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Almost three decades after the end of the socialist system in their country, Russians still harbor confused feelings about the private sector. They believe that private businesses are more efficient than state-owned ones, yet they also regret that the government does not intervene more in the economy. They believe it is impossible to both stay honest and get rich, and they distrust big business, but they approve of small and medium-sized businesses. They choose paid employment for themselves, but would like their children to have their own businesses and to be independent and successful.
These findings come from a joint study by the Carnegie Moscow Center and the Levada Center, Russia’s leading independent polling agency and are based on polls conducted across Russia by the Levada Center in August 2018. They give a snapshot of a nation that hopes its children will enjoy a properly functioning market economy in the future, while doing very little to make this happen in the present. Change, Russians believe, must still be top-down, is the government’s job.
The year 2018 saw the Russian population expressing a greater desire for change than it has for many years. There was widespread discontent with the raising of the retirement age and a surge of support for opposition candidates and resistance against those of the ruling party at the ballot box. Yet this is a craving so far for paternalism, an appeal to the government to do more to help them. This approach is quite rational. Ordinary Russians prefer a “wait and see” approach, because they understand that, they have no real influence under the current political system.1
How can we explain these contradictions come from, the desire for change coupled with an unwillingness to personally take any action to effect this change?
In Russia, the concept of “private property” dates back only to 1991, when with the collapse of the Soviet Union and the socialist system, “personal” property (the Soviet term used to denote non-state property) became “private.” This process is best described not as privatization but as de-nationalization. It was the takeover, appropriation, or receipt of pieces of state property for personal use, sometimes on tenuous legal grounds and with flimsy legal protection.
The main issue with the privatization process in Russia isn’t that private property was once state-owned. It’s that this property—especially major assets—later became quasi-state-owned or para-state-owned. This is the essence of Russian-style oligarchic capitalism: power and property are intertwined, and those who have power also have property and special rights to property. In this sense, property is not fully private. Rather, it is semi-private and semi-state-owned.
The power and influence of property-owners derives chiefly from their proximity to the state and its key figures, above all, the leader. That means that property rights are not secure. Failure to comply with political rules, or a deterioration in relations with the state and its enforcement system, can result in the loss of all rights for the property-holder—rights that only appear inviolable. The state might need the property-holder’s revenues (private revenues!) at any moment, and can define these revenues as “super-profits” it receives thanks to favorable conditions. The current Russian political system has the concept of the “social responsibility” of businesses. A good example was the August 2018 proposal by presidential aide Andrei Belousov that the state confiscate “super-profits” from chemical and metallurgy companies. In essence, the state believes that it has the right to seize revenues from major property-holders because “they have to share!”2 After all, the government begot these quasi-market oligarchs, and it can do with them what it will.
This flexible conception of ownership owes much to the patron-client relationship between top officials and prominent oligarchs. Back in 2007, Oleg Deripaska told the Financial Times that he was ready to give the Rusal aluminum company back to the state at any moment. “If the state says we need to give it up, we’ll give it up. I don’t separate myself from the state. . . . I was lucky. Just consider that everything fell from the sky.”3
Both the modern Russian state and society have inherited this mind-set thanks to path dependence, a belief in historical continuity. As Richard Pipes wrote in his seminal work, Russia Under the Old Regime, “Russia belongs par excellence to that category of states which in the political and sociological literature it has become customary to refer to as ‘patrimonial.’ In such states political authority is conceived and exercised as an extension of the rights of ownership, the ruler (or rulers) being both sovereigns of the realm and its proprietors.”4
In the Russian model, the state is the proprietor of resources, and society is divided into strata that call on the state to share the revenues from those resources. Desiring to avoid social tension, the state does share revenues with those population segments, redistributing the national wealth so as to maintain the political status quo and public order. This explains the outsize attention the government pays to filling the state coffers rather than to promoting competition and the basic rules of the game in market sectors. Under this paternalist model, the state budget becomes, amongst other things, an instrument for buying the political loyalty of various social groups and estates.
A political coalition has formed between those who own property and those who control the law-enforcement system. This fuels the commercialization of violence and enables certain business groups with ties to security structures to resolve their “business problems” using what are euphemistically called “non-competitive means.”5
“Another problem is the lack of respect for private property,” Ruben Vardanyan, one of Russia’s most successful businessmen, has pointed out. “There is no desire to associate oneself with it, because tomorrow everything could be taken away. Therefore, there are no objects of pride, no brands to identify with: I am a representative of such and such a family in the fifth generation. I think that our attitude toward private property is one of the key challenges in our society.”6
This lack of respect for property extends further to encompass state jobs, which are subject to hereditary transfer from key political players to their children. The younger generation of the elite receives not just top management positions at state banks and state companies but even government jobs. When a new cabinet was formed in 2018, Dmitry Patrushev—the son of former FSB director Nikolai Patrushev, a member of President Vladimir Putin’s inner circle—was appointed agriculture minister. This is a mechanism for a sort of collective succession: in 2024, the generation of the children of Putin’s comrades-in-arms will inherit the state by acquiring the assets of the power-property system. A system is being formed to bequeath large parts of the state as an asset—among just a few dozen families.7 We aren’t talking about the entire country, of course, but we are talking about crucial and valuable pieces of property.
It is hardly surprising then that the ambiguous status of major assets and questions about the legitimacy of their ownership have created mass distrust regarding the provenance of riches in modern-day Russia, and also often negative attitude toward private business overall, even when it is truly private and not oligarchic.
And yet, public opinion surveys taken by and focus group discussions held by the Levada Center reveal mixed feelings. Although many Russians do not want to become businesspeople themselves, they still view small and medium-sized businesses favorably, and sympathize with people who started their own companies and are battling bureaucrats and criminals. Moreover, ordinary Russians instinctively support the rights of private ownership and enterprise more than they do political rights, even if they don’t necessarily see a connection between the nature of the political regime and violations of property rights.
What does the concept of private property mean to the average Russian? A famous formula from Soviet times—“apartment, car, dacha”—lives on by inertia and is still being reproduced. Back then, these possessions were known as “personal property” and, to this day, “private” primarily means “personal” for the majority of Russians, in other words things that the government should not be able to take away. This remains the object of people’s main domestic desires, the reason to work and earn money.
Owning one’s own company or own business was defined as private property by 59 percent of respondents, and owning one’s own securities by 52 percent (see figure 1). This is somewhat theoretical, as few Russians have the ability and desire to start their own businesses or play the stock market. The proportion of businesspeople, senior managers, individuals with a higher education, and individuals of working age is higher among those who consider a company, business, or securities to be private property. This is the most dynamic segment of the Russian population and is broadly defined as middle class, based on its consumption patterns and behavior.8
Private property did not appear out of thin air in Russia, and it is rarely built from scratch. As noted above, the process of privatization can be equated with de-nationalization. Most prominent businesses in the country were formed when something state-owned became private. In mass consciousness, the public sees privatization chiefly as the transfer of major property assets, while small-scale privatization (shops, hair salons, and so on) and the transfer of apartments to private ownership are usually not regarded in this way. Public perceptions of major property-owners are more negative than they are of small and medium-sized businesses. According to two Levada Center surveys in 2014 and 2015, 62 percent of respondents perceived small and medium-sized businesses as having done more good than harm (in 2015, only 18 percent of respondents felt that small and medium-sized businesses were detrimental).9
Many years of Levada Center polls show that the concepts of privatization and freedom of entrepreneurship do not overlap much in public consciousness. Privatization is associated with big business, oligarchs, fraud, and the inequitable distribution of state resources, whereas entrepreneurship is seen as being more or less favorable.10
Our research shows that stereotypes about privatization still abound today. Respondents believe that the three main beneficiaries of privatization were the oligarchs of the 1990s, government officials, and big business, with the oligarchs being far in the lead (see figure 2).
One of the most persistent clichés that has taken root in the years of Vladimir Putin’s rule is that of the “wild 1990s.” Even though the fusion between the state and big business only grew stronger in the 2000s and 2010s, dissatisfaction with the alliance of oligarchs and government officials is redirected to the pre-Putin era.
The concept of privatization is linked firmly to the 1990s in public perceptions. One-quarter of respondents consider the Yeltsin family—another umbrella concept that represents the union of big business and big bureaucracy—to be beneficiaries of privatization, while those who divvied up assets in the 2000s and 2010s aren’t considered major participants in the privatization process. The dynamics of the post-Yeltsin era do not have an official name, although the phrase “redistribution of property” refers both to Putin’s inner circle and to representatives of the national security sector. In a 2015 survey, 42 percent of respondents said that the merger between the state and big business has been stronger in recent years than it was in the 1990s.11 It isn’t likely that Russians have a better opinion of the redistribution in the 2000s and 2010s than of privatization in the 1990s.
Many are skeptical about the origin of the wealth. Our research shows that two-thirds of respondents believe that it’s probably impossible to become rich while remaining honest, while only a quarter believe otherwise (see figure 3). (The optimists include businessmen, senior managers, students, people with a higher education, and the youngest population groups.) Members of focus group discussions believe that wealthy people took advantage of the turmoil of the 1990s, when most of the population was destitute. To date, most of the relatively poor population has a generally negative attitude toward the rich. This stems largely from the majority’s sense of their own powerlessness and their inability to improve their status or escape a vicious cycle of deprivation. This explains the common desire in Russian society for support from the state. It is a hope born of necessity.
After more than a quarter century of living in market conditions, most Russians consider private businesses to be more efficient than state-owned ones, despite all of the challenges of the new order and their distrust of privatization and big business (see figure 4). According to our research, this is broadly the view of about half of the population (compared to one-third who hold the opposite view). Attitudes toward private enterprises are most favorable among businessmen and the youngest respondents, who were born and grew up in a market economy. The oldest and least wealthy sections of the population believe that state-owned enterprises are more efficient.
At first glance, there seems to be a contradiction between the position of respondents about the efficiency of private and state-owned enterprises, and the view of two-thirds of respondents that the government plays an insufficiently active role in the Russian economy (see figure 5). Here too, however, age, affluence, place of residence, and occupation have an influence. The young, the successful, urban dwellers (particularly residents of Moscow), businessmen, senior managers, and students are more likely to say that the government plays an excessive role. The same pattern can be found as in the previous question. The younger the respondents, the wealthier and more socially active they are, the more likely they are to oppose increased state participation in the economy.
In a recent study of the opinions of representatives of major and medium-sized businesses, most respondents—owners and senior managers of Russian and foreign companies—unequivocally favored less state involvement in the Russian economy, believing that it results in problems such as monopolism, preferential treatment of players with ties to the state, and distortion of market competition, and that it ultimately undermines the business climate.12 This is not just the opinion of the more progressive segment of the Russian public that sharply contrasts with the position of the average Russian. It is the viewpoint of successful businesspeople who know firsthand how the state affects the economy and the business climate.
So on the one hand, Russians say that the state should play a bigger role in the economy. On the other hand, they also say that the state is not an efficient proprietor. How can we explain the contradiction? Our previous study about Russians’ readiness for change in their country shows that public support for state regulation reflects a lack of understanding that there are other ways of improving the country’s socioeconomic situation and of how the economy works in general.13
Most ordinary people believe that the basic job of the state is to improve quality of life for its citizens. Other objectives are mostly forgotten. This is hardly a surprise as most of the population is fairly poor and focused on material problems rather than more lofty matters. A desire for greater state involvement in the economy is synonymous with the desire for additional social guarantees and state assistance. It doesn’t matter that the state is not an efficient proprietor. What matters is that state-controlled redistribution is the main (if not only) apparent instrument or opportunity for improving the well-being of the average Russian.
Another Levada Center study on relations between the state and its citizens conducted in August 2018 shows that most Russians want the state to take care of them (62 percent) rather than to set universal rules of the game (30 percent).14 This conviction, however, is slowly losing ground. In 2001, the same ratio was 71 percent to 19 percent. Tremendous progress has been made in seventeen years. Furthermore, this isn’t just a matter of paternalism. It is also a demand for efficient state management in everyday life and for better normative regulation of economic activity.
Russians are not opposed to independence in principle. However, in the absence of a proper environment for the development of the creative potential of individuals, it is rational to look to the state, especially as the state itself promotes paternalism in any way it can, while conditions for entrepreneurship and other individual activities still aren’t improving.
Is it better to have your own business or work for someone else? This is a common dilemma in the new post-Soviet market, a dilemma that frequently requires people not only to choose a lifestyle and way of earning money, but also to select market or nonmarket behavior, and decide whether to work in the private sector or for the state (or for quasi-state structures such as major companies and banks, which are more like ministries than private enterprises). Choosing to work for someone else doesn’t always mean you are passive and inert (and it doesn’t always mean working for the state). Sometimes it only reflects the fact that starting a business amid current Russian realities is too difficult.
What makes an individual interested in self-employment as a business owner or in private practice? In the Soviet Union of the late 1980s under Mikhail Gorbachev, nascent market relations meant not only the beginning of the de-nationalization of property, but also the privatization of the individual by the individual,15 and the possibility of different types of behavior. This was a complicated process, both economically and psychologically. In essence, we witnessed the birth of a new social category: the private individual.
In 1989, when VsTIOM (the All-Russian Public Opinion Research Center, whose staff later formed the Levada Center) conducted the first studies as part of the “Soviet Person” project, even in the age group of under twenty-five, 35 percent of respondents said they would prefer to have a small but stable income than to have their own business (15 percent). In 1994, a similar study showed that the situation had deteriorated. Russians had encountered a real market (rather than an imagined one)—and it was “wild.” In the age group of twenty-five to thirty-nine, only 7 percent still wanted their own business (compared to 13 percent in 1989). The sociologist Yuri Levada attributed this phenomenon to the public seeing the difference between their imaginary, idealized, desired perceptions and a new reality.16
In addition to having one’s own business, another popular option appeared with the emergence of market relations: “Working hard and earning good money, even without particular guarantees for the future.” In a sense, this was the birth of a new bourgeois work ethic. While the number of those who wanted a “small but reliable income” grew and reached 60 percent in 1999,17 by 2003 this figure was down to 54 percent as economic growth resumed. The proportion of those willing to work without guarantees remained steady at 22 percent, and the share of those ready to take a risk and start their own business rose from 6 to 10 percent.18 Russians became used to market relations, and the most active groups became more flexible. Market behavior became the norm, despite deteriorating regulatory and economic conditions, reinvigorated state involvement in the economy, and the increased attractiveness of jobs in the state-controlled sector with guaranteed wages.
Our survey also indicates that market principles have become ingrained in mass consciousness. Forty-two percent of respondents would prefer wage employment, while 30 percent said they would be prepared to start their own business (see figure 6). We also added another market position to the survey: “self-employment (individual work, private practice),” and this received 17 percent of the vote. Combined, the number of respondents who opted for private, market-based means of living and earning income is slightly higher: 47 percent compared to 42 percent. The Russian population is currently almost evenly split on the issue.
It should be noted that respondents take current realities into account. We also asked them what they would prefer for their children. Essentially, this is a question about the future they desire to see. Here, the market had a clear advantage: 24 percent favored paid employment, 14 percent preferred self-employment, and 45 percent selected running a business—a combined 59 percent in favor of non-state-based subsistence. Many of today’s parents and grandparents would have liked to be self-employed, but circumstances did not allow it. Now they hope that their children will build their own careers in the private sector. In the youngest age group, the proportion of those hoping for the next generation is even higher: just 16 percent in favor of paid employment compared to 70 percent who expressed support for self-employment and owning a business.
Just under half of the Moscow-based respondents said they preferred paid employment. This figure was lower elsewhere, even in small cities. In the capital, only one-quarter want to start their own business (in medium-sized cities, with a population between 100,000 and 500,000, about one-third do). There are many paternalist-minded Muscovites who expect assistance and care from the state. They have been spoiled by benefits introduced by former mayor Yuri Luzhkov and gifts from his successor, Sergei Sobyanin. It should come as no surprise that Sobyanin easily won the most recent mayoral election in September 2018. Yes, the capital has many active people who are prepared to stand up for their rights, but the majority of Muscovites are quite passive and don’t mind living off the state. Moscow is Russia’s richest region, with registered unemployment just above 1 percent, a reduction in real incomes that is negligible compared to nationwide indicators, and huge earnings and spending, a significant part of which is comprised of social benefits. During the first three quarters of 2018, social benefits to Moscow residents rose by 29 percent.
What are the arguments against starting one’s own business? Respondents gave a wide variety of responses, with the amount of stress involved and the resources necessary representing the most frequent answers (see figure 7). Furthermore, 39 percent of respondents believe that business conditions have deteriorated (compared to 19 percent who believe that conditions have improved—see figure 8). In Moscow, that ratio is 47 percent to 12 percent. Naturally, these are largely just words, but the majority of respondents are not opposed in principle to being self-employed.
In 2000, when Putin first came to power there were many statements by the government about removing obstacles to entrepreneurship and pursuing better Ease of Doing Business rankings. None of this even has been registered in public opinion. Almost two decades of the Putin regime have devalued terminology. Assessing the ease of doing business isn’t about the government’s words; it’s about the government’s actions, and they are epitomized by what happened in Moscow on February 9, 2016, the so-called Night of Long Shovels. A bulldozer showed up overnight and razed buildings by a metro station where people had been buying milk, bread, and cigarettes for many years. The mayor of Moscow declared that property rights are just a meaningless piece of paper. This happened to 100 shops. In this environment, what normal person would want to start their own business?
The businessmen in our study appear to be natural proponents of private property rights.20 The details are interesting. For example, the majority of them believe that nothing can truly justify restrictions on property rights, not even a military or terrorist threat, and certainly not construction or land development (see figure 9). Up to half of respondents from the relatively liberal group of “senior managers” say that the right to private property can be restricted in the event of a military threat. For the overall sample of respondents, this figure is about one-third. Among businessmen, only 27 percent share this view. Up to half of businessmen believe there can be no restrictions on property rights under any conditions. This is the highest figure of any sociodemographic group.
The survey indicates that the business community wants to see the protection of political rights. The most important of these include the right to personal inviolability, the right to a fair trial, and the inviolability of property.
In the survey, only one in twenty of those who identified as businessmen specifically mentioned the direct violation of property rights. It is likely that at the general level (compared to the expert level), not every businessman is capable of classifying such incidents as a violation of basic principles of private property. At the same time, compared to the overall population and other sociodemographic groups, businessmen are more likely to bring up the importance of various rights and freedoms, and less likely to say that no rights are being violated in Russia.
Businessmen mention the courts quite frequently: they recognize their value as an instrument for the protection of rights; they also rely on them more often than others, even though they express dissatisfaction with the courts’ efficacy. Businessmen also express greater willingness than other groups to use instruments such as petitions and letters, and to participate in rallies, pickets, and strikes. They interpret democracy in a pragmatic sense. Businessmen at least support holding an active civic position more strongly than do other population groups.
Our study shows that businessmen have a better understanding of the links between functioning democratic institutions and a favorable environment for economic and business development.
The larger the state, the stronger its gravitational pull, and the more people and the more products of their activity fall into its gravitational field. These people are realists and don’t demand the impossible. On the contrary, they are ready to adapt to the rules of the game: to work for the state and with the state. However, our study shows that conformism has its limits, beyond which a different future may begin.
It turns out that Russians have a dream for their children and their grandchildren of a different environment that is favorable for entrepreneurship and private initiatives. Even though they don’t know how to make this future a reality sooner, they would still like to attain it. This is where the true interests of Russians and their perceptions about the future diverge radically from the interests and perceptions of the state in which they live. This mismatch is becoming more and more marked and will trigger conflicts between the state and society in the coming years.
1 The conclusions of a joint study by the Carnegie Moscow Center and the Levada Center are based on the results of a national public opinion survey conducted by the Levada Center in August 2018. Survey participants, 1,600 individuals aged 18 and over, were interviewed at their homes; the statistical margin of error is within 3.4 percent. The study also relies on numerous public opinion polls conducted by the Levada Center, as well as data from in-depth interviews carried out as part of Denis Volkov and Andrei Movchan’s project “Nonpolitical Reforms: A Study of Businessmen’s Opinions” (in Russian). September 27, 2018. https://carnegie.ru/2018/09/27/ru-pub-77353
2 “Andrei Belousov Responds to Vladimir Lisin’s Joke,” Kommersant (in Russian). August 10, 2018. https://www.kommersant.ru/doc/3712152
3 “I Don’t Need to Defend Myself,” Financial Times. July 13, 2007. http://archive.is/xMed4#selection-1297.109-1297.247
4 Richard Pipes, Russia Under the Old Regime. Scribner, 1974. P. xxii.
5 Douglas North, John Wallis, and Barry R. Weingast wrote about a problem endemic to countries with “limited access” to rents: “Rent-creation, limits on competition, and access to organizations are central to the nature of the state, its institutions, and the society’s performance.” Douglas C. North, John Joseph Wallis, and Barry R. Weingast, Violence and Social Orders: A Conceptual Framework for Interpreting Recorded Human History (Cambridge University Press, 2009), p. 17.
6 “I’m Not the Luckiest Investor,” Vedomosti (in Russian). April 23, 2018. https://www.vedomosti.ru/management/characters/2018/04/23/767486-ne-samii-investor#%2Fmanagement%2Fcharacters%2F2018%2F04%2F23%2F767486-ne-samii-investor%23!%23%2Fboxes%2F140737493996579
7 “How the Careers of Children of Russian Officials Are Taking Shape,” RBC (in Russian). June 6, 2017. https://www.rbc.ru/photoreport/06/06/2017/58b416609a7947e593629ec0?from=right_8
The Bulgarian political scientist Ivan Krastev often talks and writes about “Putin’s conviction that Russia needs not a single successor — as it did under Boris Yeltsin — but a successor generation. He sees the coming transition as a transfer of power from his generation to the ‘Putin generation,’ comprising politicians who came of age during, and have been shaped by, Putin’s rule.” http://www.ecfr.eu/publications/summary/the_arrival_of_post_putin_russia
8 One of the heroes of Thomas Mann’s novel The Magic Mountain says, “Culture and possessions — there is the bourgeoisie for you! There you have the pillars of the liberal world-republic!” Thomas Mann, The Magic Mountain (Vintage Books, London, 1999), p. 513.
9 The poll on Russians’ views on the benefits of business — https://www.levada.ru/2014/06/18/polza-ot-biznesa-v-predstavleniyah-rossiyan/ — and on business and the authorities —
https://www.levada.ru/2015/11/11/biznes-i-vlast/ — were published in Russian.
10 Back in 1991, data from the All-Russian Public Opinion Research Center (later the Levada Center) demonstrated that Russians view the development of private property favorably, particularly small-scale private property, but are not really ready to become owners of private property themselves. Vladimir Mau assessed that data at the time as follows: “The fundamental reason for this attitude isn’t so much the fear of inconsistent state policy as it is the lack of starting capital and necessary skills.” Vladimir Mau, Collected Works, Vol. 4, “Economics and Politics of Russia: Year After Year (1991-2009),” (Moscow: Delo, 2010), p. 38.
11 Business and Power (in Russian). November 11, 2015. https://www.levada.ru/2015/11/11/biznes-i-vlast/
12 Andrei Movchan and Denis Volkov, “Nonpolitical Reforms: A Study of Businessmen’s Opinions.” (In Russian). September 27, 2018. https://carnegie.ru/2018/09/27/ru-pub-77353
13 Andrei Kolesnikov and Denis Volkov, “We Expect Changes. Is There Mass Demand for Changes in Russia?” (In Russian). December 5, 2017. https://carnegie.ru/2017/12/05/ru-pub-74906
15 Yuri Levada, Collected Works, p. 64.
16 Ibid., pp. 80–81.
17 Ibid., p. 129.
18 Ibid., pp. 416–417.
19 Monitoring the Economic Situation in Russia. Trends and Challenges of Socio-Economic Development. (In Russian). December 2018. https://iep.ru/files/text/crisis_monitoring/2018_21-82_December.pdf
20 Fewer than 100 businessmen (self-defined as belonging to this category) took part in the survey, so the margin of error for this group of respondents is higher.
Carnegie does not take institutional positions on public policy issues; the views represented herein are those of the author(s) and do not necessarily reflect the views of Carnegie, its staff, or its trustees.
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