Crony Capitalism: The Power Politics of Capitalist Expansion

Norman Pollack
RINF Alternative News

Anything goes, for the demonization of Putin, even as now when the charge, surrounding himself with Oligarchs, is really looking in the mirror at America’s own image. I do not have to or want to apologize for insider-plutocratic dealings in shaping the post-Soviet Russian economy. Frankly the Jeffrey Sachs dystopian vision of tearing socialism to shreds is more than unfortunate; its operational acceptance in Russia is a betrayal of a Socialist World that, after Stalin’s death, could have advanced the democratization of vast stretches of the international political economy and put a large bite on America’s economic power and performance. Instead, the reverse seems to be happening.

Now Russia, then in short order, China, in the cross-hairs for weakening and ultimate political dismemberment and/or economic retrogradation because America’s militarization of monopoly capital will brook no opposition in this recently defined structure of intracapitalist rivalries.

Putin and Li have broken the historical connection to Marx. For that, I, for one, wish otherwise in that we see in Russia and China a bastardized version of state capitalism, rather than a clean break into democratic socialism. The creation of billionaires, summer residences on the Cote d’Azur, town houses in Belgravia, drag these countries down to the American level of consumerism and structural inequality.

Yet, my emphasis here on Russia, there is a difference: Putin is not out to conquer the world; a stable Russia in an equally stable international order appears to be enough, and to keep hegemonic claims within strict bounds. None of Obama’s grandiose rhetoric about saving the world for freedom and democracy, none of his life-strangling military budget which, almost by design, has shrunken the social safety net, and none of the drastic expansion in the realm of nuclear modernization to lethalize the weapons’ stock and perfect the means of delivery. Putin is a far more circumspect world leader than Obama and his predecessors. The KGB label has great propaganda value in the campaign of vilification against him, but where are his personally authorized drone assassinations, his airstrikes, his world-encircling military bases? And is KGB any more repressive and murderous than CIA or Special Ops forces promoting regime change, or more intrusive on privacy than NSA massive surveillance activities?

Still, Oligarchs, whatever their national origin, are deplorable, so here is a brief account of the New York Times article by Steven Lee Myers, Jo Becker, and Jim Yardley, entitled, “Private Bank Fuels Fortunes of Putin’s Inner Circle,” (Sept. 28), which sheds light on Putin’s rise to power and–although the US skips lightly over the subject, if ever referring to it at all–the destructive social costs of PRIVATIZATION of government resources. When Russia systemically veers toward America, it damages its humanistic potential and reality. Paradoxically, the Old Cold War reflected ideological differences, the New Cold War the partial erasing of those differences, though somehow raising the stakes because within capitalism lies a more ferocious beast last seen prior to 1917 and the Bolshevik Revolution, that of internecine competition for world supremacy. Only now, Russia doesn’t appear willing to play the game, under Putin, building, to paraphrase and invert Stalin, “capitalism in one country.” For Obama, why stop there?

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This is all about Bank Rossiya. Myers et. al. write, “In late March, the United States had made Bank Rossiya a primary target of sanctions, effectively ostracizing it from the global financial system. Now the Kremlin was pushing back, steering lucrative accounts its way to reduce the pain.” (I flinch when I see “Kremlin” referred to in The Times, a way of conjuring Uncle Joe back in command.) Would Putin have continued to show favoritism to the bank–for he did earlier to some extent–if the US hadn’t made it central to the sanctions, and stigmatized it specifically by making it personal? No-one should doubt his nationalism, in this case transcending issues of cronyism because Bank Rossiya, under attack, had in his mind become a stand-in for Russia itself. In effect, by way of comparison, Obama is more capitalist than nationalist; when he favors JPMorganChase, Boeing, etc., he doesn’t confuse–but he may purposely conflate–the identity of the banking or business firm with the nation, and rather, treats them well for their own sake. The nation, for him, is secondary to the interests of its ruling groups (for which the military-intelligence communities are found to be indispensible).

When the obscure Market Council shifted the business of the wholesale electricity market to Bank Rossiya, “a tidy coup set to yield an estimated $100 million or more in annual commissions,” there were other “state corporations, local governments and even the Black Sea Fleet… suddenly shifting their accounts to the bank, too,” creating “an enormous windfall.” Yet, the reporters fail to mention, some of this activity occurred in April, after the sanctions were declared, a thumbing-the-nose at the sanctions regime and not merely rewarding friends. Nevertheless, Bank Rossiya–discounting the inflammatory language of the reporters–helped turn Putin “loyalists into billionaires whose influence over strategic sectors of the economy has in turn helped him maintain his iron-fisted grip on power.” This should not be blinked. As noted, friendship altered the distribution of wealth, even if he did not personally benefit.

As a paradigm of capitalist development, however, the transformation from bureaucratic socialism to state capitalism is not hard to imagine, whether or not his presumed inner circle performed the vanguard role. (Probably the same general set of historical dynamics applies to China as well, from Mao to Li, although cronyism appears to be more clearly identified in China than in Russia.) Had Russia been able to experience a peaceful transformation following the break-up of the Soviet Union, in a world where capitalism had not been the vehicle for international dominance, perhaps, only just perhaps, the result could have been a more genuine mixed economy, shorn of billionaires and state favoritism.

This did not happen. The reporters are essentially correct when they write: “Mr. Putin came to power vowing to eliminate ‘as a class’ the oligarchs who had amassed fortunes–and, to the new president’s mind, a dangerous quotient of political sway–under his predecessor, Boris N. Yeltsin, in the post-Communist chaos of the 1990s. Instead, a new class of tycoons have emerged, men of humble Soviet origins who owe their vast wealth to Mr. Putin, and offer unquestioning political fealty to him in return.”

Regrettably, banks will be banks. Bank Rossiya (like Willie Sutton, I rob banks because that’s where the money’s at) has gathered up Russia’s entrepreneurial talent, like Yuri Kovalchuk, its chairman and largest shareholder, “a physicist by training, sometimes called the Rupert Murdoch of Russia for his role as architect of the bank’s media interests.” Also, it resorts to “shadowy corporate shell structures,” like offshore companies in the British Virgin Islands. As for stockholders, I was at least gratified to see Sergei Roldugin, a cellist who has used his investment in the bank to convert a 19th century Saint Petersburg palace into “the House of Music, a training academy for classical musicians.” (I toss that example in gratis) No question the cronyism–the article cites many examples, along with the reported wealth of leading oligarchs associated with the bank. “Business connections,” the reporters write, “became deeply personal connections,” including Putin’s “join[ing] seven businessmen, most of them Bank Rossiya shareholders, in forming [in 1996, for they all go back quite far] a cooperative of summer homes, or dachas, called Ozero, or ‘lake,’ in the northeast of Saint Petersburg.”

But is this, as critics claim, “legalized kleptocracy”? To put a fine point on the matter, the personal factor appears separate from State considerations in Putin’s mind. One Oligarch, Gennady Timchenko, an oil trader and Bank Rossiya investor, (himself under sanctions), explained: “he would never presume to question the Russian president’s policies in Ukraine, whatever the cost to companies like his. ‘That would be impossible,’ he said, going on to refer to Mr. Putin formally by his first name and patronymic. ‘Vladimir Vladimirovich acts in the interests of Russia in any situation, period. No compromises. It would not even enter our minds to discuss that.’” That is extremely important. State capitalism is not necessarily the interpenetration of business and government, that which I’ve described in articles in CounterPunch examining US structural dynamics leading to the fascist phase of advanced capitalism.

If Vladimir Vladimirovich is not exactly a throwback to Tolstoy, still we see, in Putin, capitalism in Russia is more Russian than nakedly capitalist. America has been and remains puristically capitalist, summoning the requisite domestic (massive surveillance, hostile climate toward labor, vast wealth-disparity) and foreign (war, intervention, pursuit of global hegemony) policies for its attempted sustainment. This is a big difference between the two, the US finding it intolerable that Russia, perhaps even more than in its Soviet form, places other factors above and beyond capitalism, as practiced in the US, as an integrally aggressive-expansive system, no holds barred in its global conduct. Socialism, easy to oppose and condemn; this nationalist/capitalist political formation, less so, because the alternative formation within capitalism speaks to other potentialities, including better care for its own citizens.

My New York Times Comment to the Myers-Becker-Yardley article, same date, follows:

Excellent documentation. Yet what does a comparative analysis reveal? That crony capitalism is alive and well in both Russia and the West, and that the latter’s criticisms seem odd because the same ideological framework holds true for America and Russia. We feign the same spirit of anticommunism characteristic of the First Cold War (undeniably, we are now into a Second), when in reality the US is jealous of Russia’s capitalistic success.
Attacks on Putin are sour grapes. What is the bailout of American banks, but crony capitalism? What the cozy relationship between the Pentagon and the major defense companies, but crony capitalism? It does not require a leader, here, Putin, to define the condition. Crony capitalism can be, and is, in America, SYSTEMIC, with Obama hardly passive in advancing the wide cleavage in US wealth distribution.

No one claims Putin enriches himself through crony capitalism, and in fact, I accept his argument that, not the Russian companies, but geopolitical and geostrategic concerns motivate his policies. Can Obama and the US say the same, when he serves as a shill for US business abroad, esp. in the Far East? The sanctions-business is amusing: a cover for the more ambitious plan to contain, isolate, and weaken Russia—next, ditto, China—as America desperately strives to return to unilateral preeminence in the global structure. The world is de-centered with Russia and China’s rise; America must learn to share power, or else collapse.

Norman Pollack has written on Populism. His interests are social theory and the structural analysis of capitalism and fascism. He can be reached at pollackn@msu.edu.