20.04.2006 | Andrei Illarionov

A Different country…


Former Economic Adviser to the President of Russia, Andrey Illarionov, resigned from his post at  New Year. He declared that the country had passed the point of no return  – the political leadership of the country had made a choice in favour of a corporative state, and this choice would have very serious economic and political consequences for Russia.

Today’s Russia is not the same country that existed six years ago. That country was unsettled, bustling and poor. It was, however, free. Russia has become different. Richer, and not free.

One can argue where the riches came from. They have, however, appeared, and this is a fact. One can ponder, how, when and why the move away from freedom occurred. One can discuss how the move become possible – a secret plan or the logic of events, ideological inheritance or external circumstances, old habits or new opportunities. Yet, one fact is doubtless and indisputable: we are no longer on the crossroads of political choice. The crossroads are behind us, the choice made. We live today in another country.

The main thing we have lost is freedom. The rules of play have changed - in the economy, politics, social life, ideology and foreign policy. A new model of state has appeared, developed and strengthened. Russia has become a corporative state. What does this mean?

The rules of a corporation: privileges and discrimination

Changes in legislation and practical limitation of political activities have effectively devalued citizens’ shares in the public corporation “the Russian state” and turned the latter into a closed company. Ownership of the Russian state has passed to a corporation not under the control of its nominal owners – Russian citizens.

The main rule of the corporation is the absence of universal rules. The leading principles of the corporation are selectivity, inequality and discrimination. The key factor determining the status of a member of the corporation is loyalty to the corporation, but not experience, professionalism or serving their country. The most valuable incentive for a member of the corporation is their transfer to a state company, with the size of financial flows determining their place in the corporative hierarchy. The state companies have been turned into instruments of the corporative state. Having mastered the practical state corporative principle – “privatization of income and nationalization of losses”, they have turned to mass interventions in the private sector, with “Yuganskneftegaz”, “Sibneft”, “Silovye mashiny”, “Kamov”, “OMZ”, “AvtoVAZ” and “East-Line” becoming victims of the corporation’s expansion.

The companies which are still private more and more resemble their state counterparts. The formula for corporation work with private companies is well-known. This is not merely “social responsibility of business”, but “state-private partnership”. Now every request of the corporation, from investments in various  “necessary” projects to the sale of a private company to the “correct” purchaser, will be carried out. It is not wise to refuse – everybody remembers the story with “YUKOS”.

Another important principle of the new economic model is selectivity. One company suffers from the highest possible (and sometimes even impossible) tax demands, and another obtains special privileges. In one case selling shares to foreigners is prohibited, and in other it meets comprehensive state approval (together with financing beyond the bounds envisaged by national legislation). In one case foreign citizens cannot work in Russian companies “on account of state security”, in others they are invited here for work. For some buyers prices are fixed at one level, and for others – five times more. Unequal conditions for entrepreneurial activities, economic and political discrimination are turned into absolute principles. One can use many names for such an economic model, not however free.

Ideology of the corporation: “not for strangers”

Not only economic, but also political freedom has left the Russian land. Political prisoners have appeared in our country again. The international organization “Freedom House”, which monitors civic and political freedoms in 150 countries, noted a significant change in 2005: Russia was moved from the group of  partly free countries to the group of politically not free countries. This group includes such countries as Rwanda, Sudan and Afghanistan. In 1990s Russia was more free than Balkan countries; now – on the contrary.

Corporativism also occupies a central place in the social sphere. Blocking of natural forms of political life destroy social structures enabling people to identify, formulate and protect their political interests. Instead, it is proposed to structure the social space by other characteristics: professional, religious and regional. A vivid example of this practice was the creation of a public chamber designed according to the corporative state of Benito Mussolini.

Ideology of corporativism seems indistinct only at first sight. It does not look either communist, or liberal, or socialist, or nationalist or imperial. Yet, this ideology exists. It is based on the principle “not for strangers”. This is the ideology of giving privileges, loans, subsidies, authorities and power to “allies”, this is state lobbying, with all state  resources handed to the corporation members, actual and probable. This is the ideology of protection of “allies” not because they are right, but only because they are “allies”. This is the ideology of aggression against the “strangers”, not because they are not right, but because they are “strangers”. Masters of art felt the advent of this ideology earlier than political scientists and showed it in the popular films, from “Brat-2” [“Brother-2”] to “Brigada” [“Brigade”]. This principle is withdrawal from civilization. This is a return to barbarism.

The ideology “not for strangers” is not confined to Russian territory. It does not differentiate on national or ethnic grounds. The former chancellor of another country becomes “an ally” for the corporation. A Russian businessman, who has created a national company that brought billions of dollars into the state budget, turns, for his part, into “a stranger” and is oppressed. All might of the Russian state is directed for protection of interests of the members of corporation: from the prohibition to transport Kazakhstan oil to the Majeykiaysk industrial complex and cutting off the electric energy from Moldova to the anti-Ukrainian “gas war”. New Russian imperialism obtains obvious corporative looking.

Goals of the corporation, real and supposed

The essence of the new model lies in state redistribution of resources among “allies”. Superiority of law and unified conditions for everybody are necessary only in civilized countries that respect their citizens. Equality of conditions for entrepreneurial activities is needed to overcome the historical lag of a country, to modernize it.  Russia’s stable development needs responsible and respectful interrelations with neighbours. Yet, nothing will be done if the country is held by the corporation. The corporation has other goals.

If the task of modernization is not actual, if reforms, even minimal, are aborted, if behaviour on the international scene arouses storms of indignation in the world, then the corporation does not represent Russia’s interests. They do not even endorse the so-called national projects involving distribution and consumption, in spite of their propagandistic background. Comparison of the planned expenditures for national projects in 2006 (about 5 billion USD) with the expenditures of state companies spent for new activities in 2005 (23 billion USD) demonstrates what the main goals of the corporation are and what grubby manoeuvres. The interests of corporation members are more important than modernization of the country and all national projects taken together.

Why it is bad?

Why, in fact, is a situation where state corporations become the main economic force so terrible? Why is it bad when private companies fulfil the errands of government? When officials extend the non-market sector, intensify state regulations, introduce restrictions for  “strategic reasons”? When state capitalism is formed, and the economy is no longer market? When superiority of law and equality in the face of law are absent, and inequality and discrimination triumph? When the authorities do not conceal their pride intheir corporation? Does such a model exist only in Russia? Is it absolutely nonviable?

Of course, there are other such countries in the world: Libya and Venezuela, Angola and Chad, Iran and Saudi Arabia, Syria and Iraq. Now Russia also belongs to this friendly group.

Such economic-political model can exist for a long time. In some countries of the OPEC it has lasted for thirty years, and in Venezuela – about half a century. Moreover such models do not only function where there are high prices for energy resources. Even more “interesting” economic models work in Cuba and the North Korea without their own energy resources. Nor are the Soviet models of economics, politics and society yet forgotten.

So, from the viewpoint of world history, there is nothing special in the present Russian social model. The land and people can bear much. And the life of the existing model can be protracted.

All correct, except one thing. It is now the beginning of the 21st century, selection of this model is nothing else but the conscious choice in favour of social model of the third world countries, or, to put it more precisely, one very specific group of the third world countries. The long-term outlook for this model is well-known.

The present economic-political model of development of Russia is a historical dead-end. Not a single country taking this path has become richer, more powerful, or more developed. Russia also will not become better on this way. The country’s backwardness will increase, not diminish. And the price for this experiment will be paid, as usual, by long-suffering Russian citizens.

Plans for tomorrow

Of course there is a chance for change. Hardly though through the convictions of the authorities. It is impossible to persuade the corporation. All arguments are known. And the choice made by the corporation is a deliberate choice, based on the awareness of the consequences. A choice based on other priorities.

Under the conditions of democracy the chance for change is connected with changes in power. But replacement of power is unavoidable for any regime. The only distinction of democracy is that such replacement occurs regularly and with minimal losses for the society. “Democracy is an abominable thing”, said Winston Churchill, “but everything else is even worse”.

Absence of democracy does not abolish the change of power. It happens all the same. However, under the conditions of restricted freedom it takes the form of “soft” (“velvet”, “coloured”) revolutions, like in Czechoslovakia in 1989 or in Ukraine in 2004. The social cost of such changes is must higher than that of regular democratic procedure.

Countermeasures taken by the corporation against a “coloured” revolution in Russia make it impossible in the near future. However, this fact does not cancel the necessity of replacement of power. It will still take place sooner or later. Yet, when this happens at last, the revolution may not be “velvet”. The losses at other variants of change in power will be incommensurable with the losses either of democratic procedure or “coloured” revolution.

It is difficult to say when and how the change in power will happen. Nonetheless one must understand clearly what should be done then. And something can be done even now.

The present situation in our country seems uneasily deadlocked to those who do not accept the corporative state and Venezuelization of the economy. Yes, in a non-democratic country any political struggle results in work at uranium mines. For positive result the Word must sound at first. However, the most influential mass media are controlled by the corporation.

Yet, we can start the action, which was not completed by the post-Soviet power over the last 15 years – separation of the state from citizens. One can start ones own separation from such state, beginning a campaign of civil non-participation in the affairs of the corporative state, thus initiating restoration of civil, political and economic freedoms not from the side of the state, but from the side of the society. These freedoms were already given to Russian citizens before: in 1905, 1917 and in 1991, but were lost.

If we manage to do that, then maybe a new Russia will be formed. A free, open and tolerant country, which is therefore dynamic, developed and sure of itself. A country sincerely respected by its neighbours. A country with a future.  A different country

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