Chrystia Freeland

To understand the significance of the presidential election this weekend in Russia, read a book by two U.S.-based academics that is being published this month. Why Nations Fail by Daron Acemoglu and James Robinson, of the Massachusetts Institute of Technology and Harvard University, respectively, is a wildly ambitious work that hopscotches through history and around the world to answer the very big question of why some countries get rich and others don’t.

Their one-word answer, as Acemoglu summed it up for me, is ‘‘politics.’’ Acemoglu and Robinson divide the world into countries governed by ‘‘inclusive’’ institutions and those ruled by ‘‘extractive’’ ones. Inclusive societies, with England and its Glorious Revolution of 1688 in the vanguard, deliver sustainable growth and technological innovation. Extractive ones can have spurts of prosperity, but because they are ruled by a narrow elite guided by its own self-interest, their economic vigor eventually fades.

‘‘It is really about societies that have a more equitable distribution of political power versus those that don’t,’’ Acemoglu told me. ‘‘It is about societies where the elite, the rich, can do what they want and those where they cannot.’’

For many of us, that is a welcome conclusion. It may also seem to be an obvious one. But Acemoglu pointed out that academics, policymakers and business leaders have often advanced quite different views. One perspective is that all that matters is economic growth and the right technocratic mix of policies necessary to deliver it. This approach, implicit in the prescriptions of so many International Monetary Fund missions, is that if countries can get richer, everything else will fall into place.

A version of this view, which has gained particular currency since the collapse of the Soviet Union, is that the key is private property. Establish property rights, the reformers in Warsaw, Moscow and Beijing believed, and economic and social success will inevitably follow.

But Acemoglu and Robinson argue that if an extractive regime is in charge, neither wealth nor private property can save a country from eventual decline. The Russia of today, they believe, is a textbook extractive regime, and that is what makes the vote this weekend, and the unexpected protests that preceded it, so significant.

‘‘Russia is ruled by a narrow clique,’’ Acemoglu said. ‘‘The only thing that is keeping it going is a big boom in natural resources and a clever handling of the media.’’

The point, Acemoglu argues, is that wealth in and of itself doesn’t lead to sustained growth: ‘‘Saudi Arabia can get a lot of growth, but that is not the right growth. Take away the oil and Saudi Arabia would be like a poor African country.’’

A crucial argument Acemoglu and Robinson make — and one foreign aid donors and policy advisers too often miss — is that the leaders of extractive regimes don’t implement policies that stifle sustainable growth out of ignorance. They aren’t stupid; they are merely and rationally pursuing their own self-interest. The real ignorance is that of outsiders who fail to appreciate that in an extractive regime, the interests of the rulers and the ruled do not coincide.

‘‘When you think of somebody like Chávez, you will see that his objective is not to enrich Venezuela,’’ Acemoglu said, referring to President Hugo Chávez. ‘‘He is not letting markets work because his goal is something else.’’

Acemoglu and Robinson’s analytical framework helps to make sense of one of the seeming paradoxes of the past 12 months — the prosperous middle-class people who have taken to the streets in the Arab world, in India and in Russia to protest crony capitalism. If you believe that economic growth today is a sufficient condition for long-term prosperity, these affluent agitators are puzzling. That leads observers to search for softer grievances, like the quest for dignity.

But Acemoglu and Robinson believe that dignity and long-term prosperity are intimately connected. The protesters, who put the demand for political rights ahead of everything else, are right; the academic consensus that argues they should simply focus on the correct economic policies is wrong.

In the early Putin era, the Acemoglu and Robinson approach was very much a minority view. As recently as 2008, an essay in Foreign Affairs by another pair of influential Western scholars laid out the ‘‘conventional explanation for Vladimir Putin’s popularity’’ thus: ‘‘Since 2000, under Putin, order has returned, the economy has flourished, and the average Russian is living better than ever before. As political freedom has decreased, economic growth has increased. Putin may have rolled back democratic gains, the story goes, but these were necessary sacrifices on the altar of stability and growth.’’

But in their Foreign Affairs essay those scholars strongly disagreed: ‘‘This conventional narrative is wrong, based almost entirely on a spurious correlation between autocracy and growth. The emergence of Russian democracy in the 1990s did indeed coincide with state breakdown and economic decline, but it did not cause either. The reemergence of Russian autocracy under Putin, conversely, has coincided with economic growth but not caused it (high oil prices and recovery from the transition away from communism deserve most of the credit).’’

The essay’s authors concluded with a prediction about Russia’s future that fits neatly within the framework of extractive versus inclusive institutions and labels Putin’s Russia the former: ‘‘The Kremlin talks about creating the next China, but Russia’s path is more likely to be something like that of Angola — an oil-dependent state that is growing now because of high oil prices but has floundered in the past when oil prices were low and whose leaders seem more intent on maintaining themselves in office to control oil revenues and other rents than on providing public goods and services to a beleaguered population.’’

Acemoglu and Robinson are pretty tough on Western experts, officials and business people who, they believe, are too easily seduced by the leaders of extractive regimes, particularly ones enjoying temporary bursts of prosperity.

But the 2008 Foreign Affairs essay highlights a very important exception. One of the authors of that devastating critique of Putinism was Michael A. McFaul, the new U.S. ambassador to Moscow. That appointment, lauded by many inside and outside Russia for utilizing the skills of an acknowledged Russia expert, may be one reason to be hopeful about Russia today.

This has been a bad year for dictators, starting with the Arab Spring and ending now with the Russian Winter. If you are one of the autocrats who survived the annus horribilis of 2011, here are three lessons, drawn from some smart Russians and Russia-watchers, of what the unexpected Slavic protests this month could mean.

The first is that authoritarian regimes don’t run on autopilot. To survive, particularly in the age of the Internet, jet travel and global capital flows, dictatorships need to be savvy and effective. We often attribute the success of democratic revolutions to their brave leaders or the spirit of the times, but, as Lucan Way, a professor of political science at the University of Toronto, argues, “authoritarian incompetence” can be an equally powerful driver.

That is certainly the case in Russia, where one reason United Russia, the party of power led by Vladimir V. Putin, did so poorly in elections this month is the simple fact that the regime made a lot of political mistakes.

“The ineffectiveness and stupid actions of the authorities have accelerated the process,” Grigory Chkhartishvili, the best-selling Moscow author who writes under the pen name Boris Akunin, explained in an e-mail. He recalled asking Yegor Gaidar, the late architect of Russian economic changes, “when does he expect society to awaken. Around 2015, he answered, if they, meaning Putin and his entourage, do not make too many mistakes. Well, they have made too many mistakes.”

Vladimir Gelman, a professor of political science at the European University in St. Petersburg, made a similar point this week. Gelman argued that the Kremlin’s wobble in December was an own-goal, or, as he put it, “a blow delivered with its own hands.”

The biggest mistake, in Gelman’s view, was “the attempt to mask Russian authoritarianism with a liberal facade.” That turns out to have been an error partly because “part of the political class and concerned members of civil society actually believed in the liberalization of the regime.”

But the bigger problem was that Russia’s authoritarian leaders became so infatuated with their political Potemkin village they neglected some of the coercive basics: focused as they were on the carrot, the authorities didn’t pay enough attention to the stick. Gelman contrasts this political season, when the government’s attitude before the election was “peaceful,” with the 2007-8 political cycle, when the opposition was repressed in advance and the state’s political machinery was fully engaged.

The standout example of authoritarian competence, by contrast, is China, whose rulers have continued to focus relentlessly on doing whatever it takes to stay in power. That determination was in evidence after the “color revolutions” in the former Soviet Union, which prompted a thoughtful and concerted effort to tighten government control, as did the uprisings in the Arab world this year.

The second lesson of the Russian protests is one that will be particularly worrying for China. It is that economic success does not guarantee political success. This equation is mystifying in Western democracies — where people tend to believe that “it’s the economy, stupid,” and usually they’re right.

That’s why the International Monetary Fund, which focused on Egypt’s healthy gross domestic product numbers, was wrong-footed by the protesters in Tahrir Square in Cairo. And it is why the demonstrations in Russia perplexed many foreign observers, who noted that many of their participants were well-heeled members of a middle class that prospered in the Putin era.

A partial explanation of this puzzle is that, as in Tunisia and Egypt, middle-class citizens in a dictatorship can be moved to protest by their souls, not just their pocketbooks. The refrain during the Arab Spring was that the protests were about dignity. As for Russia, Chkhartishvili put it another way: “This is not about bread, this is about cleanliness. It’s not political, it’s hygienic.”

Research by Carol Graham and Stefano Pettinato suggests another reason why a prospering society might still be a rebellious one. In work that initially focused on Russia and Peru, the two identified a group they described as “frustrated achievers,” people who had become both richer and less happy.

“Frustrated achievers are people who are just out of poverty or the lower middle class,” Graham, who is a senior fellow at the Brookings Institution, said. “They are people who have made relatively large gains, but they report being very frustrated.”

A source of that frustration, Graham said, was when “the gains around them are much bigger than their own, and bigger than they can ever achieve in their lifetime.” Post-Soviet Russia, with its oligarchs, crony capitalism and corruption, is a petri dish for frustrated achievers.

The third lesson of the Russian Winter is one it has in common with the Arab Spring. One consequence of the rise of social media is the emergence of what Way calls “leaderless protests.”

“In Russia, as in the Arab world, protests started largely spontaneously without the participation or instigation of the major opposition groupings,” Way said in an e-mail. “Instead, they were inspired by actors who came out of nowhere and lacked virtually any kind of organizational backing.”

But this new world is also hard to manage for the would-be revolutionaries. Twitter and Facebook may make it easy to get those frustrated achievers onto the streets. But the really hard work always starts the day after the revolution, and if you didn’t need to build a protest movement in the first place, you may soon lose power to the people who did.

For anyone who ever hoped Russia could become a liberal, free-market democracy, the grim trial last month of Mikhail Khodorkovsky, the former oil tycoon who was once his country’s richest man, offered a slender solace—it was widely and loudly condemned.

David Remnick, editor of The New Yorker, compared the prosecution to that of the late poet and Nobel laureate Joseph Brodsky. Joe Nocera, writing about the business and economic consequences in The New York Times (whose global edition is the International Herald Tribune), described the Kremlin’s tactics as “boneheaded.” Secretary of State Hillary Clinton warned that the case would “have a negative impact on Russia’s reputation,” and particularly on its “investment climate.” What was notable about this chorus of foreign criticism was the implication that, even judged by the Kremlin’s own standards of realpolitik, the treatment of Mr. Khodorkovsky was a mistake. Moscow’s leaders want to restore Russia’s wealth and greatness: Western assertions that the Khodorkovsky trial had hurt Russia’s reputation and would discourage foreign investment suggested that the Kremlin was harming its own cause.

But some investors, economists and political analysts are drawing a different, and much starker, conclusion: The Khodorkovsky verdict was an inevitable and logical act of self-preservation by a regime that is fully and lucratively in control of Russia.

In this reading, there is nothing accidental about Mr. Khodorkovsky’s continued imprisonment. It is, instead, the clearest possible statement of the rules of Kremlin capitalism, and of Prime Minister Vladimir Putin’s confidence that, at least as long as Siberia has oil, there is plenty of private capital willing to play.

“Within Russia, everyone who matters understands exactly what the Kremlin is trying to say – that there is no one above the rule of the Kremlin,” said Roland Nash, co-founder of Verno Capital and a 16-year veteran of doing business in Moscow.

The message, according to Sergei Guriev, one of Russia’s leading economists and rector of the New Economic School, is this: “It is to show that Putin is fully in control. It is not a question of Khodorkovsky getting out of jail, it is a question of other businessmen not following in Khodorkovsky’s footsteps.” Ian Bremmer, author of a recent book on state capitalism and president of Eurasia Group, a global political risk and consulting firm, said the verdict was “rational” and “predictable.” “If you are in a sector the state cares about in Russia,” he said, “you either play ball with the Kremlin, or you leave.’’ Mr. Nash did remark that the Khodorkovsky case had exacted a real, quantifiable economic cost. “The Russian equity market would be worth several hundred billion dollars more if it weren’t for the critical Western perception of Russia, and the Khodorkovsky case is the principal example of that perception,” he said.

Critics of Putinism, especially Western ones, like to point to this lost value as proof that the treatment of Mr. Khodorkovsky, and the authoritarian politics that his case represents, is a mistake. But that analysis, according to Mr. Guriev, a liberal who laments the path Russia has taken, leaves out the essential political calculus of Putinism.

“Economic growth per se is not important to a ruler, if he is not there to enjoy it,” Mr. Guriev said. “Better to stay in control of a stagnant, but large and rich, country than to be kicked out of a growing one. Everyone wants a bigger cake, but better a small cake than none at all.” And while the Russia cake is surely not as big as it could be, it’s big enough, and growing steadily: Gross domestic product rose 3.7 percent last year, below China’s red-hot 10.5 percent, but better than the United States’ 2.6 percent. The Russian stock market jumped 22 percent in 2010.

One reason the cake is still big enough for Mr. Putin and his allies is that many foreign investors are still willing to tolerate an economy run according to Kremlin rules.

“I haven’t talked to one corporation that used the Khodorkovsky trial, as opposed to corruption more generally, as a factor in their investment decision,” Mr. Bremmer said. Companies in extractive industries, still the dominant sector in the Russian economy, are accustomed to dealing with all kinds of governments. Playing by the authoritarian logic of state capitalism, in Russia and elsewhere, is familiar, even reassuring, he suggested.

Emerging-market investors have similar experiences. As the flows of capital between emerging markets—rather than between emerging markets and the West—become more important, so does tolerance for Russian, or Chinese, or Middle Eastern state capitalism.

“There is a much better understanding of the nuances and the differences in the rules of the game in the emerging world than there is in the developed countries,” said Mr. Nash, whose biggest investor is from Abu Dhabi. “There are now sources of capital that don’t care so much about issues like the Khodorkovsky trial.”

Get ready for the next wave of globalization. The emergence of the emerging markets is old news, of course: after all, Tom Friedman discovered that the world was flat back in 2005. But even as much of the developed world is struggling with weak consumer demand and stubbornly high levels of unemployment, the emerging market countries are writing a new chapter in the story of the global economy.

We are accustomed to thinking of our economic relationship with the countries Fareed Zakaria describes as “the rest” as a two-way exchange between west and east or north and south: western companies setting up call centers in India or manufacturing their goods in China, for instance; and, more recently, savings-rich emerging market economies, especially China, investing in US treasuries, or Russian oligarchs buying London mansions.

That was Globalisation 1.0. In the next stage, some of the biggest deals and some of the most important capital flows will be between emerging markets, with no need to stop-over at Heathrow or JFK. Forget the last decade’s race-to-the-bottom rivalry between Wall Street and the City of London to be the world’s financial capital; the new motto of the moneymen, as one Manhattan banker put it to me this week, is “Mumbai, Dubai, Shanghai or goodbye.”

One place you can watch Globalisation 2.0 gathering pace is on the 49th floor of the ‘C’ tower in the high-tech high-rise complex the locals call Moskva City, on the banks of the Moskva river, half a mile downstream from Russia’s White House, where Prime Minister Vladimir Putin is currently installed. The fancy modern furniture (the “Ziricote veneer,” a sign informs visitors, is “sourced in Chile”) and contemporary art are standard New York hedge fund decor. But Stephen Jennings, the 50 year-old New Zealander who receives visitors here, is betting on a world that by-passes the west altogether.

Jennings is a founder and CEO of the Renaissance Group, a Moscow-based financial company with ambitions to be the premier investment bank for intra-emerging market capital flows. As Jennings put it, he wants Renaissance “to provide the plumbing”.

Last year, Jennings went home to Wellington to deliver the annual Trotter lecture, a stage he used to lay out his vision of the rise of indigenous emerging market players. “Multinationals’ advantages in terms of know-how and capital have been neutralized by their inability or reluctance to grow explosively in complex, foreign environments,” he argued. “In many emerging markets and in an increasing number of industries, the market leaders have local roots. The largest metals group in the world is Indian. The largest aluminum group in the world is Russian … The fastest-growing and largest banks in China, Russia and Nigeria are all domestic.”

Jennings knows that emerging markets are “highly idiosyncratic.” But, he told me, some of the savviest emerging market champions seem to be discovering they have more in common with each other than with their erstwhile tutors in the west: “they have analogous business models and states of development … they are all culturally attuned to these fast-growing markets.”

One of the best examples is eight floors above Jennings’ office: DST, or Digital Sky Technologies, the Moscow-based internet investor which made a global splash with a landmark deal with Facebook. Earlier this year, DST formed a three-way partnership with Naspers, the South African media company, and Tencent, the Chinese internet firm. Together the three hope to dominate the emerging market internet space. Another seminal intra-emerging market deal was the acquisition by Bharti, the Indian telecom giant, of most of the African properties of Kuwait-based Zain.

A high-tech executive who lives in California and has close ties to Bharti told me the Indian firm has a competitive advantage over western rivals in what he believes will be the explosively growing African market: “They know how to provide mobile phones so much more cheaply than we do. In a place like Africa, how can western firms compete?”

It would be wrong, of course, to count the west out. Multinational behemoths like GE, Coca Cola and HSBC have been quick to understand the opportunity emerging markets represent and agile in adapting to local conditions. The reliability and the reputation of these global brands can make them appealing partners for even the most aggressive emerging market entrepreneurs. And when it comes to paradigm-shifting innovation, western companies like Apple and Facebook are still setting the international agenda.

In fact, it may be western politicians rather than western CEOs who will be blindsided by this coming wave of globalization. Lackluster economic growth and persistent unemployment are fueling protectionist sentiment in many developed countries, especially the US. At a time when emerging market countries and companies are getting better and better at doing business with one another, that impulse may not only be self-destructive. Even worse, it could be futile.