Grigory Yavlinsky’s web-site, 06.11.2018

Need money for a national park in the Arctic? Not enough money for a port complex at Novaya Zemlya [archipelago in the Arctic Ocean]? Don not have 1.5 trillion roubles for a highway from Sochi to Crimea? The government’s 540 billion roubles allocated for the implementation of the May Presidential Decrees on Russia’s entry into the top five leading scientific countries of the world is not enough? No problem! Presidential Aide Andrei Belousov has already invented everything: multi-billion projects of Rosatom, the Ministry of Transport, the Ministry of Environment, the Ministry of Communications, the Ministry of Agriculture, RusHydro, the Ministry of Industry and Trade, the Federal Forestry Agency and the Ministry of Construction, Industry and Economic Development will from now on be paid for by large business – mandatory. The discussion that began in summer about a one-time withdrawal of “superprofits” of chemical and metallurgical companies to the [federal] budget has taken on a strategic scale by the end of the Fall. Today we are talking about mandatory participation of state-owned companies in the financing of national projects. However, there are very big doubts about the quality of the preparation of these projects. It is impossible to seriously prepare 394 projects with financing over 150 billion dollars on such an urgent basis. Most likely, most of them are merely pulled out of a hat. Moreover, the effectiveness of investment projects can and should be determined by the market, and not the authorities.

That’s how the Russian economy is being destroyed.

“It is necessary to share”, the President told the business through his assistant. Business, naturally, began to object. But so weakly and gently. Okay, the authorities said, since you do not want to give half a trillion roubles, and are dragging on time, resisting – then you will give it 18 times more. And “softly but toughly” they offered the business forced investment of no less than almost 9 trillion roubles.

Why is it possible in Russia? Why does everyone agree? Why a clock can be “set ticking” for a billion-dollar business, as during internal squabbles of some pilferers?

All of this represents a “hello” from the past, an echo of a specific, and one might say, even criminal nature of the “mass-scale privatisation” of the 1990s with its “individual schemes”, loans-for-shares auctions, information wars and other “delights” (see the article “Privatisation: 25 years of fair distrust” of October 2017). No one dares to object: everyone knows how they became owners, and in the depth of their hearts they understand that they are just managers who have received assets “for their feeding” – and as easily as the assets were given, they can be taken away. And the price of private property rights in Russia is also well known. They remember [the cases of oligarchs] Mikhail Khodorkovsky and Vladimir Yevtushenkov.

It is also a consequence of the reluctance and inability of the government, business and society to find a satisfactory solution of the problem of legitimisation of the results of privatisation. This was repeatedly mentioned both at the expert and the political level (for example, in the article “The Need and Methods of Legitimisation of Large Private Property in Russia: Target Setting”, journal Voprosy Ekonomiki, No. 9, 2007). But Putin did not want it: he, in principle, cannot allow that business may become free and independent. Large-scale businessmen, from fear, generally lack the ability to think politically, and the society has not been able to understand anything.

Such attitude of the Kremlin to business bases on the fact that most large Russian entrepreneurs with multi-million dollar and billion dollar fortunes have become such not due to their efforts in the conditions of free competition and market, not because they did something useful and special, for which people would like to pay them. And not even as a result of fair and transparent privatisation. No. Future oligarchs obtained their wealth exactly with the help of the state, from the Kremlin’s power, being its protégé, and on the basis of personal connections, through fraudulent mortgage auctions and criminal privatisation.

It was then that merging of government, property and business took place, and the modern mafia state was born. It was then that a foundation of authoritarian irremovable power was formed in Russia, and an illegitimate, semi-criminal foundation of large private property and the entire economic system was laid. The obvious illegitimacy of privatisation was the main cause of fear, fatal disunity and unlimited loyalty of large-scale business to the authorities. Raidership, including the state one, blossomed on the illegitimacy of property. Now the state, due to the difficulties it created, intends to legitimise the racket in relation to the business, yet only to large-scale business.

Today political orders and administrative methods of coercion are the key ways and means of regulation. Actual economic methods of management are secondary, and macroeconomic tools, as well as laws of the market, have a very limited scope of real action. A vivid example of such “management” is the idea of removing “super-profits”. And no matter how: through direct commandeering or forced investment.

Back in the 1990s, a relatively large business in Russia made a grave mistake by confusing the state with its specific representatives — with high-ranking bureaucracy, which could be taken in business in a roundabout way, persuaded, bought or frightened. That is, one way or another to find an individual approach and comparatively easily obtain – as if in property but in reality under management – large parts of state property.

However, the “comrades” had a poor grasp of the legacy of the classics of Marxism, who explained that the state is not specific people in power, but an extensive apparatus of coercion, which, if not entangled by a network of laws, public practices and controlling institutions, becomes a source of organised violence, in other words – mafia. But it is commonly known that one can only agree on a specific issue with the mafia and only today. And if today one is able to conduct business according to some agreed rules with the mafia, this does not mean that the same rules will apply tomorrow and especially the day after tomorrow. Each time one has to negotiate again with the mafia on the same things. And it is always difficult to negotiate with those disposing of the apparatus of violence: it is not worth the effort to complain, and there is simply no one to complain to. Thus, everything that the business underpaid (from the point of view of the state) yesterday, will be taken from it tomorrow and will be also taken the day after, because it is never possible to pay the mafia completely.

The state is needed in order to protect citizens and their businesses from criminals, and the Constitution is needed in order to protect people from the state. However, when a Russian businessman says that he pays “his” state for creating conditions and protecting his business, he makes three mistakes in one short phrase. First, neither the state, nor state officials work for him, but he works for them. Second, it is not he who pays them, but they leave him as much as they see fit. And third, the Russian bureaucracy protects only itself and its own, not his business.

If our “captains of business” were once citizenly and intellectually mature and minimally capable of cooperation, they would, if not in the first place, but at least in the second place, care about how to put the state within certain limits of actually working laws and procedures. And to achieve this, they should think about the distribution of power among a wide range of subjects and institutions with clear and transparent rules, about the eradication of all extraordinary measures and about restricting one-man leadership to a maximum possible extent.

Instead, the business took a different path: it supported formation of an authoritarian political system, hoping either for personal success, or for the effect of individual and collective loyalty, or simply that, against the background of a big geopolitical game, the authorities would temporarily postpone their clashes with smaller domestic actors.

However, life shows that all these hopes (if they were) were in vain. Leading the fight on numerous external fronts, the government does not forget about those who entrenched far behind the lines. In addition, the steeper is the struggle with the main geopolitical adversary, the more difficult it becomes for businesses to evade control and harbour property and assets outside the country.

Moreover, today it is almost impossible to do this – neither in the “hostile” West, where, while talking about sanctions, we increasingly see intolerant attitudes towards any activity of Russian business and Russian money in general, and even less so in the “friendly” East, where the government treats its businesses not better than in our country, and even worse to strangers. They will not have to swallow the dust in their courts for a long time – it will be possible to return the capital hidden there (if at all possible) with the help of the president’s personal interference.

Thus, the results of the refusal to legitimise large-scale private property and the results of privatisation are obvious today: business has no rights, it is helpless, a victim of political adventures and government’s racketeering. Is it any wonder that the state has set the clock ticking for private business?

It is not even that because of pressure on business, large businessmen will lose something (they themselves will never be in trouble), but that this practice hampers the development of an already barely working economy. Consequently, poverty spreads like a cancer, and many not rich people will soon be poor. Because instead of thinking about creating new jobs taking into account [the government’s] raising the retirement age, the state has been stifling business, forcing it to do what it does not need, depriving it of normal profits, reserves and initiatives, creating uncertainty and encouraging it to flee the country.

Source