Interesting Take on Yukos

A very interesting take on the Yukos situation from the Moscow Times. And one which relates directly to some of the privatisation issues we were debating recently. Boris Kagarlitsky, director of the Institute of Globalization Studies, argues basically that given that the Russian economy is dominated by an oligarchic structure of raw materials quasi-monopolies, and given that a majority of the population seem to want these monopolies returning to state ownership, the only ‘democratic’ solution is an authoritarian one. Khodorkovsky had another idea, and hence off he went to prison. Any comparisons with or lessons for Iraq here? Can democracy be introduced like this? Off you go.

The hot topic among opposition politicians and activists the last few weeks has been the arrest of Mikhail Khodorkovsky. Who is this guy? A victim of property redistribution? A champion of democratic freedoms? Or a front for “comprador capital,” squeezed out by a nationalist administration? At a forum for left-wing political organizations held in Moscow last weekend, the discussion focused on Khodorkovsky, although the topic listed in the program was “Internationalism or Nationalism?”

The argument that Khodorkovsky is the victim of a government attempt to rid Russian business of foreign influences simply doesn’t hold water. The Putin team has done all it can to drag Russia into the World Trade Organization and to increase the role of foreign capital in the economy.

Khodorkovsky’s arrest could be put down to a run-of-the-mill battle to redistribute property if not for two things.

The first is Putin’s announcement that the legal and economic results of privatization will not be reviewed. This means that the oligarchic structure of the economy, dominated by raw materials quasi-monopolies, will remain in place no matter who owns them. In a twist of fate, the very fact that the quasi-monopolies are protected against nationalization leaves the heads of these corporations defenseless in any conflict with the regime. The Kremlin has vowed to defend the private property, not the owners themselves.

In a country where the vast majority of the population wants these companies to be renationalized, the regime can only be authoritarian. In order to defend private property, the regime has no choice but to ignore public opinion. A wide-open political contest is out of the question. The most the regime can afford is a semblance of participatory government, or “managed democracy.”

But sooner or later the arbitrary rule to which most Russians are exposed every day will affect the upper echelons of society. When the bureaucrats are all-powerful, no one is safe. At some point the defenders of private property start demanding their fair share. Some businesses choose to cut a deal. Others, in particular Khodorkovsky, have tried to establish a dialogue with the people directly in an attempt to free themselves from dependence on the state. This explains why Khodorkovsky has pushed so insistently for greater openness and has founded so many charitable organizations to support education, civil society and even the political opposition.

It was always doubtful how successful this strategy could be. However, the Kremlin sensed a threat and went after Yukos with a vengeance. Khodorkovsky wound up behind bars, though if the charges he faces are taken at face value, the entire Russian elite — starting with the Kremlin — ought to be locked up along with him.

At this point a second factor comes into play, changing the situation dramatically. Khodorkovsky stepped down as the head of Yukos and indicated that he would be happy just to run the foundations he had established to develop civil society. In Marxist terms, the oligarch became a “leader of the bourgeois-democratic opposition.” He remains a member of the oligarchic elite. But the owner of a major corporation who is trying to hang on to his slice of the pie taken from the people back in the early 1990s is one thing; a politician who has issued a challenge to the regime is another thing entirely.

The press frequently compares Khodorkovsky to the famous industrialist Savva Morozov, who bankrolled the Bolsheviks at the beginning of the 20th century. It would be more apt, however, to compare Khodorkovsky with two men who found themselves in a similarly complex situation: Benigno Aquino in the Philippines during the Marcos dictatorship, and Pedro Joaquin Chamorro in Nicaragua during the Somoza dictatorship. Both were liberal representatives of a traditional oligarchy who opposed authoritarian rule and “managed democracy” in their countries. They were neither radical nor left-wing, but the logic of political confrontation drove them into such a heated conflict with the regime that no compromise was possible.

Today, Khodorkovsky is just about the only person in Russia for whom democratic reform is not just a worthwhile goal, but a matter of life and death. He is surely familiar with the fate of his predecessors: The Aquino and Chamorro clans eventually came to power in the Philippines and Nicaragua, but both men paid for this triumph with their lives.

2 thoughts on “Interesting Take on Yukos

  1. I do not believe that these giant “quasi-monopolies”
    serve the interest of the people of russia, just as
    I doubt nationalization of these industries would
    serve those interests either.

    What instead is needed is a low-cost method to break
    up these economic concentrations into smaller entities
    and spread out their ownership and control over
    a broader section of the population.

    How about a progressive gross sales-within-russia
    tax on all entities, both foreign and domestic?

    Businesses with sales below a certain level would pay
    no tax at all. Make that cutoff level high enough
    to not discourage moderate largeness, but everything
    above that tax and tax at an increasing rate dependent
    on gross sales within russia.

    In addition to being likely more legitimate in the eyes
    of the people, such a scheme would engender a competitive
    market that would increase the rate of growth in productivity
    (and the standard of living) while tapping into and
    developing the talents of a broader, and hopefully ever
    increasing, portion of the population.

  2. “What instead is needed is a low-cost method to break up these economic concentrations”

    I absolutely agree. Interesting idea. I’m thinking about it. Although while the political structure is where it is, any change is a bit pie in the sky. Perhaps your proposal is more realistic for the EU.

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