Russia » Economics
Author`s name Michael Simpson

Oligarch Capital a New World Phenomenon

The pioneering process called "privatization" turned out to be absolutely new for Russian legal practice
Vouchers were said to be securities guaranteed with government property. The vouchers were supposed to be exchanged for shares which in their turn were to yield interest. The amount of dividends was to be determined by new owners of enterprises who could obtain control over these enterprises in exchange for the vouchers.

An imaginary foreign interlocutor may suppose that if the government issues securities it must guarantee the value and the liquidity of these securities. But what we have in Russia is actually a complex legal case. The problem is that shares of privatized enterprises in Russia are not regular securities; they are more often treated as the means to seize pieces of state property.

Businessmen hunt for shares not to receive dividends but to take control over some enterprises by force or to obtain this or that decision of the court. Consequently, here in Russia shares are not securities as it is understood all over the world, but something incredibly different.

Thus, foreign experts do not completely understand the economic situation in this country. What can be done in this situation? Today in Russia, national property is owned by oligarchs who are conditionally called owners, but they are not proprietors, in fact. At the same time, the government will not be able to buy back the enterprises from oligarchs.

First of all, they will not sell them. Second, if they agree to sell enterprises, what should be the price? The government may resort to the measure employed by Yegor Gaidar's government. They told people who had their money in the savings bank and then lost it that the money became depreciated and might be compensated in 10-20 years. If the method is applied to oligarchs, this will turn into expropriation or may further entail something like a revolution or a civil war. Finally, if the enterprises are nationalized, this will require to once again form state ministries and all bureaucratic routines involved.

The notions of national and private property are in fact the conditional terms for economics forms which are changeable. May it be so that what we have now is an absolutely new form of property? On the one hand, it is no longer national property - it is no longer controlled by ministries or the government. But at the same time the shareholdings owned by oligarchs are a poor argument as they are not real securities. These shares have never been guaranteed with money or other values.

When the circulation of these shares started, it caused no disturbance to the economic balance because at the same time, the whole of the country experienced depreciation of the value of the population’s savings.

Profits earned at the privatized enterprises within the past ten years were not capitalized but transferred to offshore banks. This is another explanation of the obvious fact that new owners of Russian enterprises are not actual proprietors. These oligarchs owning Russian enterprises understand that while they are not actual owners of the enterprises they are not obliged to invest money in them; they rather prefer to spend money as they like.

No matter in what light we consider today's property relations in Russia, they are extremely unusual. One may say that long ago even civilized countries were not aware of joint stock companies, but when they appeared, the system started working efficiently. Thus, today in Russia we should adopt the notion of "oligarch property" as a new economic term and introduce legislation to determine the regulations according to which it will function.

We may agree to act this way: let us call large enterprises and industrial facilities created within the 70 years of socialism "the national enterprises". Let us assume that the basic capital of these enterprises is not liable to be sold or bought as is typical of assets at joint stock enterprises. Then the status of oligarchs will be not be property owners but "trust owners of the right for the property".

This right to manage national enterprises can be determined by legislation. In other words, oligarchs should know that even though they are given control over some enterprises, they must still observe the regulations in accordance to which they must act. Thus, the legislation can determine proportions of property distribution so that money would be appropriated for development of enterprises and for adequate wages to workers.

At that, only some share may go to the pockets of those oligarchs who run these enterprises. The right to manage the national enterprises cannot be hereditary, and national enterprises must still remain the people's property. Let us take the armed forces or educational institutions, for example. Do readers understand my ideas?

So, the Russian oligarchic capital is a new phenomenon for world history and it should be registered legally in a particular form. It makes no sense to dispute what we must do now: to nationalize the privatized national property or to let today's pseudo-owners manage it. In fact, the present-day owners of enterprises do not run them properly and sometimes are even ready to let foreign businessmen own their shares for a trifling sum. What will happen to us if Americans seize control over all Russian enterprises?

For the time being, it is particularly important for us to give up useless ideological debates and to give the legal definition to the new economic relations we are having now, to make them transparent and understandable. It is time to discuss under what conditions shareholders can continue managing the enterprises. We believe that there are really wise businessmen among the present-day owners of national enterprises who understand they have no other way out of the situation.

Pavel Poluyan, Krasnoyarsk
Special to PRAVDA.Ru

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