Beset By A Million Bureaucrats.(International Edition; THE LAST WORD)(interview with Igor Yurgens)(Interview)

In establishing the Kremlin's control, we lost our freedom of the press. Now the challenge is to expand democracy.

In February a Moscow think tank run by Igor Yurgens, a liberal economist and one of Russian President Dmitry Medvedev's closest economic-policy advisers, delivered a scathing critique of the government's shortcomings in combating Russia's deepening economic crisis--and a set of radical prescriptions for reversing Russia's dependence on oil and reducing its crippling bureaucracy. The report sent shock waves through Russia's establishment, not least because public policy debate over the Kremlin's course has become so rare.

Yurgens now argues that only by instituting dialogue between government and society, and rebuilding the democratic institutions that were made irrelevant under Putin, can Russia ever overcome its deep economic problems. He spoke to NEWSWEEK's Anna Nemtsova in Moscow.

NEMTSOVA: Is your institute the source of Medvedev's liberal political ideas?

YURGENS: We are a source of policy ideas for the president and the government. We started working with Medvedev a few years ago on a series of nationwide renewal projects. It was a new page for him. Medvedev told us that the Kremlin doesn't need brown-nosers, it requires an honest and independent picture of what is actually going on. Today, the most honest and independent opinions on Russia's problems are coming from the liberal wing, rather than from the so-called statist patriots. The pendulum is definitely swinging our way.

What are the main problems with the government's policies?

Our ideal scenario is that the state should mix liberal and statist policies. They should allow the market to decide what industries should die naturally, but at the same time selectively support the sectors whose collapse would cause the most social upheaval. We recommend the state should stop helping its favorite oligarchs and spend its money on strategic goals like economic diversification, and developing nanotechnology, biotechnology and information technology. The biggest fault is that the government has not explained its strategy to people, and there appears to be favoritism in selecting which businesses to bail out. People believe that the state is helping its friends and letting others fail.