Book Review: Steven Rosefielde – The Prodigal Superpower

Rosefielde, Steven – Russia in the 21st Century: The Prodigal Superpower (2004)
Category: political economy, Russia, transition, military; Rating: 4/5
Summary: Google books; Introduction

This is a book about Russia’s past, and its alleged return to the future. Rosefielde outlines his theory that the Soviet Union was a “prodigal superpower”, exchanging Spartan living standards for great military power – a state of affairs he calls “structural militarization” (borrowing from Vitaly Shlykov), and alleges that Russia is likely to reinstate a political economy prioritizing full-spectrum, fifth-generation rearmament in the near future. This is because he is pessimistic about Russia’s prospects of evolving into an advanced, Westernized liberal democracy (which he regards as indispensable for economic prosperity) pursuing a security policy of optimized defense expenditures supporting downsized, mobile, RMA-enhanced military forces. Instead, Russian cognizance of the increasing threat posed by China and the West will impel it to reconstitute its “dormant structurally militarized potential”, dooming it to renewed impoverishment and an arms race it could not win in the long-term.

Although it contains an unfortunately high number of misconceptions about Russia, the conclusions are nonetheless mostly evidence-based, pertinent and though-provoking. (I originally planned to make this post a straightforward review, but my ideas ran ahead of my typing fingers and transformed it into a broad exploration of Russia’s military-strategic future. So enjoy 😉 ).

Structural Militarization in the Soviet Union

To understand Russia’s return to the future, you have to understand its past – and Rosefielde alleges that most Western analysts and policymakers failed in a big way here. The book starts with a long and rather technical discussion of CIA efforts to understand the real magnitude of military spending in the USSR. To cut it short, due to flawed methodology (arcane reasons like excessive discounting for “learning curves”, overstating the level of inflation in the Soviet machine-tool building industry, etc), they concluded that military spending as a portion of GDP was not much bigger than 10% at most, and declining steadily since the 1960’s. He alleges that this was driven by the conventional wisdom that Soviet socialism was on a long-track route to eventual convergence with Western capitalism.

Both claims were apparently wrong on both counts. Not only had Russia been spending more than 10% of its GDP on armaments since the late 1930’s, but it saw double-digit percentage increases throughout the late Cold War up until the late 1980’s. By the time the Soviet machine started sputtering to a halt, military expenditures were running at an astounding 30% of GDP. Not only were official Soviet statistics (around 2.5% of GDP) laughably wrong on this, but so were CIA estimates (6-12%).

Why did the USSR pursue “prodigal superpowerdom”? Because it could, and thought it in its best interests to do so. The Soviet system of physical management (as opposed to market-based enterprise), although it failed at providing consumer goods to the population – especially as modernization made demand for them ever more discerning, was well-structured to prepare for and fight a total war (which Rosefielde terms “Blochian war”, in honor of the great Polish visionary). Furthermore, the Soviet military leadership had a privileged social position and no resources were spared for equipping the Soviet Army so that it could confront any possible “worst case scenario”, including all-out nuclear war.

This involved huge outlays on military operations and maintenance, military machine-building, RDT&E, and construction. The physical management system afforded the military sector the luxury of avoiding struggles for factor inputs (skilled labor, investment, etc) with the civilian sector, which was in stagnation from the mid-1970’s. Nor did economic backwardness imply an inferior military-industrial complex (MIC), contrary to Western expectations. Central planning allowed for the concentration of resources and talent to solve a wide array of potential military problems, while narrow technological parity with NATO could be maintained wby buying or stealing the requisite technologies from the developed world.

I find this vision entirely plausible. Many of the Soviet-era academics I know were indeed extensively involved in military-industrial research during the 1970’s and 1980’s, and it is obvious that for an economy that was so far behind that of the US (in technology, efficiency, etc, not gross output), maintaining comparable armed forces, MIC and nuclear weapons complex would have entailed diverting a prodigious amount of resources into these activities. The USSR was the only industrialized nation to see an increase in its infant mortality rates in the 1970’s-1980’s, implying that real investments into non-military sectors, even those as vital as pediatric health, were curtailed.

The Transition, Muscovite Metamorphosis and Dormant Structural Militarized Potential

However, again contrary to Western mainstream opinion the reason the USSR collapsed was not because of its failed consumer economy, hypertrophied defense sector or general nastiness, but because Gorbachev aborted central planning (though the former factors may have tipped his hand). In the absence of evolved market mechanisms, this simply led to ruinous insider plunder, asset stripping and managerial misappropriation, all under the label of “liberalization”. The MIC remained intact, but retreated to a much lower level of output as barter arrangements replaced central planning and huge military resource stocks were sold off. This interpretation chimes with theoretical work showing that the Soviet system was fundamentally stable (albeit stagnant).

And of course – and these are my observations – high levels of military spending have continued unabated in Russia, albeit at not quite the same prodigious levels that dominated during the latter years of the Cold War (Rosefielde points out that calculating by the CIA’s methodology, Russia’s military spending fell from 13.8% of GDP in 1990 to 13.2% in 2000 – an almost inconsequential decrease).

There are two objections to this theory. First, don’t published Russian government stats usually give a figure of 2.5-3.0% of GDP and real spending of around 50bn $? That suffers from the same misconceptions during Soviet times. A lot of military spending is concealed, and most importantly, the role of physical management and economic distortions favoring the MIC remain high, despite the growing role of the market. As I pointed out in an earlier article, even in the US, the apotheosis of the corporatized, rationalized MIC, real military spending is probably around twice as high as stated in the official budget.

Second, haven’t the levels of military procurement plummeted? Yes, they have. The share of the military-industrial sector accruing to mass conventional weapons productions is still a small fraction of Soviet levels. That said, RDT&E has continued unabated, as reflected in Russia’s advances in fifth-generation capabilities in fighters, air defense, electronic warfare, information warfare, submarines, stealth and precision weapons, as well as its upgrades of old Soviet platforms with modern electronic technology to multiply their effectiveness. The share of the Russian labor force employed by the MIC remains comparatively very high, despite the loss of much of the brightest talent during the 1990’s (that said, weapons development is methodical and outstanding genius is not a necessity). Contrary to the conventional wisdom, even during the hyper-depression of the 1990’s large-scale preparations for nuclear war continued and the NBC complex probably remains highly active (although for obvious reasons this can’t be directly verified, the continued secrecy surrounding it is telling). From the mid-2000’s, many MIC enterprises saw consolidation and re-tooling, and according to Stratfor large-scale rearmament is slated to begin by the early 2010’s.

So overall even today I don’t think it is entirely outlandish to posit that the really real level of Russian military spending – when it is considered in physical-systems terms, as opposed to monetary – is around 15-20% of GDP, or around 300-400bn $ (in contrast to real US spending of more than 1,000bn $ and Chinese spending of perhaps 400-800bn $).

But back to the book. He takes a dim view of Russia’s proclivity for “structural militarization”, and proceeds to outline how the post-Soviet transition could have come to a better conclusion. He rejects the neo-liberal dogma that emphasized privatization, and instead speculated that it would have been better to a) maintain central planning (and its enabling mechanism, economic coercion) for a while longer, b) gradually re-tool the MIC towards the civilian economy, c) nurture modern market-economy prerequisites like the rule of law, property rights, etc and maintain the social welfare system and d) leave privatization for last. (Incidentally, this is somewhat similar to what happened in Poland, which had a far more successful transition; that said, it was not hobbled by a metastasized MIC and never rejected the market as fully as the post-1930’s USSR).

But in any case what happened was that central planning was dissolved first, precipitating an output collapse; the remnants of Soviet industry were sold off to well connected insiders who would become the oligarchs. They came to dominate Russia from around 1996 to 2003 through their control of the “commanding heights” of the economy. He terms this transition as a “Muscovite metamorphosis”, in which Russia regressed to the patrimonial, rent-granting system of older times, in which the Tsar bestowed transitional rent-gathering rights unto his boyars, conditional on their political support and tax payments. In this interpretation, the “liberal autocrat” Putin shifted the balance of power from the boyars to the Tsar, especially with the 2003 dismantling of YUKOS.

Rosefielde condemns this system as socially unjust, Pareto inefficient and ineffective at both generating economic prosperity or sustaining resource mobilization. In this he has a valid point, even despite the pro-capitalist reforms, robust industrial-technological policy and greater control over oligarchic depredation that the Putin system instituted since the mid-2000’s.

Back to the Future: The Schachtian Model, Russia’s Reassertion and Great Power Politics

He believes that under the Muscovite model, the burgeoning market-based component of the Russian economy would just be the result of ephemeral oil-based booms instead of firm, permanent achievements. (Here I don’t agree with him at all, because even during the 2000-2004 period only a third of growth was due to increasing hydrocarbons production; after that it stagnated. The big foreign investments seen in Russia since 2006 resulted, amongst other things, in a big buildup in industrial capacity, with automobile production – a key sector of most emerging-marked economies – expanding by 50%. It is hard to dismiss this entirely to the oil boom, because if anything an economy fully based on resource-rents is inimical to industrial development because currency appreciation should destroy domestic manufacturing).

But under those assumptions (Muscovite inefficiency), he believes that Russia will have two choices: a) abandon Muscovy, become Westernized and move to an optimized defense policy based on mobile, RMA-enhanced military forces or b) further strengthen Muscovy (through Westernizing reforms, or by regression from liberal autocracy to a kind of neo-Tsarist despotism), or move to a political economy more conductive to permanent resource mobilization such as Soviet-style socialism or a Schachtian economy as prevailed in Nazi Germany.

The latter option may look particularly attractive, combining as it does markets (strengthening the MIC by providing crucial supplies often overlooked under central planning, much as the USSR during the Great Patriotic War was dependent on American trucks, communications equipment, aviation fuel, etc), resource mobilization, privilege, authoritarianism, state controls, full employment, derzhavnost’ and high social morale (at least initially before ossification, corruption and cronyism set in). Oligarchs remain, but they are fully subordinate to the power vertical, and more enthusiastic about impoving their businesses because their property rights are better established than under the Muscovite rentier state. This makes full-spectrum, fifth-generation rearmament easier to accomplish.

The only question now according to Rosefiede is whether the real Russia continues pursuing Putvedev’s ideals of an affluent, liberal society; or whether the powers that be will dismiss it as a utopian fantasy and again present a mailed fist to the world.

Speaking of which, Rosefielde points out that donning the armor again will not be hard, for Russia retains a “dormant structurally militarized potential” (as pointed out above, it has an intact MIC, huge mobilization capacities and the mineral wealth to sustain both). Furthermore, since the crisis is significantly worse than expected – and especially if the feared “second wave” of bank defaults happens to drown out Goldman Sach’s predictions of a strong recovery starting in H2 2009 – then re-militarization, public works and a shift towards a Schachtian model may prove increasingly irresistible attractions to a Russian people and elite already disillusioned with the West. Needless to say, this will be lauded by the Genshtab (the Russian General Staff), who will be reconfirmed in their honored social status for the first time since the 1980’s and who will again be free to indulge in their “worst-case scenario” and super-weapons fantasies.

Is a Prodigal Superpower doomed to Stagnation?

That said, Rosefielde believes that Russia is doomed to stagnation if it embarks on the road to prodigal superpowerdom. Just as Gorbachev (wrongly) believed he could simultaneously expand weapons production (while “disarming”), enhance social benefits, democratize the country, reform the economy and enrich his inner circle, Putin believes he can have both free enterprise-driven prosperity, derzhavnost’, and lawless authoritarianism.

In reality, though rearmament will serve as a temporary deterrent to China and NATO, Russia will doom itself in the long-term, with growth under the Muscovite model projected to fall below that of China and the US, and be roughly equal to that of already-developed Europe and Japan. Its military expansionism will unleash a new arms race it has no hope of winning, as the global correlation of forces inexorably moves against it (because of its vulnerability to foreign developments in RMA and missile defense, which may neutralize its rebuilt military power and massive nuclear arsenal).

This is another major point on which I disagree with Rosefielde (again, these are now all my points). First, from a purely military-strategic perspective. Russia has its own ABM development program and Chinese strategists believe it will be amongst the first nations to exploit the RMA. Backwardness is not preordained, especially in a centralized state capable of focusing its energies on military development and still much more open to the world economy / technology diffusion than the erstwhile USSR. Another key point is that for structural reasons it does not need to devote as many resources to ensure its key strategic objectives are fulfilled.

What are Russia’s current strategic objectives? 1) Keep the Russian lands whole; 2) achieve overwhelming conventional military dominance over the post-Soviet area; 3) seize control over (the hydrocarbon reserves of) the Arctic Ocean; and 4) be in a position to threaten America’s maritime superiority / control of the world’s sea-lanes, on which it depends for its world hegemony (this will also probably apply to China in a few decades).

Although 1) was a rather big problem during the 1990’s smuta, by now control has been reasserted, the war in Chechnya is officially over and Russia is focusing on expanding its empire into the former Soviet states. Not expensive.

2) Though until now this has been relatively unnoticed (for instance, contrary to popular Western opinion it was Georgia which  embarked on imperial adventures in 2008), the fact remains that Russia has always expanded whenever it recovers its balance after crises, and this time will probably be no exception, all talk of the “end of history”, etc, to the contrary. Furthermore, this will happen whether or not the decline of the West accelerates or not. If the US falls into a hyper-inflationary economic crisis (towards which it is making a lot of efforts) and curtails its (overstretched) presence in Eurasia, Russia’s urge to take advantage of the resulting security vacuum may prove irresistible.

But if the US remains strong, uncompromising and expansionist, then Russia will be forced to take increasing measures to check its encroachment. As Putin hinted many times, Russia has drawn the line at Ukraine and Georgia, beyond which NATO will not be allowed. So either way the re-establishment of some kind of Russian Empire – be it through informal geopolitical spheres of influence, an EU-like confederation with several CIS states (e.g. Belarus, Kazakhstan, Ukraine, Armenia, etc) or a unitary Eurasian state, seems to be almost inevitable. This will require more mobile, RMA-enabled conventional forces. As brilliant military analyst Dale Herspring shows, although the bulk of Russia’s forces remain backward and demoralized, there are intensive plans to reform them and modernize them. This is substantially more expensive than just keeping the country together, but still manageable, especially given Russia’s mineral windfalls.

3) Russia’s new military doctrine staked out much of the Arctic as its own. This is an important area because the Arctic is melting, opening up new hydrocarbon reserves (which will help with further melting it 😉 ). Also, as pointed out by Trausti Valsson, this will open a new, better shipping route between Europe and Asia, helping make the previously benighted Russian High North into a major transport and commercial hub. In the longer-term, the new lands can be brought into exploitation, especially if global warming produces huge numbers of climate refugees in the desiccating South. (Although a problem is that the soils there are acidic and may only be suitable for subsistence agriculture).

Nonetheless, the new development there will make it possible to organically support the new sea and air bases needed to project power over the Arctic. It will be relatively cheap to dominate this region through denial. Russia could construct an “iron phalanx” (my term, AFAIK) of heavily-networked air defense systems, fifth-generation and modernized fourth-generation fighters, drones, stealthy arsenal ships and modern silent submarines backed up by supersonic cruise missiles, supercavitating torpedoes, and possibly more exotic weapons.

4) Denial of the oceans. The expensive aircraft carrier battle group is the foundation of US maritime superiority, but as many forward-thinking analysts point out their time is dated, because the power of the offense and penetration are growing faster than the power of the defense. As Germany showed in the world wars, even a vastly inferior naval power can substantially neutralize the maritime superiority of states with much bigger navies and prouder maritime traditions. The USSR followed in its footsteps, optimizing its naval forces for denying the Arctic littoral to enemy CVBG’s (where its strategic nuclear subs prowled) and sinking convoys in a third Battle of the Atlantic. This is a logical pattern for Russia to follow, and much cheaper than trying to build outdated white elephants aircraft carriers of its own. It may have realized this.

So in conclusion, yes – Russia is doomed to remain economically subpar to the US. That is true regardless of the model it pursues in the future: Muscovite, Schachtian or Western. (It is a feature of its geography. The US has excellent riverine connections and sea-ports connecting its industrial centers and agricultural regions, and is strategically secure bordering military basket-cases like Canada and Mexico; Russia has poor riverine interconnections tying together its vast land area, a cold climate, vulnerable open borders, and strategic challengers in the form of the EU, the unstable Muslim areas to the south, and China – which necessitate a relatively high level of military spending and state control. Nor is Westernization a panacea, because in Russia all too frequently free markets lead to disintegration, not rejuvenation).

That said, Rosefielde’s assertion of Russia’s long-term decline is highly unrealistic (the above scenario is based on prodigal superpowerdom under the Muscovite model; Rosefielde says the Schachtian model will yield somewhat better results, but will not prevent relative decline vis-a-vis the US). But obviously, China’s GDP per capita did not overtake Russia’s in the late 1990’s, and indeed Russia remains substantially ahead today. Instead, as I argue in my article Kremlin Dreams Sometimes Come True, its impressive human capital, macroeconomic rationalism and energy windfalls stand Russia in good stead for economic convergence to an asymptote not far below that of the major Western nations. (Or even surpass them. It should be noted that the next decades are going to be a time of major discontinuities, when energy shortages and rapid climate change – in short, limits to growth – will make maintaining economic growth an increasingly challenging proposition. Given its surfeit of energy resources and large tracts of frozen land, Russia is unlikely to suffer from these trends as much as nations like China. It will actually benefit from some of them).

Conclusions

Though I disagree with many of the underlying assumptions in Rosefielde’s book (the extent of the demographic problems confronting Russia; the desirability of full Westernization; the inevitability of its decline, especially given my consideration of factors like world resource shortages and climate change that he neglects; the reliance on linear extrapolations of GDP to show that Russia is doomed to relative decline under any economic system other than the Western one, etc), I think his observations on Russia’s high level of “structural militarization” are valid and are germane to Russia’s future trajectory.

Although high military spending will doubtless constrain the possibilities of Russia’s civilian economy, it should be noted that a) on objective factors it is much better placed for sustained, higher growth than in the USSR – for a start it’s a market economy now, however imperfect, b) to fulfill its superpower objectives (maritime dominance), the US has to spend relatively more than Russia because the cornerstone of its power, CVBGs, are very expensive, and furthermore they are increasing vulnerable to cheap countermeasures and c) future trends in energy and the environment aren’t going to have as bad an effect on Russia as on its two major geopolitical rivals, the US and China.

As such, I do not share Rosefielde’s belief that reactivizing Russia’s permanent mobilization regime will necessarily lead to its stagnation and descent into geostrategic irrelevance. (And whether Russia will actually follow through on this is still a big if). Though this might be counter-intuitive in the current global period of limited superpower tensions, stability and economic growth (at least until 2008), it is far from certain that the next few decades will be as tranquil, and as such returning to the past, if done in a considered way, may be even be a good idea for ensuring peace and security.