Staunton, May 11 – The Putin system is in certain respects “not a state in the traditional sense,” Vladislav Inozemtsev says. Instead, it is a corporation that acts to enrich a circle of people around the ruler however much that leads to the impoverishment of the people. But because it is a corporation rather than a state, it can’t be easily destroyed but must be outlasted.
The Russian economist and commentator points out that Putin’s system lacks many of the things that define statehood: a clear ideology, clearly defined borders and the absence of a distinction between public and private spheres. Moreover, “it is openly hostile to legal culture as such” because it wants to be free to repress its own people (ridl.io/ru/rassvet-i-zakat-kommercheskogo-gosudarstva/).
Its main goal is “the personal enrichment” of those near the center of power. Putin didn’t invent it, Inozemtsev says. Something similar has been functioning in other post-Soviet states, but he did extend it and applied the principles it requires far more broadly than any of them have so far.
As he describes this system, “the strategy of personal enrichment requires the complete commercialization of power and public offices, which are treated as an asset with a set price. The feeling of ‘gratitude’ for promotions forms a fundamental ‘bond’ between the cogs in the profit-making mechanism of power.”
For this kind of operation, “the crucial point is that the legality of this profit should not be undermined. Its beneficiaries extract it not by violating any codified norms” but rather by observing the real rules that exist. And those rules mean that “no matter how much budget revenues increase,” the income goes primarily to them and not to the people.”
Such “a commercial state” is not the same thing as “a captured state.” The latter involves the capture of state institutions by oligarchs or mobsters “without any formal political power.” In Russia, however, as Inozemtsev says, “the country is ruled by those who have been elected or appointed according to legally defined procedures.”
As a result, while “the commercial state has the formal attributes of a state, in reality, it is a business structure imitating a state,” an arrangement that gives it both specific strengths and specific weaknesses.
It strength is that its formal attributes give Putin’s corporation powers that “no corporation or mafia structure has.” It can do everything a state can; and it is perceived by others as a state which limits how others can respond to it. But because it isn’t a state, it lacks the taboos other states have, making any dialogue with it extremely hard.
“Civilized countries are dumbstruck when faced with a ‘partner’ that does not want to hear about the law and legislation, that denies the difference between the truth and lies, that in principle makes it clear that it can buy anything, even when this is not justified by the logic of conventional political expediency.”
Putin and his team appreciate just how valuable the outside world’s misperception of it is to them and that is why “their favorite word is ‘sovereignty.’” In such a situation, Inozemtsev continues, “a world which values the rights of citizens over those of the state has no effective way of responding.”
But the weakness of this “commercial state,” Inozemtsev says, lies in its “extreme internal inefficiency.” To ensure that their own wealth increases, Putin and the people around him have to hide what they are doing and the transaction costs of doing so are thus extremely high.
“As a result, the main problem of the ‘commercial state’ is not that a lot of money is embezzled (precisely its goal), but the much greater amounts of money that are wasted on window dressing. This boosts operational costs, which do not translate into higher efficiency.” Fighting corruption in this case thus becomes counterproductive as well.
Inozemtsev argues that “the emergence of a completely new type of state (or quasi-state, to be more precise) is in itself one of the most original innovations in international politics in the 21st century. It shows that a commercial company is able to privatize state institutions and eviscerate them so almost no statesman-like approach can be traced in the actions of the leaders.”
“The pursuit of maximum enrichment is an effective means of consolidating the regime’s group of beneficiaries, expanding it and making membership in it attractive. This group ensures the loyalty of the ‘cogs’ and the high degree of controllability of the whole system.” And it makes such a country a threat to all others.
As the economist points out, “this lack of any checks and balances, whether moral or financial, makes the commercial state a wolf in sheep’s clothing invading a peaceful flock: the sheep are practically incapable of resisting the wolf, since they have no understanding of how their partner’s claims and techniques may change as the game progresses.”
“The commercial state cannot be disrupted from the inside or from the outside. It shapes its domestic policy and makes sure there is enough money and resources to fight the opposition; it creates incentives for driving dissenters out of the country and replacing them with loyalists from neighboring countries; and it builds an information infrastructure of surveillance and terror.
“At the same time, it is sufficiently adventurous and aggressive in its foreign policy to elicit forceful confrontation from Western countries.” And as a result, “it is much more likely that at some stage an agreement on the ‘redlines’ will come and the commercial state will get a free hand within these lines.”
But any such victory will necessarily be limited in time. “The commercial state is untenable in the longer run: it can absorb any amount of resources with no positive impact on society; by definition, it does not care about modernization or development … and has shut the door to such a revolutionary transition.”
“It is now left with only natural resources dwindling away (and enjoying ever less demand globally) and a population that is becoming ever more impoverished. With time, the expectations of the ruling elite will enter into irreconcilable conflict with the country’s capabilities. Then the time for change will come.
As a result, he continues, “the fate of the Russian commercial state is in the balance. It will be decided not in the trenches of the Donbass, the offices of Washington and Brussels, or even the streets of Russian cities. It will come from successful de-carbonisation, new possibilities of global finance, and a world offering better opportunities for talented Russians.”
And that means, Inozemtsev concludes, “the regime in Russia cannot be destroyed – it can only be outlasted.