ISSN 2330-717X

Shifting Autocracy: Why And How The Russian Regime Is Turning Into A Tyrannical Dictatorship – Analysis

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The distinguished economist and philosopher, Nobel laureate Thomas Schelling, author of the concept of nuclear deterrence, has a famous book called “Micromotives and Macrobehavior”. To paraphrase, today’s text could be titled Macro Motives and Micro Behavior.

This text presents a summary of my modeling of some of the macro-fundamental foundations, incentives and factors, economic and otherwise, that condition and mediate the political discourses of power elites in autocratic regimes in the modus operandi of active expansion.

The presented model is superimposed on a concrete and topical example of an expansionist Russian autocracy actively shifting toward dictatorship. An example that we are observing in real time today, observing from within and experiencing all iterations literally on ourselves. 

Let’s call this modern and not alien to us autocracy “the Regime.”

This Regime, or rather the elite power groups that represent it, has until recently distinguished itself by effectively finding a balance in political decisions about its interests and opportunities, the essence of which was obviously its own utility, maximizing cost reduction and maximizing lifespan. 

What was the macro-efficiency and rationality of the Regime’s policies?

First, it was a balanced macroeconomic policy to neutralize inflationary risks and social discontent, while simultaneously ensuring weak economic growth, balanced against the structure of the economy and the goals of the regime elite to maximize their own utility and lifespan.

Second, it is effective propaganda, an information policy that stimulates public opinion in the discourse and volume required by the regime and indoctrinates ideological narratives with a maximum degree of positive social assimilation. At the same time, the restrained repressive activity against oppositional opinion did not create social anxiety. 

Thirdly, it is maximum integration into global processes through the expansion of resource donation, not allowing the world community to isolate the country at one time and on a large scale. This provides a range for tactical maneuvering and preserving the dominant position of the regime elite inside the country for some time.

However, the autocratic institutional structure itself, which protects itself from liberal transformations, carries significant risks that determine a number of inevitable inefficiencies.  

What are the macro inefficiencies of the Regime?

First, it is the very expansion and strengthening of the autocratic institutional structure. As a consequence – the retention of the course of budgetary entrepreneurship, where the population rises on the budget elevator – power, infrastructure or bureaucratic, and the elite is located at maximum proximity to the budget and the Center. However, the hypertrophied dependence of a substantial part of socio-economic agents on the state budget creates the risks of distributional errors and dispersed multiple disequilibria that cannot be leveled by natural market mechanisms.

Second, and as a consequence – low technological development, primitive structure of the economy and sources of GDP generation, low productivity, low rate of economic growth, low level and growth of incomes of the population. Under the conditions of informational and social global integration, the relative stability of the quality of life and incomes in relation to one’s own economy and the relative increasing lag of incomes and quality of life in relation to developed and some developing economies regularly generate internal social tension and weaken support for the Regime. Neutralizing these factors requires regular and appropriate incentives, which is a cost to the Regime elite.

Third, the willful curtailment of economic and civilizational prospects and the voluntary shift to an autarkic aggressive dictatorship through the indoctrination of the “threat to sovereignty and national identity” from an external enemy – the collective West. The consequence is economic degradation, the repressive strengthening of domestic politics and the growth of geopolitical aggressiveness as a natural evolutionary discourse for an authoritarian dictatorship, inevitably leading, however, to the point of collapse.

As a result of the development of an autocratic regime, accompanied by degrading institutions that suppress the growth of human capital and civic passionarity, entrepreneurial activity and innovative creation, there are no significant drivers for economic growth within the country.

The use of fossil resources and first-order products as the main sources of value creation and the deliberate suppression of incentives and factors for the formation of other, more technological and distributed, sources implies the inevitable centralization and uncompetitive use of these rent-based sources. 

They are used by those closest to their control, i.e., the political elite. The political elite are rent-seeking political entrepreneurs who accept the institutional rules of a formed autocratic regime and give mutual commitments not to violate these rules. In return, they gain access to the sources of enrichment – the budget and the possibility of receiving corruption bonuses.

The population, in its turn, gets exactly those opportunities and rights, which correspond to the interests of maximum prolongation of the regime’s life cycle and growth of the well-being of its beneficiaries.

The capitalist frame of the economy of the Regime allows the most efficient and least costly redistribution of goods in horizontal market exchange, with the main economic resource remaining in the hands of the Regime elite. Since the institutional nature of the Regime implies reduced forms of individual initiative and entrepreneurship, and half of the population are budgetary consumers, the sources of goods that are redistributed beyond the control of regime elites, their volume and variety are extremely small. And this means that rising incomes and opportunities will not stimulate excessive needs while maintaining them at the grassroots levels of developed economies’ quality of life.

Thus, the Regime finds an equilibrium state. However, the shift in the sources of value added and economic growth in advanced economies toward technology and innovation implies an increase in human capital and goodwill in general, stimulated by a corresponding ethico-institutional environment. This inevitably presents the Regime with a dilemma, as the equilibrium is upset.

Or it is necessary to close the gap with developed economies and stimulate, above all, the development of other sources of value added and the expansion of horizontal exchange of the greatest number of benefits, including rental income. Such a policy is inevitably associated with a weakening of the political autocracy regime, and thus with the liberalization of institutions, processes and ideological doctrines. But in this case, regime elites – rent-seeking political entrepreneurs – are forced into an environment where access to the budget and corruption premiums are sharply reduced by various factors: from increased political competition through greater access to rent sources to institutional changes like the return of independent courts and the weakening of regulatory powers.

Or regime elites choose (which is the most likely and natural) to strengthen their own positions and prolong access to existing sources of wealth. In this case, amid a widening gap with advanced economies, political elites increase the volume of exploitation and income from rent sources, while tightening the autocratic institutional regime, which sharply reduces individual initiative and restricts civil rights. This means that the environment for the formation of new sources of value added, capable of giving impetus to economic development and growth, is excluded.

At this point, the shift toward an authoritarian dictatorship begins.

To neutralize the threat of social turbulence due to the inevitable deterioration of the quality of life and the simplification of consumption on the background of the primitivization of supply, regime elites increase the concentration and volume of aggressive propaganda. It is aimed at stimulating patriotic hysteria in the paradigm of the “threat to national identity” and the sabotage of “internal enemies” such as “national traitors”. 

The state ideology with unambiguous postulates, one-sided formulations, and linear, no-alternative evaluations is strengthened and acquires the clearest possible contours.

At the same time, all power assets are mobilized and directed towards destroying the sources of any competition with the regime-from individuals to civil associations, from persecution for individual public statements to closing or squeezing all opposition media out of the country.

Along with the intensification of reactionary and repressive measures, the Regime maintains a macroeconomic policy that seeks to buy inflationary risks as much as possible and to neutralize the imbalance between the population’s needs and opportunities. Under such conditions of inevitable primitivization of the economy due to a tightening political climate and individual opportunities, the Regime compensates for the loss of part of the population’s income with increased income from rent sources, expanding social subsidies or providing benefits for participants in horizontal exchange, i.e. private business. Preserving the conditional elasticity of the economy and the adaptability at the grassroots level of private business under conditions of structural simplification is still an effective policy for Regime interests, reducing their costs.

Thus, the Regime eliminates competition and strengthens its position from two sides: through linear mechanical tightening and stimulating propaganda. On the one hand, it repressively tightens restrictive domestic policy and mobilizes power assets in the form of expanding the powers of all security agencies and departments. On the other hand, the consensus of social opinion in support of the Regime is maximized, which rejects any dissent to the point of severing micro-social ties, such as family or friendships.

The regime is shifting into a state of aggressive dictatorship.

Geopolitical aggression is also an absolutely natural and natural, but not necessary, factor in the activity of the regime’s elites in their desire to prolong the term of their uncontested control of rent sources of enrichment and social domination. This factor is logical, because the vector chosen by the regime is in a “reverse spiral,” in which every new step to preserve the status quo today results in a worsening of the situation tomorrow, and this stimulates a new step that will lead to an even greater deterioration the day after that, and so on.

In this sense, foreign military aggression is simply one of the stages of the dictatorship’s backward spiral. It can come in two cases. 

First, when one group of regime elites thus stimulates other groups to support and recognize their exceptionalism under new extreme conditions. 

Second, when the social legitimacy of regime elites weakens, the incentives for maximizing social support lose effectiveness. The main reason for this social cooling is a progressive or trained increase in the costs to the population, such as a significant deterioration in the quality of life due to the inevitable economic degeneration (narrowing of supply and primitivization of consumption) or an intensification of repression. 

In both cases, military aggression is a way for the ruling elite group to maintain the status quo or to stimulate other social agents – other elite groups or the population – to support its dominance as much as possible.

But regardless of any tactical successes, the end point of such a movement is dialectically predetermined. This point is the painful socio-economic collapse and the collapse of the Regime with the equally painful formation of a new social institutional order.

This is the projection for any autocracy facing the choice of closing the economic and technological gap with the developed countries through institutional-political and socio-ethical liberalization or shifting to dictatorship. If the latter option is chosen, there are only two modus operandi: isolated autarky or aggressive autarky. In the first modus, the existence of the Regime can be very long. In the second, the Regime sits on a time bomb.

As we can see, the elites of the Regime have made their choice. Unfortunately – or fortunately.

Paul Tolmachev

Paul Tolmachev is an Investment Manager, Economist and Political Analyst. He is Certified Professional in Philosophy, Politics and Economics (PPE Program), Duke University. Having more than 20 years' experience in the financial markets, Paul held management positions in leading international investment and wealth management firms. Paul is serving as a Portfolio Manager for BlackRock with more than $500 million in personally managed assets. He also is a visiting scholar at the Stanford Institute for Economic Policy Research, where he researches institutional and political economy, decision science and social behavior, specializing in the analysis of macroeconomics, politics, and social processes. Paul is a columnist and contributor to a number of international think tanks and publications, including Duke University, Mises Institute, Eurasia Review, WallStreet Window, RealClear World, Investing.com, The Epoch Times, L'Indro, etc.

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