short leash, offering little prospect of better
governance or high productivity, which typi-
cally evolves organically from decentralized
markets and open economic competition.
found itself at the mercy of foreign creditors.
vate enterprise must defer in choosing be-
markets and the broad interests of the moth-
erland as interpreted by the Kremlin.
not just go back to government ownership
and Soviet-style planning? Clifford Gaddy, an
economist at the Brookings Institution, ar-
gues that Putin sees himself as a corporatist
rather than a socialist that he is the chief ex-
ecutive of Russia Inc., not the chief function-
ary of a centrally planned economy. The goal
is to keep the economy on a course broadly
mapped by the government, but to leave the
operations to the private sector in order to
avoid the wretched inefficiency characteristic
of state ownership.
erations of subsidiaries and to fire operating
managers who fail to meet his expectations. So
control of the private sector is based less on
formal regulation than on extralegal threats
buried under a blizzard of tax claims and
criminal prosecutions in 2004 to 2006.
and immense oil revenues, the owners of
large enterprises were presented with a unique
ultimatum: You can keep your properties if
you make them productive. Of course, you
must also be prepared to share your wealth
with the government and with other private
parties favored by the government. Last but
hardly least, you must defer on strategic deci-
sions that could affect Putin's power or Rus-
sia's interests as interpreted by the Kremlin.
came clearer. The government took advan-
tage of the oil boom to pay off its foreign
debts. And it consolidated its grip over busi-
ness, demanding an increased share of the
earnings of raw material exporters, which
were reaping the fruits of the broader global
commodity boom. The government thereby
lion set aside to support domestic investment
and to sustain the Kremlin's power to reward
compliant businesses. Most of the accumu-
lated reserves, it should be noted, were held as
the short-term debt of Western governments
contain the ravages of currency appreciation
supply capital to Russian businesses suffering
from a shortage of domestic credit.
himself free to change the op-
erations of subsidiaries and
fail to meet his expectations.