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Proceedings of the Standing Senate Committee on
Foreign Affairs

Issue 8 - Evidence (morning meeting)

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OTTAWA, Monday, April 30, 2001

The Standing Senate Committee on Foreign Affairs met this day at 9:00 a.m. to examine and report on emerging political, social, economic and security developments in Russia and Ukraine; Canada's policy and interests in the region; and other related matters.

Senator Peter A. Stollery (Chairman) in the Chair.

[English]

The Chairman: Honourable senators, we have a full day today. Our two witnesses for this morning, Ms Chandler and Ms Debardeleben, both professors, come from the Institute of European and Russian studies at Carleton University and are steeped in Russian culture.

Dr. Joan Debardeleben, Professor, Institute of European and Russian Studies, Carleton University: Honourable senators, I will talk today about elections, dealing somewhat with political parties and public opinion in Russia, to give you an impression of how the Russian public is able to express itself through the political system and some of its viewpoints on major issues of economic and political reform.

We have been undertaking research in this area at Carleton University for about the past 10 years. We have worked with Russian partner organizations, both in Moscow and in several of the regions, to conduct a series of public opinion surveys. We also operated a CIDA training project called "Capacity Building in Public Policy" with the intention of providing our Russian colleagues, particularly those in the regions who have less exposure to Western contacts, with high-level skills in conducting public opinion surveys. We have a fair degree of confidence in the level of our research. My presentation is based on this research, as well as my general reading, general knowledge, and contact with Russian political life.

I will begin with some comments on the Russian elections. As you probably know, competitive elections were only introduced in 1989, but with the participation of political parties at the central level only in 1993. Russians have been subjected to a whole array of elections. They seem to be going to the polls constantly, either for federal elections, referenda, or regional elections. It is encouraging that, despite this, at least at the national level, interest has been maintained at a fairly reasonable level, with turnout rates for national elections close to 70 per cent.

Elections are run in a fairly respectable manner, by international standards, at least in terms of the technical formalities. The elections generally include competing political parties. Some of the major problems have to do with control of the media, and the fact that there is not always equal media coverage of the various political forces. The Russians learned a lot from their Western consultants during the presidential election of 1996 about what could be called "influencing or manipulating" public opinion. The ruling forces have become quite adept at using the media, particularly television, to shape public opinion.

I will not go into much more depth about that now. That is the major question I would raise about the validity of Russian elections. As you know, there are both parliamentary and presidential elections. The elections for the state Duma, which is equivalent to our Parliament, are run by an electoral system quite different from ours and much more similar to the German system. The members of that body are elected through two separate parts of the ballot.

The Russian voter actually votes in two separate parts of the ballot. One part is very similar to ours, single member constituencies. The other part is a proportional representation party list system, which means Russians are presented with a list of political parties - usually a very long list, with as many as 43 parties on it. They are asked to vote for one. Depending on how that spins out, half of the seats in the Russian Parliament are allocated proportionally to those parties that win at least 5 per cent of the vote.

This has encouraged the formation of political parties. It means that even if no party is strong enough to win a clear majority, or even a very clear or strong plurality, parties can be represented in the Duma. The Duma is the lower house of the Russian Parliament.

It is a somewhat complicated system. However, I think it testifies to the sophistication of the Russian voter that there do not seem to have been many reported difficulties in dealing with this ballot, although it is somewhat unfamiliar to us.

As a result, we have actually seen the emergence of political parties in Russia, unlike, for example, in the first parliamentary elections in the Ukraine, where parties were not encouraged and did not have this kind of proportional representation component on the ballot. It has since been introduced in the Ukraine. Therefore, there was a system in Russia from the beginning to encourage the formation of political parties, although it also allowed the party system to become somewhat fragmented, as any party that won as much as 5 per cent of the national vote could be represented in the Duma. It meant there was not the same kind of incentive for parties to form large coalitions as one would find in a purely single member district system.

One reason that this system seemed good, despite the fragmentation that was produced, was that electoral politics in Russia have tended to focus very much around personalities. This has been true not only in the presidential elections, but also in local elections for what we would call MPs, or representatives to the Duma. Local notables would be more likely to succeed if this were simply a plain, first-past-the-post system such as we have. It would have been unlikely to generate national political parties. This party list system for half of the ballot has been quite important in encouraging the formation of political parties.

This is quite a controversial feature of the Russian electoral system. There is a significant debate about whether it should be abolished. However, it has been maintained to this point.

I will direct your attention to the first slide. At the top of that slide are the parties. Those six parties are the ones that received above 5 per cent in the most recent elections for the Parliament in 1999. You will notice that the vote for the party is the first figure there, the one that says 24.29 per cent. You will also notice that the Communist Party has consistently done very well in the party list vote. It actually received the largest proportion of the votes in 1999, as it did in 1995.

I am sorry, I have some of the figures transposed there for Zhirinovski. They should be flipped around. That does not affect what I am talking about now, that the communists won close to a quarter of the party list vote in 1999 and slightly less than that in 1995. Therefore, the Communist Party remains the one that is able to draw the largest number of votes when people are asked to choose a political party.

You will see right below it is the Unity Party, the one that President Putin endorsed, and it got almost, though not quite, as many votes as the Communist Party in 1999.

You will also notice that the Unity Party did not exist in 1995 and 1993. It is a newcomer. Therefore, it may be difficult to say whether it will survive. It did live up to its name. It did unify many people in the political centre who previously had not been associated with that party.

The next largest political party, the Fatherland Front, associated with Primakov, one of the former Prime Ministers and also an important figure in foreign affairs, and Luzhkov, the mayor of Moscow, got 13 per cent of the vote. You could say that the Unity Party and the Fatherland Party represent the centre of the political spectrum, with the communists on the left. Then the parties on what we would call "the right," meaning here the union of the rightist, very pro-market forces, the fourth one listed there, got only 8 per cent of the vote in 1999. You will see that historically, it and the parties similar to it have never done much better. It has changed its name several times since 1993. Those very strongly pro-market forces have done much worse than the leftist forces, the Communist Party.

If you look at the very bottom party, Yabloko, another pro-market party but more of an opposition one, it has consistently received between 5 and 8 per cent of the vote. The pro-market forces have not managed to form an effective coalition. If they did, if the rightist forces united with the Yabloko, they would have about 16 per cent of the vote for the very pro-market position, still less than the consistent 22 to 25 per cent for the communists.

As you can see from this slide, there is a fairly substantial body of public support for the successor to the Communist Party. A large portion of this tends to come from those whom you might call the "losers" of the economic reform. They are people who have lost out, who have done poorly: elderly people, working people who have become unemployed, others who have simply not benefited economically from the reform process. These people tend to vote quite consistently for the Communist Party.

The Zhirinovski bloc is the far right-wing, nationalist force, and its support has fallen off. That is why I had the figures for 1993 and 1995 transposed there. It did very well in 1993, getting 22 per cent of the vote. It has declined to 6 per cent now. Fortunately, we see support for the extreme nationalist fringe declining.

If you could scroll up there and show what is below, you will see the other parties that got below 5 per cent of the vote. I will not talk about those, but the list goes on and on. It is hard to understand why people vote for these parties, but there is a large number of parties that get under 5 per cent of the vote and are not represented on that portion of the ballot in the Duma.

That is the situation with the political parties.

Senator Corbin: On a point of order, could we have this information on paper? I can hardly read or follow this.

The Chairman: Yes, can we get these figures copied?

Dr. Debardeleben: I can distribute them after today.

The Chairman: I would really appreciate that.

Senator Corbin: I would like to have them now for the purpose of discussion. This is an exchange.

Dr. Debardeleben: I have it on paper.

Senator Corbin: Thank you very much.

Dr. Debardeleben: One of the interesting things about political parties is that President Yeltsin refused to associate himself with one. He wanted to present himself as sort of standing above the fray. I think this is one factor that has prevented the development of a strong reform, pro-market party, because he did not use his own political force to support that kind of initiative.

President Putin has associated himself with the Unity Party. Whether this will end up being an important party or not still remains to be seen. That is a positive development, in that it suggests that the President may use his authority to develop a political movement or organization with linkages to a mass constituency. This is a positive thing for Russian democracy, although it still remains to be seen what kind of real impact it will have. If it remains purely a personal influence vehicle, then it will not be as effective as if it takes an actual programmatic position. One thing that has contributed to the support for the Communist Party is that it has taken on programmatic positions in support of increased social welfare spending. That has been an important basis for the appeal of the party in the Russian Federation. So many people have suffered from the introduction of market reform measures rather than benefiting from them, and have therefore wanted a stronger social welfare system.

I wanted to talk next about aspects of public opinion, how Russians are viewing what is going on in their country. If we could go on to the next slide. The question there is: "How satisfied are you with your current standard of living?" We asked this question in the survey we carried out following the presidential elections in 2000. Our sample was not totally representative of Russia, but it was conducted in four diverse regions, and was representative within those four types of regions. We think it is a good measure of Russian public opinion.

You see high levels of dissatisfaction with the standard of living. Nearly 50 per cent of the respondents said that they were not satisfied with their standard of living at all. Only 7 or 8 per cent said they were very satisfied. This pattern has been consistent and is not surprising. It also helps to explain why a fairly strong level of support exists for parties which are critical of the market reforms that have been introduced and which would like to see a stronger system of government protection for those who have suffered from those economic reforms.

If we could switch now to the next slide.

The Chairman: Could you tell us what the four different regions were?

Dr. Debardeleben: The first of the four is Stavropolskiy, which is a region in southern Russia, right next to Chechnya. It is considered to be a relatively poor region, primarily agricultural, but in Soviet times it did well because it has rich agricultural conditions. In the post-communist period, it has suffered significantly under the impact of the economic reforms.

The second region is Nizhniy Novgorod, which is an industrial region with a reputation for being pro reform and having a lot of western influence and economic involvement. The capital of Gorki was a closed city because of its military-industrial base.

The third is an oil and gas region, one of the richer regions in Russia, Khanti-Mansi Okrug. It ranks at the top in terms of per capita income and other measures of economic well-being.

The fourth region is Orlov Oblast, a mixed agricultural industrial region in central Russia which has traditionally voted for the communists.

Among these four regions we have a fairly good mix. I would not take these percentages to be an exact reflection of the Russian population's viewpoints, but I would take them to be a rough indication of how people view the processes currently going on.

There are always difficulties in sampling Russian public opinion. Since we train the people who are involved in these surveys, we are fairly confident of their technical competency as well as their character. Certainly you can have problems of various types when doing surveys in a country like Russia.

The second issue I wish to address is the attitude toward the market reforms. The general position here is that while people show a fair amount of support for the concept of markets in general, or as a slogan or a term, when you start asking people about specifics, they are quite critical. If you ask people, "What is your view of market reform?" you get a picture like the one on that top bar graph. The far left is approval, and the far right is "do not know," but the second to the right is disapproval. You see a split in opinion about market reform, with slightly more support than lack of it. If you look at the two left columns as being supportive of market reform and then the third and fourth as being critical, you see a split opinion about the whole notion of market reform in Russia, and then some 12 per cent of the people who simply do not know.

The point is people do not really understand what "market reform" means. When you ask them more specific questions about those components of market reform that we consider crucial, they become much more critical. On the first question, attitude towards price controls, the almost universal opinion is prices should be controlled by the state. Regardless of what commodity you are talking about, whether it is bread, automobiles, children's clothing, books, furs or whatever, between 80 and 95 per cent of the respondents consistently say the state should control prices on these commodities. When you start talking about very specific elements of market reform, people become much more critical.

When we ask about another important component of market reform, privatization, people are likewise critical of that. The chart on the top asks people what they think of the idea of privatization. We define it for them in the question, namely, taking the ownership of property out of the hands of the state and putting it into private ownership.

You will see that the second and third columns are those who oppose that. Thirty-seven per cent of Russian respondents strongly oppose privatization. Only those two left-hand columns approve to some degree. Nine per cent and 17 per cent say they feel some degree of approval for privatization.

Privatization was initiated in its most energetic form in 1992. This survey is from the year 2000, by which time the response to privatization is overwhelmingly negative. The people do not believe they approve of the idea, and we are talking about the idea of privatization, not just its implementation.

On the bottom chart, we asked people directly, "Do you think that privatized enterprise should be re-nationalized?" You will see in the column on the left that 60 per cent of the people said yes, most large enterprises should be re-nationalized. Only 5 per cent said no enterprises should be re-nationalized.

Ironically, this position is not supported by any political party, except the communists to some degree, and it is not clear whether even they would re-nationalize enterprises. However, the public has a clear position, at least in terms of large enterprises, that there should be re-nationalization. It would probably have somewhat of a different view for small enterprises, the local retail outlets, or the service sector. More sympathy for privatization exists in those sectors, but with respect to big industry - telecommunications, oil and gas, all these things - the belief is that privatization has not been successful or desirable.

Other attitudes towards privatization can be seen on the next slide. The question was - agree or disagree - privatization will turn Russia into a country in which the majority are poor and few rich. Sixty-one per cent agree with that. They see privatization as causing a great increase in stratification to the point where the majority of Russians will be poor as a result.

The next slide shows a different dimension of views on privatization. Respondents were asked to agree or disagree with this statement: "In the future, privatization will permit the creation of a more effective economy." In this case, the "disagree" is stronger. People do not think that this will effectively produce a better economy. They do not see this as a vehicle to efficiency even if it causes inequality. It will neither produce efficiency nor contribute to equality.

There is no belief in the "trickle-down effect" here. They do not believe that if the economy does well, even the poor will do better. On the contrary, most people do not believe that a privatized economy is more effective.

The next statement was: "Privatization is permitting those in power to take control of property." They are in strong agreement with that. There is a strong view that privatization is basically a political process that is benefiting the few and allowing the powerful to gain control of the property that was previously in the hands of the state.

These are rather stunning results, I think, and rather disheartening in a number of ways. They suggest that some nine years after the economic reforms were implemented by President Yeltsin, they have not gained the assent of the population. The population is critical of major elements of the economic reform process. Whatever the Russian regime has done to try to persuade the public that their reform policy was a good one has not been effective.

Let us move on to the next chart, to a slightly different question that relates to attitudes towards democracy. Here we have a more optimistic view when we ask Russians, "Do you support the idea of democracy in Russia?" The idea of democracy receives strong approval. There is strong approval by 37 per cent and 37 per cent more approving than disapproving. A much weaker percentage, only 26 per cent, expressed disapproval of the concept of democracy, with competitive elections, a free press, et cetera.

When Russians were asked how satisfied they were with how democracy is currently being carried out in Russia, there was strong disapproval. Forty-eight per cent said that they were strongly dissatisfied with the way democracy is being implemented in Russia. There is quite a contrast there. The people have bought the idea, but rejected the implementation. The population is dissatisfied, not only with the results of the economic reform, but also with the results of the political reforms.

This is a picture of a population responding to poor governance. People were asked to agree or disagree with the statement: "Many people in the federal government are dishonest." Forty-five per cent agree, 30 per cent agree somewhat, and only 7 per cent disagree. There is a strong belief that the government is corrupt and dishonest, which is reflected in poor governance.

I know that you have spoken about Mr. Putin, but I want to make one point. We have a "thermometer" question. We tell the respondents that we are going to give them a list of people and institutions, and they should tell us how they feel about them. If they feel warmly, they give a score of 10. If they feel coldly, they give a score of 1.

If you look at the scores on the chart for Mr. Putin, with 10 on the left and 1 on the right, you will see that he is highly regarded. If you look at the scores for Mr. Zyuganov, the head of the Communist Party, you will note that many people do not like him. There are 13 per cent who like him a great deal and quite a number in the middle.

Mr. Putin is clearly the exception to this picture that I have drawn, in the sense that he is a figure who commands high respect or warm feelings. At the same time, the people's reactions to the way they are being governed, both in terms of political processes and the way economic reforms are being carried out, are highly negative.

You could draw your own conclusions. One would be that this is a populist figure who must do significant work to turn things around. His base of support might dissolve quite quickly, given the fragile foundation that the Russian public provides by way of support for the reform process underway. I do not know whether this can succeed or not.

The conclusion that I would draw, in terms of Western policy, is that Western governments should pay much more attention to the broader public's reaction to reform processes than has been the case. Assistance should be directed as much to the bottom of the political sector as to the top.

You might say that aid going to the top may improve governance, but it does not seem to have done so. The activation of a public that is supportive of democratic ideas is needed. That public does not see the government as implementing democratic ideas effectively.

Projects that propagate the notion of a citizenry that demands accountability, and has tools to do so, might aid in constructive expression of some of the present criticism and discontent. The Russian population has not demonstrated itself to be revolutionary in outlook. We are unlikely to foment revolution, but more likely to foment participation in acting on the discontent that the Russian population feels.

Dr. Andrea Chandler, Professor, Institute of European and Russian Studies, Carleton University: I have prepared a separate presentation.

Honourable senators, my remarks will deal primarily with social policy, which has been a serious challenge for the Russian Federation's government since the collapse of Soviet communism. I am currently doing research on the topic of democratization, policy change, and social rights in the post-communist era, and causes and consequences of Russia's pension reform crisis. The Social Sciences and Humanities Research Council of Canada funds this research.

The plight of Russia's social welfare system illustrates the complex dilemmas involved in reforming Russia's government institutions, tax collection systems, and federal system. Reforming social welfare poses a difficult problem because it is an issue that concerns almost everyone in Russian society in some way.

Russian leaders recognize that social welfare, and the deterioration of the social safety net, has a potential to undermine social stability. At the same time, the knowledge that citizens value the current social welfare system impedes the government's political will to undertake reforms that could cut entitlements. I will conclude my remarks with some observations concerning the recent Russian social reforms initiated under the leadership of President Putin.

It is no secret that Russia's social welfare system has declined dramatically in the last decade. One might consider the following information. The country's health care system is seriously strapped for resources. According to World Bank figures, 30 per cent of Russians live below the poverty line. Estimated unemployment increased from 5.6 per cent to 9.5 per cent between 1993 and 1996.

The official figures on unemployment do not necessarily recognize the degree of hidden unemployment in the country. Unemployment benefits are meagre, and once unemployed, it is difficult to break the cycle of unemployment.

The situation about which I know the most is old age pensions. Chronic problems with the pension system have included a number of items. Between 1995 and 1998 in particular, reported incidents of pension arrears increased, meaning that citizens' pensions might be delayed by weeks or months. Second, there were difficulties in adjusting pensions to account for the increased cost of living associated with Russia's market reforms, especially during the periods of inflation of 1992 to 1993 and 1998.

For the most part, pensions have had inadequate purchasing power. In 1997, the average monthly pension was only 13 per cent higher than the poverty line, and the minimum pension was 80 per cent of poverty-line income. That is according to official statistics.

In Russia, social welfare is not just a policy problem; it is a political problem with various dimensions. In the last eight years, pensioners have intermittently shown their discontent through social activism, protests and demonstrations. The plight of social welfare has empowered Russia's left-wing advocates. For example, there is evidence that pensioners are among the most likely groups to vote for Russia's Communist Party.

Social welfare has contributed to tensions between Russia's federal government and its regions. Finally, social welfare forces Russian leaders to confront the fact that some aspects of the old Soviet system remain relatively popular, and thus resistant to change.

Because of its political volatility, the issue of Russia's social welfare system has been at the forefront of the political arena since communism collapsed. There has been a consensus among the Russian leadership since 1992 that the current social welfare system is inadequate and in need of reform. However, under former President Boris Yeltsin, there was relatively little progress in reforming social welfare for the following reasons: First, there was policy drift at the top, which was the result of Yeltsin's unpredictable yet powerful style of leadership and the many difficulties that successive Russian governments faced in achieving sustainable reform. Between March 1998 and August 1999, Yeltsin replaced four Prime Ministers, and it is not easy for any government to accomplish a major reform under these circumstances.

Second, social welfare issues were politicized, in that they constituted one of the main aggravations in relations between the executive and the lower house of Parliament, the Duma. As inflation accelerated in Russia in 1992 and 1993, pensions could not keep up with changes in the cost of living. It was not until 1998 that a pension indexation law was passed. Even then, the law was so controversial that it was the subject of a Supreme Court challenge.

Third, there was little consensus on social welfare reform, just as there is little consensus on the overall direction of reform in Russia, particularly when it comes to matters that concern the economy. The system of Soviet-style, expansive social welfare benefits remains popular because it was seen by the left and by social movements as a uniquely Russian legacy worth defending. It is important to stress that when Russians appear to be attached to their social welfare system, it is not simply because they view it as an adjunct to communism, but rather because they deem it an accomplishment of the Russian nation.

At the same time, advocates of market-style reforms could not really offer an appealing alternative model of social welfare. Pension reforms, and social welfare reforms in general, were often associated in the public mind, and in political discourse, with the International Monetary Fund and the World Bank, and these are not the most popular institutions in Russia.

This perception is not necessarily accurate. Two American experts on social welfare have argued that the World Bank has not been particularly successful in influencing social reform in Russia. It has not been able to convince Russian stakeholders of the wisdom and feasibility of the reform options advanced by these institutions.

Also, when social welfare reforms were considered in Russia, they often reached the public eye with unfortunate timing, such as in 1997, when relations between the government and the Parliament were particularly strained; and in 1998, shortly before the rouble crashed in August.

It is important to emphasize that Russia's social welfare system is not simply an intact legacy of communism - a relic of the Soviet system - as it is sometimes depicted. It is fairly well known that the Soviet system offered a relatively expansive, modest set of social welfare guarantees to its citizens. Scholars are currently debating whether this system was actually as effective as the ideology claimed it to be. There is some agreement that by the late 1980s, the Soviet welfare state was becoming too expensive and inefficient to be maintained in its then form.

Many of the inefficiencies still exist. However, by the time the Soviet Union collapsed in 1991, Russia's social welfare system had become very dynamic. A series of reforms had been passed under Gorbachev's "perestroika," in particular for the funding of social welfare, where separate funds were created to collect and distribute revenue for health, employment, pensions, and social insurance.

When the Russian Federation became independent in 1992, it inherited not the Soviet-style social welfare or social safety net, but a hodgepodge of semi-reformed institutions that proved to be poorly adapted to the market economic reform process that had been initiated by Boris Yeltsin.

The state of social welfare illustrates some larger issues in Russian politics. In respect of governance, the reform of Russian government institutions was neglected under Boris Yeltsin. Social welfare illustrates how an institutional system that worked fairly well in Soviet times can break down in the new era. In the Soviet Union, the social system was predicated on the idea that enterprises, local governments, regional governments, and the federal government as a whole, were relatively seamlessly integrated. That assumption is no longer true.

New social welfare institutions were created to combine with old institutions in a way that was never properly harmonized. Social welfare institutions were accustomed to coping with decades of stable Soviet prices and consistent social needs. They were easily overwhelmed by the destabilizing socio-economic effects of Russia's transition from communism.

In particular, social welfare suffers from a revenue collection problem. The funds that administer social welfare share the same difficulties in collecting taxes that plague the Russian government's budget as a whole.

The next issue is federalism. Social welfare issues have contributed to weaknesses in Russia's federal system. On the one hand, Russia's regions and localities sometimes argue that, as the central government reduced its budgetary commitments, it left the regions to take up the slack in meeting social needs. On the other hand, the federal government feared that the regional governments were making budget decisions in ways that undermined the universality of Russia's social programs. These interactions took place against a backdrop of increasing regional disparities that enabled some wealthy regions to offer generous social benefits, while less well-endowed areas found themselves strapped for cash.

Undoubtedly, such problems will sound familiar to a Canadian audience, but they are multiplied when a federation has 89 republics and regions, as does Russia. The federal system is one area where Putin has promoted key changes that are purportedly intended to ensure that Russian laws and institutions work in a coherent manner across the Russian Federation. Thus far, assessments of the prospects for these reforms are mixed. One criticism of Putin is that he has promoted solutions that centralize, or bureaucratize, problems in the federal system, rather than encouraging the sort of cooperative, intergovernmental relationships that tend to be associated with a well-working federal system.

Under the leadership of President Putin and Prime Minister Kasyanov, Russia has a new opportunity to consider social welfare reform. There is evidence of a change in direction in the Russian government. First, the recent changes to the tax system included restructuring the payment of taxes that are used to fund social welfare programs. Putin has attached a strong priority to reforming laws to lower taxes and reduce redundancies in the collection of revenue, with the hope that enterprises would be more likely to pay their taxes under the new system.

This demonstrates a clear understanding of what seems to be an obvious point - that social welfare benefits cannot be improved unless there is money to support them. However, critics of the tax scheme fear that the money collected may not be spent in such a way as to meet the greatest social needs.

Second, there is now greater attention in official discourse to the harmonization of social reform and economic reform. There is an admission that the Russian government's previous approach to social issues was wanting.

There is a recognition that social welfare reform must be a top priority. Similar to the governments of the Yeltsin administration, the Kasyanov government gives pension reform precedence over other aspects of the social safety net.

Third, and this is perhaps the most important aspect, President Putin has acknowledged publicly that having a predictable, adequate social safety net is necessary for the citizenry to have confidence and trust in their government.

Since Kasyanov became Prime Minister, which was in 1999 before Putin became President, the Russian government claims to have ended pension arrears, although there is some question about whether that holds true in all regions at all times.

Putin has also steadily increased pensions several times. At this point, it is difficult to determine whether such claims are rhetorical spin-doctoring, or whether there have been real, substantive changes in the administration of pensions.

As in other areas of reform, Putin's endeavours may be aided by the fact that he enjoys more support in the Parliament than Yeltsin did. He has cultivated more cooperative relationships with the Duma. However, Putin's approach to reform thus far has been very top-down. He has been criticized for being vague in public about the content of the basic outlines of reform. Therefore, it remains to be seen whether the citizenry will be able to have a significant voice in the creation of social policy, and to what extent the process of legislative consultation and compromise will produce legitimate reform.

Senator Austin: My first question is directed to Ms Debardeleben. My understanding is that the Unity Party and the Fatherland Party have now entered into a working coalition, which according to your numbers, would give them a very substantial vote of almost 40 per cent, and about 111 seats in the Duma, which would be a very substantial minority. Has this in fact happened and has it become a "Putin party"?

Dr. Debardeleben: The situation is more complex than one where you can simply take the numbers from the previous election and add them up. There is more shifting around between the various factions in the Parliament than one might expect. You have a handout with a pie chart on the second page that indicates some of the movement between the various factions. That handout was prepared by committee staff.

Putin has been able to command support not only from the adherents of those two political parties or movements, but also from other political movements at various times, depending on the issue at stake. He does have a more effective working plurality within the Duma than President Yeltsin previously had.

The disturbing thing in this whole situation is that Russian voters can go to the polls to elect a Parliament, but they have seen as yet no consistent evidence that their votes impact on the government to be formed. Let me explain what I mean. Until the 1999 elections, the Prime Minister in power - including Putin until he was elected president - did not reflect the choice of the majority as expressed in the parliamentary vote. This leads the Russian public to feel that their votes do not necessarily bear any relationship, at least in terms of the Parliament, to what the government is. It bears more relationship in terms of the presidential election because there are only two choices. One is elected and the other is not.

There is a kind of jockeying around that occurs in the Parliament after the vote to form various coalitions, and not only of the kind that you have mentioned. Also, the political parties that do gain a substantial number of votes seemingly cannot translate those into any kind of effective influence on the government.

Russian citizens are disillusioned with democracy as it currently functions, in part because they do not see a connection between whom they vote for and what kind of government they get.

These kinds of elite coalitions that you are talking about may give Putin some tools with which to pass some of his initiatives, which may be a good thing, but that power may not reflect the ability of Russian citizens to see the Parliament as any kind of vehicle for representation. It is a double-edged sword. The people voted for different parties that, before the election, had not formed any coalition; in fact they were more or less at each other's throats. The fact that those parties form coalitions after the election may or may not be encouraging to the Russian public.

Senator Austin: It is assumed, though, that political pluralism is good for the development of Russian democracy and social equity. You have put a lot of emphasis on the consciousness of Russian voters. In your view, do they really see democracy as the way to advance their economic interests? Or do they see a more stable order and less political infighting as the best "next step" to economic development in Russia?

Dr. Debardeleben: Certainly the Russian public strongly supports stable, orderly government. That support is related to that second alternative that you mention. Without a government that can actually govern, that can control corruption, control crime, and that can implement effective policies, it does not really matter what program is being pursued because there probably will be no economic influence.

Russians are quite supportive of Putin as an individual, but the problem is that there is not much confidence in the honesty and effectiveness of government operations as a whole.

The population is largely split on the question of whether efforts to build a strong, orderly government are undermining some of the political liberties established in the post-communist period. That concern may be most vocally expressed by the intelligentsia, as demonstrated most recently in the conflict over NTV. Where is the line between strong government and authoritarian government; or between a kind of soft authoritarianism and some sort of intrusion into the political liberties that have been won? There seems to be some ambivalence about that.

Senator Austin: It seems to me, although I have none of your expertise, that the Russian public's general reaction to events concerning the media indicates a fairly low level of concern. Yes, some elites are concerned. We can look at events that have taken place, such as Gazprom's move into NTV, and know that such a move in this country would cause an enormous reaction. Yet the reaction of the Russian public is almost a shrug of the shoulders.

I have a list of all the media in front of me. Only Berezovsky's and Gusinsky's present and/or former media interests can be described as independent. The rest, particularly the three national TV networks, are pro-Kremlin. The leading radio stations, Rossia and Mayak, are pro-Kremlin, as is most of the print media.

Dr. Debardeleben: I do not know what conclusion you draw from that, but I draw the conclusion that it may be very hard for the public to form any opinion in opposition to attacks on the independent media. If the independent media is under attack, how does the public express its views?

You are right. Russians will probably not go to the barricades over this. They have developed a sense of resignation, which is understandable. There have been many, not violent, but radical shifts in policy in the past decades, and particularly in the past 15 years.

What have they improved? Russians may well ask, "What is the point in protesting this or that move by the government? If there is a radical change, will it be any better?" There is a kind of resignation, a backing-off from politics, a sense of inefficacy, which has a positive side, in that there is no revolution, which there could well be in some other country. On the negative side, it means you cannot read public opinion by the absence of overt protest. People do not currently have the tools or motivation to feel confident that their protests will produce a positive outcome.

Senator Austin: I would ask you a question in the form of a conclusion. By and large, the Russian public would like to see economic progress and to see it take place as rapidly as possible. They believe that a semi-authoritarian system is best designed to develop the policies that will advance the Russian economy. Dissension in the Duma and the media are a distraction from an economic program that the Russian public seems to believe that Putin is trying to organize.

Dr. Debardeleben: I would be somewhat less confident in attributing to the Russian public a belief that government order in the hands of the current elite, which is much more than Putin, will produce that outcome. However, you are right that there is a desire for stronger government action in a direction which will take account of the kinds of issues that Ms Chandler mentioned, and a belief that only in that way will there be economic improvement. Certainly, there has been economic improvement for large numbers of the elite. Some sectors of the population are doing very well indeed, and they are those who are close to the governing hands.

Senator Bolduc: I wish to return to Senator Austin's main issue. I may be wrong, but from your statistics, I see a kind of a paradox between the attitudes of the Russians who favour democracy on the one side, and those who are against the market economy. It is probably correct, taking account of the state of the Russian economy, that economic growth would be more urgent - if this is the basic objective - and they play the market economy game rather than the democratic game. My question is: What should Canada do from that perspective? Is it right for us to suggest the democratic way that we know here, and, for example, proportional voting, when we realize that that means 40 parties, which is something that nobody, not even a specialist, can understand?

We have proof in other parts of the world, including Korea, Chile, Singapore, Taiwan, and many other places, that economic growth proceeds faster under a little more authoritarian government than under a democratic one. At the summit in Quebec, everyone was bending before democracy for Latin America. I am not an authoritarian. I am for democracy here, and in the United States and places like that. However, in South America, and probably also in Russia, I am not sure that that is the fastest way to achieve economic growth. What do you think that Canada should do about that? Should we encourage democracy, or at least what I would call the "apparatus" and the processes that we know here, or should we look to the objectives we are hoping to achieve in that country?

Dr. Debardeleben: I think it is too late to change course on that. That would have been an appropriate question in 1990, whether the Chinese path should be followed in Russia or whether a more thorough reform which also involved political democratization was appropriate. It is now too late to turn back the clock. Certainly the media can be controlled. There can be efforts to implement a stronger state authority or more authoritarian system. Many elements of the Russian public would not allow the reversing of the democratic structures. It would be a big mistake right now.

Your question implied that the reason there has not been economic growth is too much democracy, or at least that was a contributor. That was perhaps a contributor. However, another contributor was the way that economic power was redistributed after the collapse of communism that put power in the hands of certain interests whose primary concern may not have been economic growth, but extraction of profit, a large part of which has taken the form of capital flight. These people have not all been removed from the government.

I am less confident than some people. There is a debate about the degree to which the government's primary interest is in weeding out that kind of extraction of profit by an elite group. Certainly there are claims that some oligarchs have been attacked, but others have not. If that really is the problem, then perhaps you need more democratic control to bring accountability, rather than less.

[Translation]

Senator Bolduc: Maybe I was misunderstood. I am not against democracy, that is for sure. However I am under the impression that what is going on over there is not democracy at all. It is fighting among elites and therefore it is not democracy. Democracy is a lot more open than that. They are doing great things like high masses only it is not democracy.

The Chairman: Like they do in South America.

[English]

Senator Graham: Presuming that we are pursuing at least a semi-democratic path as the best solution for Russia, I believe that you indicated that Russians generally are perhaps not happy with the implementation of democracy, meaning the process or how it has developed. Of course, this implies lack of confidence in the structure or in the system. This leads me to ask who actually formulates the law. We know that the government would have a say. Do the opposition parties have a role in formulating the law? How fair is the law?

Let me give you an example. I observed elections in places like Hungary and Bulgaria, where one encounters some of the most complicated electoral laws in the world. However, in the final analysis, the people would feel that the law is fair because they all had a say in its formulation. Would that be the case in Russia?

Dr. Debardeleben: You are referring to the electoral law. I do not think the problem in terms of democracy relates to the electoral law. The electoral law would be passed by the Parliament, which would have all the same problems of representation that I have mentioned. There might not be a sense of direct involvement in the formulation of electoral law. I do not think the grievance is against the electoral law as such, or even the implementation or operation of elections. We have asked questions in our surveys about whether people think the election was honest. A significant portion of the population believes there is dishonesty in the way votes are counted or reported. This was a particular problem in 1993, when the Constitution was being voted on at the same time and the president needed to get a 50 per cent turnout on the vote. That cynicism has diminished. It is more related to what I was mentioning before, that there is little relationship between the election and what then happens. In other words, if 25 per cent of the people vote for the communists, and yet the social welfare system gets as little attention as Professor Chandler mentioned, or ineffective attention, then one might ask whether this is an effective democracy.

The sense that international agencies such as the IMF and the World Bank, and Western governments, are able to dictate the terms of economic reform by putting strings on credits and various kinds of assistance, means that the government is not really effective in representing the views of the population as expressed at the ballot box.

I would interpret the situation much more along those lines. There then exists a chicken-and-egg problem. The question is whether people have an impact on laws, and the answer would seem to be no, they do not feel they do have an impact on laws in general. People do not have recourse, either through their deputies or through other vehicles, for seeing their views implemented in policy. This again brings us back to ineffective governance. It is not only a problem of poor representation, but also of poor governance. People do not necessarily believe that what they have expressed through their democratic institutions, such as they are, is resulting in an outcome that is reflective of their real interests. I believe it is a much bigger problem.

Senator Graham: How are the elections financed?

Dr. Debardeleben: There is some support for political parties that get a certain proportion of the vote, but certainly financing from private sources is an important issue because there is no effective system of control over public financing of elections. That is one reason. Also, there is the fact that the government can control the media because so much of it is state owned, as just mentioned, and pro-Kremlin. The pro-government parties have much greater access to the media in electoral campaigns, even without paying any money. It does not need to involve a payment through campaign financing.

Senator Graham: Are elections observers from other countries welcome?

Dr. Debardeleben: Yes, they are. They have been present and generally Russia has scored fairly well. I do not think there have been major questions about election fraud. The 1993 constitutional vote was one example, but even there the international observers did not issue any condemnation of that vote. It is not on that level that we are seeing the problem. The problem is on the level of how government is behaving once these elections have been held, and how the elections relate to what governments do, which problem every country has to some degree. However, the Russian electoral institutional system, with the president, the Parliament and the dual executive, creates a situation where parliamentary elections, in particular, are quite ineffective vehicles of representation.

Senator Graham: I am wondering about the prevalence of centres for democratic education that might be financed by CIDA in Canada or an organization in Sweden, or the National Democratic Institute in Washington.

Dr. Debardeleben: I do not know the extent of those, but they certainly exist. At Carleton we recently reproduced a textbook on local self-government which is being implemented in a variety of high schools throughout the country. There are many other projects of that type that are very much in the right direction.

Senator Graham: I think we should invite Professor Chandler to comment on any of these questions if she has some observations.

The Chairman: As an observation, I should like to say that all of the charts, which were quite interesting, seemed to relate to what Professor Chandler told us. If the Russians do not feel that anything good is happening to them, naturally they feel embittered about the system, whatever it is, because it is not producing anything that is making their lives better. I suppose that will not change until their lives start to get better. It does not seem complicated to me, from Professor Chandler's points on the social safety net, which has been basically wrecked in the view of many people in Russia, that people have a tendency to think that it was better before than it is now.

Senator Grafstein: I have two brief issues. They seem to be different, but I think they merge. First is the ability of the central government to raise taxes. When I was last in Russia, I noticed that part of the distress related to the fact that school teachers, janitors, pensioners and war veterans were either not receiving their pensions, or their pensions were severely eroded or reduced. Naval officers were not paid for months. The first issue for any maintenance of and respect for power is the ability to raise public moneys and then to disburse them. What is the ability of the central or state governments to impose taxes and collect them?

Dr. Chandler: That is a difficult problem.

Senator Grafstein: Neither of you mentioned the erosion of the government's ability to function. You said the government has not been able to do this or that. The essence is that unless they have money, they cannot do anything. It is the role of the common law in relation to the fact that money was being collected by government.

Dr. Chandler: The tax-collection problem has several dimensions. The first is simply the idea of collecting taxes as such, and making it a significant part of the way you raise budget revenues, which is something that has changed dramatically in Russia since the collapse of the Soviet Union. Under the Soviet system, the state controlled the economy, and so was in a position of having much tighter control over enterprises than it does now. When that situation changed and the government needed to rely on different mechanisms, such as collecting actual taxes, it became much more difficult.

There are a couple of problems with collecting taxes. Since enterprises have been in difficult straits since the collapse of communism, because production has declined and many enterprises find it difficult to raise the cash that they need to support themselves, it creates a problem for the government in collecting taxes from those enterprises.

The government has also been concerned about tax evasion, because it is difficult to compel enterprises to pay taxes, especially when there seem to be so many unofficial relationships between them, including bartering and so on. Once new private enterprises are created, it is difficult to collect taxes from them because that is a new role for the government. It is a new thing for private enterprises to even exist.

The problems with tax collection are serious in themselves. Add to that the fact that Russia's budgetary needs and its expenditure needs seem to be ambitious, relative to the amount of taxes that it can collect.

You have a slightly different situation with pensions because, as I mentioned, they are financed by funds that are separate from the government budget. This is due to a reform that was introduced in 1990. There is a separate fund to collect revenue for pensions. That reform was intended to try to protect the pension system from the budget, and to ensure that there was sufficient revenue within this fund to support pensions. However, it also makes this new system rather vulnerable, because it means that the pension system is expected to support itself, for the most part.

Some of the problems in delays or arrears in pensions or social benefits are related to problems in the tax system and in the budget as a whole, but they are also the result of the fact that new institutions have been created that are expected to support themselves and really do not yet have that capacity.

The tax system has been difficult to reform politically. It has been difficult for the government and the Duma to agree on what kind of tax system Russia has had.

Senator Grafstein: I have a question relating to the independence of the judiciary. I noticed that the Duma in effect approves the appointment of constitutional Supreme Court judges.

Is that the way it works? In other words, tell me as briefly as you can how judges are appointed, under what mechanism and what power.

Dr. Debardeleben: Are you talking about Supreme Court judges, the constitutional court?

Senator Grafstein: Yes.

Ms Debardeleben: Supreme Court judges are proposed by the president, I believe, and approved by the Duma. There have been problems with that, more in the past than in the present. The Supreme Court was disbanded by President Yeltsin in 1993 when it made some rulings that he did not like. It was reconstituted under the new Constitution. It could not be put into operation for over a year because there was no agreement on the justices.

Due to that experience, the court has been somewhat reticent. There have been some rulings against the executive, but the court has been reluctant to take outlandish positions that would slap the hand of the president. One ruling of the court permitted the Communist Party to reform. This was before 1993. Then there were the controversial rulings that surrounded the siege of the White House and the disbanding of the Duma in 1993.

The court is appointed and sees itself as somewhat answerable, although not directly. At least theoretically, it is protected from direct political intervention. However, if the president could disband it in 1993, then presumably it could happen again.

The court has not been as strong a vehicle of control over executive power as one might have hoped. Perhaps that is because it is a young institution. Other countries have a similar system of appointment of Supreme Court Justices, or the equivalent, and have been able to establish fairly effective courts. However, in Russia it is a very young body. The problem may not be so much in the appointment process, as in the confidence that the constitutional order will be followed if the court oversteps certain bounds.

Senator Di Nino: I have two brief questions. The first deals with the independence of governance. The second relates to polling data and the information on social policy from Professor Chandler on the differences between the generations.

My first question has to do with the obligations, or at least the relationships, that Putin and those in governance have with the oligarchs and other people who may influence them. Do those in governance effectively enjoy independence of action?

Dr. Debardeleben: That is a difficult question to answer. What constitutes independence? There are strong financial links between various elements of the state structure, and, for example, there is the NTV issue, and Gazprom, where the majority of the shares are still state owned. This means that the benefits that accrue from them go not only to the government, but to shareholders close to the government, suggesting there is not the degree of independence that we would wish to see.

The whole notion of conflict of interest, as we have articulated it in our own Canadian context, is not commonly understood. This concept must be explained even in simpler dealings with Russians. Thus, I do not think there is independence in a sense that we would support, and therefore this is not the reality. This is part of the problem with privatization, which in many cases, turned former state enterprises over to private or corporate hands that had strong private interests. The line between public and private good is very blurred. I would say there is no independence as we would understand the concept.

As to your second question, I have given a simple depiction of the types of opinions. We have done much more complex analyses and will continue to do so. Age is a variable that does impact on views about many of those things we looked at. Younger people tend to be somewhat more supportive of market reform, privatization, and democratization. However, it is not a very strong difference. If you looked at it in a table, you would see a trend, but you would still find significant numbers of people in all age categories who fall into each of those opinion groups. You could expect some generational trend in the direction of being somewhat more pro-market and not necessarily dissatisfied, which tends to be more related to income. I think a big variable is that younger people tend to be better off. It is unlike our society, where you see income rising with age. Income tends to decline with age in Russia. If you include material well-being and satisfaction, part of the age factor falls out.

Senator Corbin: A previous witness said that there is no connection between the present and the past in Russia. I found that statement astounding.

You said that only 7 per cent of Russians voted?

Ms Debardeleben: No, the figure is 70 per cent. The turnout is quite good.

Senator Corbin: That is quite good.

We talk about the institutions and the academic viewpoints and what have you, but both of you have concentrated very much on issues close to the people. I appreciate that very much.

Have the people in Russia really changed over the centuries, from the periods of feudalism, czarism, Sovietism, and what have you? In what ways, if any, have the mindsets of the people towards their administrators really changed, beyond your point-specific inquiries?

Second, could you tell us about the state of Russian studies in this country and the competency of our bureaucracy in understanding real Russian problems? That is part of the nature of our study. Perhaps the question is too broad, but I would appreciate some cutting comments from both of you.

Dr. Chandler: This sort of question is somewhat difficult for a Westerner to answer. I went to the Soviet Union for the first time in 1985. The first several times I went, I found if difficult to have really open conversations with people I met. It was difficult to know what their actual views were compared to what they were telling me.

There have been several dramatic changes. Speaking anecdotally from my own experiences, they are very open to free ideas. They are avid readers, and they are very critical of what they read. They are more outspoken politically than they used to be. They are probably much more aware of politics and events in their own country than many Canadians. These are very positive signs. I have not seen any deterioration.

At least some of the people that I meet and some of the educated people in society are very interested in computers and the Internet, and very adept at using and adapting them. This is also promising. There is great energy and sophistication when it comes to learning new things and adapting to new technologies.

One continuity in Russian society is very much a sense of self-reliance and ability to adapt to changing conditions.

It is a real asset to be able to adjust to their situation. However, some people put a negative interpretation on that and say that self-reliance tends to make people more accepting of their political institutions because they realize that they will always have to be the primary actors in their lives.

Dr. Debardeleben: I would mention three points of continuity, because Russia's past weighs very heavily, both the pre-revolutionary and the Soviet period. Things did change in the Soviet period. It was an important time of change in terms of modernization, increasing levels of education, secularization, and exposure to internationalization through the multi-ethnicity of the country - but that topic is much too large.

Three areas of continuity explain part of that paradox of support for democracy and skepticism about market reform which Senator Bolduc raised. This is very culturally imbedded. It is not only a reaction to the poor reform results, it is part of the culture as well. First is an expectation that the state should have a broad scope, what Richard Pipes calls the "patrimonial state," with the state as owner as well as governor. The view that the state should be taking care of the people in some way is still deeply embedded, although changing among the younger generation. This view of the state is certainly different from ours. That strong neo-liberalism concept of getting the state out of everything is not familiar to the Russian mentality.

Second, the same importance is not placed on individual achievement, action and profit gain, and a much stronger collective identification exists which goes against the market idea of people seeing their own personal economic gain as the primary goal of their lives. This collectivism is very strong, even among younger Russians, although weakening to some degree, especially among some of the economically successful younger people.

Third, what I would call a very strong spiritual element to Russian life, the Russian soul, is very much there. People are "deep." I do not know how else to describe this. The love of poetry, art, culture, is related to the spiritual - not necessarily religious, but a spiritual inner search. This runs in concert with the collectivism, but somewhat in contradiction to the notion of individuals as rational economic actors. I do not think Russians view themselves that way, that that is their primary motivation in life. They like to live comfortably, but they do not have that same kind of view of personal economic gain as the primary goal of life. Therefore, they can endure in the way that Professor Chandler mentioned. They can put up with a lot because they have a very strong sense of a different meaning, a different level of meaning, a level of human solidarity which enables them to endure a lot of suffering.

Those are very strong elements of continuity. They produce feelings about what people want from their politics that are somewhat different from ours, and those elements give rise to somewhat of a dissatisfaction with and resistance to market reforms. That is not to say it cannot be changed, but do you respect that culture or not? Part of democracy might include making room for that adjustment in the reforms we would try to further in the economic sphere which might cut against the grain of certain elements of Russian culture.

Russian studies is a huge problem because there is not enough support for Russian language. This is very important. You can send all kinds of Canadian delegations to Russia, but if you do not know what people are saying and have to work through interpreters, in that kind of environment, you will be - I do not know if I want to put this very bluntly - but sometimes deceived, misled, or will misunderstand what is going on. We need Russian speakers to be involved in all of our programs. Russian language study has been cut back dramatically. It is going down consistently at those universities that offer Russian, partly because they are responding to the market. Our government needs these people, even if businesses do not feel they do.

With respect to competence in the public sector, many of our graduates are working there, and I think they are quite good. However, some people who are not Russian specialists are somewhat naïve about the projects. That naivete is lessened to the extent that you involve people who study the country. Often people in high positions in Russian government are quite adept at operating the system, and Canadians must be equally adept at spotting that. It takes people who understand the language and the culture. We have some of those, but not generally in the very top positions. That would be my very brief comment on that.

The Chairman: I want to thank you both. We will have to move on to our next witnesses and take about a 10-minute break to reorganize the room.

It has been very interesting. I must say in relation to the secularization of Russia, which relates to the Soviet period, one of my consultants is Mrs. Zirokofsky, my next door neighbour. She is Ukrainian, of course. I always consult her when a question arises that I do not understand.

I asked her about this. It was very interesting, because we did have a witness here who said, "Well, 1917, everything sort of stopped." She told me that not until 1939 did very much change at all where she lived. The religious persecution, if that is what you want to call it, was at its worst between 1951 and 1958, when the priest would work in a factory, and they would pull the curtains when they had a christening. Then I read in The Globe and Mail last week that the Pope is apparently to visit what I presume is a Greek Catholic cathedral, and the Ukrainian government is worried because 2.5 million people might show up from, I suppose, both the Greek Orthodox area and Ukraine. It does not sound to me as if a great deal has changed for what Senator Corbin calls the "ordinary people."

Dr. Debardeleben: That spiritual element means that a revival could happen if it is allowed.

The Chairman: Thank you very much.

Senator De Bané: Tell me about that issue of privatization that runs against the culture.

Dr. Debardeleben: Market reform.

Senator De Bané: In Canada, the regions which suffer economic difficulties look to the state in a different way than do the better-off regions. In some regions, public expenditures represent a higher percentage of the economy than they do in Russia. It all depends where you sit. If you are well off, you understand why the market economy works. However, if you are in a region where it does not work, then the support will be weak, as shown in your charts that indicate that most Russians think that privatization is bad, et cetera.

Dr. Debardeleben: This point is more or less the one that I am trying to get at. There is an element in Russian culture that does not look at it quite that way. Other values are at play here that relate to solidarity and to collective identification. If one asks the classic question, would you rather have both you and your neighbour being poor, or both of you better off but your neighbour significantly richer than you, the Russian inclination is to choose equality and solidarity rather than large differentials, even though they might be a bit better off than they were. The cultural predisposition is different, and it is not all considered in terms of the rational economic actor.

I think that that could change. If people see that economic reform brings results, that could change.

Senator De Bané: It was thought for generations that the West had theoretical democracy, where most candidates were exactly the same, while in their own country, they had effective democracy. They had schools, shelter, food, et cetera. If they were taught that for generations since 1917, surely that must have some influence.

Dr. Debardeleben: Why did that government come to power in that country in 1917? It was due partly to those values. There was some kind of resonance with that culture. It has shifted somewhat, in that the government took on a different role.

The Chairman: Thank you very much to our witnesses. Both of your presentations were interesting. Our new witnesses have arrived.

I have a brief item of business to deal with now. The eight proposed members of this committee who are going to Washington are Senators Andreychuk, Austin, Bolduc, Corbin, Di Nino, Grafstein, Graham and Stollery. Is that list, as read, agreeable to honourable senators?

Hon. Senators: Agreed.

The Chairman: I would like to introduce our next witnesses. Many of us know Professor Gillies from his time as a member of Parliament. He is appearing today with Professor Dutkiewicz. We would like to have as brief a presentation as possible so that we do not run out of time for questions.

Dr. Piotr Dutkiewicz, Professor, Institute of European and Russian Studies, Carleton University: Honourable senators, it is a great honour and pleasure for me to be with you today. I may be dizzy, because I came from Russia last night, where I served as an adviser to the Russian Minister of Education for seven days and almost seven nights on reforms of higher education in the area of social studies.

When I told him that I was to testify before this committee, he asked me to convey personal greetings to you. Thus, from Minister Vladimir Fillipov, I pass along best greetings and good wishes to this committee.

I would like to make my presentation as short as possible. There is an old Siberian saying, that life in Russia is hard, but fortunately it is short.

I have also brought for your perusal, a sample of the new Russian currency that displays the image of President Putin. You can try to use this during your stay in the United States. I do not know what kind of success you will have, but it does show the new mood in Russia, that is not only anti-American, but generally anti-Western.

I am also providing a copy of the study prepared by the Canadian Bureau for International Education. I serve as the editor of and chief adviser to the study on the reforms of higher education in Eastern Europe. It includes a large section on Russia and Ukraine. This study is composed of about 600 pages of very recent information on the reform of higher education in this region.

There are three main points I should like to make. First, Russia is undergoing tremendous change in the area of education. The size of the educational establishment is astounding. There are about 180,000 educational institutions in Russia. Every year, 35 million people, or about 23 per cent of the population, are involved in one type of education or another. Six million people work in the area of education. Being a minister of education for Russia is quite big business over there.

Second, education is still very conservative. The new minister, Mr. Fillipov, is doing his best. However, almost 60 per cent of teachers are aged 60 and above. There are tremendous problems with infrastructure. There are tremendous problems with payments to teachers. About 40 per cent of teachers are not receiving their salaries on time, and sometimes salaries are delayed by two or three months. In far eastern parts of Russia, it sometimes takes half a year to receive salary payments.

Recently, President Putin asked the Ministry of Education to be more in line with so-called "Russian values." Clearly, the education system is becoming another tool in the hands of the Russian state.

There are four main goals of the current reforms. The first is to make education more Western-compatible. There are conversations about the establishment of the credit system, establishment of the new curriculum, and so on. The World Bank is doing a fine job in this area, as are other international bodies. Unfortunately, Canada is out of the picture.

Second, they are moving towards more regionally diverse programs that would give the schools, including higher educational institutions, more flexibility.

Third, in the area of social sciences, at least, Russia is now much more Western-oriented. This has been the case for the past three or four years.

My point is that there is more freedom and pluralism in education. There is more regional diversity. There is a better-prepared educational management system, but still Russian education is far behind Western expectations and far behind the expectations of many Russians.

Russians see education as a vehicle for advancement. They see education as one of the few ways to catch up with Western standards. They are making tremendous efforts to catch up with the West. However, the main problem is money. This will be the first year in the last 10 that the education budget will grow by 1 per cent. That is not much, but it is something.

The infrastructure is in terrible shape. I visited about 21 educational institutions last week. Except for the fancy and well-furnished offices of the rectors or chairmen of the schools, the buildings are in terrible shape. There is no access to computers, and so on and so forth. This makes the Russian educational system very costly, because maintenance costs are eating up to 65 per cent of the entire education budget. This is terrible.

I have worked quite successfully in Russia and with Russians for 18 years. Russia is undergoing what I call "the politics of imitation." They are trying to imitate many Western institutions and regulations, including educational ones. However, much of the Soviet mentality, programs and textbooks remain. This imitation is on the surface. What is going on inside is continuity.

It is an emerging reality that this mixture of imitation of Western systems and the post-Soviet legacy will make Russia a very interesting place to study for another 20 years.

Senator Austin: Professor, I would like clarification of your point that the central authorities want education to be more in line with Russian values; then you mentioned Westernized objectives and the desire to be more compatible with various Western practices. Could you sort that out for me? It seems to be a common question.

Dr. Dutkiewicz: From 1991 onward, the Ministry of Education has undergone tremendous changes. A law passed in 1995-96 gave the higher educational institutions much freedom of choice on textbooks, curricula, et cetera.

However, in the last year or so, since President Putin came to power, there has been a reverse tendency. There is emphasis on the state standards of education - the tendency towards more manipulation of higher education - to keep them in line. I would say there is a contradictory process at the grassroots level - university and high school; and there is a tendency to be more compatible with Western textbooks and curricula. However, at the presidential level, there are strong signals that this freedom has its own limits. We Russians should be more oriented towards the traditional Russian values of collectivity - the values of the orthodox religion, the state and the authority. Thus, these two tendencies are shaping the educational system. I should add that the current Minister of Education, Mr. Fillipov, is liberal-oriented; however, he does receive his orders from above.

Dr. James Gillies, Professor, Schulich School of Business, York University: Honourable senators, it is a pleasure to be here.

It has been more than a 10 years since a government was elected to change the command economy of Russia to a market-driven one. During the past decade, several nations, including Canada, have done much to help that transition take place. This has been done not out of generosity, but because we all believe that a stable Russia is an important element in a prosperous economy and a prosperous world.

Much has been accomplished in the last 10 years, but a great deal remains to be done. The massive use of vouchers to transfer the state ownership to private hands has created some remarkable disparities in ownership, and in wallets. However, the progress has been fairly remarkable, and I would say that about 60 per cent to 65 per cent of the people that we deal with in Russia now believe that the transition will in fact take place and be successful. I never would have thought that this could be possible, given the fact that Russians had lived with the command economy for so many generations.

Two things that have made all the difference are television and the Internet. The new Russian generation is exposed to so many of the values of the rest of the world, and these two technologies are having an enormous impact on the way in which the Russian economy is developing and changing.

A good deal of the assistance to Russia has come from the World Bank, the IMF, the OECD and the EBRD in the form of direct investments. As you know, many of those investments have not been successful; indeed, they have been staggering failures. It is not astonishing that that has slowed down the amount of investment flowing into the Russian economy.

There are many reasons for those failures, but one has been the lack of reliability in corporate governance in Russia. Without proper governance, investors are loath to continue to put money into Russian firms or to undertake joint ventures with Russian companies. I am not here to suggest for a second that improving corporate governance will resolve all the problems. However, it is a necessary, if not a sufficient, condition if adequate investment flows are to recommence.

I was asked by CIDA to look at what we might, or how we might, do something about corporate governance in Russia. I thought it was a ridiculous question. My reply was that, first, we should develop some good, standard political governance before we worried about corporate governance. I certainly did not think that bringing a few dozen Russian directors to Canada for two weeks to take an executive development program would do any good at all. In fact I thought it would be useless and counter-productive. CIDA agreed, but they asked me to give it a little more thought, which I did.

I discovered that there are, surprisingly, a number of relatively good MBA programs operating in Russia today. The reason that they are relatively good is that they have been developed by universities in North America and Western Europe. The best example is the university in St. Petersburg, where the Dean of the School of Business is a graduate of the University of California at Berkeley. The Berkeley faculty teaches in Russia for a considerable amount of time. Professors from Henley College and Kingston College in London also spend a great deal of time on business education in Russia, as do professors from Harvard.

Hence, I was astonished to discover that they were teaching contemporary strategy and business in Russian universities and various other places. I believe that the way to achieve systemic change in Russia is not to deal with the existing directors and corporations, but to change the educational framework. In that way, a new generation of young Russian entrepreneurs can be taught about the operational methods of modern corporations and the basis of good corporate governance. In other words, corporate governance needs to be taught in Russian universities by Russians, in Russian and to Russians, in a contemporary fashion.

The problem was that there was no one to teach corporate governance. Also, it is difficult to determine exactly what to teach, because you cannot take a Western curriculum and simply dump it into the Russian community; it does not have any particular relevance.

I am here primarily to give a vote of confidence and thanks to CIDA, who agreed that that was the way to go. We should try to put together a consortium of universities in Western Europe and North America that had relationships with universities in Russia. In that way, we could determine if we could initiate a program whereby we would teach current Russian professors about modern corporate governance in an effective manner. Then, those professors could return to their universities to teach executive development programs and courses in corporate governance and strategy to the people who live in their communities.

Well, it was a great idea, but getting it going was a little rough. First, we discovered that we needed a Russian partner, so we arranged to deal with Moscow State University, Higher School of Economics. This was a good school to choose, because it has branches throughout Russia, and we did not want this program to be confined to Moscow. They signed a contract with us to help us identify the schools and teachers that might be willing to join this program. In addition, we put together an advisory council, with representation from the World Bank, the OECD, EBRD, CIDA and professors from IMD in Switzerland, from the London Business School, from the University of Michigan and from the Schulich School of Business, as well as a few directors from Canada, some of whom had experience working with Russian corporations. We brought together everyone that we could find in Canada that knew anything about working in Russia. McDonald's Restaurants was an obvious choice, but there are many others, particularly in the natural resource industries, who have been a great help to us.

We asked Russians from the Higher School of Economics to do a study of what was happening in higher education in Russia. I have a copy of that report, which we could table if you wish. We decided that we needed to determine the major problems facing Russian directors if our teaching were to be relevant. Therefore, we organized a seminar to bring a number of Russian directors to Canada, not so much to teach them about corporate governance, but to find out what their problems were.

I can tell you their problems are many, the most important of which is that no one obeys the law. Although there are all kinds of laws, they are not enforced. Serving as a director is very difficult. When we talked to them about transparency and their responsibility to minority shareholders and so on, those concepts did not make any sense at all, even though we were speaking to the Chairs and CEOs of some of the largest companies in Russia.

However, we have learned much. I do not know whether the Russians learned anything, but we learned much about what must be done when bringing over people to teach. We found that they where very interested in finance and in how to raise money. They were not too interested in how to deal with shareholders.

At any rate, we found the seminar useful and they found it useful. We will continue to do it because we want to keep our offerings relevant.

Indeed, we have spent the spring selecting 20 professors from universities throughout Russia to come to Canada in July for four weeks to take a program in corporate governance. We have had an interesting time selecting them. There is an association of business schools in Russia, which we used. The Sores Foundation, which many of you will know of, not only gave us access to their lists of people in universities, but also put a good deal of money into this project. They helped us a lot.

Finally, we circulated application forms to 330 institutions. As my colleague mentioned, the number of educational institutions in Russia is staggering.

We received 80 applications. To attend this program, you must speak English; you must be endorsed by the university where you work; and that university must agree to offer, next fall, either an executive development program or course to the Russian directors in their community.

The applicants will be here for four weeks. Some Russian professors are coming from the Higher School of Economics to teach in the program, as well as some corporate governance scholars who are knowledgeable about Russia.

In addition, in order to keep the impetus of the program, we have organized a corporate governance centre at the Higher School of Economics which we support, and with which we do research and write case studies on corporate governance in Russia. That work is underway. We are working toward having an information source at the Russian corporate governance program at Schulich for Canadian firms on how to do business in Russia.

The program is managed by a very small group. The director is in Moscow today, interviewing the people attending the program. We expect to have an outstanding group of academics here. We expect to be able to send them back to Russia to teach in their schools in a very effective fashion.

This seems to be a good model. We have already been asked by the World Bank if we would take the program to China. The model involves using a home-based university as a foundation and educating the teachers in their own language to go back to teach in their own schools. We will not do a program in China, by the way; we have our hands full trying to do a program in Russia. However, we will probably do a program in Eastern Europe, financed by the World Bank, and headquartered in a university in Hungary.

There seems to me now to be wide acceptance of the proposition that if you want to make real change in an economy, if you want to have a real impact in developing it, you take a fairly long view and do it by educating the trainers. Training the trainers is the way to go.

We do not think we would have much impact on the corporate governance in Russia today through a few seminars with current Russian directors. First, they are very set in their ways. Close relationships exist between the management and the boards of firms. Rather, we must provide a system whereby the new managers coming into the system can learn, as they want to, what it means to operate in a free-market economy with organizations that are taking capital from the people in the form of shares, and what the real responsibilities to those shareholders are. Those changes will come along with the new, young, entrepreneurial Russians, of whom there are hundreds of thousands. That is where we can make a difference.

We believe this is a very effective program, based on the right approach and the right philosophy. If I may repeat myself, I was delighted to be invited here to talk about our program so I could congratulate CIDA for being willing to put over three years and $3 million into it. We believe the program is already beginning to have a major - "major" may be too strong a word - but having an impact on education in Russian business schools.

It is very intriguing that Canadian business schools are doing very well in the world outside of Canada, perhaps better than the business schools of any other country. The home base of business education, as you all know, is the United States of America, but American schools are very inward looking and have been very slow to move outward. The Canadian schools, through CIDA's support, have been taking programs all over the world for the last 25 years. We have had an active program teaching Chinese professors for 25 years. We hear horror stories about CIDA, but I am not sure that Canadian taxpayers realize how significant CIDA has been in helping us take business education to those countries.

More significantly, because we have been able to do that, Canadian business schools are much more internationally minded than most other schools in the world. Given the global economy, that is an amazing situation in which to be.

The Chairman: Thank you. That was very interesting.

Senator Grafstein: Professor Dutkiewicz, I am interested in structures in Russia. We talked to earlier witnesses about the independence, or the lack thereof, of the judiciary. In Canada, our democratic processes began in a number of ways, but one of the roots of our independence and our freedom and our constitutional system involved the evolution of our educational system.

If you examine those areas in which Canada's educational system has been bereft of independence, there you will find the difficulties or deficits in the democratic process.

I have examined this question recently for many different reasons, but Ontario's educational process had an interesting evolution that led up to Confederation. Essentially, as with the judiciary, there was almost a separation of the educational process, which allowed it to evolve in a reasonably free and independent atmosphere.

Our public schools and high schools are essentially locally controlled. Then we have the evolution of universities. All this evolved into a division of powers under Confederation whereby education was left to the provinces. There is a current and ongoing tense debate over the need for funding and direction from the federal government, and the federal government's desire to get more deeply involved in education.

The witnesses are nodding their heads, so the record should show that they agree this has been a long and interesting course.

Having said that, tell us about Russia. I am pretty clear on the evolution of education there before 1914, and even after 1917, but tell us where it is today in constitutional terms. Who is responsible for what?

You have indicated that Mr Putin is suddenly talking about values, which implies some sort of control. Just give us a brief sketch of how the system is supposed to work under the new Constitution, from primary school to high school to university. Can do you that briefly for us?

Dr. Gillies: I know nothing about the evolution up to the university level, but I can tell you that the chancellor of the Higher School of Economics, which is a post-graduate school, is also a member of the Duma. The separation of church and state is not total.

Senator Grafstein: Education and state.

Dr. Dutkiewicz: I would say that the new Russian Constitution of 1992 eliminated the state monopoly on education.

Senator Grafstein: When you say "the state," could you break it down between the regional states and the federal state?

Dr. Dutkiewicz: The Russian education system is highly centralized. The ministries of Higher Education and Education exercise tremendous control over the entire process through several mechanisms. One is the so-called "state educational standards." Simply put, they impose a set of programs, like hours of teaching of particular subjects or topics. Second, there is a system of licensing. If you have a licence, you can teach. If the licence is revoked in certain areas, for instance, in political science or in business, you cannot teach those subjects. The third type of control is so-called "accreditation." You could lose your accreditation in the higher educational system, for instance, if you do not have enough professors teaching in one particular field. Fourth, there is the so-called "state attestation" system. This is the state-run quality control, if you wish. Obviously, on top of all this is the one fundamental aspect that all education is state financed.

The 1992 Constitution makes the system more flexible by introducing the idea of private education. For instance, there are 200 private high schools and about 15 private universities in Moscow alone. However, they are based rather on Western assistance, or Western assistance is crucial for their survival, and they are operating partly on the assumption that such a system will continue for some time. Otherwise, they would face a significant problem.

The system is state funded at the regional level. That means that the federal funds are disbursed throughout the system. The regions are not responsible for education. There are different bodies at the regional level that play a subsidiary role in the management of education. These are councils for education or regional ministers of education. However, they have little to say about the direction of the educational system.

The 1996 law on education says that the role of the regional structures should increase, and also that the regions should pay some money for education, but because of the very weak tax system, the ratio of financial sharing between the federal and the provincial levels is still 95 to 5, meaning 95 per cent of the money comes from the federal system and about 5 per cent comes from the local system. That 5 per cent is mainly used for maintenance because of the terrible state of the buildings, of the infrastructure.

Senator Grafstein: At the end of the day, the federal government, through the executive branch, effectively controls education?

Dr. Dutkiewicz: That is correct in reality. According to regulation, no.

Senator Grafstein: In reality, it does so through funding and through fiat.

Dr. Dutkiewicz: That is correct.

Senator Grafstein: Let us get to the other notion of how we evolved our democratic system, and the independence of teachers was very much part of that. Let us start at the top and work down. The whole notion of tenure at universities had to do with the rights and prerogatives of professors to be independent of government and to be able to demonstrate that they could educate without fear of reprisal. Again, there was a long evolution in our law before we had tenured professors. The history in England was more complex, and it did not happen easily.

What is the system of professorship? How do you become a teacher, let us say, at the high school level in the state system? Is that also controlled by the central government? Can a professor obtain tenure, or is there a parallel notion of tenure in the Russian system?

Dr. Dutkiewicz: The idea of tenure is to never say "sorry" again, and it is not known in Russia to the extent that it is in North America. There is a contractual system. Every five years, professors go through a process called "attestation," and they receive contracts for the next five years. This is in the so-called "higher educational institutions." The Russian Academy of Science has a system of researchers and academicians. An academician would be the full equivalent of the Western-type tenure, fully independent. However, they are mostly not in teaching institutions, but rather research institutions. This notion of tenure does not exist as we know it in the West.

High-school teachers are appointed for 10 years, and the system is pretty stable. I did not hear of any examples where teachers were intimidated or their contracts not renewed because of their political views. There is currently a great deal of self-censorship in Russia, so even if they have, legally speaking, a lot of space for using different teaching approaches, they will self-censor themselves because they see that the Western model of education does not fit the current Russian environment. That self-censorship is probably the main obstacle to the group of teachers aged 60 to 65 introducing changes. Younger teachers are very dynamic, take a lot of initiatives, introduce new courses and new textbooks. This is different work. However, again, if the state decides that they have to be controlled, it will do it effectively.

Senator Andreychuk: Perhaps I could follow up on this topic of education. You talked about the fact that there is much self-censorship, and there was some talk about injecting Russian values into the education system. Can you comment on whether this is a result of the disorganization in Russia, or is this the new attitude because of President Putin? In other words, we see a need in Russia for more stability, control and organization, and that means a firm hand at the presidential level. On the other hand, there is a fear that this may be more than just a firm hand; it may be a retaking of rather autocratic control. Is this part of what you see going on in the education system, Professor Dutkiewicz?

Dr. Dutkiewicz: Thank you for the question. I think that the key issue here is the very anarchistic way in which the reforms in higher education were introduced in 1992-93. The so-called "new gained freedom" meant in practice a very chaotic development in education. It meant in practice that the process of education became very shattered and everyone was teaching different topics and subjects, and using different textbooks which were not even approved by the Ministry of Education.

After a few years, there is now a situation wherein the traditionally high standards of education in Russia are crumbling.

Second, the self-censorship is also a part of the current trend, which stipulates that we must find our own way of education. We cannot imitate the methods of the West, as we have been doing for the last seven or eight years. The third point is, who provides the resources in practice. This is an extremely powerful tool. For example, students do not have money to buy textbooks. If the state is giving these textbooks free to the schools, obviously the state gains control of what is to be taught at this level.

The state can have a showpiece, since it is now supporting several universities, not only because of the higher standards, but because they are trying to develop the so-called "Russian approach" to higher education. There is a mixture of factors. I would not put one issue ahead of another. There is a tremendous struggle at the higher educational level and at the university level.

Senator Andreychuk: Is the church involved in this struggle within education?

Dr. Dutkiewicz: Not much, but the struggle is generational. There are young teachers, both at the high school and at the university level, who would like to be much more open, much more flexible and Western-oriented. There is this generational gap that is quite visible.

I spent some time interviewing people, and the so-called "well-established" professors told me that I am coming from the West and trying to impose Western values and the Western system. They told me that these values are not compatible with theirs. They claim that the West is imposing its textbooks, which they do not need and do not like. At the same time, there is an entirely different attitude among the young professors. Their attitude is to either take those same textbooks, or they want to work together to adjust the textbooks to the Russian needs and standards of education. They want this chance, otherwise they feel they will not be able to teach social science properly.

There is a struggle, and it will continue for some time. The Western assistance, in my view and as Professor Gillies said, is absolutely crucial. Canada has no elaborate scheme. There are wonderful examples. We have produced a book for high schools on local governance, of which 100,000 copies have been distributed free of charge in Russia.

We do not have a systemic approach to the higher educational mobility system, as Canada has with the European Union and NAFTA, and we do not have such a mechanism to support younger scholars and students at the level of third and fifth year of study in hooking up with the Western system.

Senator Andreychuk: Professor Gillies, you have outlined the CIDA approach to corporate governance, and your hope seems lie in the younger entrepreneurs who are coming forward as opposed to the existing ones. It seemed to me that part of the problem was that when we first broached the subject of democracy in Russia, the attitude was that somehow or other, since they were well educated, they would simply buy into our system and it would automatically become the international economic order. Will you be looking at international standards, and the kind of thing that is not really Westernized, but is now a global system that they will be accountable for if they want to expand and work? You did not touch on that area and I should like to hear your comments.

Dr. Gillies: The answer to your question is yes, the OECD has set international standards for corporate governance. The OECD runs a conference in Moscow. As a matter of fact, the next one is in June. As you know, the OECD has no power whatsoever - it is really a debating society - but they go to Russia and many Russian organizations attend their conferences.

Corporate governance is a big issue in Russia today and is receiving much attention. It is difficult to generalize, but our view is that it will be this younger generation who need capital who will want investment to come there. There will not be joint ventures in Russia if there is no confidence that your partner will follow reasonable rules of governance. Our hope, therefore, is that we will change the mindset of the young people coming up as to what is expected in the way a corporation is managed and governed. Through doing that, more capital will flow and the situation will generally improve, but it is a very big job.

Senator Andreychuk: Does this go hand in hand with political stability, like the rule of law needing to be in place, et cetera?

Dr. Gillies: The rule of law, of course, is fundamental to the existence of any form of real governance and certainly to corporate governance. Until the judicial system is firmly in place, it will be difficult to establish good governance in Russian corporations. There is an enormous number of laws. The major problem is that they are not enforced.

We have spent a lot of time talking to Russian directors on boards that represent the investment of the International Monetary Fund or the World Bank, and they throw up their hands in dismay. I talked to a gentleman who had sat on five Fortune 500 boards and then decided he would work pro bono with the IBRD and sit on a couple of boards in Russia representing their fund. Being a director of a Russian company is different from being on the board of a major British or American company, because they just do not comprehend that the company is now owned by the shareholders, and that the minority has some rights and so on. In fact, this gentleman said that the corporate governance principle he always operated on was to obey the law in principle, but he found out that if you obeyed the law in Russia, the company would cease to exist because you had to pay off so many people. It is a long struggle, but the only way to bring about change in Russia is through the establishment of good corporate governance in a framework of the rule of law.

Senator Corbin: I would like to have another go at the question of education, following on the previous comments, questions and answers. I hope I am not being redundant, but I would like to sort out some of the notions and concepts following on the comment that education is another tool in the hands of the state through bringing it more in line with Russian values.

I am also inspired by one of the questions suggested to us by our researcher. I have difficulty in understanding specifically what is going on in the mind of the state with respect to education. Is this control of the system agenda a subtle form of interior propaganda? How do you separate the notions of Russian values, patriotism and nationalism? In what way can you reconcile them with the long-term development of true and authentic democratic values?

I have a problem understanding this whole approach.

I say this, of course, respecting the comments you made about the age gap, the new way of seeing things.

Dr. Dutkiewicz: That is a key question. I will try to answer, but probably my comments will add to this puzzle instead of clarifying things.

I would make three points. First, fewer and fewer of my Russian colleagues are asking what is a true democracy, why we should be a democratic society. Why should we introduce these values? More and more of my colleagues are saying that democracy is not a key issue.

The key issue is the well-being of the society. If we do not have that well-being, we will not have a true democracy. The issue is the sequence.

In the early 1990s, the first issue was democratic values, introduction of the market and other things, and then the well-being. Now the sequence is different. My colleagues are now saying that the democratic values introduced in the early 1990s did not bring stability or well-being. Therefore, we would be better off not introducing democracy.

It is reflected in the higher educational system in the way that they perceive their role. There is more "economization" of curricula. There is less talk about democratic values in the textbooks. There is less talk about Western values. Instead, there is more talk about the national identity. The main topic currently in Russia is defining "national identity." Who are the Russians? How should we put ourselves within the world context of identification? What kind of policies should we introduce in order to raise the younger generation in Russian values, as a counterweight to the Western influence of mass culture and Western values?

Another point relates to your question about the separation of notions. I will tell you the Russian approach to this. Democracy is a remote goal. Order in the state is needed now. If there is a strong state, society will not be brought to its knees, but will rather stand up and say that we are a big superpower. We are a big player in the world.

In the social sciences, this notion is transformed in practical ways by the introduction of more courses on Russian politics, and by making sociology and economics more Russian-oriented. There is less and less in the curriculum about the world. There is less comparative politics. There is more Russian politics in other curricula.

In practical terms, it means the divergence of Russia and the rest of the world. It means more Russian-oriented courses and fewer topics related to the world in geography, politics, sociology and literature. My role was to tell them that they needed to balance the curricula. Inward-looking education leads nowhere. I told them that they must be open. They needed to realize that a comparison must be made with what is going on in the world. They should take the best from the West. However, it is more difficult to pass on this message in Russia these days.

Senator Bolduc: My questions are directed to Professor Gillies. I have two. One is about the group of directors that you were talking about. Are they directors of state enterprises or business firms?

Dr. Gillies: Business firms.

Senator Bolduc: Second, are they people from the top? You talked about young executives, so are you talking about the top or the middle management?

Dr. Gillies: We are trying to get people who are in top management. At our directors' seminar, we had chairmen and CEOs, which was very interesting. In our academic seminar, we are gearing the program for teaching, I would say, at one or two levels down. We would call them "vice-presidents" and so on. That is the group that we think we can change. We cannot do much about the existing people.

Senator Bolduc: You are a man of the university now, but you have been, and still are, a very good economist. You are well known. My second question relates to economic growth in Russia.

If you were the Canadian government, how would you reorient the CIDA programs? I know that the one you have is good, but we have a fairly large involvement with Russia. How would you tackle trying to help them in terms of economic growth?

Dr. Gillies: I have not thought seriously about this question, but my view is that most grants and most aid, which are simply given to existing organizations to build a dam or something, are a waste of money. A long-term approach must be taken. You must try to change the fundamental values.

I was interested in Senator Corbin's question about Russian values. I want to be careful how I put this, because each nation has its own values, but values are becoming homogenized. I am sometimes thunderstruck when I talk to my Russian colleagues in the universities. I am basically talking to economists and people teaching in business schools, not the scientists. They are very familiar with the literature in the economics journals in the West, far more than we would ever be with the literature of economics in the Russian journals.

They know that this new generation feels very strongly that if democracy is ever to come to Russia, it will be the same as it has been all over the world. There is a close relationship between political freedom and economic freedom. They need to see a strengthening of their institutions and their institutional framework.

I would devote my attention to that strengthening if I were the Government of Canada. Money spent on reform of the judiciary, for example, is absolutely the best money that could be spent in Russia today. How to reform the judiciary and the regulatory system are interesting issues.

I apologize for the personal reference, but that is what I know about. We have been asked to develop a program for regulators of security exchanges, markets and so on. It would have been unthinkable 10 years ago, but markets are now beginning to evolve in Russia. However, they will not go far until regulations governing the capital markets are in place. There is a vast amount of current corporate governance legislation in Russia, but it will not mean much until the institutional structure is there.

If I were responsible for CIDA, I would try to steer as much of the funding as possible into ways of creating institutional change. That would take priority over building a railroad.

Senator Bolduc: I asked my question because the more I heard from the witnesses this morning and the more I understand public opinion, I find that it is very much related to the individual situation of each Russian. Younger Russians believe that they have nothing to protect, and so they want Western ideas and lifestyles. Members of the older generation look at their pensions, and of course they are protectionists. Fundamentally, that is the situation, and I suspect that it is the same for university professors, higher civil servants, military personnel and others.

Dr. Gillies: You are absolutely right. You maximize your own individual interests and you maximize those interests of society.

Senator Austin: To fill in my background on the Russian educational system, what is available in Russia in the sense of an "open university education?" Is there an educational program for young adults who are in the economic or the social system, who wish to work and advance their education? Is there a system that equates to what we call "open university education?" Does that system exist on a sustained basis?

Dr. Dutkiewicz: There is a positive answer. Yes, there is such a system for adults that has functioned for the last 40 or 50 years. At the same time, this program is becoming smaller. The higher education system in Russia is not connected to the demands of the labour market. There is a huge gap between education and labour market requirements. We have tried to explain that: Do not produce historians of modern art, because you will never be able to employ hundreds of thousands of them. That is one gap.

The second gap is an economic issue. There are no subsidies for Russians to attend adult education, so most of them have to pay, and fewer and fewer programs for adults are subsidized by the state. The programs are run on the basis of their economic efficiency, and they cannot afford it.

The third gap is an issue of funding. If there is a choice, within the limited resources available, between educating the younger generation and the adult generation, the decision has been to put most of the resources into educating the younger generation. State resources available for these educational programs are declining. Again, it exists in theory in most of the major universities, but the enrolment is not as high as it was some years ago.

Senator Austin: How many Russian or Ukrainian students are studying in Canada today, in any discipline? Is it an important group? For example, there are 53,000 Chinese students studying in the United States, and there are roughly 5,000 studying in Canada. What would be the comparative numbers?

Dr. Dutkiewicz: I do not know those figures, but judging from our knowledge of the market, roughly 300 to 500 students arrive each year from Russia. The main obstacle to this exchange is the international student tuition fee. Only wealthy Russians - the so-called "new Russians" - can afford such fees. Russian student enrolment levels would be much higher if international student fees were waived, and they could pay fees equivalent to their domestic fees.

Senator Austin: That has a rather obvious answer. Is it not in the interests of Canada and Russia to offer attractive terms for young Russians to come to Canada for educational purposes? Would not CIDA be well advised to try to establish such a program? Is not the Canadian value system better understood by these Russians after they spend time here, interacting with students and professors?

Dr. Dutkiewicz: To my mind, it would be one of the best investments that Canada could make. It is important politically, because these people will return to Russia not only with knowledge, but with a certain package of values. It would also be socially beneficial - we could change the picture inside Russia. This is a long-term investment, but I believe that it could be the best investment.

Dr. Gillies: There is a program sponsored by CIDA to bring Russian students to Canada. It has been running for a number of years, but it is a small program. I have forgotten the name of it, but it was named after one of the former Russian presidents.

Dr. Dutkiewicz: It is the Yeltsin program. Higher-ranking officials are using it for short-term visits, and they are not exactly the target group. The Russian Ministry of Education has a special fund to send students to Canada, and it offers five scholarships each year. The scholarships are extremely good in any terms, because they offer US$25,000 yearly to each student. Five fully funded students benefit each year. Given the size of Russia, and the size of the Canadian educational system, five students are not enough. Obviously, if these five students have been selected to come to Canada, you can bet that they are sons and daughters of very prominent Russians.

Senator Austin: Professor Gillies, the limited but significant self-interested reason that corporate governance is adopted in countries, with which I have had some experience, is that it attracts foreign investors. Countries like China, for example, while they do not have a perfect system, now have their companies listed on the New York Stock Exchange and other exchanges. They are practising, in limited models, Western corporate governance to solicit foreign capital for their economy.

Is it your opinion that Russia produces enough capital to meet its own requirements? The capital may be misallocated or transferred out of the country. However, it seems to me that the leverage for advancing a standard of corporate governance that we would recognize would be attractive to Russians, if they needed foreign capital, and they would be prepared to meet the requirements of the foreign investor. If they do not need foreign capital, then corporate governance would not be much of a lever. Could you comment?

Dr. Gillies: As you know, the Russian economy is quite strong, in a peculiar sense. The rouble is quite strong on the foreign exchanges now because of the economy's resource base.

Senator Austin: The price of oil has an influence.

Dr. Gillies: Yes, and that has been significant. However, on balance, they do need capital. We have been able to make as much progress with as many universities as we have because they see the need for better governance. You will recall that the IMF and the World Bank lost literally billions of dollars, and they will not return.

The EBRD goes in there, loses millions, and no one cares; not even EBRD cares. They do not even know. The reality is that no one is going back. This must be addressed if joint ventures are to succeed. There is no question that Russian corporations are ambitious to be listed on international exchanges. They never will until they clean up their act.

In regard to outside continuing education, the Sores Foundation has invested literally hundreds of millions of dollars in Russia in what they called the "open university." I was astounded that, when we wanted to find a quick and easy way to get out applications for our program, we were able to use the open university Internet. Russian universities are now being linked. Our application could be downloaded. It was downloaded from all the universities. What that said to me is that it is not some sort of primitive economy. Modern communication systems, use of the Internet and things of that sort are very well developed.

The director of the Higher School of Economics, the business school there, has made 200 trips to North America. He has a Ph.D. from the University of Michigan. We are not dealing with a really backward situation. There are foundations on which to build. The institutional framework must be take shape. Once they get that done, if they can, and make it hold and make it a country governed by laws, they will be okay.

When I first started working with these people three or four years ago, I would have said it was 60 to 40 that it would not happen. Now it is 60 to 40 that it will happen. There are many bumps on the road, but I would predict that in another decade or so, Russia will have a reasonable market economy and be operating reasonably well.

Senator Di Nino: I will just follow up on a comment about private schools. I should like to know who goes to these schools, who sets the curriculum and who funds them. Have their results shown any visible differences from the publicly funded schools?

Dr. Dutkiewicz: First, private schools are self-financed. The state does not help them. Second, they are operating under their own curriculum regulations. That means they have absolute freedom in introducing new curricula. However, they must devote a certain amount of time to certain subjects or topics. They may use any textbook they wish. They may write their own textbooks for that purpose if these textbooks are supported by the Ministry of Education through the special certification system, which is not difficult to achieve.

Third, the fees range anywhere from US$300 to about US $1,500 monthly. This is a significant barrier for many people, but there is an enrolment mix. There are the children of the so-called "middle class" and the children of the Russian rich. There are also people who will sell their cars to send children to these schools because they believe they receive a better education.

The education offered is much more interactive. The schools introduce children not only to knowledge, but also to certain values. The teachers are mostly young and dynamic. The schools are quite well equipped with modern technology - computers, the Internet. Almost every child has access to a computer, and so on. They are very well hooked up technologically. They collaborate with many Western schools, particularly in Europe and the United States.

They were regarded as pioneers and as offering a better education than many other schools. Some of the state-run high schools have also picked up quite quickly in the last two or three years, and are becoming more and more competitive with the private schools.

While the private schools were very popular from 1993 to 1996, in the last two and a half years, parents have started to wonder whether it is better to invest money in a private school education, or to send the child to the state school and then to the West for a year or two to get a Western type of education. Many people are choosing the second option. They save some money by sending the child to a state school, and then to the West for a year or two.

Senator Graham: You said that education in Russia is highly centralized. Apart from the private schools, can we assume that it is standardized throughout the country?

Dr. Dutkiewicz: That is correct. There are so-called "government standards" for each subject.

Senator Bolduc: We heard previously that nothing is ever implemented, and we would like to hear more about that.

Dr. Dutkiewicz: The standards are more or less implemented, yes.

Senator Graham: Did I hear you say that the average age of teachers is 60 or over?

Dr. Dutkiewicz: I do not know what the average is, but normally, in a group of ten teachers, four will be about 30 or 40 years old, and six will be in the 60-year-old range. It very much reflects the payment scale. The average salary of a teacher in a Moscow high school is about US$60 to US$80 a month. A university professor's basic salary is about US$200 a month.

Senator Graham: You also said that about 40 per cent of teachers are not paid on time?

Dr. Dutkiewicz: Yes, particularly in the outlying regions.

Senator Graham: You also said that delays in payment of salaries could extend to two or three months, even up to six months?

Dr. Dutkiewicz: That is correct.

Senator Graham: Would that not be a great disincentive to entering the teaching profession? Does that apply across the board, to universities as well as to schools?

Dr. Dutkiewicz: University professors are mostly paid on time. Teachers at high schools in the regions experience the greatest delays. This is a huge disincentive for young people to choose this as a career. However, in one of the highly recognized universities, in Moscow or St. Petersburg, and with grants and access to Western money, many of my colleagues will earn an average Western salary.

Senator Graham: My question is in line with the dilemma that Senator Austin found himself in, in terms of some of your original comments. You said that President Putin had asked the Minister of Education to bring education more into line with Russian values. Subsequently, you said that, generally speaking, studies in social sciences are more Western-oriented. Then at some point, you referred to an anti-American and anti-Western feeling among the population. You said that sometimes, Canada escapes being swept up in or included in this feeling. I am wondering if Canada is regarded as being the same as the United States in this general anti-American feeling.

Dr. Dutkiewicz: Canada is seen as a very friendly country and different from the United States. It has been said repeatedly that we are different. This means that our relations are different from the relations between Russia and the United States. Canada is similar geographically, and in terms of the landscape and the mentality, to Russia.It is a pleasure for them to collaborate with Canadians.

I have access to the top policymakers in Russia, thanks to the fact that I am from Canada. I would not have the same access if I held an American passport.

Senator Graham: Professor Gillies talked about the value of Canada's investments in improving the judicial system. One of our earlier witnesses suggested we should offer more scholarships for Russians to come to Canada.

Professor Gillies, how many of those would remain in Canada, or would they all go back to Russia?

Dr. Gillies: We would not take people in our program without a commitment from them and from their university that they will return. They have to go back. The biggest worry is getting the commitment from the university that they will offer the program, which is also a condition of acceptance.

Senator Grafstein: Mr. Gillies, a great former senator, who was also one of the great executives in this country, once told me that the responsibility of a board of directors could be broken into two parts. The first is to select, remove and compensate primarily senior executives. The second is to ensure that they are honest and that they have a very strong and independent audit committee.

Would you give us a comment or two about the role of the audit committee in Russian corporate governance? Is there such a thing as an independent audit committee?

Dr. Gillies: The answer is no. However, what is also true is that what Canadian directors do most poorly is hire and fire CEOs. It is almost impossible to get fired as a CEO in Canada.

Senator Grafstein: We know all about that. We are not asking for perfection, we are asking for conception. I assumed that was the answer.

That leads to the serious question of how is it, then, that international auditing firms can effectively sign off on an audit? In other words, the audit is not really worth the paper it is written on, if in fact they make so many exceptions to the rule. How does that work?

Dr. Gillies: I think you will find that more and more international auditing firms are not signing off. They are unwilling to do so. What they will do is report that they have examined the books to the extent that they were given permission to do so, et cetera. They do not really give a clean audit in the way we would expect one.

Senator Grafstein: Finally, how can any of these companies hope to be listed on North American exchanges?

Dr. Gillies: The answer is that they will not be listed until they change. What we are trying to do is get them to change.

The Chairman: Thank you, Professor Gillies and Professor Dutkiewicz. We will adjourn until one o'clock.

The committee adjourned.

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