By all indications, one of the statistically strongest periods of economic growth in Russia might be coming to an end. The Russian economy grew 5 percent last year, while all the major ingredients of economic well-being remained stable or well within control.

The government has been pointing to a whole list of achievements – and this rhetoric will get increasingly noisy as elections approach. For the ordinary person, the government and its spin doctors argue, life has changed for the better. Pensions have been increased and arrears in pensions and public-sector salaries have been paid.

For the person on the street, however, things have hardly changed. The Russia Journal poll this week indicated that the daily lives of many Russians have barely improved and, though there is slightly more confidence in the future and faith in the current administration, little to none of the economic gain to the country is visible in people's daily lives. In most regions across Russia – which are dotted with unheated houses and beer shacks – the situation is so terrible that any talk of economic well-being seems ludicrous.

This is especially notable because we live in a time when prosecutors have been acting zealously against corrupt corporations. The most influential of the oligarchs who held the political system hostage have been exiled from the country, the red management of the utility giants has been replaced by energetic young managers and several new commissions and measures have been taken to stop capital flight. Why then, one must wonder, are economic improvements not trickling down to the masses?

First and foremost, nothing has changed because, in a managed democracy like Russia's, reform from the top rarely means true change in people's lives. Managed democracy creates an aura of change, while people remain non-participants. Russians have little or no faith in the political system and ignore elections while trying to find ways to live – despite the government, not because of it.

A second, and perhaps more important problem, is the massive bureaucracy that remains between the government and ordinary people. Change never reaches the bottom rungs because the bureaucracy sucks out every benefit and diverts any gains to itself. The so-called "middle class" and the symbols of recent prosperity cited by the Western media – such as posh new restaurants in Moscow and a growth in the number of casinos and imported cars on the streets – is part and parcel of the bureaucratic elite or those connected to it.

President Vladimir Putin's increasing dependence on administrative and federally imposed vertical-power structures to bring about change is precisely the cause of the failure. Putin is simply implementing the political model first proposed by former Prime Minister Yevgeny Primakov, who saw filling jails with businesspeople as the solution to the country's woes. The only enterprises that flourished under his brief regime had bureaucratic patronage. The same things continue now.

The seemingly unrelated connection between grass-roots level democracy and the economic well-being of the masses should be the first big lesson of this failure. Instead of trying to manage democracy, political leaders must let people enjoy more freedom of thought, of expression and enterprise. Without this, any attempt to reform the system will be a waste of time and a huge draw on country's resources.

With Putin's KGB background and years in the government, he should know how deep corruption runs through this system and that it cannot be reformed. The Russian bureaucracy must be purged and its burden lifted from the population's shoulders.

Finally, the state should try to enable private enterprise to flourish. Through the worst years of economic decline, people survived precisely because of the chaos in which bureaucrats were either too busy making money or too ill-equipped to control all activity in the country. Now, having regrouped, the bureaucracy watches small business with a vengeance and extorts money out of it like a leech.

The solution to this economic dilemma is a political one. It will take the political courage to dismantle the bureaucracy and encourage small enterprise. No amount of machinations by even a qualified technocratic government can create real economy recovery.