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Putin’s approach of curbing the oligarchs may seem selective and arbitrary and is open to accusations of using the criminal justice system to cow political opponents and break them to the president’s will. Nevertheless, it sent a clear signal that the days of the tycoons, who had been pulling many of the country’s political strings, were over: there were now certain restraints on their activities, and they were no longer omnipotent.

President Putin. Photo: AP

Putin managed to redefine the alliance with the elites and scale down the oligarchization of power, which had led Boris Yeltsin to a political trap and greatly weakened the federal center. In the first term of his presidency a new system of power was set up that normalized relations between the state and big business.

Putin’s “dictatorship of law” may well be necessary to transform Russia from a barter economy run by robber tycoons, corrupt bureaucrats, and crime syndicates to a modern capitalist economy with a transparent civil service and judiciary. His methods of squeezing the oligarchs and frightening the governors cannot always be described as democratic. The problem is that it may well be impossible to create an effective state in Russia by purely democratic methods.

As is now recognized even by more conservative free market thinkers, a limited but effective state is absolutely necessary to ensure the conditions for a working free market. Somehow, the power of the oligarchs, corruption, and organized crime have to be curbed, and a measure of discipline and honesty restored to the state service. So when Putin speaks of the need for a stronger state, he is reflecting not just the Russian tradition but also Russian realities.

Instead of unlimited freedom there should be freedom with certain limits, which the governors, oligarchs, and civil servants are obliged to observe. The introduction of rules is a sign not of curtailing liberties but of civilization. It has been noted that liberal values are threatened just as thoroughly by state incapacity as by despotic power and that less state can mean less freedom. The problem for Putin is whether or not he can rein in corruption without suffocating more acceptable forms of private economic activity.

The business community should be able to engage in a dialogue with the state: not in the form of collusion of individual business barons with the authorities, but as a consolidated group able to articulate its common interests. The influential Russian Union of Industrialists and Entrepreneurs, which unites several thousand employers and business leaders, could potentially become a body capable of providing a framework that reconciles the interests of the state and business. The Union cooperates actively with relevant Duma committees and with the government and its ministries. Its members now participate in regular meetings with Putin, ironing out the rules of the relationship between power and business.

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"Deprivatizing" the State

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