Global Policy Forum

By Andrei Illarionov*

Today's Russia is not the same country it was only six years ago. Back then, the country was unsettled, tumultuous, impoverished. But it was free. Today Russia is different. Richer. And not free. We can argue over where the wealth came from. But it's here, and that's a fact. We can try to sort out how, when and why this turn from freedom came about. We can discuss whether it was a secret plan or the logic of events, an ideological heritage or foreign pressures, old habits or new possibilities.

But this much is undeniable and indisputable: We are no longer at the crossroads of a historic choice. That crossroads is behind us. The choice has been made. We live today in a different country. A new model of the state has taken shape and put down roots. The state has become "corporatized"; it has become a corporate enterprise. What does this mean? Changes in legislation and limitations on political activity have effectively devalued the shares held by citizens in what might be described as a publicly held company called "Russian State." This company has been transformed into a privately held company which the nominal owners - Russian citizens - no longer control.

State-owned companies have become the assault weapons of the corporate state. Having mastered the main principle of state-corporatism - "privatize profit, nationalize loss" - they have turned to massive intervention in the private sector. The victims of this corporate expansion include Yuganskneftegaz, Sibneft, Silovye Mashiny, Kamov, OMZ, AvtoVAZ, Eastline.

Companies that are still in private hands resemble ever more closely their state-owned siblings. Any request from the state - whether it's a donation to a "necessary" project or the sale of the company itself to "correct" buyers - is fulfilled. Declining is not an option. The fate of Yukos is known to all.

Another guiding principle of the new economic model is selectivity. One company is confronted with the maximum possible (and sometimes impossible) tax bill; another gets unique exemptions. In one case the sale of shares to foreigners is prohibited; in another it gets overwhelming state support (along with financing beyond any limits set by law). In one case foreign citizens are not allowed to work for a Russian company "for reasons of state security"; in another they are eagerly recruited. One set of buyers pay one price; another, five times as much.

It is not only economic freedom that has left Russia. Political freedom is also gone. Political prisoners are back. The international organization "Freedom House," which monitors political and civil freedoms in 150 countries, reported a qualitative change in 2005: Russia moved from the group of "partly free" countries to the "not free" group. Others in the group are Rwanda, Sudan, Afghanistan.

"Corporatism" plays a central role in civil society as well. Freezing normal political life has eliminated the social structures that identify, formulate and protect the political interests of the public. Instead, society is structured along different interests - professional, religious, regional. The corporate ideology may seem unclear at first glance. It does not look communist, or liberal, or socialist, or nationalistic, or imperial. But it does exist: It is an ideology of "nash-ism" - "ours-ism." It is an ideology of offering privileges, subsidies, credits, powers and authority to those who are "nashy," "ours."

It is handing out all sorts of state-owned and national resources to members of the corporation, both current and prospective. "Ours-ism" is an ideology of protecting "our own" not because they're right, but because they're "ours." It is an ideology of aggression to "others." It is a return to barbarism. "Ours-ism" does not know national or ethnic boundaries. The former chancellor of a foreign country is made a member of the corporation and becomes "our man in Europe." Meanwhile, a Russian businessman who created a company that brought billions into the national treasury turns out to be an "other" and is exiled to the depths of Siberia.

The entire might of the Russian State is thrown behind "our" members of the corporation, whether this means refusing to transit Kazakhstan oil to Lithuania, switching off electricity to Moldova or waging a "gas war" against Ukraine. Russian imperialism has taken a distinctly corporate image. The point of the new model is to redistribute resources to "our own." The rule of law is only for civilized countries. Fair business practices are only for countries that want to catch up with the developed world. Good relations with foreign neighbors are necessary only if Russia is interested in long-term development. The corporation has other goals.

What's wrong with that? What is so awful if state corporations become the driving force of the economy? If private companies carry out the wishes of the government? If the authorities inflate the non-market sector, strengthen state controls, set restrictions for "strategic" reasons? If state capitalism displaces a market economy? If the primacy of law and equality before law are absent, and inequality and discrimination triumph?

Is it only in Russia that this model exists? Is it really not viable? Yes, there are other countries like this. Libya and Venezuela, Angola and Chad, Iran and Saudi Arabia, Syria and Iraq. Russia is one of them now.

And yes, this politico-economic model can last for quite some time. In some OPEC countries it has survived for a third of a century; in Venezuela, for half a century. It can survive even without high prices for energy. Cuba and South Korea have even more impressive models, and that without any energy resources. There was also the Soviet political, economic and social model.

So from a historical point of view, there's nothing particularly novel about the new Russian model. This country and this nation can take a lot. The current model can last a long time.

There's just one thing. Choosing this model today, at the outset of the 21st century, is nothing other than deliberately choosing the third-world model. More precisely, the model of a very specific group in the third world, whose long-term prospects are well known, no matter how much money they get from oil, no matter how many pipelines they control at home and abroad, and no matter what saccharine stories they tell on TV.

The current politico-economic model of Russian development is a historical dead end. No country that has set off on this road has become richer or stronger or more developed. Nor will Russia. It will fall farther behind. And the price will be paid, as usual, by Russian citizens. Of course, it is possible to change this. But most likely not because the authorities will want to. It is impossible to convince the corporation; it knows all the arguments. The choice it has made is a conscious choice, with full knowledge of the consequences.

In a democracy, political change is linked to a change of rulers, which occurs regularly and at minimal social cost. The absence of democracy does not prevent a change of rulers. It happens anyway, but with limited freedoms it takes the form of "soft" revolutions, like the "velvet" revolution in Czechoslovakia in 1989 or the "orange" revolution in Ukraine in 2004. The social costs of such changes are much higher than for the democratic process.

Measures that the corporation has taken to prevent a "color" revolution make it highly unlikely in the short term. But even they do not deny the inevitability of a change of power. It will happen sooner or later. When it does happen, it may not be "velvet." In this case, the cost to the country will be incomparably higher. It is difficult to say when or how this change of power may occur. But it's imperative to know what will have to happen then. Some of it can be started now.

For those who cannot accept a corporate state, or the Venezuelization of the economy, or the degradation of social life, the current situation seems a nauseating dead end. Yes, political struggle in a non-democratic country can end in a mine. Before there can be a deed, there must be a word, and the most important mass media are under the corporation's control.

But one can start doing what in their 15 post-Soviet years the authorities could not do - separating the citizen from the state. One can start one's own separation from such a state through a campaign of non-participation. In this way, working from below, one can begin to restore civil, political and economic freedoms - freedoms that were offered to Russian citizens in 1905, 1917 and again in 1991, but squandered away.

If we succeed, we may get a new Russia - free, open and tolerant. A dynamic, developed and steady country, standing on its own feet, genuinely respected by its neighbors. A country with a future. Another country.

About the Author: Andrei Illarionov resigned in December as an economic adviser to President Vladimir Putin in protest against government policies. A longer version of this article appeared in the Russian newspaper Kommersant. Translated by the IHT.