Oligarchic capitalism in one country Something funny happened to Russia on its way from socialism to capitalism. A bunch of politically-connected "oligarchs" managed to subvert the process while making themselves hyper-rich. In a fascinating [PDF paper], Serguey Braguinsky asks " whether oligarchic capitalism represents a transition stage that will eventually lead to a true market economy and political democracy, or whether it is a blind alley that can only lead to another inefficient socioeconomic system." He is not optimistic. A major contribution of the paper is its database of almost 300 oligarchs covering a period of ten years. Among its conclusions: the newer generation of oligarchs, who had little connections to the old nomenklatura system and who could have produced a true entrepreneurial class, ended up engaging in rent-seeking and asset-stripping instead, becoming virtually indistinguishable from the old kind.
Something funny happened to Russia on its way from socialism to capitalism. A bunch of politically-connected "oligarchs" managed to subvert the process while making themselves hyper-rich. In a fascinating [PDF paper], Serguey Braguinsky asks " whether oligarchic capitalism represents a transition stage that will eventually lead to a true market economy and political democracy, or whether it is a blind alley that can only lead to another inefficient socioeconomic system." He is not optimistic. A major contribution of the paper is its database of almost 300 oligarchs covering a period of ten years. Among its conclusions: the newer generation of oligarchs, who had little connections to the old nomenklatura system and who could have produced a true entrepreneurial class, ended up engaging in rent-seeking and asset-stripping instead, becoming virtually indistinguishable from the old kind.
In practise, wealth building is not so much about freedom, but about (perceived) power.
Here is other long but interesting essay (hat tip to HTWW):
Russia's Managed Democracy [The] economy that Yeltsin left behind was in the grip of a tiny group of profiteers, who had seized the country's major assets in a racket - so-called loans for shares - devised by one of its beneficiaries, Vladimir Potanin, and imposed by Chubais, operating as the neo-liberal Rasputin at Yeltsin's court. The president and his extended `Family' (relatives, aides, hangers-on) naturally took their own share of the loot. It is doubtful whether the upshot had any equivalent in the entire history of capitalism. [Putin] was picked by the Family to ensure these arrangements did not come under scrutiny afterwards. His first act in office was to grant Yeltsin immunity from prosecution, and he has generally looked after his immediate entourage. (Chubais got Russia's electricity grid as a parting gift.) But if he wanted a stronger government than Yeltsin's, [Putin] could not afford to leave the oligarchs in undisturbed possession of their powers. After warning them that they could keep their riches only if they stayed out of politics, he moved to curb them. [Putin] has taken back under state control parts of the oil industry, and created out of the country's gas monopoly a giant conglomerate with a current market capitalisation of $200 billion. The public sector's share of GDP has risen only modestly, by about 5 per cent. But for the time being, the booty capitalism of the 1990s has come to a halt. In regaining control of some stretches of the commanding heights of the economy, the state has strengthened its leverage. The balance of power has shifted away from extraordinary accumulations of private plunder towards more traditional forms of bureaucratic management. These changes are a focus of some anxiety in the Western business press, where fears are often expressed of an ominous statism that threatens the liberalisation of the 1990s. In reality, markets are in no danger. The Russian state has been strengthened as an economic agent, but not with any socialising intent, simply as a quarry of political power. In other respects, Putin has taken the same underlying programme as his predecessor several steps further. Land has finally been privatised, a threshold Yeltsin's regime was unable to cross. Moscow boasts more billionaires than New York, yet a flat income tax of 13 per cent has been introduced, at Yegor Gaidar's urging. A highly regressive `unified social tax' falls on those who can least afford it. Welfare benefits have been monetised and slashed. Key economic ministries remain in the hands of committed marketeers. Neo-liberalism is safe enough in Russia today. The president has made this clear to all who are interested. On a visit to Germany in October, brushing aside questions about the death of Politkovskaya, he told his hosts: `We do not understand the nervousness of the press about Russia investing abroad. Where does this hysteria come from? It's not the Red Army that wants to come to Germany. It's just the same capitalists as you.' [The] country is a `managed democracy': that is, one where elections are held, but the results are known in advance; courts hear cases, but give decisions that coincide with the interests of the authorities; the press is plural, yet with few exceptions dependent on the government. This is, in effect, a system of `uncontested power', increasingly similar to the Soviet state, but without any ideological foundation, which is evolving through a set of stages that parallel those of Russian Communism. The first phase sees the heroic destruction of the old order, a time of Sturm und Drang - Lenin and Yeltsin. The second is a time of consolidation, with the construction of a new, more stable order - Stalin and Putin. The leader of the second phase always enjoys much broader popular support than the leader of the first, because he unites the survivors of the original revolution, still attached to its values, and the anti-revolutionaries, who detested the anarchic atmosphere and the radical changes it brought. Thus Putin today continues Yeltsin's privatisations and market reforms, but creates order rather than chaos. The successor to Putin in the third stage - comparable to Khrushchev - is unlikely to be as popular as Putin, because the regime, like its predecessors, is already becoming more isolated from the masses.
[The] economy that Yeltsin left behind was in the grip of a tiny group of profiteers, who had seized the country's major assets in a racket - so-called loans for shares - devised by one of its beneficiaries, Vladimir Potanin, and imposed by Chubais, operating as the neo-liberal Rasputin at Yeltsin's court. The president and his extended `Family' (relatives, aides, hangers-on) naturally took their own share of the loot. It is doubtful whether the upshot had any equivalent in the entire history of capitalism. [Putin] was picked by the Family to ensure these arrangements did not come under scrutiny afterwards. His first act in office was to grant Yeltsin immunity from prosecution, and he has generally looked after his immediate entourage. (Chubais got Russia's electricity grid as a parting gift.)
But if he wanted a stronger government than Yeltsin's, [Putin] could not afford to leave the oligarchs in undisturbed possession of their powers. After warning them that they could keep their riches only if they stayed out of politics, he moved to curb them. [Putin] has taken back under state control parts of the oil industry, and created out of the country's gas monopoly a giant conglomerate with a current market capitalisation of $200 billion. The public sector's share of GDP has risen only modestly, by about 5 per cent. But for the time being, the booty capitalism of the 1990s has come to a halt. In regaining control of some stretches of the commanding heights of the economy, the state has strengthened its leverage. The balance of power has shifted away from extraordinary accumulations of private plunder towards more traditional forms of bureaucratic management.
These changes are a focus of some anxiety in the Western business press, where fears are often expressed of an ominous statism that threatens the liberalisation of the 1990s. In reality, markets are in no danger. The Russian state has been strengthened as an economic agent, but not with any socialising intent, simply as a quarry of political power. In other respects, Putin has taken the same underlying programme as his predecessor several steps further. Land has finally been privatised, a threshold Yeltsin's regime was unable to cross. Moscow boasts more billionaires than New York, yet a flat income tax of 13 per cent has been introduced, at Yegor Gaidar's urging. A highly regressive `unified social tax' falls on those who can least afford it. Welfare benefits have been monetised and slashed. Key economic ministries remain in the hands of committed marketeers. Neo-liberalism is safe enough in Russia today. The president has made this clear to all who are interested. On a visit to Germany in October, brushing aside questions about the death of Politkovskaya, he told his hosts: `We do not understand the nervousness of the press about Russia investing abroad. Where does this hysteria come from? It's not the Red Army that wants to come to Germany. It's just the same capitalists as you.'
[The] country is a `managed democracy': that is, one where elections are held, but the results are known in advance; courts hear cases, but give decisions that coincide with the interests of the authorities; the press is plural, yet with few exceptions dependent on the government. This is, in effect, a system of `uncontested power', increasingly similar to the Soviet state, but without any ideological foundation, which is evolving through a set of stages that parallel those of Russian Communism. The first phase sees the heroic destruction of the old order, a time of Sturm und Drang - Lenin and Yeltsin. The second is a time of consolidation, with the construction of a new, more stable order - Stalin and Putin. The leader of the second phase always enjoys much broader popular support than the leader of the first, because he unites the survivors of the original revolution, still attached to its values, and the anti-revolutionaries, who detested the anarchic atmosphere and the radical changes it brought. Thus Putin today continues Yeltsin's privatisations and market reforms, but creates order rather than chaos. The successor to Putin in the third stage - comparable to Khrushchev - is unlikely to be as popular as Putin, because the regime, like its predecessors, is already becoming more isolated from the masses.
Did Russia start the world revolution of managed democracy?
