Jospeh S. Nye: A reformed Russia is in all our interests

In the 1950s, many Americans feared the Soviet Union would surpass the United States as the world's leading power. The Soviet Union had the world's largest territory, third largest population, second largest economy and more oil and gas than Saudi Arabia.

The USSR possessed nearly half the world's nuclear weapons, had more men under arms than the US, and had the most people employed in research and development. It detonated a hydrogen bomb in 1952, one year after the US, and in 1957 was the first to launch a satellite into space.

In terms of soft power, communist ideology was attractive in post-Second World War Europe, owing to its anti-fascist credentials, and in the Third World because of its identification with popular national-independence movements. Soviet propaganda actively fostered a myth of the inevitability of communism's triumph. Nikita Khrushchev boasted in 1959 that the Soviet Union would overtake the US by 1970, and by 1980 at the latest. As late as 1976, Leonid Brezhnev proclaimed communism would dominate the world by 1995. Such predictions were bolstered by annual economic growth rates of 5-6 per cent and an increase in the USSR's share of global output, from 11 per cent to 12.3 per cent, from 1950 and 1970.

But then, Soviet growth rates and global output began a long decline. In 1986, Mikhail Gorbachev described the Soviet economy as "very disordered".

A year later, Foreign Minister Eduard Shevardnadze told his officials: "You and I represent a great country that in the last 15 years has been losing its position as one of the leading industrially developed nations."

What is surprising is the wildly inaccurate Western assessments of Soviet power. In the late 1970s, a "Committee on the Present Danger" argued Soviet power was surpassing that of the US, and the 1980 American election reflected this. Yet in 1991, the Soviet Union collapsed, leaving Russia significantly shrunken territorially (76 per cent of the USSR), demographically (50 per cent of the USSR's population), economically (45 per cent of the USSR's output), and in terms of military personnel (33 per cent of the USSR's armed forces).

The soft power of communist ideology had virtually disappeared. Nonetheless, Russia had nearly 5,000 deployed nuclear weapons, and more than one million armed forces, though its total military expenditure was only 4 per cent of the world total (compared to 40 per cent for the US), and its ability to project power globally had greatly diminished. In the words of Russian analyst Sergei Karaganov, Russia has to use "hard power, including military force, because it lives in a much more dangerous world and has no one to hide behind from it, and because it has little soft power - that is, social, cultural, political, and economic attractiveness."

Today, institutions needed for an effective market economy are largely missing, and corruption is rife. Russia's robber-baron capitalism lacks trust in market relationships. The public-health system is in disarray, mortality rates have increased, and birth rates are declining. The average Russian male dies at 59 - extraordinarily low for an advanced economy. United Nations demographers suggest Russia's population may decline from 145 million today to 121 million by mid-century.

Dysfunctional government and pervasive corruption make modernization difficult. Peter Aven, president of Alfa Bank, argues that: "there is a huge dependency on oil, a need for capital, a need for serious reforms, while the social burden is very strong. Stagnation is the main threat."

With its residual nuclear strength, great human capital, cyber-technology skills, and location in both Europe and Asia, Russia could cause major problems for or make major contributions to a globalized world. We all have an interest in Russian reform.

• Joseph S. Nye, Jr, a former US Assistant Secretary of Defence, is a professor at Harvard University