UPDATED (from Charles): Here is a video of Andrei Illarionov discussing what the West should do about Russia on the BBC. The video is short (only about twenty minutes) and might make for good background research.
The Salvatori Center will host Andrei Illarionov, Senior Fellow at the Cato Institute and former Economic Policy Advisor to Vladimir Putin, at the Athenaeum next week.
Andrei Illarionov is the most prominent, active and accomplished figure in the rising Russian libertarian movement. Illarionov, an advocate for free trade and founder of Russian Libertarian think tank- Institute for Economic Analysis, was an important Economic Policy Advisor to President Putin. For the international community, Illarionov's appointment was a positive sign of reform in Russia.
He also served as Russia's representative to the G8 till early 2005. The libertarian economist has been, and continues to be a driving force behind Russia's recent reforms. Some of his notable accomplishments include the following.
- In 2001, President Vladimir Putin introduced a Flat Tax of 13%. This move was essentially the brainchild of Illarionov, a long standing opponent of progressive taxation. The Putin administration also reduced the Corporate Tax rate from 35% to 25%. Russia's incredible success with Illarionov's tax code have encouraged governments to consider tax reform in their country. Even the Communist Party in China is planning to reduce outrageous tax brackets, and lower corporate tax rates. ('Liberals' are against flat taxation, and 'Communists' in China along with Post-Soviet countries are openly adopting the flat tax! Where did we go wrong?) . The National Bureau of Economic Research found Russia's flat tax to significantly reduce tax evasion. Economists expected an improvement in labor productivity as a result of flat tax reforms, however Russia's inelastic labor market prevented a dramatic increase, as was seen in tax evasion. Another study by the Hoover Institute also found an increase in tax revenue despite significant drops in the tax rate, both for Personal Income Tax and Corporate Tax.
- When Russia experienced windfall gains from the energy sector, Illarionov was a strong advocate of paying up foreign debt. "If you cheat or blackmail your neighbours you can't expect to be invited to their next Christmas dinner." He labeled Prime Minister Mikhail Kasyanov's reluctance to pay an old Soviet $40 billion debt as 'Hooliganism'. Illarionov believes it is crucial to pay off debt in a timely manner to stay clear of disasters such as the Disaster of 1998. Inability to pay foreign debt and an overvalued Ruble were cited as reasons for the disaster by Illarionov. In anticipation of the Disaster, he called for a sharp devaluation of the Ruble.
- He played a key role in creating the Stabilization Fund. The fund collected the windfall gains from Oil and was supposed to act as a safeguard against inflation and export price fluctuation.
- Illarionov was also responsible for securing Russia's position in the G8. "I wish Russia would be a G-8 member as a developed, free and democratic country. I worked to that end. At the time when Russia was invited to the political part of G-8, nobody suspected such changes in political trends. But they would have hardly accepted Russia, if the Yukos affair and all other things that started in 2003 were happening even then."
Illarionov, on the other hand, has achieved the impossible. Russia now boasts one of the lowest personal income tax rates in Europe. He has created a sound foundation for future reform.
However, his sound economic advice and integrity made many enemies in the Kremlin. After several conflicts with the administration, Illarionov resigned from the administration in 2005. He criticized the emerging 'Corporatist State' and termed the recent election undemocratic. He believes the following steps are necessary for political reform:
1. Immediate release of all political prisoners.
2. Immediate end to all political repression.
3. Immediate elimination of all limits on the activities of the mass media.
4. Elimination of limits and prohibitions on political activities.
5. Restoration of basic civil freedoms, including the sanctity of the individual, freedom of speech, freedom of movement, and freedom of assembly and association.
6. Introduction of a criminal prohibition against interference by the executive branch of government in court decisions.
7. Restoration of election laws to what they were as of December 31, 1999.
8. Cancellation of the official results from the special operations of 02 December 2007 and 02 March 2008.
The question is, how much support does his Libertarian tradition have in Russia? Also, Can the Kremlin ever be home to a party vowed to free markets?