From Cronyism to Cooperation: How Russia's Business Climate is Evolving
"Discover how the changing dynamics between the state and businesses in Russia could lead to more transparent and mutually beneficial relationships."
The relationship between businesses and government in Russia has long been a subject of intense scrutiny. The financial crisis of 2008-2009 threw these dynamics into sharp relief, highlighting the critical nature of state support and how it's allocated. This sparked renewed interest in understanding not just the mechanics of these interactions, but also the priorities that guide governmental assistance at the federal, regional, and local levels.
Historically, Russia's business-government interactions have been viewed through various lenses. Early analyses often pointed to "state capture," where larger firms, particularly at the regional level, were seen as manipulating government support to their advantage. This model, popularized by J. Stigler in 1971, suggested that government assistance disproportionately favored established, often underperforming, enterprises with strong ties to local authorities.
However, a contrasting view emerged with the "grabbing hand" model, which described a more predatory relationship, especially impacting small and medium-sized new businesses (SMEs). In this scenario, government officials were seen as extracting resources from these firms, creating a challenging environment for growth and innovation. More recently, economist Timothy Frye proposed a more nuanced perspective, suggesting a "system of exchange" where enterprises and regional authorities engage in reciprocal relationships, trading support for obligations.
The Rise of the "Model of Exchange"
Recent research indicates a significant shift in these dynamics. A 2009 survey of 957 manufacturing enterprises reveals that the "model of exchange" is now the predominant pattern in Russia's business-government relations. This suggests a move away from the more exploitative models of the 1990s, where either state capture or the grabbing hand held sway. Instead, businesses and the government are increasingly engaging in mutually beneficial collaborations.
Implications for the Future
These trends suggest that Russia may be on the cusp of a significant shift in its approach to economic development. As regional authorities increasingly focus on supporting modernization, the country could move toward a more innovation-driven economy. The federal government's focus on employment stability, while conservative, provides a crucial safety net during economic transitions. The blend of these approaches could pave the way for sustainable and inclusive growth.