#6532
#10
Novoe Vremya
November 3, 2002
THE SHADOW OF OLIGARCHY
Too much government: that's why big business gets involved in elections
Author: Yevgeny Trifonov
[from WPS Monitoring Agency, www.wps.ru/e_index.html]
WHY ARE LARGE COMPANIES TAKING ON THE HUGE COSTS INVOLVED IN HELPING THEIR SENIOR EXECUTIVES BECOME REGIONAL LEADERS? THERE IS NO DIRECT PROFIT IN DOING SO. BUT THERE IS SOMETHING ELSE: THE OPPORTUNITY TO CREATE A NORMAL ECONOMY AND NORMAL SOCIAL POLICY WITHOUT THE HEAVY BURDEN OF BUREAUCRACY.
Alexander Khloponin's victory in the Krasnoyarsk territory gubernatorial election showed that big business is making substantial, long-term inroads into regional government. It is already clear that this is not a one-off event, but part of a trend. When Roman Abramovich became the governor of Chukotka, and Alexander Khloponin became head of the Taimyr autonomous district, and Boris Zolotarev took control of Evenkia, it was said that "the oligarchs are privatizing remote, sparsely-populated regions" in order to secure immunity from prosecution for themselves and exploit the rich natural resources of Russia's remote regions; but now it is clear that this was not the point at all. Those three sparsely-populated regions have now been joined by Yakutia, with a population of almost a million; while the victory of Khazret Sovmen, a gold-mining magnate from Krasnoyarsk, in Adygei has shown that the success of entrepreneurs in their move into government is by no means a paradox confined to Siberia. Actually, it was the North Caucasus rather than Siberia which started the trend: the first business leader to become a regional leader without being part of the Soviet-era party nomenklatura was Kirsan Iliumzhinov in Kalmykia. To be more precise, we don't actually have any leaders who have no links at all to the nomenklatura; but Iliumzhinov was one of the successful Komsomol activists who went into business in the late 1980s - the group that produced today's business elite. It has become a stable social layer, with its own mentality, and group interests which often come into conflict with the group interests of the Soviet-type state officials who have taken key positions in administrative bodies and comprise another stable type of leadership. Many now consider that the shadow of oligarchy is hanging over Russia's regions. True, voters seem to be less and less afraid of this. The trend is clear, but two vital questions remain unanswered: why, unlike in stable democracies, are the leaders of big business moving into politics - and what do they intend to do in the regions after winning office?
THE TRAGIC ABSENCE OF SOCIETY
Some believe that the business sector is attempting to fill a gap in the economy and the social sphere, a gap created by the state's withdrawal. That's not entirely accurate. In fact, the state has not withdrawn; on the contrary, state bodies are all that remains intact in many economically depressed regions, but they are incapable of ensuring that the social sphere functions normally and at least refraining from holding back economic development. The problem lies in a completely abnormal interrelationship between the government, community organizations, and the business sector. Only by working together, in a certain form of harmony based on common interests, can these combine to make up a nation which is developing normally. Let's start by looking at the tragic lack of community organization across the vast expanses of Siberia, the Urals, and central Russia as well. This is not a reference to civil society, the lack of which we see all too clearly in the endless (and entirely justified) complaints from those who would like to see Russia become a European-type nation; the concept discussed here is that of an ordinary society - a community living according to certain rules.
The entrenched position of organized crime - the bane of most Russian regions - isn't really evidence of general economic malaise and a decline in morality; cynical as this may sound, it's some kind of attempt at community organization. It's savage, primitive, unconstructive, leading into an abyss - but it is still an attempt by society to organize itself. Think of Bykov from Krasnoyarsk, with his charity work and hordes of admirers and imitators; think of Klimentiev in Nizhny Novgorod, and Koniakhin in the Kuzbass.
Thus, there is no organized society in Russia, save for a few ethnic regions with their own peculiarities. And what of the state? There is too much of it. The number of state officials in Russia has risen by a third compared to the Soviet era. And this was not merely a whim of the Yeltsin-era leadership; in expanding, the state was attempting to fill the vacuum left by the collapse of the Communist Party of the Soviet Union. The CPSU not only shaped the state - it shaped society as well, it was the glue holding state and society together. Needless to say, the quality of that bond left much to be desired; but once it was gone, the state was left floating in a void.
Russia's current crop of state officials is something of a cross between Soviet bureaucrats and the functionaries found in developing nations like Iraq or Paraguay - who, in the absence of a strong business elite, take on entrepreneurial as well as administrative functions. That's a mild way of describing the total corruption prevailing there (and here): business as run by state officials. The problem is that this form of business sector is no substitute for normal private enterprise. State officials are only capable of redirecting money into their own pockets; they have no interest in economic growth, or industrial efficiency, or creating jobs. With few exceptions, enterprises which remain in state hands are extremely inefficient; their resources are misappropriated, their equipment is stolen. Moreover, the bureaucracy views the private sector with great mistrust, of course, seeing it as a dangerous competitor. This, for example, explains the intensity of the recent battle over who would become the governor of Krasnoyarsk: for the first time, a representative of big business was competing for control over such a large and wealthy region, so the bureaucratic clans interpreted this as a challenge. This applies not only to Krasnoyarsk, but to some neighboring regions (Khloponin was opposed by Govorin and Tuleev, governors of the Irkutsk and Kemerovo regions), as well as Moscow.
The private business sector is moving into government because it's difficult and uncomfortable for it to operate in a ruined society where the bureaucracy is omnipotent. It is worth noting that it's big business which is now moving into government - and its plans are drawn up in terms of years and decades. The business sector has been directly supporting regional politicians for a long time, but this tactic is not always effective, since most politicians are part and parcel of the bureaucratic system, and once they're in power they have no wish to change anything. Moreover, big business, which requires stability, is prepared to spend money on supporting the social sphere in the regions where its enterprises operate. It's the bureaucrats who view the social sphere as a feeding trough, an area from which money can be diverted to their own benefit. What's more, big business has an interest in shaping an organized society, since in its absence it is replaced by criminals and political extremists like the notorious May movement in the Urals, which has become infamous for taking over enterprises. The workforces of large enterprises are fairly stable communities, in which people are connected with each other by a multitude of threads. Contrary to popular opinion, large companies also have an interest in the existence of strong labor unions, since workers have to have someone to represent them in negotiations with employers. The extreme weakness of Russian labor unions is evidence of society's lack of organization, its non-existence as a participant in politics and the economy. If a large industrial enterprise lacks a labor union, or if the union is only a formality, then there is no feedback mechanism between management and workers; this poses a risk of social conflict. It is more advantageous for the management to meet the demands of dissatisfied workers and raise wages, rather than waiting for a dramatic conflict to arise. That is precisely why the business elite is now paying so much attention to programs for developing social partnership.
Social partnership is impossible without the participation of the state - that is, of those very same state officials who have been so much criticized. And these plans are fairly realistic, since a government supported by the business sector is quite capable of dismissing corrupt and useless officials, replacing them with professional managers. That is essentially what is being done in Taimyr, Evenkia, and Chukotka: their bureaucracies, deprived of an independent role and with their ranks purged, have started to work efficiently enough - and not in order to line their own pockets, but for the good of the regions.
And yet, how advantageous is it for the private sector to have its representatives become regional leaders? Is this good in terms of profits? It's too early to give an unequivocal answer to this question. For example, Alexander Khloponin - having exchanged his place as CEO of Norilsk Nickel for the governorship of Taimyr - raised taxes for the enterprise he used to head: Taimyr needed a large amount of money to overcome the serious socio-economic crisis it was in as a result of being run by bureaucrats. Where else could the governor get the money, apart from the Krasnoyarsk territory's largest tax-payer? Besides, Khloponin simply had to succeed as governor - being a young regional leader, not connected to the previous administration, and as a representative of Norilsk Nickel. Some major economic and social projects were launched in Taimyr, and the money for them, once again, came largely from Norilsk Nickel. Now that Khloponin is in charge of the entire Krasnoyarsk territory, he is faced with the same challenge as he was in Taimyr, only on a much larger scale: Taimyr has a population of 44,000 and not much in the way of industry, but Krasnoyarsk has a population of almost 3 million and hundreds of large, "idle" enterprises. It will be necessary to overcome devastation across a vast territory, with extremely complex and diverse problems. Yes, if there is a competent crisis management plan the federal government will provide some funding; but not much, and money is needed immediately. Where can it be obtained? Of course, the governor will try to ensure that all enterprises pay their taxes on schedule; but how much money is it possible to get from bankrupt enterprises? For the time being, it's impossible to make the region's second-largest enterprise, the Krasnoyarsk Aluminum Plant (KrAZ), contribute to the regional budget - since it operates on a tolling system permitted by federal law. KrAZ will have to pay more taxes than it does now, of course, but this will take a long time. That leaves Norilsk Nickel, once again. It has already paid some taxes in advance, plugging a hole in the region's budget and enabling the new Khloponin administration to start paying overdue wages to state-sector workers.
So it turns out that for Norilsk Nickel, supporting "their man" as governor - first of Taimyr, now of Krasnoyarsk - has meant substantial costs, with no tax breaks or commercial advantages. And the situation in other regions where business leaders have taken charge - Chukotka, Evenkia, Adygei - is just the same. Yes, the Chukotka Peninsula does have oil and gold deposits. But there isn't that much of either; extracting natural resources can only bring in some revenue years from now, and not in significant amounts. Any talk of a tunnel between Chukotka and Alaska is no more than a publicity stunt. Building such a tunnel cannot be economically viable under any circumstances, and Governor Roman Abramovich is perfectly well aware of that. In any case, the Chukotka project is currently costing the former Sibneft CEO a pretty penny; with no commercial benefits in sight over the next few years, or even decades. The situation in Evenkia is similar: it does have large oil and gas deposits, and in theory the YUKOS oil company, which made Boris Zolotarev governor, could start extracting and exporting these energy resources on a large scale. But in reality, there are many obstacles: Evenkia lacks any of the required infrastructure, which would take years and billions of dollars to build - and YUKOS simply can't afford it. For similar reasons, it is unrealistic to organize extraction of other natural resources in Evenkia - ferrous and non-ferrous metals, or coal. Industrial development of Evenkia is a matter of the very distant future; but YUKOS is spending money on the social sphere, housing construction, and the development of local industry - so much money that the Evenkia autonomous distric has become one of Russia's leading regions in terms of economic growth figures. Meanwhile, Khazret Sovmen has to spend money from the goldmines of Siberia on the economy, infrastructure, and social sphere of Adygei - a tiny strip of land alongside Kuban. There's no profit in this either.
THE SPECTER OF KALMYKIA
So why are large companies taking on the huge costs involved in helping their senior executives become regional leaders? As we have seen, there is no direct profit in doing so. But there is something else: the opportunity to create a normal economy and normal social policy without the heavy burden of bureaucratic omnipotence which strangles any form of enterprise. This can be viewed as a form of socio-economic modelling: since companies such as Norilsk Nickel, YUKOS, and Sibneft intend to be operating in Russia for a long time to come, they need to start shaping a system of government which is convenient for them. This includes social partnership, restoring a ruined society, and subordinating the bureaucracy to that society. This purpose only appears all too noble; in fact, this is what big business does all over the world - only we in Russia have grown accustomed to "business leaders" being those fly-by-night operators who seek to make a quick fortune and emigrate. But their day is passing, inevitably; and the generation coming in to replace them wants to have some confidence in what tomorrow will bring. To ensure this, it is prepared to spend a lot of money, knowing that such long- term investment will not yield an immediate profit, but it is reliable, and - most importantly - it changes the attitudes of citizens to business leaders as such.
For business executives in government, the problem is whether they will manage to overcome resistance from the bureaucracy and the suspicion of the public; whether they will have enough strength, energy, and knowledge to do so. Otherwise, good intentions may crumble due to the effect of an unfavorable environment; they may vanish like smoke in the face of the temptation to rule as the bureaucrats have ruled - after all, it is simpler, and more customary, and much more profitable in personal terms. Such an outcome is possible, and the example of President Kirsan Iliumzhinov in Kalmykia serves as a terrible warning of it. Iliumzhinov made a good beginning: he tried to cut down the bureaucracy, he helped small business, he poured money into social programs. But then, having run up against the realities of the post-Soviet era, the young business executive turned into a successful feudal overlord - while the piece of scorched earth known as Kalmykia reverted to its former state: poverty, devastation, bureaucratic omnipotence. Perhaps Iliumzhinov started too early, while those business leaders who have gone into regional government in recent years have accumulated sufficient experience and are supported by more powerful structures, enough to change the situation. For the time being, they are making a success of it. Time will tell whether the regions they head will become beacons for the rest of Russia.
(Translated by Arina Yevtikhova)
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