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Moskovskiy Komsomolets, December 5, 2003

Grigory Yavlinsky: We Shall Solve People's Problems

Interview with Grigory Yavlinsky By Irina Medvedyeva

Question: It is said that there is a sense of stability in Russia now, and the people are happy with that. What do you think?

Yavlinsky: For one thing, I myself am one of the people. If the citizens of my country were happy, I would be among them. Stability is good; but when prices are constantly rising faster than pensions, that is bad. When neither the state nor insurance companies pay for essential health care, and good quality medical treatment is out of people's reach, that is very bad. When you face constant bribery, constant misappropriation of public monies, and court decisions constantly favour the authorities - there is nothing to be happy about. These are the consequences of the system that has evolved in our country. It is a mixture of Stalinist administration traditions and robber capitalism.

Question: What do you mean by "robber capitalism"?

Yavlinsky: Robber capitalism, or peripheral capitalism - it's capitalism with no independent judiciary, no independent media, no independent legislators, no public oversight for the special services and law and enforcement agencies; but there is strong-armed intervention and a total merger of business and government. These six signs, taken together, are the main characteristics of the present system. Unsurprisingly the preconditions for such a system were laid down in the 1930s. That was when all administration, and all branches of government, were united in the same fist. That was when they started training up "administrators" with no morals. They were commanded by the Politburo. Then the Politburo was transformed. From the 1990s, it started senselessly reducing the directive method to the level of a wrench machine-milling operator. Directors started being called owners, and competition arose. But the small group of comrades in charge, and the bureaucracy below them - they never went away, as we know.

Question: But all the same, we do have capitalism now.

Yavlinsky: This isn't about the socio-economic order; this is a system of governance that has no future. A system based on such principles has substantial economic limitations. It can manage to feed a quarter of Russia's population, but three-quarters remain overboard. It can develop one megapolis - Moscow, for example. But it is incapable of offering anything more. All talk of some improvements in this system is justified, yet unjustified at the same time. The taxation system, for example - it needs to be improved, of course, but no matter how much you improve tax legislation, the total sum of taxes keeps increasing. No matter how much you improve the judicial system, the courts still find in favor of the authorities.

In other words, it's possible to speak of partial improvements. But if you keep making partial improvements, you end up with something like the joke about the man who was treated for jaundice, but after he died it was discovered that he was Chinese. The nature of the system precludes partial solutions to its problems. At some point, fundamental changes must be made.

We know perfectly well that there is a big gap between our talk on how to change the system and really changing it. Therefore, we need to defend our rights, to prevent our lives being made even worse, and resist the pressure being exerted on us. Actually, some countries in Latin America and South-East Asia have had systems based on corporate-group administration for decades. The authorities there use all available methods - including pseudo-democratic methods - to retain their hold on power.

Question: Do you mean "banana republics"?

Yavlinsky: In "banana republics," bananas are the main source of revenues. But bananas don't grow in Russia. Our main source of revenue comes from exporting natural resources, oil and gas.

Question: So the exporters of natural resources should probably pay "natural resources rent" to the state.

Yavlinsky: Talk of natural resources rent is relevant as long as world oil prices remain high. If prices fall, there won't be any rent to collect. You can only have snowball fights as long as there is snow. Once snow melts, it is all over. For example, Iraq starts exporting oil - oil prices fall - and natural resources rent bursts like a balloon. What's more, as soon as hydrogen-powered cars come on the market - and that will happen around a decade from now - everything will really grind to a halt, as global demand for petroleum products will fall off sharply.

Question: This latest burst of fighting the oligarchs - is it tactics or strategy?

Yavlinsky: We'll soon see. In the past, for example, various communists were jailed or even executed - but that didn't change the system. The "tried and tested party cadres" were simply replaced by mediocrities, nothing more.

If Person A is replaced by Person B, or even if a state monopoly on oil production is established, the quality of that monopoly will be no better than Gazprom or Russian United Energy Systems, unfortunately. In other words, this is completely unsatisfactory. The individuals involved aren't the problem; the problem is that the system created in Russia is quite different from other European countries - even Anatoly Chubais, the "architect" of that system, has used the term "robber" to describe it. He said he was unable to create anything better.

Question: Where does the term "peripheral" come from?

Yavlinsky: It is peripheral because our system, unlike the Soviet Union, is actually part of the global economy. But it is on the periphery - it supplies raw materials. It isn't very influential, remaining on the sidelines when big decisions are made. Our objective is to move towards the centre of the civilized world. Overcoming the peripheral nature of the system means creating an independent judiciary, civilian oversight for the special services, independent legislators, and a separation of business and government.

Question: Why separate them? They get along fine.

Yavlinsky: Let me tell you a story. Back in 1927, Soviet academic Stanislav Gustavovich Strumilin, the founder of Soviet statistics, received orders from Stalin on growth rates. Stalin wanted industrial output volumes to grow faster. When Strumilin decided to follow orders, some colleagues reproached him for his unrealistic projections. This was his response: "It is better to stand for high growth rates than go to jail for low ones." That's what our business leaders did at the latest congress of the Russian Union of Industrialists and Entrepreneurs, when they gave the president a standing ovation. It's better to stand and applaud.

Question: The crackdown on YUKOS gave business leaders a real fright. They're afraid the same thing might happen to them.

Yavlinsky: They're afraid because very few of them consider that their fortunes were made fairly. Both they and the regime take it as a given that the oligarchs have been "allowed" to use natural resources for a while. Like letting somebody use your mobile phone: if you want to, you let them, and if you don't, you don't... That's why the oligarchs are being so cautious now.

Question: In the West, private property is sacred. God forbid that anyone should try confiscating it. But in Russia, for some reason, nobody believes that private property cannot be touched - not even the oligarchs themselves.

Yavlinsky: There are two sides to the concept of property. There is the "title" to property - that is, the documents to prove ownership; and there is the acknowledgement by society that this is your property. These are different things. If a police station chief has a Zhiguli car, society acknowledges that car to be his property. But if he turns up tomorrow driving a Rolls-Royce worth $150,000, then no matter how many documents he produces to prove he owns it, he will not get that social acknowledgement of the car being his property. And if the car is confiscated from him, his neighbours will say: "It was the right thing to do - how could he afford such a car?"

The people do not recognize the oligarchs' right to their multi-billion-dollar fortunes - no matter how many shares, certificates, and evidence they might have. That's the trap of criminal privatization and the loans-for-shares auctions of the mid-1990s.

They also don't recognize it, as in 1992 the people lost all their savings when inflation reached 2,600%. And then they were told it was the only correct way to carry out reforms, and the right thing to do. Then they started thinking: If everything can be taken away from us, then everything can be taken away from anyone. Why not, if it's all right to do such a thing to the entire citizenry?

Question: You have given an excellent description of the "robber capitalism" system. All we need to know now is how to fix it.

Yavlinsky: There is the long-term prospect. We need to pass laws.

Question: But you were just saying that legislation by itself can't be effective, as the system can't be improved in parts.

Yavlinsky: Laws ought to be based on a certain structure of interests. Then the laws will pursue those interests. But as long as business and government are so closely linked, this cannot be done.

Question: So you propose separating business from government?

Yavlinsky: We need to pass laws to regulate the structuring of relations between business and government within civilized limits. We have seen what happens when business makes a deal with the President. You don't interfere in politics; and we leave you alone. We know where that leads. A clash. And when business clashes with government, that's always a very bad thing for society.

Another option: when business says there ought to be an amnesty for all fortunes made under dubious circumstances, made as a result of privatization. Legalize them all and turn over a new leaf. However, as I explained earlier, most of the public would not accept that.

Question: So what do you want to do - persuade people that oligarchs are honest and successful entrepreneurs?

Yavlinsky: No, I don't want to persuade, trick, or force anyone. But the problem of unresolved issues in relations between business, government, and the people is very urgent. Until we deal with it, we won't even be able to start freeing ourselves from robber capitalism. It's the first thing that needs to be done. So what I propose is the following: a social contract in the form of a package of bills consisting of three blocks.

The first block of laws

Aimed at restricting the influence of the "money-bags" on government. The purpose of these laws is to protect political power from the oligarchs. This block includes laws on financial transparency for political parties, the rules for upholding business interests in the Duma, and creating real public television. Moreover, it includes laws on anti-corruption procedures - for the Duma, the Cabinet, and the presidential administration.

The second block of laws

Addressing the greedy, those who think they didn't get enough during privatization and want to grab some more for themselves - like splitting up YUKOS, and so on. We should pass a bloc of anti-monopoly legislation, introducing real competition which would lead to real changes of ownership via competition. This is how new property-owners will arise, by creating an efficient economy.

One of our "mighty oligarchs" recently said something to the effect that Russian oligarchs aren't really managers at all. They were managers under specific conditions, with specific objectives (when they needed to win a loans-for-shares auction, for example). But they don't know how to run a company. They want to sell everything off, because they don't know how to create a modern corporation.

The third block of laws

The essence of this is recognizing the privatization deals of the mid-1990s as legitimate - with the exception of criminal cases where deals were based on murder or violence. All the others would be legitimized by a single piece of legislation. Moreover, there would be a compensation tax law. This is calculated as follows: let's say somebody received an oil company in 1995. We look at his net profits over the past nine years, deduct what he paid for the company in 1995, and levy a one-time- only tax on the remainder - 25%, for example.

Question: Isn't that rather high?

Yavlinsky: It's not just a matter of money, or how much. It's important to create a social consensus, so the people will acknowledge property rights and we need never revisit this issue. Actually, business and the economy are different things. Business means making money without going to jail. The economy means creating prosperity. One of Russia's peculiarities is that our government thinks like a business owner. That's why it's not concerned about creating prosperity, but aims to get as much as possible from everyone, to get money into the budget.

Question: Have you submitted this package of bills to the Cabinet or the Duma for consideration?

Yavlinsky: I discussed this concept with the President in July. Later on, he was asked about this idea during his visit to Columbia University.

Question: Did the president support your proposals?

Grigory Yavlinsky: He said it should indeed be a matter of amnesties for capital, not amnesties for specific individuals. He has not returned to this topic since then.

But there is no other way. This package of bills is like a social contract. The situation in Russia will become more healthy once business stops interfering in politics, buying up the Duma and the Cabinet. If you want to do business, then do it! If you want to quit business and go into politics, then you should move well away from business, so everyone can see you're no longer involved in it.

Question: So, in short, your package of bills is aimed at taking political power away from the oligarchs?

Yavlinsky: It is aimed at making government accountable to the people, not to the oligarchs.

Question: Do you think passing these laws will be enough to change the nature of government in Russia - so we could then address the problems of pensions, health care, and corruption - improving the areas people aren't happy with now?

Yavlinsky: I can't propose an instant solution to all the problems that have built up in Russia. I can only tell you how to painlessly resolve the most important of them, in a way that avoids further destruction of the country and further impoverishment.

This requires political will. Sitting around, looking on, and saying how bad things are - that's not our approach. In any political format, no matter what may take shape, we will strive to resolve at least some of the problems facing the people and the nation as a whole. We will address the issues of health care, education, inflation, housing costs, pensions, jobs, taxation, the military, public safety, economic growth and development. We will fight any and all manifestations of fascism, nationalism, and militarism.


See also:

Understanding Russia

Moskovskiy Komsomolets, December 5, 2003

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