Kagarlitsky on “Putin’s Corporate Utopia”

Boris Kagarlitsky, the Director of the Institute of Globalization Studies, is one of my favorite commentators on Russia. He is one of the few that examines Russia from a left social democratic perspective with the hopes that a popular Russian movement against global capital would emerge. It is because of this that I frequently feature his columns in the Moscow Times and Eurasian Home.

Kagarlitsky’s new opinion, “Putin’s Corporate Utopia,” is worth giving some thought. Among many things, he argues that corporate capitalism in Russia is an agreement amongst the political and economic elite. In exchange for politically deferring to the Kremlin bureaucracy, the economic elite gets a government that exercises power in their interests. Kagarlitsky argues that this is no different that in Germany or America in the sense that “Putin lobbies interests of the Russian business just as Angela Merkel lobbies interests of the German business, which strives to own a part of the Russian lucrative energy market.” Russian corporate interests are thus intertwined with Russian political interests. As Kagarlitsky explains:

Does the Russian state try to grip control over big business? The answer is: positively it does, but only in political sphere. As for the economic policy, few Cabinets in Russia’s history depended on capitalists more than the present Cabinet depends on the interests of big business. Corporations dictate today’s agenda in Russia – they got this right in exchange for their loyalty not only to the existing political system but to the President and any high-ranking official in the Administration.

And as the things stand today, they have all reasons to be loyal – authorities provide favorable conditions, profits and prices on shares grow constantly. Why would business beware of the Putin’s regime – because of the problems with the free press? But the business press covering mostly changes in securities quotations doesn’t suffer from the state’s pressure. Or is it because of the problems with human rights? Well, don’t you know that in our country people are different, and while some have no rights, the others have no problems at all? As for the problems with ethnic Chechens, any Chechen possessing several milliards of dollars can afford to buy amnesty and respect. As for bureaucratic pressure on small and medium businesses, doesn’t it serve the interests of big business? As a matter of fact, big business is even more practiced in making small enterprises bankrupt than the corrupt bureaucrats. Putin’s bureaucrats are ready and willing to do business themselves. Thanks to their business interests they better understand concerns of the Russian entrepreneurs. Thus, they have ousted foreign enterprises from lucrative oil business. But in doing so they opened way to domestic businesses.

For Kagarlitsky, this is a lesson Russia learned from the west. And it has been a good pupil.

There is more. To say that Russia’s general approach toward corporate capitalism is without particularities would be an analytical mistake. Capitalism’s particular qualities are a reflection of a nation’s history, culture, social structure, i.e. what Marxists call the superstructure. Many forget that the relationship between base and superstructure is dialectical. The former and latter are locked in a perpetual process of mutual influence. But it should be stressed that these Russian particularities never move from a position of quantity to quality because in the end the general character of global capital remains determinant in the last instance.

Still these superstructural additives to Russian capital are of great importance. This is what makes Putin’s capitalism more an outgrowth of the practices of Sergei Witte than that of England or America, let along the Soviet state. Kagarlitsky even cites the Count Witte to suggest that “as for the economic policy, I don’t think there has ever been more liberal government in Russia, except for the earl Sergey Witte’s ill-fated administration, which as you might know, let the country plunge into the 1905 Revolution. In a strange way, all the current free-market measures not only have failed to fight monopolies but strengthened them. After privatization the majority of corporations retained their status of natural monopolies, abolishment of state control being the only novelty.”

One many disagree with Kagarlitsky’s splitting of economics and politics into two distinct spheres as if one can be held without the other. I would purpose that instead of looking at them as in a static equilibrium (the political = the economic) or even a static hierarchy (the political over the economic or vice versa), it might be more fruitful to think of them as in a shifting relationship where in some instances, the economic trumps the political while in others the political subordinates the economic.

The tie that binds these two spheres is what Kagarlitsky defines as bureaucratic capital. It is this that gives Russian capital its particular character:

President Putin’s vision of the capitalism ? la Russe is quite plain: strong centralized power based on and supported by big private corporations. The two elements are linked by bureaucratic capital, which is permanently bread within the state and permanently privatized. Through this the state accumulates resources and sustains the order. New business projects are nourished by the state and when a chance occurs it is ceded to business or becomes a private corporation itself. Needless to say that bureaucrats are rewarded for their services – they take bribes, have their interest in flourishing businesses and enjoy loyalty from the part of big capitalists.

Bureaucrats want the oligarchs to respect certain rules, a kind of code of honor but the problem is that in this country it is ridiculous when a bureaucrat appeals to morality.

President Putin’s conception is based on a viable market approach similar to American or German corporatism, but with specific Russian character. It is that in systems of peripheral capitalism bureaucracy always tends to be outsized, corrupted and incompetent.

Being “the leading national force”, “the locomotive of development” bureaucracy can rule the state; at any rate it copes much better than private business would do. And it is accountable to the people unlike the foreign capital and its servants in Russia. For the Russian capitalism bureaucracy is the lesser evil.

The very thing that binds the two spheres is potentially its own undoing. Kagarlitsky positions the 2008 Presidential election as the test for how strong the “agreement” between politics and economics is. The election will open up a space for factions to renegotiate their positions within and in relation to each sphere. This is why the choice for the next President will be so tricky. He is going to have to be a good mediator to keep the system stable and beneficial to the major players in each sphere. It is out of these potentially irreparable cracks that Kagarlitsky hopes a popular opposition movement will arise.