PUTIN'S RUSSIA

Putin's Russia

Putin's Russia

Introduction

The National Intelligence Council and the Department of State's Bureau of Intelligence and Research held a conference entitled, The Putin Era in Historical Perspective, on 15 November 2006. The goal of the conference was to examine the historical roots of the current Russian political and economic system-one in which an increasingly authoritarian state has recaptured the commanding heights of the economy, where capitalism has developed through a symbiotic relationship between political and economic elites, and the Kremlin is pursing a more assertive foreign policy. Conference speakers were experts on Russian history: Professors Richard Pipes (Harvard), Stefan Hedlund (Uppsala University). Thomas Owen (Harvard), Stephen Kotkin (Princeton), Marshall Poe (The Atlantic Monthly), Nigel Raab (Loyola Marymount), Eric Lohr (American University), Dominic Lieven (London School of Economics), Ronald Suny (University of Chicago), and Arnold Horelick (RAND).

State Capitalism: The Long View

Participants agreed that Russia has never developed either a capitalist culture or the institutional structure of a modern capitalist state. Since the 15th century, the Russian state has controlled land, natural resources, and labor. The notion of private property only emerged in 1785 and, even today, only 24 percent of Russians consider the protection of private property a fundamental right, while a majority believes that natural resources should be controlled by the state.

• Russia never has had legally enforceable property rights, an essential feature of a functioning capitalist society. For centuries, property rights and business associations have existed in limbo, enjoying no legal status or protection. This resulted in a system that, at its heart, lacked accountability.

• Where there are no institutions that can call an autocrat to account, property rights are always conditional upon one's personal influence with the autocrat. Throughout the centuries, under both the Tsars and the Soviets, the principle of kormleniye-currying (and purchasing) favor with the leaders to protect one's property-has prevailed, but kormleniye is conditional and can always be revoked.

• Citizens have never had access to the institutionalized means by which they could hold their autocratic leaders accountable. The business elite has never had a political party to represent its interests and has often been stigmatized because of its wealth.

• Russia has long been suspicious of foreign involvement in its economy. During the Tsarist era, foreign businessmen would win concessions and present detailed plans to the government for developing natural resources, only to have the state revoke the concession and have Russians appropriate the foreign business plans.

Participants agreed that, under Putin, many of these traditional features have resurfaced, and present an impediment to long-term economic development.

Russia's current growth-largely based on high energy prices-has not stimulated sufficient demand for contracts and property rights. A small group of Putin's close colleagues occupy the commanding heights of the economy, driving growth through natural resource extraction. They enjoy privileges through kormleniye as well as increasingly through excluding foreign companies after allowing them to do much of the initial investment work in energy projects.

• There is too much room for arbitrariness in the ...