HOW DO YOU SLAY A DRAGON?

The post-Soviet privatisation de facto  presented a very narrow circle of people with a great advantage by having access to assets. For a variety of reasons these people found themselves in a winning position: administrative resources were available to them; they had access to funds; their education; their age; and so on. On the other hand, the broad mass of the people had no possibility of taking part in the distribution of these assets. The man in the street was reduced to being a temporary holder of a voucher, that he either sold off to speculators at a low rate that didn’t reflect its genuine economic value, or who lost out on any value entirely by leaving it to his grandchildren as a memento of the era. Individual investments in the shares of investment funds were simply a myth, that was shattered by the economic crisis of 1998.

The successful privatisations that took place in Eastern Europe demonstrate that there was an alternative to the method that was chosen in Russia. But the decision taken in Russia was less a mistake than it was a conscious ideological choice. The government made its number one priority solving a political issue, not a social or an economic one. The aim was to pull the rug out from under the feet of the Communists, who were supported by the so-called “red directors”, by rapidly creating a new “class of owners”.

I think we can say that the Russian government of the time deliberately chose this method of privatisation, because it was the one that best met its priorities. At that time it hardly bothered anyone that as a result of this, economic justice was thrown out of the window and, as a result, social justice, too. Similarly, no one cared that this created the conditions for the rise of a crime-ridden economy and a mafia state. All of these “fruits” ripened about 15 years later, notably after Putin came to power.

Long before Putin, the authorities skilfully conducted the privatisation process, using it as an instrument to strengthen their influence over society. And a priori , the privatisation of strategically important facilities was a subject for political bargaining, something the government used to solve its own issues, that were frequently a long way from economic ones. Loans-for-shares auctions were no exception to this, that became a bargaining chip in the 1996 presidential election campaign.

As someone who was directly engaged in this game with the government as a representative of business, I had understood by the beginning of this century that the country had entered a social and political dead-end. It was vital to get out of this by putting right the results of this spontaneous privatisation. I began to speak out, saying that it was essential to take urgent and extraordinary steps in order to re-establish economic justice.

Soon after Putin came to power I suggested to the leadership of the country that we should look again at the issue of privatisation; in the first instance, of course, that of the loans-for-shares auctions. I suggested that the problem could be solved by bringing in a one-off tax for the main beneficiaries of the privatisation process. This could be done by way of contributions to a special fund for economic development, that would have been measured in tens of billions of dollars.

Unfortunately, not only was my initiative not supported, but it became one of the factors that led to my arrest. Later I and others realised that Putin’s regime had no intention of changing the results of privatisation; on the contrary, they planned to use them specifically for their own ends. This strengthened my sense of foreboding, and ultimately led me to the conclusions that I laid out in my article “A Turn to the Left”, that I wrote when I was in prison.

In the more than 15 years that have passed since the publication of “A Turn to the Left”, the situation in Russia has radically changed; and what began as a political error has ended up being a full-blown political and socio-economic disaster. Clearly, the measures that I suggested at the start of the century are totally inadequate today. Tough and serious decisions need to be taken, and political will and courage are needed to make them happen.

Twenty years of Putin in power show that the main beneficiary of the privatisation process that was launched at the start of the 1990s has been Putin himself. Once he came to power, he and a narrow group of people close to him – some of whom were directly linked to the criminal underworld – privatised not individual facilities or even the economy: they privatised the state itself. They turned the state into a weapon for their personal enrichment and for their own common use.