ARTICLE: "Kremlin Inc. Gobbles Up Industries: Critics say the Russian government uses takeover to do its political business," by Peter Finn, The Washington Post National Weekly Edition, 27 November-3 December 2006, p. 17.J.P. Morgan, the Wall Street titan who dominated the nation's financial markets in the late 19th century, believed that unbridled competition between companies in "rising America" was hobbling its economic growth. He was a huge believer in rules and wanted a more orderly market dominated by large corporate behemoths.
So Morgan bought up, in one example, lots of small railroad companies in order to create a big one. He repeated this pattern many times. This brutal rolling-up process was known in those years as "Morganizing" an industry.
Morgan's justifications remind me of those we hear coming out of Putin's Kremlin. We are told that Russia needs big companies in key industries, otherwise it won't be able to compete globally.
Part of Putin's justifications include, as the story argues, a need to self-correct the sort of goofy-ass privatization process that Russia suffered in the early 1990s. Every Russian I knew felt it was a huge rip-off, enriching the new boyars and doing little to make life better in Russia. The shift to the gangster-style capitalism was also extremely disorienting for a public long used to something far more orderly (the Soviet Union is the only country where I've ever come close to being arrested: once for jaywalking and once for frisbee).
I buy the latter justification to a certain extent, but I really think the Morganizing rationale is closer to the mark. I think Putin and the power guys feel like Russia needs to catch up big-time to a globalization process that favors the largest corporations with the most global reach, and are working to Putinize various prized industries to create just such a roster.
The problem, of course, is the heavy state involvement in these entities, leading to a pol-biz overlap of the sort that eventually collapsed in the U.S. across a series of panics and scandals and other skullduggery that eventually led to the social reform movement that peaked with TR's presidency, only to be revived again and again (always in more muted forms) as the 20th century progressed.
Not a fun trajectory to watch, but one easily predicted. Not a hard call. When faced with the competitive landscape of Globalization IV, Russia decided to come back as fast as possible using methods that have worked for others in history, taking advantage of what was there on the table to get the ball rolling. Beyond that, the Kremlin uses its existing relationships around the world to keep itself relevant diplomatically, but no attempts at a military profile beyond its accepted boundaries (the "near abroad" that no other great power particularly wants to run).
I expect this process to go on for quite some time. A significant period of stability and income growth will be required before the questions get asked, much less the reforms begin.
Meanwhile, do I still include Russia in the Core? Yes. My underlying argument on Core v. Gap is: Can I imagine America intervening within its borders any time soon under any un-fantastic circumstances? And the answer is, No.
Russia may not be everyone's cup of tea, but it's not a geo-strategic or military problem for the U.S. anymore, unlike the long period of the Cold War.
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Comments (2)
Russia certains behaves much more like the low end of the New Core, though, and seems to be moving in the wrong direction, at least in the short term.
All the spy talk smells bad, too.
Posted by Dan in B-more, hon. | November 30, 2006 6:22 PM
Russia is a strange place but it will be a question of who is out of step in the coming decades, Russia or the US. Russia and the former Soviet states tend to follow the weak government strong organized crime model of "Mobocracy." Anyone who has watched the "Sapranos" will be familiar with the operating principle. "Mobocracy" is the path that Iraq will follow, and not the liberal democracy dreamed of. I was in a former Soviet republic a short while ago and was provided a simple example of how "Mobocracy" works in law enforcement. Its strange to think of the Mob being the principle provider of law enforcement but their main business is in the security/insurance/enforcement/protection business. The police in this republic either were not paid or were paid badly. The police earned there personnal income through traffic stops where they would collect the fine on the spot, after some negotiation with the stopped motorist. Failure to pay would mean a trip to see the judge and the judges were paid in a similar way to the police. If the person was unable to pay the policeman and the judge then they would go to jail where the jailers were paid in a similar way to the policeman and the judge. The police were thereby more of a petty rolling shack down than actual law enforcement. But this is where the Mob can in. If a person paid the Mob the Mob would make sure no on bothered them, to include the police, etc. The Mob had the monopoly on violence and crime. Anyone or anything outside of the Mob who acted in a violent or criminal way not authorized by the Mob met a violent end at the hands of the Mob. The mob exacted its justice in an extremely brutal and public way, and since it had influence both with the criminals and jailors, even jail was no safe haven. Especially not jail. What Putin is doing through consolidations is limiting the number of Mobs. Just like the railroads to Morgan a large number of small but wild economic power centers are harder to control than a few large ones. Putin is caught in the pull between the Mobs "shadow government" and the official state government, much like government figures in various parts of the US have been at various times. Indeed if one were to look at US History what they would see is that those small railroads that Morgan merged all had their own private armed militias. For the military side of the equation, while Morgan Morganized the railroads the US government Morganized the militias into the National Guard. In the 1877 B&O Riot in Baltimore the private militias faced off against the striking railroad workers and at some points against each other. This riot was one of many during the "Great Depression" that stretched for a generation at the end of the 19th century in America, a depression that was created by unregulated capitalism, the thing Morgan was fighting against. The barely regulated "Volunteer Militias" that became the National Guard, for their part were directly responsible for the Civil War at least but probably the Mexican American war as well. The "Volunteer Militias" had started out as the quasi-legitimate expression of the street gangs of US cities where their membvers were involved in the quasi-legitimate protection raquet of the early fire insurance companies. The violence in American streets during the days of the early democracy bear comparison to Baghdad. First the Mobs roaped the violence in and then the protection aparatuse of the Mobs became legitimized and encorporated into government. It is the history of US law enforcement, fire protection and militias. Should we expect to see anything different in the emerging democracies today?
Posted by John Frum | December 1, 2006 1:10 PM