World

Putin’s neo-communism is doomed to fail

11 March 2022

11:29 PM

11 March 2022

11:29 PM

It is responsible for inequality. For financial instability. And probably for poverty, racism and global warming as well. We have heard a lot about neoliberalism over the last 20 years. But now Vladimir Putin’s Russia is going in completely the opposite direction. The world is about to witness an experiment in what can only be described as neo-communism. The twist is that, unlike its liberal counterpart, it will be a complete failure – and the best thing the West can do is wait for it to implode.

Over the last three weeks since Russian soldiers moved across the border into Ukraine it has become clear that Putin is trying to recreate a Soviet empire. Ukraine was top of the list, and Estonia, Latvia and Lithuania may well be next. Now it seems he is intent on re-creating the Soviet economic model as well. The Kremlin has suggested that it is planning to nationalise the assets of foreign firms pulling out of the Russian market.


Very soon, there may be state run airlines, fast food franchises, manufacturers, accountants and investment banks. McDonald’s has closed in Russia, and Netflix, Apple, Microsoft, Goldman Sachs, Deloitte and Gucci have pulled out of the country. Presumably Putin’s increasingly deluded group of bureaucrats simply plans to take over those operations and start running them themselves. Add in the oil and gas sectors which account for 40 per cent of Russia’s state revenues and 60 per cent of its exports – which are effectively state run through a group of government sponsored oligarchs – and in effect this will soon be a fully planned economy. Even the rouble soon won’t be convertible into hard currencies anymore, and next week the country may default on its debts for the first time since Lenin repudiated Tsarist debts in 1918. At this rate it can hardly be long before the five-year-plan is back, and the lights are burning late at the offices of Gosplan (as the State Planning Committee was known) again. Trotsky must be cheering from his grave.

Here’s the catch, however. It will fail both catastrophically and very quickly. We know from the history books that the Soviet model was a disaster. It made the wrong stuff, inefficiently, and unbothered by quality control. A Big Mac is not going to be any better when it is grilled by the Russian government, neither will the iPhoneski be anything like as good as the Apple version.

In reality, it will be even worse than it was in the 1970s and 1980s, known as the years of stagnation. The consumer-based, tech-led, services-dependent economy of the 2020s needs the dynamism and flexibility of a free market even more than the old industrial economy of the 1970s did. Eventually it will collapse under the weight of its own bureaucratic ineptitude. So long as Putin can be contained, one thing is certain. Neo-Communism will be as much of a failure as the first version – and eventually it will unravel.

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