Courtesy Reuters Vladimir Putin stands in front of a map of Russia in his residence outside of Moscow.

Putin's Fairy Tale

Why Russia Will Try -- and Fail -- To Build a New Empire

Since returning to the Russian presidency in 2012 amid stagnant economic growth and dropping poll numbers, Vladimir Putin has been grasping for a narrative that could legitimize a second decade of his rule. That search explains, in part, why Putin seized on the crisis in Ukraine. It has allowed him to present a bold new vision for Russia, one based on a promise of a national resurgence, a promise that is hugely appealing for Russians -- in the short term, at least. But in the long term, Putin’s new national story has only set them up for disappointment and economic pain.

For most of the 2000s, Putin’s semi-authoritarian model of politics rested on a simple bargain with Russia’s population: Your political freedoms may shrink, but your incomes will rise. This was as true for ordinary Russians as it was, on a dramatically greater scale, for the oligarchs. Wealth and living standards rose faster during this period than at any other point in Russia’s history. In the first decade of the twenty-first century, per capita income went from about $2,000 to more than $10,000. Against the background of that growth, most Russians were willing to tolerate a steady constriction of political accountability and the growth of a predatory and corrupted bureaucracy.

Russia’s economy is still growing, but it is losing steam. In the years before the global economic crisis of 2008–9, Russian GDP expanded roughly seven percent every year. In the years since, that figure has fallen to just 2.5 percent, and in 2013 the economy grew only 1.3 percent -- its worst mark since the 2009 contraction and its slowest positive rate since 1999. Disposable income growth has collapsed to just 1.5 percent a year after growing an average of nearly 15 percent every year between 2004 and 2010, with the exception of the crisis year of 2009, according to Bloomberg data.

Economists say that improving Russia’s economic growth would require a range of structural reforms. But Putin, keen to protect his key political constituencies -- oligarchs on the

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