Paul
Goble
Staunton, July 4 – Many have been
struck by Gideon Rachman’s argument that countries can be classified as either
nation states or civilization states (ft.com/content/b6bc9ac2-3e5b-11e9-9bee-efab61506f44),
but Vladislav Inozemtsev says many, including Russia and a large number of
other post-Soviet states, are neither. Instead, he argues, they are “business
states.”
These states, the Russian economist
writes on the Snob portal, are not so much like former empires as “trading
corporations of Modern times, many of which fulfilled the fucntions of states like the British East India Company,
for example” with one major distinction (snob.ru/entry/179441/).
That distinction
is that “in the role of the denigrated and exploited are not residents of
overseas territories but rather all the subjects of this or that national
leader.”
According to Inozemtsev, “a business
state is a system in which the formal instruments of state administration are
completely subordinate to the tasks of the increase of the wealth of its
leader, persons close to him, their friends and relatives and also all those
whose political loyalty is needed by ‘the big boss’ for the support of his
power and provision of his own security.”
In a state of this type, it is “senseless
to speak about corruption in the usual sense of the word” because the personal
enrichment of the members of the political elite is “the highest goal of the
system and extracting profit from their positions on the hierarchy is its
fundamental imperative.”
In a business state
like Russia today, Inozemtsev continues, “the powers that be de facto control
public wealth … but de jure only fulfill standard administrative
functions – and precisely that situation defines the most important characteristics
of the business state.” And over time,
this state looks at the population only as “a bio resource” whose support it
wants to keep to a minimum.
“This corresponds to the logic of
any business corporation,” he says. The
difference is only that the usual corporation has to live with the power of the
state, while the state doesn’t have to be concerned about or feel limited in
any way by anything. Thus, what appears from other perspectives as a violation
is in fact absolutely logical and consisten.
Such systems have three basic characteristics.
First, they are ineffective. Because the rulers want to extract ever more
profit from the population, they do not invest in it or in its future and thus
eventually find themselves in a dead end.
Competition and innovation
decline, and the systems themselves decay.
The only thing that acts to restrain
that decay is some external source of money such as rents from the sale abroad
of raw materials like oil and gas.
Second, such systems are ruthless.
They do not need to satisfy the population but to exact resources from it; and
in their competition among themselves, they feel no constraints either. And
third, such systems are open. “The Soviet Union of the Brezhnev era could not
become what Putin’s Russia or Yanukovich’s Ukraine became.”
Under Brezhnev, “immigration was
almost impossible,” information was tightly controlled, and Moscow sold abroad only
17 percent of the oil it pumped, not the 62 percent it sells now. The business
state has to be open in this way for the same reason a declining corporation must:
it is the only way to ensure it will continue to make money.
“The business state is similar to a
company whose owners are ready to sell to anyone who offers an unexpectedly
high price, but if a buyer isn’t found, then the goal becomes the extraction of
the maximum possible current income when there is a complete lack of any
strategic goals and tasks.”
But just as corporations that land
in this state eventually fail so too do business states, Inozemtsev says. Because power is invariably monetarized in
these states, the siloviki integrate with the state and become wealth and try
to keep it going so that they can continue to enjoy the wealth it provides
them.
“A business state of course can be
destroyed in the course of a popular uprising or as a result of the interference
of external forces, but it is naïve to hope that its formal collapse will destroy
all its structural elements.” They are likely to continue far after the founder
of the business state leaves the scene as has happened in Ukraine.
According to Inozemtsev, “the most
probable” way for the Russian business state to end is bankruptcy. That is because its rulers being businessmen
are rational. “They will hold on to power as long as the profits of doing so
exceed the risks” just as businessmen of all kinds tend to do.
That could have happened in Russia
after the 1998 default, Inozemtsev said, had Boris Yeltsin not found Vladimir
Putin as his successor, someone who is quite prepared to ensure the survival of
his system by harsh and brutal action, something not everyone in the Russian
political elite has been or is willing to do.
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