The elephant in the dining room

The Korea Herald

G7 plus 1: The elephant in the dining room trumpets

After all the talk of Africa, climate change and global trade being the focus of this year's G7+1 meeting, the elephant in the dining room has trumpeted.
President Vladimir Putin's former economic adviser Andrei Illarionov has said that the G7's acceptance of Russia "demonstrates their indifference to the fate of freedom and democracy in Russia." This "appeasement" undermines "the survival of West's basic institutions, such as the market economy, liberal democracy and human rights," he added.

Indeed, Russia's presence undermines the very values the seven industrialized democracies joined forces to protect. Russia is neither an advanced free economy nor a democracy: its Gross National Product is a function of its size not its performance, while democracy requires a lot more than occasional elections.

Economically, Russia has immense natural resources but its performance reveals the incompetence of the kleptocracy's central planning. Moscow has the world's largest population of US dollar millionaires but that wealth is still dependent on cronyism. Entrepreneurs in Russia do not build and sell products and services people actually want -- they build close ties to the Kremlin. Russia is 91st in the world by Gross National Income per capita, well below Gabon, South Africa and Turkey.

Central control has discouraged growth throughout the economy. Abuse of power is routine: unaccountable bureaucrats reap riches with arbitrary regulation and confiscation, forcing businesses to succumb to bribery and shady dealings. Away from every high profile grab of Western-owned oil and gas fields lie hordes of pesky officials demanding bribes from all small traders. Russia currently ranks 121st in Transparency International's Corruption Perception Index of 163 nations -- below Kazakhstan and only one place above Indonesia.

Bribery in the court system undermines property rights and contracts, especially for foreigners, discouraging the investments the country so desperately needs. For Russians, the absence of the rule of law is the reason why more than 46% of their income is from the so-called "informal" sector: unregistered, untaxed businesses forced into illegality.

This litany of misrule puts Russia 103rd out of 130 countries in the Fraser Institute's Economic Freedom of the World Index 2006, worse than Nigeria, China and Bangladesh.

Most radio, television and newspaper sources are either directly controlled by or under intense pressure from the regime. The independent Moscow Times estimates that the ruling elite controls roughly 90% of news.

Russia is as credible a candidate for the G7 as Venezuela, the oil-rich, one-party state ruled by President Hugo Chavez who shut down the popular Radio Caracas Television last week.

The G7 allowed Russia to join them in 1998 hoping it would be lured into consolidating democracy and freeing its economy. Some of us who went to the G7+1 jamboree in Russia last year hoped to shine the spotlight on its repression, state monopolies, cronyism and protectionism -- not to mention its post-imperial interference in the new stable and prosperous democracies of Eastern Europe. We did, but nothing much changed.

Instead of using this year's Heiligendamm G7+1 meeting to do the right thing and castigate Russia, Germany's foreign policy officials are talking about "damage limitation," the contemporary jargon for appeasement.

When a government is free to write its own rules, history tells us it is also free to break them. Unless the G7 reverse appeasement and demand that Russia behave itself, the elephant will stay out of control.

It is in our self-interest to help the Russian people to economic freedom and growth: only prosperous democracies make safe global neighbours.

Alec van Gelder is a research fellow at International Policy Network, a development think-tank in London.

This article also appeared in the China Post (Taiwan) and the http://www.scmp.com/portal/site/SCMP/menuitem.2c913216495213d5df646910cb... target=blank>South China Morning Post (Hong Kong)