Teaching Comparative

An integrated state

Russia signed a new trade treaty with the U.S. and is about to join the WTO. Those successes for the Russian government focus more attention on the connections between the economy and the government.

Government control of companies and industries is growing. Combined with changes to election laws, it seems that the power elite in Russia are settling in for the long term and for broad control. No longer are Russian oligarchs free agents in the unrestrained markets of Russian capitalism. How does this compare with the integration of the state in China or Iran?

People like Berezovsky prospered because they stayed out of politics and then got out of Russia. People like Khodorkovsky ended up in jail because they began to get involved in politics. People like Putin seem likely to end up prosperous and in charge of a powerful state because they found the right combination of police, political, and economic power.

Peter Finn's report in the Washington Post outlines a case study of government takeover and asserts that the government is using its controlled businesses to achieve political goals.

Kremlin Inc. Widening Control Over Industry

"In industries such as energy, aviation, engineering, mining and car manufacturing, private companies that emerged after the collapse of the Soviet Union are being brought back under state control or consolidated in the hands of businessmen loyal to the authorities. Government ministers and Kremlin insiders now sit on the boards of the country's largest companies...

"The Kremlin defends the swelling economic role of the state as an essential element in the creation of powerful companies that can compete in the global economy. The takeovers are also officially called a necessary reversal of dubious privatizations in the 1990s that deprived the state of income and strategic assets crucial to Russia's security...

"Sergei Markov, a political analyst and Kremlin consultant, wrote in a recent article. 'Vladimir Putin's policy is becoming increasingly clear -- to promote the creation of a pool of major Russian companies that could become global players. That would enable Russia to preserve the independence of its economy and, amid free competition, to save the choicest morsels of the Russian economy from being acquired by foreign multinational corporations.'

"Others are deeply skeptical. 'We should differentiate between state capitalism and bureaucratic capitalism; here we have bureaucratic capitalism, groups of state bureaucrats taking control of companies,' said Nikita Belykh, leader of the small Union of Right Forces party. 'The attempts of the state to get control of various companies can be explained by the desire of officials to redistribute property. And the lack of transparency in these deals is scary and dangerous.'...

"The marriage of politics and business has led to charges that companies such as Gazprom have wielded their power to punish countries such as Ukraine and Georgia, which had drifted from Russia's orbit...

"'The state wants reliable people to head these corporations, loyal, patriotic people who will be very different from owners of the 1990s and act for the national interest as the Kremlin defines it,' said [Tatyana Stanovaya, a senior analyst at the Center for Political Technologies in Moscow]. 'And that coincides with the concrete interests of individuals around Putin who strengthen their own economic position as property is redistributed.'"

posted by Ken Wedding @ 11:39 AM