IILLARIONOV PUSHES FOR LESS STATE INTERFERENCE IN ECONOMY.

Andrei Illarionov’s economic analysis, put crudely, is based on the assumption that the greater the state interferes directly in the economy, the less the economy grows. Thus, ironically, he has been very enthusiastic about certain Asian economies, even asserting that China’s communist government played a much smaller role in redistributing goods and services than did Russia’s capitalist one (the government share being measured as a percentage of the gross domestic product). This, according to Illarionov, explained why the economies in Taiwan, Singapore and China grew while Russia’s contracted. A corollary of Illarionov’s thesis is that these countries, including China, are freer economically than Russia. Indeed, he claimed earlier this year that Russia’s level of economic freedom is somewhere between that of Zaire (currently known as Congo) and Sierra Leone (Vedomosti, April 13).

In an interview published today, Illarionov said that the state needs to be strengthened in terms of protecting the security of its citizens and their property and in order to support a “single and transparent” set of “rules of the game.” This echoes what Putin himself has pledged and statements made by German Gref, head of the Center for Strategic Research, the president-elect’s policy think tank. He also said that the state apparatus has to be reformed, given that it currently involves itself in business while taxes and “extortion” stymie businesses. At the same time, Illarionov said Russia must uphold democratic freedoms and honor and observe human rights. This suggests that he is not, unlike oligarchs like Alfa Group founder Pyotr Aven, pushing for a Russian version of the Pinochet model (Vedomosti, April 13; see the Monitor, March 31).

Illarionov is not only categorically opposed to foreign borrowing, but also suspicious of Russia’s reliance on natural-resource wealth. In an interview, yesterday, he said that the recent fall in world prices for Russian crude oil was a good thing in the long-term, because it would force the country to move away from reliance on natural resources (ORT, April 12). If he acts on these views in his capacity as Putin’s adviser, this could put him in conflict with Russia’s natural-resource barons and oligarchs, who are likely to continue lobbying the government for subsidies and protectionist policies. Meanwhile, it remains to be seen whether Illarionov’s appointment signals the direction Putin really wants to take in economic policy or is merely a gesture aimed at convincing potential Western investors that the new government is committed to economic reform–or some of both.

KURIL ISLANDS STILL A STUMBLING BLOCK IN RUSSIAN-JAPANESE RELATIONS.