MOSCOW: Sooner or later, all revolutions end. People are so sickened by crime and uncertainty that ‘law and order’ becomes their primary goal. At this point, society either succumbs to dictatorship or forges a new social compact that accepts the revolution’s key results.

In Russia, the Revolution of the 1990s has clearly entered its stabilization phase: there is broad acceptance of the market and private property; the period of feeble state authority and weak government is giving way to enhanced state power as an exhausted society allows today’s rulers wider latitude for political maneuver.

So there now exists a real possibility for a new social/political compact. Yet a critical question remains: how will Russia’s rulers use their enhanced powers and freedom to maneuver? They are now in a position to conduct a constructive policy and address problems too long ignored. But there is also a danger that these stronger powers may forge an undemocratic regime; that stabilization may be followed by authoritarianism.

Hope is to be found here in the fact that market economics is no longer seriously challenged. Struggles over the re-distribution of property, and debates about the form of the market economy continue, of course, but everybody sees Russia’s market economy as a reality. The Primakov government, which came to power in 1998, depended on the Communist majority in the Duma; yet even it did not dare dismantle any market institution. On this issue, basic agreement seems to have been achieved.

That agreement matters. After years of decline, Russia’s economy is growing fast, in industrial production, investment and incomes. This is not, in my view, primarily due to economic reforms (which are too recent to have had this effect), nor is it due to a fall in the ruble or rising oil prices.

The true explanation is that, in the past few years, there has formed in Russia a critical mass of well-managed, market-oriented enterprises capable of normal production, with resources released from the inefficient Soviet-era public sector.

Encouraged by improved economic performance, last year the government had the will to introduce a program of in-depth structural transformations. It started on tax reform: a 'flat' income tax, a single regressive social tax, a ban on the turnover tax, etc. The country also advanced down the road of fiscal federalism: channeling all of VAT into the federal budget, and the income tax to the regions, makes for a sensible system of distributing budgetary resources among the tiers of authority.

The second important area of progress has been reform of Russia’s federation: establishment of federal districts and reform of the Federation Council. These changes are controversial, but a federation whose laws are not observed by some of its constituent members cannot function normally; a federation in which the observance of laws depends on the whim of local administrators simply cannot exist. President Putin’s moves to strengthen an integrated power system are therefore logical and correct.

As a result, Russia is today a realistic, even if imperfect, federation. Yet, in this phase of post-revolutionary stabilization, there is real danger that the central authorities, having strengthened the ‘vertical power structure,’ might interfere in affairs that are within the competence of the regions and local government.

The third important area of progress is in military reform, including a decision to cut the numerical strength of the Armed Forces over the next three years. There will be bitter resistance here, however, for the interests of strong political forces are at stake.

As the first revolution in the post-industrial world, the Russian revolution of the 1990s was characterized by limited violence and broad compromises with the old elites. The main danger for today’s stabilization period concerns the functioning of democratic institutions and the preservation of freedom of speech. These risks to democracy are greatest because of the bad and sad traditions of Soviet power and the centuries of the pre-Soviet epoch.

Admittedly, the ‘oligarchs’ helped discredit freedom of speech in this country. But Russia and all its citizens – not just Gusinsky and Berezovsky – need freedom of speech and democratic institutions. Despite this, many supposedly liberal economists toy with the naive and dangerous idea that “We don’t need democracy, give us a Russian Pinochet and to hell with freedom.”

Yes, economically efficient authoritarian regimes have existed, but they were exceptions. With our traditions, authoritarianism here would likely be so corrupt as to be incapable of conducting a sensible economic policy. Democracy may be imperfect, but compared to other arrangements it remains the best instrument for adapting to the world with flexibility and efficiency.

Today’s threats to freedom of speech and to our democratic institutions are realistic. We see examples in many of our neighbors, where democracy seems to exist formally, but where everybody understands that it is a toy democracy. In this country, democracy is – so far – a young but realistically working instrument. Preserving and strengthening it is and must be our paramount objective.