Samuel Johnson famously advised James Boswell and his circle to “clear your mind of cant.” This is equally sound advice for students and commentators about Russia but it is not always followed. As a result much of contemporary writing about Russia falls prey to various mythologies. One of the pervasive and most stubborn of these is that Russia, unlike its Soviet predecessor, has a market economy and is therefore less vulnerable to economic crises that could undermine the system. This myth, however, is belied by the facts and as Khrushchev reminded his colleagues, “facts are stubborn things.”
Undoubtedly observers are misled because Russia seems to possess many of the institutions of a market economy: corporations, banks, a stock exchange, etc. But none of these factors constitute what is essential for the existence of a market economy and the advent of capitalism, whatever its form. These factors are private ownership of the means of production, as secured by law, and the sanctity of contracts. Neither of these exists in Russia or is likely to emerge anytime soon. In an age of mixed public-private enterprises throughout all the major Western economies there is, of course, no such thing in reality as pure capitalism, although it exists in theory. Nevertheless for a capitalist economy — i.e. one where there is a market that more or less governs economic trends, activities and developments — to exist, there are certain basic necessities that Russia not only lacks but also that its government is determined to uproot or supplant and replace with the state.
First of all there is no right to private property in law. This means that nobody in Russia can actually securely own property. Regardless of what is written on paper, every property owner knows that it can be taken away (or alienated) from him anytime the government wants to do so. In a true market economy this cannot be done, except by force of a legitimate law democratically legislated and adjudicated. In Russia — as the Khodorkovsky, Browder-Magnitsky and Yakunin cases show for all their differences — when Mr. Putin decides he wants to remove the owner of a property either from power or from liberty, or from Russia, he and his officials who are also equally complicit in these deeds do so unceremoniously. Indeed, as Peter Baker and Susan Glasser long ago showed, even high-ranking officials who own major state corporations and direct them serve and own these properties merely as a condition of their utility and service to Putin. Once that service is over or their utility as servitors fully compromised Putin removes them. The same was true under Communism for the Nomenklatura , or ruling class. They had rank, access to privileges, etc. but when their usefulness ended, if they were lucky they were retired or, if worse, exiled to the Gulag or shot along with their families.
Tsarist rule too was no different, although towards the end it was much more humane. Indeed many scholars, including, among others, this author and his teacher, the late Richard Hellie (a noted specialist in medieval Russian history), accurately described Russia ten years ago as being built along the same lines as the Tsarist service state. Thus these state corporations which are owned by the people who govern and rule Russia perfectly manifest the ongoing feudal principle that property and power are fused and that all property belongs to the state, or more accurately to Vladimir Putin who can do with it as he pleases. Observers should remember that in 2011 Putin and Medvedev’s so called “castling” move (Rokirovka in Russian) demonstrated for all to see that in their eyes the entire state belongs to Vladimir Putin as his personal property and he can do with it or its component parts as he pleases. This patrimonial ownership of the state is the essence of state power in Russia and precludes the emergence of any secure property rights in law or of a market economy. And the ensuing corollary of this patrimonialism is the service state. Moreover the absence of private property rights compromises the ability to agitate for civil, human, and political rights, and as Richard Pipes observed years ago, lies at the heart of the continuing patrimonial autocracy of Putin.
Second, because there are no rights in law to property and no civil, human, or political rights, there is no concept of the rule of law — and thus the sanctity of contracts among free legal entities. Equally importantly, there can be no accountability of the Tsar (or President) to law or any legally constituted authority. This is not only a case of the Russian proverb quoted by Stalin that paper endures whatever is written on it. Rather this condition is another defining attribute of the Russian state. Economic activity at all time takes place under the sufferance of state authorities and indeed, state authorities own at least half if not more of the Russian economy, and numerous cases show that “private businessmen,” even if they possess or possessed good contacts with the Kremlin, own their empires and properties merely at the tolerance of those authorities.
Under such conditions there may be individual markets in goods and services, and Russia is clearly in many (albeit often distorted) ways vulnerable to the vagaries of the global marketplace. But under no circumstances can we say that Russia is a market economy. Similarly this kind of economy, despite the ingrained corruption, does not preclude growth, but as Angus Madison demonstrated, growth over the long term is invariably inferior to that of true market economies. Thus the continuation of Putinism consigns Russia to eternal backwardness if not wholesale corruption. In no way are such tendencies or prognoses consistent with a market economy.
We would all be better off if authors writing about Russia relearned some basic aspects of what used to be called political economy or “Economics 101” rather than succumbing to the lazy mythology of Russian studies. Whatever others may write; the stubborn reality remains that Russia today is still what it always has been, namely a patrimonial autocracy and service state.