGE results with the amount of state funding of university fees via individual state financial obligations (GIFO), were sacrificed along the way. The rejection of the GIFO was an element of the deal between technocratic reformers and members of the State Duma, in return for pledging loyalty to the EGE; in addition, the reformers themselves had little interest in introducing GIFO, it being a technically complicated venture.

At first sight, this policy outcome could be regarded as a success story for the technocratic reformers: using bureaucratic tricks and administrative maneuvering, they overcame the resistance of various interest groups and the mass public and implemented their project. Yet the EGE faced problems due to the inappropriate incentives of the subnational bureaucracy. EGE results in the regions counted toward evaluation of the performance of regional governors, thus tempting them to achieve better EGE numbers at any cost, including leakage of tests and blatant fraud.56 Later, however, evaluation rules were changed, and as EGE results became more or less objective, the exam’s introduction became irreversible. While the educational mobility of students increased, corruption in school exams declined, and university entrance exams were eliminated, major side effects became visible later. The content and meaning of the EGE degraded over time as the pressure of interest groups such as educational administrators and university managers resulted in fundamental changes. First, anonymous testing was gradually replaced by other mechanisms of evaluation oriented toward the subjective judgments of teachers and more vulnerable in terms of corruption. Second, EGE certificates, initially available for applications to various universities (such that the best school graduates could choose among them), were used for admission to only one college chosen by graduates.57 At the end of 2016, Olga Vasilyeva, then the minister of education, announced the plan that all Russian universities would regain the right to introduce extra entrance exams in addition to the EGE, thus greatly diminishing its value. Yet, this plan is not fully implemented, however. But since many Russians perceived the EGE negatively, and its legitimacy was and still dubious,58 the revision of the reform and the possible rejection of its achievements could be met with no serious resistance.

Which is a better solution in terms of policy outcomes? First, a long preparatory period for the reform, which involves public discussion, mutual adjustment of major stakeholders’ positions, step-by-step implementation and further embedding; or second, a quick imposition of the reform in the format of a secret operation, bypassing key actors and public opinion, followed by further revisions and ultimate emasculation? Answering these questions requires an in-depth analysis of policy changes in comparative perspective that lies beyond the scope of this book. But in the context of post-Soviet Russia, several policy reforms combined the worst features of the two options and involved appeasing and co-opting stakeholders on the one hand and privatizing gains and socializing losses on the other. In such cases, tactical selective appeasement of stakeholders may give rise to a strategy for policy change where buying the loyalty of veto players turns from a means to an end of technocratic reforms. In that event, not only will policy outcomes become imperfect, but the legitimacy of the reforms will come under question. The fate of large-scale privatization of state enterprises in Russia in the 1990s is instructive. Privatization was accompanied by co-opting former Soviet enterprise bosses, the so-called red directors, in exchange for their loyalty and the use of special conditions for privatizing the most attractive assets through loans-for-shares deals. This contributed to the transfer of property rights to a limited number of oligarchs closely linked with political leaders.59 Although in economic terms this reform was relatively successful and many privatized enterprises performed much better than state-owned companies,60 the legitimacy of privatization in Russia in the eyes of the mass public was much lower vis-à-vis some other post-Communist states. A large share of Russians endorsed en masse revision of privatization deals.61 No wonder that the counterreform promoted by the Russian state in the 2000s, namely the creeping nationalization of assets of privatized and private-owned enterprises (“business capture”),62 was deemed much more legitimate than privatization and reversed the reforms of the 1990s to a great degree. According to data from the Russian Federal Anti-Monopoly Service, by the end of 2016 the Russian state controlled more than 70 percent of all assets in the country’s economy.63

Thus, reformers who pursue policy changes within the framework of the technocratic model of policy-making are caught in the crossfire of two extreme options. If they try to satisfy powerful interest groups and propose far-reaching compromises for the sake of their co-optation, these compromises may turn out to be so ineffective that the reforms do not achieve their goals. However, should the reformers outwit their opponents in the run-up to the adoption and implementation of policy programs and successfully push through their proposals, the policy changes will not be irreversible. They will potentially be easily undone by counterreforms initiated by interest groups who may restore the situation to the previous point of departure or even make it worse than the original status quo. This is why technocratic reformers often cannot limit themselves to policy-making; they must rely upon political support not only from parties and/or public opinion but also primarily from political leaders. Indeed, political leaders may be interested in successful policy reforms if these strengthen their powers and/or increase their public support. In such cases, the leaders may lead informal pro-reform policy coalitions, whether broad or narrow in nature—the recentralization of state governance in Russia in the early 2000s may serve as a prime example. 64

However, political leaders’ support for technocratic reforms is not a guarantee of policy success; even if this condition is necessary, it is not sufficient. First, leadership changes may put previous policy priorities into question (as happened in Russia with technological modernization, which was set as a top policy priority during Medvedev’s presidency). Moreover, if the personal stances of political leaders shift for one reason or another, then policy priorities can even reverse direction. For example, the move by Russia’s rulers from economic development goals to geopolitical adventures after the annexation of Crimea in 2014 put Russian technocratic reformers into a semi-peripheral position in terms of policy priorities, which had been changed by Putin almost overnight. However, even if political leaders sincerely support policy reforms over a long period of time, their list of top policy priorities is inherently limited. While they concentrate on supporting several major policy changes, the rest of the items on the policy agenda will remain of secondary importance. The other side of the coin in the success story of tax reform in Russia in the early 2000s, actively backed by Putin,65 was the failure or at least limited advancement of several other policy reforms.

The support of political leaders is vitally important for technocrats because it gives them leverage for overcoming resistance to policy reforms by powerful interest groups. Sometimes, even this support is not enough; strong and embedded interest groups can divert policy changes in a different direction. This is what happened with police reform in Russia in the early 2010s: despite open and loud public discussion (or perhaps courtesy of this discussion) the outcome of the reform was essentially limited to window dressing and the reshuffling of some personnel.66 And even if political leaders reduce interest groups’ resistance to policy changes, technocrats are rarely able to impose control over the bureaucrats in charge of implementing policy—especially if these policies require interaction and effective coordination of various agencies.67 It is not by chance that while the Ministry of Finance and the Central Bank of Russia were able to conduct successful macroeconomic policies, target inflation, and implement tax reforms,68 welfare policies in Russia were conducted in “muddling through” mode and/or merely redistributed federal state subsidies.69 The main difference was that governing state finance and policy reforms in this area depended on decisions made by a narrow circle of technocrats, and their formal and informal coordination enabled prudent policies; whereas welfare policies required complex coordination not of several persons but of various state agencies on both national and subnational levels. Given the poor quality of the bureaucracy and weak incentives for reforms, it was exceedingly difficult to achieve sustainable coordination, and even the efforts of the technocrats and political leaders were not enough to resolve these issues.

It is thus unsurprising that to technocrats, the most attractive mechanism for implementing policy reforms is the creation of pockets of efficiency—separate organizations with large funding and discretion that can play according to special rules of the game, beyond general principles of state regulations and have more room for maneuvering in conducting policy reforms. For example, implementing large-scale privatization of state enterprises in Russia in the 1990s became possible only because of the establishment of the State Property Committee (Goskomimushchestvo), a powerful vertically integrated agency that had the exclusive right to organize the sale of state assets and was controlled by the team of technocratic reformers led by Chubais.70 Despite the fact that the central government of Russia in the 1990s had weak leverages of control vis-à-vis regional authorities, Goskomimushchestvo, using the sticks of threats and the carrots of bonuses, was able to conduct a federal program of privatization in most of Russia’s regions (with some notable exceptions such as Moscow City and Tatarstan). Moreover, Goskomimushchestvo, using various tricks, was not only able to squeeze legal approval of its proposals through government, parliament, and the presidential administration, but also to acquire broad discretion in its activities, thus becoming a “state within the state.”71 However, after the end of privatization and Chubais’s following removal from several top positions in the government, the influence of Goskomimushchestvo and its successor agencies greatly declined. The formal institutionalization of pockets of efficiency may be supplemented by informal mechanisms of their patronage by political leaders who may support their beloved pet projects in various areas. There are many examples of such projects,72 and some of them have brought certain positive effects. Overall, however, political patronage is vulnerable as a mechanism for promotion of policy reforms because of its informal nature and dependence on political circumstances.

To summarize, one might argue that the imperfect technocratic model of policy-making cannot preserve many reforms (even under favorable political conditions) from partial and inconsistent implementation, emasculation, major revision, or even complete reversal. In the case of the political model, parties and their leaders can correct errors after certain policy failures and relaunch policy reforms under new conditions during one of the subsequent political business cycles. But for technocratic reformers, whose professional credibility depends on their reputation in the eyes of their bosses—namely political leaders—a second chance may never come. This fact produces incentives to use windows of opportunity only to conduct those policy reforms that can bring immediate positive effects. Conversely, policy changes oriented toward long-term advancements may be postponed or result in unworkable compromises. Against the background of the success story of tax reform in Russia in the early 2000s,73 the failure of the pension reform launched during the same period74 is a telling example. Changes in the tax system benefited the Russian state and its rulers soon after inception in the early 2000s; whereas the pension reform assumed benefits only in the long run and generated costs for individuals and companies because of the proposed transition to an accumulative pension system and the increase in the age of retirement. Since the technocratic reformers and political leaders who had initially supported the reforms had little interest in adopting and implementing policies that might only bring significant returns decades later, and the bureaucracy as a veto player insisted on preservation of the status quo, debates on pension reform resulted in a compromise aiming to satisfy the major actors. A partial and contradictory 2002 pension reform did not solve any problems but only postponed them, even though the conditions for major changes seem to have become less and less favorable over time. Overall, however, the choice of short-term priorities for policy reform reflected the fact that many post-Soviet leaders have tended to behave, in Olson’s terms, as “roving” rather than “stationary” bandits.75 Their horizons of policy planning have rarely exceeded the next election cycle, while transitions to hereditary succession of power are unlikely.

Thus, the imperfect technocratic model of policy-making faces major and irresistible constraints. On the one hand, technocratic reformers and their patrons among the political leaders prioritize policy reforms with short-term positive effects at the expense of long-term programs. On the other hand, the poor quality of the bureaucracy and the influence of interest groups distort the goals and means of policy changes and negatively affect policy outcomes. Even if technocratic tricks (quasi-experimentation, creating special conditions for reforms under the political patronage of leaders, co-optation, and compromises in the form of sacrificing some reform projects) have brought certain successes, their price may be prohibitively high in terms of irreversibility of policy changes. But even if one admits these flaws and defects of the technocratic model of policy-making, to what extent are alternatives to this model possible, desirable, and realistic, and what are their effects?

Alternatives

to

Technocracy: No Way

Out

?

What would happen in Russia if for whatever reasons policy reforms in all areas were abandoned and technocrats only maintained the status quo in crucially important policy fields? Most probably, in the short term neither the political leaders nor the ordinary citizens would notice anything important. They might even breathe a sigh of relief because they were tired of the numerous successful and unsuccessful policy reforms over the last quarter century. The negative effects of the persistence of the status quo bias might be observed only in the medium term and/or after a change of political leadership. Policy reforms and mechanisms for their conduct would eventually be at the center of the political agenda, and alternatives to the imperfect technocratic model of policy-making would be discussed once again.

From the viewpoint of many analysts and the technocrats themselves,76 the most plausible solution is a correction of the defects of the technocratic model of policy-making aimed at its improvement. One may consider incentivizing bureaucratic performance through competition between agents, constraining the discretion of certain state agencies and revising their powers and, as the most radical solution, the replacement of “bad” political leaders, whose informal ruling coalitions are packed with rent-seekers, with “good” reform-minded and less corrupt autocrats. The problem, however, is that successful policy reforms in autocracies are relatively rare not only because of the personal traits of the political leaders but also because the incentives presented to them have left little chance of fixing the inherent defects of the imperfect technocratic model and transforming it into a perfect one. But even recruitment en masse of the best and brightest professionals into the ranks of policy reformers cannot guarantee that the major problems of the technocratic model will be resolved. Quite the opposite, the poor quality of the bureaucracy and the dominance of rent-seeking interest groups make attempts to improve the technocratic model questionable: they may result in the expansion of (already rigid) state overregulation and in the increase of the discretion of state watchdogs and law enforcement agencies.77 These changes may create new obstacles to policy reforms instead of the existing ones, or even in addition to them.

But what of the odds of a hypothetical transition from the imperfect technocratic model of policy-making to the political model bringing positive outcomes? In the short-term perspective, these odds are rather dubious. The experience of post-Communist Moldova and Ukraine (especially after 2014) tells us that politically accountable governments, even if they are formed through free and fair elections, are often no better at conducting policy reforms than technocratic cabinets of ministers. In these cases, the risks of state capture from outside, by oligarchic interest groups who compete with one another over rent-seeking, are high, and policy reforms may be blocked even if they are a priority for political leaders. A chain of weak, inefficient, and corrupt cabinets of ministers is not an attractive alternative to the technocratic model. Another risk of such a transition is the aggravation of principal-agent problems within a predatory piranha-like state apparatus78 and a possible shift toward decentralized corruption, which is justly considered even more dangerous than centralized corruption.79 In addition, the political model means that politically accountable governments may be hijacked by economic populists who may try to exploit the popular mandate to conduct inefficient policies. It may take Russia to numerous failures from the viewpoint of policy outcomes under conditions of bad governance, and temptations and risks of this kind may increase over time.

However, in the case of present-day Russia, both improvement of the imperfect technocratic model of policy-making and transition to the political model appear unrealistic. Since the political regime in the country is far from being in a full-scale crisis, its incentives are not toward change but toward preservation of the status quo. This is why the main alternative to policy reforms in Russia is further appeasement of rent-seekers and further sluggish development if not stagnation.80 The sad fate of Ulyukaev, the major proponent of post-Soviet technocracy, may serve as a prime example of this tendency. In November 2016 Ulyukaev, who was minister of economic development at the time, was fired and later sentenced to eight years in jail due to accusations of bribery during the process of privatizing a large block of shares of the state-owned oil company Rosneft. According to media reports, Ulyukaev, who had consistently objected to the government giving preferential treatment to state-owned companies and raised his voice against the proposed mechanism of privatization of Rosneft, was most probably not guilty of these criminal charges. Meanwhile, soon after Ulyukaev’s dismissal, the Rosneft block of shares was privatized in a nontransparent and suspicious way: the state-owned Gazprombank offered credit to two foreign investors in exchange for being loaned these shares. Just before this deal, Rosneftegaz (the holding company that controlled Rosneft shares) had put a large deposit into Gazprombank, so that this money was used to fund the privatization deal. Some observers even compared this model to the infamous loans-for-shares deals of the 1990s.81 The outcome of this deal was an increase in the influence of Igor Sechin, Putin’s close ally and CEO of the Rosneft, who was notorious as a highly voracious rent-seeker even in the rather grim context of Russian crony capitalism. Ulyukaev, who stood for other policy priorities, was sacrificed to the interests of rent-seekers with the consent of Russia’s political leadership. This episode (like many others of its kind) was hardly conducive to policy reform.

Ironically, Ulyukaev’s own statement, made more than two decades before his downfall, turned out to be prophetic. In the case of the privatization of Rosneft’s block of shares (and many others), the decision-making was quite competent and did indeed “depend upon knowledge and experience but not upon voting results.” The problem was that the competence, knowledge, and experience of rent-seekers was much more important than the competence, knowledge, and experience of Ulyukaev and the other Russian technocratic reformers. While attempting to avoid the negative effects of politics on policy-making and “to achieve a ‘regime of non-interference’ of politics in other spheres of public life,” technocrats found themselves caught in a trap: policy-making was affected by more negative influences, while politics only aggravated these problems. Under these conditions, the technocratic cure became more dangerous than the disease of bad governance, and it remains to be seen whether Russia will find a more efficacious one.